UK bankers call for Budget rethink on levy
Banks have intensified their calls for George Osborne, the UK chancellor, to give them a break on the bank levy in this week’s Budget by arguing that it has already caused a 13 per cent shrinkage of UK banking assets, reports the Financial Times.
Optimism is growing among senior bankers and their advisers that Mr Osborne may throw the industry an olive branch in his Budget speech, including possibly appointing an external body to carry out a review of the levy.
The British Bankers’ Association has said in its Budget submission to the Treasury that the levy is “causing damage”, and called for a cap on its rate and a “sunset clause” to phase it out after a certain period.
Mr Osborne shocked the banking sector before the election by raising the levy by 50 per cent and changing it from a temporary tax to a permanent one.
HSBC, the biggest single contributor to the levy, fired a pre-election warning shot in the chancellor’s direction by saying it was reviewing whether to keep its headquarters in the UK, with a decision due by the end of the year.
Another idea that bankers say is being discussed by the Treasury is to shift how the levy is calculated from the global balance sheets of UK banks to their domestic activities. That would make it less punitive for HSBC with its big overseas operations.
The BBA says the fall in UK banking assets since the levy was introduced in 2011 is mostly due to a drop in non-sterling loans and securities, “indicating that some aspects of international banking are contracting”.
“The decline of the UK sector’s size contradicts the trends of other major international banking centres and indicates that the UK’s leading position is under threat,” it says.
Citigroup has recently written to customers of its London subsidiary to say it is considering merging it with its Dublin-based subsidiary, which people familiar with the bank say is a response to the UK’s growing tax and regulatory burden.
Credit Suisse and ING have warned the Treasury in pre-Budget talks that they are considering pulling some of their activities out of London. Other banks, such as Goldman Sachs, are also quietly examining such a move.
One senior City-based executive at a large foreign bank said the finance ministers of several other countries had been secretly lobbying him to move assets out of the UK. “They are knocking on our door and selling themselves as an attractive destination,” he said.
Mark Garnier, a Conservative MP and member of the Treasury select committee, says: “In my personal view I think we have reached a tipping point. I don’t think now is the right time to get rid of it, but I think there should be some ‘forward guidance’ on when it might be phased out.”
The BBA has commissioned Sir Hector Sants, former head of the City regulator, to lead a review by consultants Oliver Wyman of the competitiveness of the banking sector that will examine if it has driven foreign banks to move assets out of the UK.
John Kingman, one of Mr Osborne’s most senior aides, met executives from Citi, Credit Suisse, Nomura, ING, UBS, Morgan Stanley and Société Générale ahead of the Budget and assured them the chancellor would go as far as he could politically to support the banks, even though short-term policy shifts were unlikely.
A Treasury spokesman declined to comment.
