Banking: Levy

House of Lords written question – answered at on 18 November 2010.

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Photo of Lord Myners Lord Myners Labour

To ask Her Majesty's Government whether the burden of the proposed banks levy will fall more heavily on high street banks than investment banks.

Photo of Lord Sassoon Lord Sassoon The Commercial Secretary to the Treasury

The bank levy has been designed to target short-term, and therefore riskier, funding, which contributed to serious liquidity problems that played a key role in the financial crisis. The levy does not fall on insured customer deposits and only applies at half-rate to uninsured customer deposits (except for those from financial institutions) and longer-maturity funding (i.e. over one year remaining to maturity).

The burden of the levy will therefore fall proportionately more on banks that rely on short-term wholesale funding relative to those predominantly funded by retail deposits and long-term funds.

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