Bigger banks should have to pay higher tax

Big banks should be taxed more than smaller ones because they pose a greater risk to the entire financial system, a study by the Bank for International Settlements said today.

It found that the risk banks pose increases more than proportionately to their size, the Wall Street Journal reported.

This comes at time when regulators are debating the merits of imposing taxes on systemically important banks to prevent a repeat of the fall-out that followed the collapse of Lehman Brothers a year ago.

The report, which studied 20 unnamed large banks, states: "A key result is that the contribution of an institution to system-wide risk generally increases more than proportionately with its size."

This, in turn, suggests that: "Any 'systemic charge' applied to individual institutions should increase more than proportionately with their relative size.

"In other words, there is a clear rationale for having tighter prudential standards for larger institutions."

The BIS, which is known as the bankers' bank, made no suggestion in the report as to who should impose the tax or where the revenues should go.