Bank levy to raise £2.5bn

21st Oct 2010 16:47

A permanent tax on the banks will raise about £2.5bn each year by 2012-13 onwards, the government said today.The new levy comes into force from January and will mean the banks make "'a fair contribution" to the potential risks they pose to the financial system and to encourage them to move to less risky funding,' Treasury minister Mark Hoban said."It will apply to the global balance sheets of UK banks and the UK operations of banks from other countries," the Treasury added in a statement.The British Bankers' Association said the levy "will have a significant impact" on overseas banks, adding more clarity is needed on how it will interact with taxation in other countries. "Some banks could be taxed multiple times by multiple jurisdictions on the same activities," the BBA said.A consultation period will run until 19 November, with the tax rate set afterthat. Wholesale liabilities that mature in less than a year will be taxed at a rate of 0.07%. Longer term liabilities will be half that rate while Tier 1 capital and insured deposits are exempt.Deposits not covered by insurance or a state guarantee will now also be subject to a half rate, which eases the cost for banks with large numbers of foreign depositors such as HSBC and Standard Chartered.Analysts say the levy could cost the major high street banks £200m each year. Some 200 overseas-based banks will also be affected.