Bank levy aims to generate £2.5 billion a year

Banking tax levy unveiled to generate capital and reduce investment risk. Tax reforms on banks revealed by the Treasury to promote safety practices within financial institutions. A new tax levy on bank balance sheets expected to raise £2.5 billion a year was announced by the government yesterday. The Treasury said the draft legislation, which will affect UK banks and the UK operations of banks from other countries from January 2011, will encourage banks to take fewer risks with their funding. The total size of bank balance sheets will be taxed excluding items such as bank capital and retail deposits covered by insurance. Uninsured deposits will be taxed at half of the final rate level, which is yet to be agreed upon.