Introduction: structure: steps for determining the amount of the bank levy: step 5
Paragraph 6(2) of Schedule 19
The first £20 billion of chargeable equity and liabilities does not attract a bank levy charge.
Where the chargeable equity and liabilities are greater than £20 billion, the first £20 billion is to be allocated against chargeable equity and long term liabilities and short term chargeable liabilities in the same proportions as calculated in Step 4.
This requires that:
- the amount of the equity and long term liabilities are reduced by an amount equal to A% of £20,000,000,000, and
- the amount of short term liabilities are reduced by an amount equal to B% of £20,000,000,000.
Once the calculation has been undertaken proceed to Step 6 (BKLM154600).
Example: Bank Z
|Step 1||Bank Z determines in accordance with Part 4 of Schedule 19 that for the period of account ended 31 December 2014 that it has chargeable equity and liabilities of £500 billion.|
|Step 2||The chargeable equities and liabilities exceed £20 billion so Bank Z proceeds to step 3.|
|Step 3||Bank Z determines that of its £500 billion chargeable equity and liabilities £200 billion are long term and £300 billion are short term.|
|Step 4||Bank Z must then determine the proportion of its chargeable equities and liabilities that are long term (‘A%’) and the proportion that are short term (‘B%’).|
|* A% is calculated as 200/500 which means that 40% of its chargeable equity and liabilities are long term equity and liabilities.|
|* B% is 300/500 which means that 60% of its chargeable liabilities are short term liabilities.|
|Step 5||Bank Z must therefore reduce the amount of equity and long term liabilities by A% of £20 billion and reduce the amount of short term liabilities by B% of £20 billion.|
|Long term (£bn)|
|Chargeable equity and liabilities||200|
|40% of £20 billion allowance||8|
|Total chargeable equity and long term liabilities||192|
|Short term (£bn)|
|60% of £20 billion allowance||12|
|Total chargeable short term liabilities||288|
|Step 6||As the chargeable period in this case is 12 months Bank Z proceeds to step 7.|
|Step 7||The charge on total equity and long term liabilities is at 0.0525% and the charge total short term liabilities at 0.105%.|
|Levy Rate||Bank Levy|
|Total chargeable equity and long term liabilities||£192bn||0.0525%||£100.8m|
|Total chargeable short term liabilities||£288bn||0.105%||£302.4m|
|Total bank levy chargeable||£403.2m|
So total bank levy due from Bank Z will be £403.2 million.