Global Bank Levy: Consensus continues to be elusive

Group of 20 nations failed to agree on a proposal to impose a global tax on banks that was aimed at making the financial industry bear the cost of bailouts, settling instead for a common set of guidelines. The G-20 could not make headway on the contentious issue of taxing banks for future bailouts with India, Australia and Canada opposing it.
Governments, Central banks and tax payers provided whopping amounts as bailout money to the banks during the crisis. Now the IMF and the other main proponents? the UK, Germany, France, and the US wants to impose a risk levy on their liabilities, profits and compensation. Apart from the objective of recovering the fiscal costs of bailing out banks during the crisis, the global tax on Banks also aims at creating a fund for similar future situations. Some law makers even insist that bank cough up additional cash to reimburse the tax payers and fund schools, hospitals and other public services.
Britain, France, US and Germany have always argued that the tax would curb the type of excessive financial risk-taking that pushed the global economy to the brink, and help build a shock absorber for future crises. But the idea came up against fierce wave of opposition from nations whose banking sectors survived the worst of the crisis intact. While opposing the levy, Australia and Canada established that such a tax is not needed as they did not suffer the financial crisis the way it had affected some other countries.
India was not at all in favor of imposing any tax on banks, but proposed a better option, to adopt regulatory mechanism as is being followed by Indian banks. India and the other opposing economies believed that the levy would hurt banks that had little to do with the crisis and would not prevent future meltdowns. The imposition of such a tax would bring down the margin of the banking business by as much as 20% and would end up doing more harm than good.
A levy in itself does not do anything to fix the underlying problems that caused the global financial crisis but, a well laid regulatory mechanism will definitely do the required. The solution lies in rectifying the flaws in the fundamentals and not in covering up the responsible flaws with another monetary imposition.