G-20:India prefers tighter fin. rules to EU-style bank tax

New Delhi, June 21 (PTI) India on Monday favoured tighter
financial regulations, as opposed to an European Union
proposal to tax banks to pay for future crisis, to support the
fragile global economic recovery.
"The important thing is that the global economy should
fully recover... We support all efforts at raising the
benchmark of financial regulations," India's Finance Secretary
Ashok Chawla told reporters here on the agenda of G-20 meeting
beginning June 26.
Chawla will accompany Prime Minister Manmohan Singh to
the meeting at Toronto.
Smarting from a sovereign debt crisis in many of its
member countries, including Greece and Hungary, the European
Union earlier this month proposed creating an emergency crisis
fund by taxing banks. The proposed fund would be used to deal
with future crises.
The EU plans to take this proposal to the G-20, a
grouping of 20 developed and developing economies.
India's stand is that instead of a bank tax, regulations
for the banking sector should be strenghtened. Finance
Ministry sources said that since Indian banking regulations
were quite prudent, the view was there was no need for
imposing any tax on banks in the country.
The bank tax proposal was dropped from the joint
communique of G-20 Finance Ministers who met earlier this
month in South Korea.
But the G-20 Finance Ministers did talk of contribution
from financial sectors to the government's efforts to spur
eocnomies at the time of downturn.
The Eurozone crisis, which has seen the economies of
Portugal, Ireland, Italy, Grecee, Spain and Hungary face
stress, threatens to derail the fragile global economic
recovery since the 2008 global financial crisis caused by the
failure of larges US banks.
Sources said by way of clarification that when the G-20
communique called for contribution from financial sector, it
did not refer only to the bank tax. Tight regulations also
imply costs for banking sector, the sources pointed out.
Chawla parried a question on the impact of China making
its currency--Yuan--more flexible on the Indian economy,
saying, "Let us not get into it. Let us wait and watch."
To a query on reforms in the bodies like World Bank and
IMF, he said, "The agenda on international financial
institutions reforms continue to be pursued vigorously."
The G-20 nations welcomed the decision to increase voting
power of developing nations in the World Bank and called for
similar measures in the IMF so that reforms in the
multilateral agency could be completed by November.
The World Bank in April announced shifting of 3 per cent
voting power in favour of developing countries, bringing their
total stake to 47 per cent in the multi-lateral agency. India
became the seventh largest shareholder in the World Bank
following this shift. PTI MG
MRD