On Tuesday, Chancellor of the Exchequer John Healey told chiefs of Britain's major lenders that the UK's fiscal position is tight, but he has not made a call on new bank taxes in this month's Budget, a person familiar with the discussion said. The Treasury declined to comment immediately.
Attendees included HSBC's Georges Elhedery, Barclays's CS Venkatakrishnan, Lloyds Banking Group's Charlie Nunn and NatWest Group's Paul Thwaite, the person said. Also present, per one of the people, were Mahesh Aditya, head of Banco Santander SA's UK operations, and Debbie Crosbie, the chief executive of Nationwide Building Society. City Minister Lucy Rigby joined the breakfast session with Healey.
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Executives are worried Healey is weighing extra taxes on UK-based lenders to raise revenue in the Budget, the people said. Bloomberg has reported that one idea under consideration is a windfall levy that would not apply to international banks. According to two people with knowledge of the discussions, they also talked about the deployment of customer deposits: high-street banks typically channel those funds into credit for small businesses and other customers, while some firms - including some fintechs - leave the money parked at the Bank of England instead of making loans.
According to people with knowledge of the meeting, CEOs argued that because international investors own shares in the big UK banks, targeting only domestic lenders with an extra tax would still deter overseas investment into the UK. They also said the Bank of England's capital requirements are tougher than in other markets and that this restrains lending. The people said Healey seemed receptive to the bankers' request that the BoE take another look at those standards. For savers and investors, the mix of possible tax changes and regulatory tweaks can sway how banks price products and how investors feel about UK financials.
How this fight resolves affects lending rates and savings yields. Get the free Market Briefs daily newsletter and follow the argument.
