150611 Bank fines
  • HSBCing you. HSBC, the world’s local bank, could soon be a lot less local to London. As you’ve no doubt heard, it’s threatening to move its headquarters away from our capital as part of a general restructuring. And its reasons? Among them is the Bank Levy that George Osborne introduced in 2011. Back then, it was a 0.05 per cent change on banks’ global balance sheets. Now it has risen to 0.21 per cent.
  • The Levy, quantified… The graph at the top of this post shows how much has been raised by the Bank Levy since its introduction: from £1.5 billion in 2011 to £2.7 billion last year, for a total of £8.7 billion overall. It’s true that a good proportion of this has been – and will continue to be – paid by HSBC. A tax on global balance sheets hits them harder precisely because their global balance sheets are so sprawling. It’s expected that they will have to stump up £1 billion by themselves this year
  • …and the fines. But what’s this? The graph also shows the amount that the banks have had to pay out in fines due to malpractice. It’s less than the Bank Levy, but it’s not an insignificant amount: £3.1 billion, in fact, since 2011, or 36 per cent of what the Bank Levy has accrued. And that is just for the United Kingdom. HSBC had to pay out £1.2 billion to US authorities after an investigation into money laundering in 2012. I repeat: money laundering. Funny how the banks don’t highlight those sorts of costs when they complain about taxes.
  • Tight-lipped George. Nevertheless, will Osborne cut the bank levy to keep HSBC happy and in situ? It didn’t come up in his Mansion House speech last night, despite expectations that it would – which leaves the forthcoming Budget.
  • Money-saving. But here’s the rub: the Bank Levy is expected to raise £3.7 billion a year from now on – which is roughly equivalent to an extra penny on the basic rate of Income Tax or, more pertinently for the banks, increasing Corporation Tax by 2 per cent. This is money that the Chancellor will be loath to lose. So perhaps he should just stick to the message the he delivered last night: “there is no trade-off between high standards of conduct and competitiveness.” The banks can make and save money by being good.