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Sustainable Financial Markets: Financial Transaction Tax and High Capital Buffers Indispensable

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  • Dorothea Schäfer

Abstract

The sustainability of the financial markets is a requirement that has only appeared on the economic policy agenda very recently, whereas a stable financial system has been a declared goal for decades. The relationship between sustainability and stability is, however, still unclear. The two terms are often used synonymously but stability is only one part of sustainability. The following outlines the requirements for sustainable financial markets based on the current general principles of environmental sustainability. Financial stability is considered a public good. The prerequisites for the sustainability of financial markets include internalizing costs of use, financial institutions forming adequate buffers in order to restore stability autonomously and without the help of the taxpayer, diversity, a longterm outlook, and credibility. Financial transaction tax and a higher leverage ratio meet the requirements for sustainability of financial markets; both are cornerstones of the planned restructuring of the financial markets.

Suggested Citation

  • Dorothea Schäfer, 2013. "Sustainable Financial Markets: Financial Transaction Tax and High Capital Buffers Indispensable," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 3(4), pages 3-9.
  • Handle: RePEc:diw:diwdeb:2013-4-1
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.419110.de/diw_econ_bull_2013-04-1.pdf
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    Keywords

    Sustainable financial architecture; financial transaction tax; leverage. - ratio;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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