Effective Regulation, Not Tax, Key To Reducing Bank Risk-AFME

22nd Jun 2010 13:36

By Patricia Kowsmann Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The Association for Financial Markets in Europe said Tuesday that while it welcomed more details on the tax that the U.K. government will impose on the banks, effective regulation remains the most important tool to avoid future crises. Earlier Tuesday, U.K. Chancellor of the Exchequer George Osborne said his government will impose a widely expected levy on banks' balance sheets starting in January next year. He said the government expects to raise GBP2 billion a year from the move. "The tax does not reduce risk in the financial system," the association, which has 197 members comprising leading European banks, as well as key regional banks, brokers and law firms, said in a statement. "There is also clearly a need for government, regulators and firms to work together to develop a robust regulatory structure that includes a resolution regime that will cope with bank failures without having to resort to taxpayers," it added. Shares of the U.K. banks gained following Osborne's announcement, since the levy was expected and the speech didn't bring surprises. At 1221 GMT, Lloyds Banking Group PLC (LYG) shares were up 1 pence, or 2.5%, at 58 pence. Royal Bank of Scotland Group PLC's (RBS) stock was also up 1 pence, or 1.4%, at 47 pence. Both banks are partly owned by the government. Barclays PLC (BCS) recovered some of earlier losses, and at 1221 GMT shares was down 8 pence, or 2.6%, at GBP3.09. -By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, [email protected] (END) Dow Jones Newswires June 22, 2010 08:36 ET (12:36 GMT)