John
06-22-2010, 05:49 PM
Britain slapped a 2 billion pound ($3.1 billion) annual tax on banks on Tuesday and Germany and France said they will follow suit, telling the industry it must pay for its part in the financial crisis.
Britain's tax was less harsh than some previous estimates, however, adding to evidence that resistance from other leading economies to imposing similar levies may cap the scale of steps taken by governments.
British banking shares were down on the day but cut their losses after Finance Minister George Osborne's speech.
"This was a crisis that started in the banking sector and the failures of the banks imposed a huge cost on the rest of society," British finance minister George Osborne said.
"So it is fair and right that in future banks should make a more appropriate contribution which reflects the many risks that they generate."
Germany, France and Britain issued a joint statement saying they would all introduce levies on their banks to ensure no country is disadvantaged.
France will present the details in its coming Budget and Germany plans to present draft legislation in the summer. phased in, helping bank shares erase most of their early losses.
Finance Ministers from the Group of 20 leading economies have dropped the idea of a global levy ahead of a summit this week due to Canadian and Japanese resistance. But European Union leaders, under pressure to justify austerity measures to their voters, renewed a call for international action last week.
"We have clarity and it's not as bad as the worst case scenario," said Andrew Lim, analyst at Matrix after Osborne's speech. "Now we know it's only 2 billion pounds and that includes the UK operations of the overseas banks."
Detailed Treasury forecasts in the Budget document showed it expects the levy to raise 1.2 billion pounds in 2011/12, rising to 2.5 billion pounds in 2013/14.
The levy will be set at 0.07 percent of assets, with a lower initial rate of 0.04 percent in 2011. It affects covered liabilities, which are assets with Tier 1 capital and customer deposits deducted, and includes a lower rate on longer maturity wholesale funding.
The tax was part of an emergency budget of harsh spending cuts and tax rises as the UK's new coalition government aimed at bringing down a record peacetime deficit.
A bank levy had been expected to cost the industry between 1 billion and 5 billion pounds, depending on its structure.
By 1420 GMT Britain's bank index was down 0.3 percent, having been down about 1.6 percent before the Budget.
Britain's tax was less harsh than some previous estimates, however, adding to evidence that resistance from other leading economies to imposing similar levies may cap the scale of steps taken by governments.
British banking shares were down on the day but cut their losses after Finance Minister George Osborne's speech.
"This was a crisis that started in the banking sector and the failures of the banks imposed a huge cost on the rest of society," British finance minister George Osborne said.
"So it is fair and right that in future banks should make a more appropriate contribution which reflects the many risks that they generate."
Germany, France and Britain issued a joint statement saying they would all introduce levies on their banks to ensure no country is disadvantaged.
France will present the details in its coming Budget and Germany plans to present draft legislation in the summer. phased in, helping bank shares erase most of their early losses.
Finance Ministers from the Group of 20 leading economies have dropped the idea of a global levy ahead of a summit this week due to Canadian and Japanese resistance. But European Union leaders, under pressure to justify austerity measures to their voters, renewed a call for international action last week.
"We have clarity and it's not as bad as the worst case scenario," said Andrew Lim, analyst at Matrix after Osborne's speech. "Now we know it's only 2 billion pounds and that includes the UK operations of the overseas banks."
Detailed Treasury forecasts in the Budget document showed it expects the levy to raise 1.2 billion pounds in 2011/12, rising to 2.5 billion pounds in 2013/14.
The levy will be set at 0.07 percent of assets, with a lower initial rate of 0.04 percent in 2011. It affects covered liabilities, which are assets with Tier 1 capital and customer deposits deducted, and includes a lower rate on longer maturity wholesale funding.
The tax was part of an emergency budget of harsh spending cuts and tax rises as the UK's new coalition government aimed at bringing down a record peacetime deficit.
A bank levy had been expected to cost the industry between 1 billion and 5 billion pounds, depending on its structure.
By 1420 GMT Britain's bank index was down 0.3 percent, having been down about 1.6 percent before the Budget.