German institutions and banks condemned efforts by Germany and France to push ahead with a financial transaction tax in the euro zone without including leading centres such as London. German Chancellor Angela Merkel and French President Nicolas Sarkozy on Wednesday voiced their determination to press ahead with a tax on financial transactions opposed by Britain, but appeared to diverge on the timing. “If a financial transaction tax is not introduced on an international basis, it shouldn't happen. We reject moves to create tax havens within the European Union,” said Hans Reckers, managing director of the association of German public sector banks. Andreas Schmitz, president of the association of German private banks, on Wednesday said the introduction of a financial transaction tax in the euro zone could result in business migrating to less-regulated territories. This would dent trading results for banks in Germany and continental Germany in particular. “It could have a significant impact on earnings,” Schmitz said. Earnings at German banks could fall between 5 and 10 percent he further said, adding the cost of clearing and settling trades could double. Deutsche Boerse, operator of the Frankfurt Stock Exchange and the Eurex derivatives exchange, said, “A selectively implemented transaction tax may cause trading to migrate to markets which are least regulated. “This is not conducive to improving systemic stability of global markets. It would make more sense to strengthen the institutions which contribute toward systemic stability; for example central counterparties in Europe.” The BdB, which represents Commerzbank and Deutsche Bank, also said the situation in Greece remains dangerous, and that German banks remain well capitalised. Banks are also well placed to implement Basel III capital rules, Schmitz added.
