Increased bank levy, a whole 0.06%!

The Treasurer Scott Morrison has announced in the budget that banks with debts over $100 billion (Westpac, Commonwealth bank, amongst others). This levy increases by 0.06% for the July 1st and is estimated to raise approximately $1.5 billion in the next for years.

But who will pay for this increase in tax?

Well, the banks may increase interest rates or mortgage rates to compensate for their losses, despite the big 5 banks having a combined income of above $30 billion. Staff and shareholders may also need to foot the bill for this levy, as wages could decrease or share prices fall, all to keep the big banks profits up.

Another part of this budget, banks will be fined for stepping out of line. Senior bank staff who are found to be in breach of their obligations will be stripped of all pay rises and barred from holding executive roles. If entire banks breach their conducts, small banks will be fined $50million and larger banks fined $200million.

So what do you think about this new levy, will it work?

http://www.abc.net.au/news/story-streams/federal-budget-2017/2017-05-09/federal-budget-2017-big-banks-bear-the-brunt/8511364

http://www.abc.net.au/news/story-streams/federal-budget-2017/2017-05-09/federal-budget-2017-big-banks-bear-the-brunt/8511364

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4 Comments

  1. I think in the long term it’s got the potential to work, but it would rely on a lot of transparency between banks and households/govs. It might be difficult to ensure that all official who are found to be in breach of their obligations are actually fined. (this might just be something to make consumers and household feel happy about?)

    Liked by 1 person

  2. I wonder if it is partially meant to be a disincentive for banks to carry large liabilities on their balance sheet to prevent a GFC-style crash? Perhaps a more fragmented banking industry with more, smaller players would be healthy for competition.

    Liked by 1 person

    1. Interesting point, though I thought we had a Glass-Steigel sytle law in australia preventing banks from investing more than a certain percent of their liquidity in investments, preventing a GFC style collapse?

      Liked by 1 person

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