French President Nicolas Sarkozy and Prime Minister Stephen Harper leave the Elysee Palace in Paris on Friday, June 4.LIONEL BONAVENTURE/AFP / Getty Images
The G8 and G20 are, fortunately, unlikely to arrive at a consensus in favour of a global bank tax at the end of June; instead, they appear to be heading toward a sensible agreement on how to implement international standards for bank capital.
On his journey to Western Europe this week, Stephen Harper may not have convinced David Cameron, the Prime Minister of Britain, and Nicolas Sarkozy, the President of France, to drop the proposal for an international bank tax, but China, India and Mexico, all members of the G20, are among the countries that oppose such a tax.
There may be a majority in favour of this essentially punitive measure among the old-money economic powers in the G8, but they can hardly pressure Canada to conform, when the leading emerging economies are dissenting, too.
The national governments that support the bank tax are more or less the same ones that had to lend - or even give - vast amounts of money to some of their countries' banks to keep them in business during the crisis of 2008-2009. They are understandably responding to the well-founded anger of their electorates, but such a burden on institutional lenders would not repair or undo the bailouts of the recent past; rather, it would be a clog on the regular flow of credit. That would harm the very peoples of the countries whose leaders are trying to appease them.
There is, however, agreement that the public should not have to reimburse banks for the banks' own errors, or to subsidize them. Mr. Harper is right to have said in Paris, "Even if countries do things differently, we would be able to agree on a common principle so it's not the taxpayers that are paying for those risks" - that is, the danger of bank insolvencies.
That common principle would presumably permit equivalent, but different, means of preventing bailouts of banks by governments and citizens. Consequently, Canada should be free to continue with its prudent rule requiring banks to have an asset-to-total-capital ratio of no more than 20 to 1. Other countries may reasonably hesitate to deleverage themselves too quickly, by enacting a similar limit; that could bring a recession-inviting credit crunch.
In the end, the long-standing Basel process for the converging standards of bank capital should aim at something like the Canadian regime. A bank tax that amounts to compulsory insolvency insurance should not be the long-term goal for the international financial community.