October 05, 2009

Paul Tucker, the deputy governor of the Bank of England, has proposed a levy on banks to pay for any future financial rescues as a way to curb reckless lending. Speaking to the Institute of International Finance in Istanbul, Tucker suggested that the levy threat would act both as a curb on behaviour by the banks, while also encouraging them to highlight to the authorities rivals that are acting recklessly.

“If the banking system knew that, in a systemic crisis, the banking industry would over time pick up the bill — if there was a bill — I would like to think that that would change your incentives,” he said. Mr Tucker suggested his scheme would be in addition to fees charged for the Financial Services Compensation Scheme.The deputy governor's comments are likely to unsettle further a bank industry already concerned about the prospect of additional taxation and controls as they recover from the credit crisis.