Treasury call for challenger bank levy rethink
The new levy, proposed in the Summer Budget, means banks will have to pay 8% on all UK profits over £25m while the existing bank levy will drop from 0.21 per cent to 0.1 per cent by 2021.
Tyrie’s letter warned that the charge would hit challenger banks’ profitability and could reduce competition.
He wrote: “Millions of consumers and small businesses have been getting a poor deal for decades because of inadequate competition and choice in banking. It is crucial that competition from new and smaller banks is not unnecessarily impeded by prudential regulation.
“The PRA has taken steps to resolve this problem by adapting the capital requirements applied to new banks. The challengers want further adaptations to compensate for the future impact of the new corporation tax surcharge on their bottom line.
“It is essential that the surcharge does not obstruct parliament’s efforts over the past four years to increase competition in the banking sector. The committee will want an assurance from the PRA that it has assessed its effect on competition in the retail sector.”
Tyrie’s call follows concerns raised last month by the Building Societies Association suggesting the new levy could hit mortgage lending by up to £20bn in five years.