Saturday 3 December 2016

Banking levy to leave BoI with big UK bill

Move also likely to decrease value of AIB's British assets

Joe Brennan

Published 23/06/2010 | 05:00

Bank of Ireland is the Irish lender most affected by a new banking levy introduced yesterday in the British budget.

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"From January 2011, we will introduce a bank levy," Chancellor of the Exchequer George Osborne said. "It will apply to the balance sheets of UK banks and building societies, and to the UK operations of banks from abroad."

The levy will be set at 0.04pc of institutions' balance sheets in 2011 before rising to 0.07pc thereafter. The measures are expected to raise in excess of £2bn (€2.4bn) a year.

Budgetary documents, published after his parliamentary speech, said the charge would only apply to banks with UK liabilities in excess of £20bn . This would affect Bank of Ireland and may have a marginal impact on the valuation AIB might get for its UK assets, which were put up for sale in March.

Bank of Ireland's UK Financial Services, with a balance sheet in excess of €50bn, will be hit by the measure. However, analysts said it was difficult to calculate the exact cost, as tier 1 capital, insured retail deposits and other liabilities were exempt from the levy.

Liabilities

AIB is understood to believe its UK operations, with a balance sheet of almost €25bn, may escape the levy, when exempt liabilities are stripped out.

But analysts believe that the issue may affect the value AIB will achieve for its UK assets, as they would increase the balance sheet size of its buyer.

Irish Life & Permanent and Irish Nationwide's balance sheets all fall below the £20bn threshold.

The UK treasury said that it would publish final details on the levy later this year, following consultation.

When asked about Ireland's stance on bank levies last week in a parliamentary question, Finance Minister Brian Lenihan said: "It is my intention to ensure that the sector contributes its appropriate share, thereby minimising as much as possible taxpayers' exposure to potential costs arising from state support of the banking sector."

France and Germany also signalled yesterday their commitment to introducing similar measures, which echo European Commission proposals that trading bloc's banks be taxed to cover the costs of future financial meltdowns.

Europe's largest economies are looking to push the agenda with other members of the G20 at a summit in Canada this weekend.

Irish Independent

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