Emergency Budget: Bank levy to be introduced

The coalition government have unveiled a banks levy that will apply to the balance sheets of UK banks and building societies and to the UK operations of banks from abroad

The tax, which is to be introduced in January 2011, may raise over £2 billion each year.

Osborne also announced deductions for Tier one capital and insured retail deposits and a lower rate for longer maturity funding.

Smaller banks with liabilities below a certain level will not be liable for the levy.

Osborne stated that it would be unfair to wait until every country in the G20 introduces a bank levy, but that the French and Germans have joined the UK in committing to introduce a bank balance sheet levy.

Osborne said: "The failures of the banks imposed a huge cost on the rest of society. So I believe it is fair and it is right that in future banks should make a more appropriate contribution, which reflects the many risks they generate."