Following concerns Basel III rules will push up costs to corporates, Britain’s largest banks are facing a larger-than-expected new tax. The government expects to raise £8.8 billion by 2014 – a cost which banks will want to recoup from customers, including corporates.
The balance sheet tax will be introduced on 1st January at a rate of 0.05%. After one year, that is set to increase to 0.075%. A £20 billion allowance will apply, intending to make smaller banks pay proportionately less than larger banks. The UK balance sheets of foreign banks operating in the country will also be hit by the levy, which is introduced in the 2011 Finance Bill.
This is an increase on the rates suggested by the government previously – changes which will raise an extra £400m by 2014.
It comes as Basel III rules are also anticipated to increase banks costs. The capital and liquidity requirements are prompting banks to promote longer-term deposits, and treasurers will see fewer opportunities to maintain both liquidity and yields on investments at the same time. January 2011’s edition of Treasury Today takes an in-depth look at Basel III’s impact on corporates.