New banking ‘balance sheet’ levy to be introduced in the UK, government announces

14 July 2010

The British Coalition government is drawing up plans for a ‘balance sheet’ levy for banks and building societies which could generate up to £2.5 billion per year.

According to the authorities, the new piece of legislation is aimed at increasing the stability of the banking sector by ensuring institutions find funding from less riskier sources.

The introduction of the new levy was first announced by chancellor of the exchequer George Osborne in the government’s June Budget.

Mark Hoban, financial secretary to the Treasury, said that it was the culture of “excessive risk taking” within the industry which led to the recent global credit crisis.

Coupled with broader regulatory reform, “the levy is intended to ensure that the banking sector makes a fair contribution that reflects the risks it poses to the financial system and the wider economy, and to encourage banks to move away from riskier funding”, he explained.

Representatives from the French and German authorities announced that they would be looking to implement a similar banking levy when Mr Osborne unveiled his plans earlier in the year.

Meanwhile, Mr Hoban told attendees at the annual dinner of the British Bankers’ Association that a reform of the payment culture within the sector is needed for banks to regain public trust.

By Jim Ottewill

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