The German government adopted August 25, 2010 a proposed tax on bank profits. However criticized, this initiative illustrates the contribution of theoretical economics institutions concerned to stabilize.
The establishment of the ECB as an independent authority had rewarded the efforts of Kydland and Prescott (1977). They had demonstrated the time-inconsistency of monetary policy (a policy of low inflation may be quickly followed by an inflationary policy). A first step supported by Germany for the project in the euro area.
The success of European monetary policy to face financial crisis of 2007 raised the gaps budgetary policies of different member states. Structural problems, advances that have erupted in recent months with countries like Greece or Portugal. These difficulties are closely related to the support of governments to the attention of the great leaders of banking. In sum, monetary policy has eased the macroeconomic crisis while governments have avoided the crisis by micro rescue of several banks.
The German initiative proves to be a way of preventing bank runs . Three solutions are proposed by the economic literature. The first is the force that narrow banking financial intermediaries have sufficient funds to repay depositors in case of crisis. The second approach was proposed by Diamond and Dybvig in 1983 and is to establish a public system of deposit insurance financed by a levy on all deposits. A third and final proposal is that the lender of last resort source of moral hazard. Hazards which have multiplied in 2008 and 2009 when states have recapitalized many banks. In sum, if the third proposal has already been "adopted", the second is valid.
Germany does not impose a fee for each applicant, however the "bank tax" applies to financial intermediaries within a limit of 15% of their net income. Certainly There remains a incentive to risk taking, since some banks will be saved in case of future crises, but the allocation of this fund a few banks in difficulties may exclude others, resulting in a risk-taking limited . In addition, the establishment of this fund encourages companies to increase their capital base and diversify their activities.
Two challenges remain ahead. The first is extend this policy throughout the European Union . This idea is not only desirable for each country taken separately (France supports the initiative), it opens for European governance as monetary and fiscal facilitating homogenisation of the competitiveness of financial players in the eurozone. The establishment of a new independent authority in charge of a European fund would enhance the credibility of the European Central Bank.
A second challenge is to develop an evaluation grid banking institutions could take advantage of these bank charges. Determine debt ratios as capitalization would be a first step to encourage institutions to strengthen their balance sheets. The tax credit would serve more only to limit the use of public funds supplied by taxpayers. Better tax would encourage financial institutions to adopt sustainable growth strategies and thus indirectly reduce the risk of further systemic crises, in agreement with new prudential .
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