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
1. 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.
2. 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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