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UK's Challenger banks to be hit by new banking rules.

Global Banking News-July 9, 2015--UK's Challenger banks to be hit by new banking rules

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Global Banking News - 09 July 2015

Analysts are of the opinion that new banking rules in the UK will affect challenger banks the most.

A new 8 percent surcharge on bank profits will hit newer banks, according to Moody's Investor Services. The surcharge is to come into effect next year and accompanies a reduction, and phasing out, of the controversial bank levy in the next six years.

Since newer banks could generate more profits as they do not have to atone for past misdeeds, they will have to eventually pay out more as surcharges.

Carlos Suarez Duarte, vice president at Moody's Investors Service, said, 'We believe that the positive effects of the reduction of the bank levy from 0.21 percent to 0.1 percent of global chargeable liabilities will be largely offset by the introduction next year of a new 8 percent surcharge on bank profits. However, structurally it is a more bondholder-friendly tax regime because it partly shifts the burden from the balance sheet to earnings, meaning that a loss-making bank would have a reduced overall charge. Profitable challenger banks will be the most affected by the new charge on profits, while the exclusion of the chargeable liabilities outside the UK from the calculation by 2021 will be positive for UK banks with large overseas operations such as HSBC and Standard Chartered.'

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Publication:Global Banking News (GBN)
Geographic Code:4EUUK
Date:Jul 9, 2015
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