Agenda Item 6 Stability Fees Meeting of the Advisory Expert Group (AEG) on National Accounts Luxembourg, 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 – 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 2

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 3

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 4

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 1 st proposal: New schemes: taxes, unless clear evidence of proportionality Long-standing schemes: insurance, unless clear evidence of non- proportionality 2 nd proposal: always taxes, unless clear evidence of proportionality 5

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 6

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 7

Thank you for your attention! 8