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EMERGENCY BUDGET 2010: Banking Levy could hit lease rates

Date: 22 June 2010   |   Author: Tristan Young

The banking levy, announced in the Emergency Budget, could have in impact on vehicle leasing rates, but only in the longer term, according to the Finance and Leasing Association.

The levy will apply to all large UK banks and the UK operations of foreign banks and will raise more than £2bn a year, according to Chancellor George Osborne.

Taking effect on 1 January 2011, it is proposed that the levy will be set at a rate of 0.04% of a bank's balance sheet, rising to 0.07% in 2012.

A spokesman for the FLA admitted that because motor finance providers rely on the wholesale funding market from the banks, the costs of the levy would be passed on to their customers. However, the spokesman added that any current arrangement is unlikely to allow for the costs to be passed on, but future arrangements may have to take the extra costs into account.

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