23 May 2013

Europe's banks caution Finance Ministers on negative impact of FTT

Nine European trade organisations* have co-signed a letter addressed to the Irish Minister of Finance and President of the ECOFIN Mr Noonan to warn about the negative effects of the proposed financial transaction tax (FTT) on financial activities that are essential to the functioning of financial markets and our economy as a whole, such as government financing, risk hedging and corporate access to finance. 

The undersigning organisations believe that the negative consequences of the tax will be proportionate to its huge effective magnitude and will dis-incentivise on-exchange trading and clearing, contrary to regulatory reforms implementing the G20 objectives whilst the real economy will mostly have to bear the additional costs arising from the FTT.

“While we fully recognise the objective of generating new sources of revenue for public finances”, explained Guido Ravoet, Chief Executive of the EBF, “we can only regret the negative consequences the FTT - as it is currently foreseen - would have on competition among financial services actors in Europe, merely on the basis of their location in or connection to the FTT zone".

The industry fears that introducing an FTT based on a territorial scope limited to 11 Member States will result in an extremely high pressure on these countries’ financial services operators, particularly at a time of high economic uncertainty. “We are convinced that the FTT would significantly increase the dependence of these countries’ governments on financial markets outside the FTT zone and outside Europe”, added Ravoet.

The signatories of the letter, therefore, urge ECOFIN Ministers to reconsider the Commission’s proposal in light of the detrimental effects that will accrue from its imposition.

Press release

Full letter

* The Association of International Life Offices (AILO), the European Association of Cooperative Banks (EACB), the European Banking Federation (EBF), the European Fund and Asset Management Association (EFAMA), the European Repo Council (ERC), the European Savings Banks Group (ESBG), the Fédération Européenne des Conseils et Intermédiaires Financiers (FECIF), the Federation of European Securities Exchanges (FESE), and the International Capital Market Association (ICMA)

© EBF