Financial Secretary to the Treasury, Mark Hoban MP, announced today the publication by the Government of draft legislation on the Bank Levy, which was announced in the June Budget.
Following consultation with industry over the summer, the draft legislation and accompanying consultation response sets out the details of how the levy will work ahead of final legislation, which will be published before the end of the year.
The Government has carefully considered the responses from all interested parties during the consultation to help ensure the successful introduction of the Bank Levy, which is intended to encourage banks to move to less risky funding profiles. The levy is expected to generate around £2.5 billion of annual revenues by 2012-13. The levy will be permanent.
Mark Hoban said:
We have consulted on the design of the scheme so that it achieves two objectives: firstly, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy. Secondly, the final scheme design incentivises banks to make greater use of more stable financial sources, such as long term debt and equity, working with the grain of our wider reform programme.
Notes for editors
In its June Budget, the Government announced that it would introduce a levy based on banks’ balance sheets from 1 January 2011, intended to encourage banks to move to less risky funding profiles.
In addition to introducing a Bank Levy, the Government is taking action to tackle unacceptable bank bonuses. The Independent Commission on Banking will look at structural and non-structural measures to reform the banking system and promote competition. The Government will also consult on a remuneration disclosure scheme and, working with international partners, will explore the costs and benefits of a Financial Activities Tax on profits and remuneration. The Government has also asked the Financial Services Authority, as part of its forthcoming review of its Remuneration Code to consider imposing more stringent requirements on the deferral and award of variable pay; examine mechanisms for strengthening the link between performance and remuneration to ensure that incentives are aligned with the long-term performance of the firm; and consider how to vary capital requirements to offset risk in remuneration practices.
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