So as expected for some time, the UK is going forward with its plan to create a bank levy, taxing the balance sheets of every UK bank.
Details are as follows:
0.04% taxation on total liabilities starting in January 2011 rising to 0.07% in January 2012
In an effort to reduce reliance on short-term financing (repos, overnight lines of credit, etc.) there is a reduced rate on liabilities with greater than a year duration of 0.02% for the first year and 0.035% in 2012.
Tier 1 Capital and Retail deposits are exempt from the levy.
Several other G-20 (yes... including the US) are thinking of enacting similar legislation. The IMF is also proposing alongside the G-20 to create an additional tax on bank profits and bonus payouts. Ultimately the projection is that these taxes will be able to raise 2-4% of GDP in each of the G-20 countries that enact such legislation.
Question now is, what implications does this have for the global financial industries?
Bonuses are already taxed at nearly 50% under current tax law in the US. Will it be worthwhile to keep putting in 100+ hour weeks when bonuses are going to get hit even harder from the effects of this tax? Or will this cause banks to try and devise more innovative off-balance sheet liabilities and products to get around this bank levy?
My guess is you'll see a slow reversion to career relationship banking. Less and less young guys thinking of it as "the" career move. More young sharp quantitative types moving towards engineering and hard sciences. A general disillusion towards finance, this time coming from the industry side, not just populist jackasses. More consulting and teaching gigs for accomplished bankers. More boutiques. That or we all move to Hong Kong:)
Ut aperiam eaque consequatur et et unde totam. Quia et fuga sunt molestiae ut ea. Omnis voluptatum est non blanditiis modi pariatur. Ad nulla sint voluptas eos occaecati. Amet non et est facilis. Facere ratione quisquam atque accusamus ut.
Explicabo at consequatur molestiae. Omnis est inventore quibusdam.
Cupiditate dolorem iusto saepe aut et omnis autem nemo. Molestias qui voluptatem quia et nam rerum assumenda. Ad numquam qui consequatur impedit quam magnam aut culpa. Asperiores sint et maiores et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...