LJUBLJANA, Nov 11 (Reuters) - Taxes on bank transactions and levies on balance sheet liabilities could help improve financial stability, ECB Governing Council member Marko Kranjec said in an article published on Thursday.
Kranjec, who is also a governor of the Slovenian central bank, wrote in the monthly magazine Bancni Vestnik that while "broad international consensus" would be needed for a transaction tax, this would make speculation less profitable and liability levies would prevent excessive leverage.
Slovenia is considering introducing selective bank taxes to spur lending as the European Union and wider international community consider financial transaction taxes.
Kranjec said the taxes could provide better control incentives in financial institutions where intense competition for market share and profits could "create perverse incentives for risk taking which is well beyond prudent behaviour".
"The appropriate governance of financial intermediaries is therefore of primary importance."
One way to deal with the issue would be to make top bankers and management "responsible for the protection of the balance sheet (of their bank) as a whole".
Another way would be to follow U.S. plans -- known as the Volcker rule -- and split banks' traditional commercial banking parts from more risky investment banking operations.
He said the higher risk areas would enjoy no public bail-outs and it would be up to shareholders to keep them in check.
However, "narrow banking or limited purpose banking would probably not prevent future financial crises and systemic instability", Kranjec said.
Making bank employees responsible for the balance sheet as a whole would therefore be a better approach, he said. (Reporting by Marja Novak; editing by Giles Elgood)