Oct 13, 2021

The levy on Irish banks has been extended for another year to the end of 2022, but the Government is giving up €63m in receipts with the departure of KBC and Ulster Bank from the Irish market. The bank levy was due to expire at the end of this year, but Finance Minister Paschal Donohoe announced it is now going to run through the end of next year, bringing in €87m instead of the €150m from this year. Although the extension was expected by the banks, the reduced takings from the measure are something of a surprise. The levy is charged on the amount of deposits held in the main retail banks, but it will apply to fewer institutions next year as Ulster Bank and KBC Bank Ireland are exiting the market. Now only AIB, Bank of Ireland and Permanent TSB will be included in the scope of the levy. However, the Department of Finance will not be asking those banks to pay more to make up the difference, even though the three will be absorbing the bulk of the deposits their departing competitors are leaving behind. AIB and Permanent TSB are negotiating to take over Ulster Bank’s performing assets and liabilities, while Bank of Ireland has a memorandum of understanding with KBC to take on its mortgage and deposit books. But despite the total quantum of deposits remaining roughly the same, the amount collected via the levy will be in the region of €87m. The Department of Finance has committed to reviewing the levy next year, which is a signal that it could be withdrawn. Bank investors would welcome such a move, as the savings would drop through directly to the banks’ bottom line, improving their profitability. The removal of the levy would also show that the Irish banks continuing on the path to normalisation, potentially helping the State market shares and reduce its ownership of the sector. Business Newsletter