Bank Tax Plan Must Be International to Work: UK's Darling
President Barack Obama's proposals to impose a levy on large banks would only work if it was agreed globally and financial regulations set out at the G20 summit should be put in place first, UK Chancellor of the Exchequer Alistair Darling told CNBC Thursday.
"We will talk to the Americans about their proposals when they've got further details. I think a transaction tax, a levy, is something that would only work if it was agreed internationally. It would have to be something that was agreed in every single country," Darling said.
"My first priority is to make sure that we implement what we agreed with the G20 meetings last year and that is to make sure that banks hold adequate capital," he said.
- Watch the full interview with Alistair Darling above.
Obama roiled the financial sector earlier this month with proposals designed to reduce risk-taking. The president proposed that Wall Street banks should pay up to $117 billion to repay taxpayers for bailouts. The plans would also force large banks to sell off riskier units such as proprietary trading and hedge funds.
In the UK, Darling introduced a one-off tax on bankers' bonuses earlier in the year and has openly discussed the possibility of a transaction tax. He is set to meet with leaders from the banking industry in Davos later Thursday to discuss the future of the sector.
George Osborne, UK Shadow Finance Minister for the Conservative Party, told CNBC that the plans to break up the banks were the right way to reduce risk and backed Obama's levy proposals.
"I think that President Obama and Paul Volcker (former chief of the Federal Reserve) are heading in the right direction in saying that the riskiest end of investment banking … doesn't sit easily with retail deposit taking," Osborne said.
"We're interested in looking at is the idea of some kind of levy going forward that acts as an insurance policy for tax payers across the world," he said.
Osborne, who many analysts believe will be in charge of the UK’s finances by summer, also stressed that any plans should be international and agreed through the G20.
- Watch the full interview with George Osborne here >>>
Bob Diamond, president of Barclays, disagreed and told CNBC that breaking up banks is not the best way to reduce risk in the system.
"There is absolutely no evidence ... to say big is bad or big is riskier," Diamond told CNBC. "Banks aren't big because they want to be big, banks are big because their customers need them to be big."
Tighter regulation in the financial sector could put a serious dampener of economic growth and there is a trade off between the two, Peter Sands, CEO of Standard Chartered, told CNBC.
"What we need is a better set of regulations that make the system safer and we also need to make the system efficient and effective in supporting the real economy," Sands said.
- Watch the full interview with Peter Sands here >>>