Citation
Kirkbride, P.J. (2010), "Editorial", International Journal of Law and Management, Vol. 52 No. 4. https://doi.org/10.1108/ijlma.2010.01052daa.001
Publisher
:Emerald Group Publishing Limited
Copyright © 2010, Emerald Group Publishing Limited
Editorial
Article Type: Editorial From: International Journal of Law and Management, Volume 52, Issue 4.
In this issue, we have a series of papers demonstrating the international reach of the journal: papers that examine and critique developments in the UK, China, India and Bangladesh. The topics range from capital valuation models (Paulo), e-commerce and legislative reform (Sumanjeet), shareholder protection (Wei-qi), through to legal accountability (Mollah).
Although all these papers and studies are of strong interest, the discussion and presentation of a paper on legal accountability is timely in view of the public outcry to determine lines of actual or future accountability following the global “banking and credit crisis”. The significance of the need for such debates has recently been illustrated through the reports of the international monetary fund's (the “IMF”) tax recommendations as a recovery of the banking crisis from those viewed as morally culpable, at least from the “popular press” perspective, and as an attempt to appease fears over a future repetition. The proposals emerged in April 2010 following a request from the G20 members countries. The IMF proposed two taxes or levies: a financial activities tax (FAT) levy; and a financial stability contribution (FSC). The FAT would be a general tax on profits and pay across a broadly defined financial services sector to include the insurance industry as well as banks. The FSC would be levied against banks and other systemically important financial institutions, initially at a flat rate and refined to increase in level in accordance with the greater risk in activity.
Although not met with welcoming arms from the industry, the proposed levies have found favourable comment from politicians and consumer groups alike, many of them keen to penalise the “fat-cat” bankers and to ensure radical reform to prevent a further collapse. For both the policy and lawmakers these proposals illustrate some interesting challenges, in addition to the need to appease a call for “justice”. First, a co-ordinated global response is required. This is emphasised by the IMF itself: it urges a global approach to this reform agenda in order to prevent banks and other institutions moving to more favourable political jurisdictions. A globally co-ordinated approach would assist in promoting a level playing field for cross-border institutions and ease implementation.
Second, an effective regulatory impact assessment is required. For example, there is a growing opinion that the FSC increases the reliance on public funds to bail out failing banks and others in the future. The point is made that the financial sector should not rely on public funds in the event of a crisis. As an industry it needs to put in place measures that will enable failing firms to be wound down or restructured without the needing taxpayer support. As the Association for Financial Markets in Europe has stated, “Banks must be allowed to fail and the cost of dealing with any failure must be first met by shareholders and creditors, not taxpayers”. The FSC might, paradoxically, increase risk taking and become viewed as a “bailout” fund!
Perhaps this is an area where, as Choudhary explores, is one requiring a perceived justice to appease the public concerns but, one suspects, that the importance and competitiveness (and contributions to revenue coffers) of the industry will not encourage radical legislative interference. To the contrary, one suspects that the responses and articulations from the industry representative bodies will persuade Governments to concede to a self-regulatory approach – on this occasion!
Professor James Kirkbride