In an advance chapter of the IMF’s upcoming Global Financial Stability Report, the group investigates the “merits and feasibility of systemic-risk-based capital surcharges”. Otherwise known as bank taxes, these levies enjoy broad support around the world, although Sweden is the only country currently collecting such fees from its domestic banks.
The IMF reviews the literature and develops a framework for assessing a charge on banks based on the threat that they pose to the global financial system. This would discourage banks from becoming “too big to fail” and raise funds to finance future bailouts (or pay down the deficits that resulted from past bailouts).
The IMF is careful not to endorse the imposition of such fees. As if to underline the unreality of its simulations, it makes the following assumptions:
(1) the capital surcharges are estimated across countries;
(2) regulators have access to the relevant cross-border data; and
(3) these surcharges can be enforced seamlessly across countries.
On these points, the gulf between theory and practice is as wide as the spread on subprime mortgage-backed collateralised debt obligations underwritten by Greek banks.