Canada has won a key battle against a global bank tax as G20 finance ministers came to an agreement to allow countries to deal with the issue as they want.
Bank tax supporters, which include the United States and Europe, are free to move ahead with the tax, but the G20 agreement allows other countries to regulate the banking sector as they see fit.
"The majority of the countries in the G20 do not support an ex ante bank tax, that is clear," Canadian Finance Minister Jim Flaherty said at a news conference, following a two-day meeting of finance ministers in advance of this month's G20 summit meeting in Toronto.
"At the end of the day, different countries will choose different ways of reaching the goal (that banks should pay for government interventions) but there is no agreement to proceed with an ex ante bank tax," he said.
In their communique, the G20 finance ministers and central bankers said a "fair and substantial" contribution should be made by the financial sector for the costs associated with the government's intervention in the sector.
The statement allows G20 members to avoid a bank tax, if they wish, as the requirement for banks to pay back government aid is limited to countries that bailed out the banking sector.
The wording allows for a "range of options" to deal with the issue.
"All of us have a strong interest in seeing those programs succeed in restoring confidence," U.S. Treasury Secretary Timothy Geithner told reporters.
Besides Canada, Japan and Australia have spoken out against a bank tax.
The statement sets forth the economic agenda going into Toronto later this month.
"The recent volatility in financial markets reminds us that significant challenges remain and underscores the importance of international co-operation," the statement said.
Europe's debt has sparked fear that the global economy could enter into a second recession, following the one set off in 2008 by the collapse of the U.S. sub-prime mortgage industry.
The G20 group also said it welcomed the recent $1 trillion bailout in Europe for countries such as Greece who are dealing with unsustainable debt.
