The government will consult on the viability of a financial activities tax on profits and remuneration in the financial services sector.
Financial Secretary to the Treasury, Mark Hoban MP said that disclosure on remuneration practices will be scrutinised. The measures were reiterated in an announcement today clarifying details on a bank levy, which appeared in yesterday’s Comprehensive Spending Review.
Draft legislation and accompanying consultation on the permanent bank levy, expected to generate around £2.5 billion of annual revenue, will be published before the end of the year. It aims to encourage banks to move to less risky funding profiles.
Hoban said: “We have consulted on the design of the scheme so that it achieves two objectives: firstly, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy. Secondly, the final scheme design incentivises banks to make greater use of more stable financial sources, such as long term debt and equity, working with the grain of our wider reform programme.”
In addition, the government has also asked the Financial Services Authority (FSA) to consider imposing more stringent requirements on the deferral and award of variable pay, as well as examine ways to strengthen the link between performance and remuneration to ensure that incentives are aligned with the long-term performance of the firm. It will also be asked to look at how to vary capital requirements to offset risk in remuneration practices.
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