Taxing Banks: the role of tax in post-crisis bank regulation

Conference held at the Saïd Business School

on the 4th of October 2011

The financial crisis left no doubt as to the need for improving bank regulation. Some proposed improvements have materialised, most notably those contained in Basel III, but the process is still on-going. In the UK, for example, the Independent Commission on Banking set up by the Government to consider reforms to the banking industry is expected to produce its final report in September.

At the same time a number of new financial sector taxes, including bank levies, Financial Transaction Taxes and Financial Activities Taxes, have been proposed both at a domestic and a supra-national level. Whilst the debates on the latter two taxes continue, new bank levies have been introduced in the UK, Germany, France and 7 other EU member states. Other countries are expected to adopt similar levies in the near future.

The purposes of these levies vary, but they generally include: encouraging banks to hold more Tier 1 capital, addressing liquidity risk, funding a resolution regime and making banks pay a contribution reflecting the risk they pose. They are thus partly intended to achieve the same goals of regulatory reforms currently underway.

The use of taxes to achieve these regulatory goals is a new phenomenon and thus requires careful consideration. As a start we ought to consider which of the two, regulation or tax, is better suited to achieve these goals. More practically, as the two will be in place concurrently, we need to consider the interaction between them.

Our understanding of the issues arising from the new financial sector taxes and, in particular, their interaction with regulation is still at an early stage. Ideally, an exploration of these issues would involved expertise in both bank regulation and tax. This conference brings together experts from both fields with a view to further our understanding of these issues. Whilst the conference was partly academic in focus, a number of regulators, bank officials and practitioners also participated.

The format of the conference is specifically designed to allow for as much interaction as possible between the experts from these two fields. Presentations are short (around 20 mins) thus allowing considerable time for discussion after each session. A panel discussion rounded off the conference.

Please click here for the final programme (including biographies for speakers and chairs).  

If you have any questions about the conference, please email cbtevents@sbs.ox.ac.uk

TAXING BANKS: THE ROLE OF TAX IN POST-CRISIS BANK REGULATION

4th October 2011, Saïd Business School

09:00 Registration and coffee

09:30 Session I: Introduction and welcome

Michael Devereux (University of Oxford)

Chair: Colin Mayer (University of Oxford)

Bank capital structure and liquidity - regulation

- Andrew Bailey (FSA) – Reforms to capital and liquidity requirements. 
- David Miles (Bank of England) – The case for higher capital requirements.
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- John Vickers (University of Oxford) – The ICB’s recommendations on capital and loss-absorbing debt.
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- Angela Knight (British Bankers’ Association) – Banks’ perspective on recent regulatory developments.
- Discussion

11:25 Coffee break

11:50  Session II: Bank capital structure and liquidity - tax

Chair: Clemens Fuest (University of Oxford)

- Mick Keen (IMF) –The case to introduce balance sheet taxes to improve solvency.
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- Enrico Perotti (University of Amsterdam) - The case to introduce liquidity charges to improve liquidity.
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- Michael Devereux (University of Oxford) - The interaction between regulation and tax: as alternatives or in combination. 
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- Discussion

13:30 Lunch
 
14:25 Session III (i): Bank special resolution regimes

Chair: Paul Davies (University of Oxford)

- John Armour (University of Oxford) - The case for and design of resolution regimes.
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- Charles Goodhart (LSE) - Funding of resolution regimes.
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- Discussion

15:25 Session III (ii): UK Experience

Chair: Judith Freedman (University of Oxford)

- John Vella (University of Oxford) - UK bank levy.
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- Malcolm White (HMRC) - UK tax developments post-crisis.
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- Richard Middleton (Association for Financial Markets in Europe) - Banks’ response to post-crisis regulation and taxes.
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- Discussion

16:35  Coffee break

16:50 Session IV: Financial transaction tax

Chair: Mick Keen (IMF)

- Manfred Bergmann (EU Commission) - EU Commission’s proposal.
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- Clemens Fuest (University of Oxford) - A response.
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- Discussion

17:50 Panel discussion

Chair: Michael Devereux (University of Oxford)

18:30  Close