BRITISH banks are on the hook for billions of dollars under US government plans to hit Wall Street with a $117bn (£72bn) 10-year levy.
Barclays Capital, Royal Bank of Scotland and HSBC will fall within the scope of President Barack Obama’s charge, which is designed to recoup losses incurred by the Tarp scheme. Last night, analysts estimated the three companies could be forced to hand over up to $15bn through their US subsidiaries.
White House officials said 35 American institutions – certain to include Goldman Sachs, Citigroup and Morgan Stanley – and 15 international groups with US assets of $50bn or above would be affected by the tax.
Deutsche Bank, BNP Paribas, Commerzbank, Credit Suisse, UBS and Nomura are in the firing line. Insurers are also affected.
Obama said: “We want our money back... My commitment is to recover every single dime the American people are owed.”
The levy, which amounts to 15 basis points (0.15 per cent) of banks’ liabilities minus insured deposits and shareholders’ equity over 10 years, is intended to strike banks with large capital markets operations disproportionately hard.
Although Obama sought to link the tax to the Tarp deficit, analysts pointed out most investment banks had repaid their dues at a premium while insurer AIG and automakers General Motors and Chrysler – who are exempt from the charge – were responsible for the losses.
“The government needs money and the banks are the only companies in a position to pay,” said Atlantic Equities analyst Richard Staite.
The move is also a clear rebuke to bulge bracket firms as they ready themselves for an earnings season that could see up to $65bn paid out in total compensation for 2009.
Rochdale Securities vice president Dick Bove described the proposal as “probably about the most unfair thing ever seen on Wall Street”, but added: “The banks threw down the gauntlet to the President [with huge bonus payments]. The President threw it right back at them.”
Banking shares barely moved yesterday. Analysts said the market’s mild reaction reflected the belief that institutions would pass the cost of the tax on to customers rather than allow it to eat into profits.
The White House plans to lobby Britain and other G20 nations to introduce their own version of the tax. But the Treasury said last night that such a tax would be unnecessary as the government expects eventually to recover all of the bailout funding provided to UK banks.