UK BANKS FACE $10BN BILL FROM U.S

Three British banks may have to pay more than $10 billion (£6 billion) to the US Government as part of its crackdown on financial institutions bailed out by taxpayers.

Royal Bank of Scotland, which is 84 per cent owned by the Government, may be on the hook for almost $1 billion to the US over the next decade under a stringent new levy announced by the Obama Administration yesterday. Barclays could face a total bill of about $5.6 billion over ten years, while HSBC may have to hand over $3.8 billion, Joseph Dickerson, an analyst at Execution, calculated as the details of the US levy emerged.

The three UK lenders were scrabbling to clarify their exposure to the tax, proposed by President Obama to claw back billions of dollars from banks that have been saved from collapse by state support. If approved by Congress, the new tax — which the White House called a “financial crisis responsibility fee” — would force about 50 banks, insurance companies and large broker-dealers collectively to pay the US Government about $90 billion over ten years. About 35 would be US companies and 10 to 15 US subsidiaries of foreign groups.

Barclays and HSBC are thought to be among the biggest foreign banks to be caught by the tax. RBS’s exposure is smaller than it would have been because it has in recent months reduced its US assets. The UK banks are caught despite not participating in the Troubled Asset Relief Programme because they benefited from systemic support from the US Government.

The tax is set to be on banks’ US assets, less their capital and deposits. The rate, at 0.15 per cent, will effectively be on their wholesale funded business. Mr Dickerson said that along with the bonus tax in the UK, “this is clearly going to be a cost of doing business in the Western world”.

The White House plans to lobby Britain and other G20 nations to introduce their own version of the tax. However, the Treasury said last night that such a tax would not be necessary in Britain, where the Government expected eventually to recover all of the bailout funding provided to banks at the height of the crisis.

Mr Obama timed the announcement of the levy to coincide with the start of the bank reporting season when bonuses are announced.

The President said that he was determined to recover “every dime” the American people were owed. “We want our money back and we are going to get it. My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people.”Most of the biggest banks refused to comment.

The new tax, which will become payable on June 30, will apply to companies with more than $50 billion in assets, whether or not they received bailout money. Sixty per cent of the money is expected to come from the ten largest institutions. These are likely to include Goldman Sachs, JPMorgan Chase, Deutsche Bank, Morgan Stanley, Citigroup, Bank of America and GE Capital. AIG, the insurer, would be liable for the tax but Fannie Mae and Freddie Mac, the housing financiers, and carmakers such as General Motors and Chrysler, all of which were funded under TARP, would be exempt.