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Peter van de Ven, OECD

Agenda Item 6 Stability Fees Meeting of the Advisory Expert Group (AEG) on National Accounts Luxembourg, 29-31 May, 2013. Peter van de Ven, OECD. What’s the issue?. Many countries (14) introduced a number of schemes with levies on banks: Payment for deposit insurance

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Peter van de Ven, OECD

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  1. Agenda Item 6 Stability Fees Meeting of the Advisory Expert Group (AEG) on National Accounts Luxembourg, 29-31 May, 2013 Peter van de Ven, OECD

  2. What’s the issue? • Many countries (14) introduced a number of schemes with levies on banks: • Payment for deposit insurance • Instrument to manage financial stability • Not new, several longstanding deposit insurance schemes • Raises questions on the recording of the payments: taxes versus insurance-type of transactions

  3. Main types of schemes • New schemes: revenue base is (part of) the bank’s balance sheet or the nominal value of derivatives (trading volume and net stock) => vast majority: taxes • Government realises the assets of failed banks to compensate depositors => capital tax (UK, NA) or capital transfer (UK, treasury) and non-tax revenue (Australia) • Long-standing schemes with payments consistent with cost of insurance (?) => insurance (except Canada: taxes) • Involvement of non-government institution • Voluntary schemes

  4. International standards Criteria for recording as taxes (SNA 2008) • Payments should compulsory • Payments should be made to government • Payments should be unrequited => payments clearly out of all proportion to the costs of providing the services Possible additional criteria (GFS Manual) • Disconnect between payer of levies and receiver of the benefits • Service is fairly general (collective), not specific (individual) • (Non-)proportionality at the individual level Note: Existence of a special hypothecated fund

  5. Further discussion of deposit insurance schemes Proportionality of the payments: • Here: service component + risk component relevant • After the exceptional events of the financial crisis: nearly impossible to evaluate the proportionality • Retrospective element => “excessive rates” => taxes 1st proposal: • New schemes: taxes, unless clear evidence of proportionality • Long-standing schemes: insurance, unless clear evidence of non-proportionality 2nd proposal: always taxes, unless clear evidence of proportionality

  6. Further discussion of realisation of assets to compensate depositors Appropriation of assets: • Capital tax or capital transfer? • Recording as taxes inconsistent with SNA-definition: levies “at irregular intervals on the values of the assets or net worth or on the values of the assets transferred between institutional units” • Taxes only relevant for additional levies in the case of shortfalls Compensation of depositors: • Capital transfer => asymmetry with recording of losses on deposits as “another change in the volume of assets” Proposal: No recording of transactions, simply treat it as winding down the bank

  7. Summary proposals • Steady state long-standing schemes: insurance, unless clear evidence of non-proportionality • New schemes: taxes, unless clear evidence of proportionality (irrespective of existence of hypothecated funds and regardless of government having a contingency to guarantee the deposits) • Compulsory payments to schemes managed by public corporations/funds: • If government fully determines pricing policy and guarantees any shortfalls => part of government; treatment as taxes • If not, treatment as non-tax payments • Realisation of assets to compensate depositors: Not to be accounted for; levies in case of shortfalls to be treated as taxes; minor excess of assets to be treated as payment for services

  8. Thank you for your attention!

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