Bank Levies Aren't the Answer to the UK's Fiscal Needs
If lenders were extracting excess profits from the state, taxation would be better than messing with central bank interest payments and their role in monetary policy. The trouble for Reeves, however, is that the evidence for finance plundering the BOE is flimsy. Moreover, even a heavy-handed extra levy on bank earnings would raise pitiful amounts compared with what the UK needs. Still, the budget pressure is such that Reeves might announce some kind of levy, alongside a slate of more industry-friendly policies, as part of the government's strategy for financial services at the annual Mansion House dinner on Tuesday night.
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CC-Transcript 00:00 Now let me turn to the changes I'm making to capital requirements to allow UK banks to do more lending and release more capital for investment into our infrastructure and into our businesses. First, I'm supporting the Bank of England's decision to raise the asset threshold for AML requirements to between 25 and £40 billion. This will both benefit the Challenger banks and bring increased competition and innovation to the market and support those businesses to expand their footprint here in the UK. Second, I am confirming our approach to Basel 3.1 implementing lower capital requirements for domestically focused banks from January 2027, while preserving flexibility on our approach for international banks to ensure that the UK always remains competitive whilst aligning with international standards. Third, I have committed to meaningful reform of the UK's ring fencing regime. Recognizing that now is the time to go further in tackling inefficiency and boosting growth. While retaining the aspects of the regime that support financial stability and protect consumer deposits. And fourth, following the new growth focused remit letter I sent in November, I welcomed the Financial Policy Committee's announcement that it will review the overall level of bank capital needed for UK financial stability. Reporting back to me by the end of this year. The review will inform the work that the Treasury is taking forward with the bank to ensure the prudential framework strikes the optimal balance to deliver resilience, growth and competitiveness.
