BKLM154500 - 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 (as shown in the example below).

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)
Chargeable liabilities	300
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 0.078% and the charge total short term liabilities at 0.156%.

-	-	Levy Rate	Bank Levy
Total chargeable equity and long term liabilities	£192bn	0.078%	£149.76m
Total chargeable short term liabilities	£288bn	0.156%	£449.28m
Total bank levy chargeable	-	-	£599.04m

So total bank levy due from Bank Z will be £599.04 million.