Bank levy to be based on guaranteed deposits in bid to raise €200m

The Government’s move to more than double its revenue haul from the bank levy to €200 million will see it move to basing the charge on the deposits of the State’s three remaining retail banks that are covered by the deposits guarantee scheme.

PTSB, formerly known as Permanent TSB, was disproportionately affected by the previous basis of calculation, which was off the level of deposit interest retention tax (Dirt) that banks collected and passed on to the Revenue Commissioners.

That is because the smallest of the three banks has a relatively higher level of retail customers whose deposits are subject to Dirt, as well the fact that it has traditionally paid more interest, according to analysts.

The levy will switch next year to being charged at a rate of 0.112 per cent of the deposits held by the three domestic banks that are covered by the European Union (Deposit Guarantee Schemes) Regulations 2015, according to the Finance (No. 2) Bill 2023, published on Thursday.

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The scheme, administered in the Republic by the Central Bank, covers deposits of up to €100,000 per customer per bank.

The levy is currently raising about €87 million a year, down from €150 million annually between 2014 and 2021, before Ulster Bank and KBC Bank Ireland became exempt from the charge when they signalled they were exiting the market.

Minister for Finance Michael McGrath had already signalled in his Budget 2024 speech last week that the industry charge would increase to €200 million next year.

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It is understood that PTSB’s charge will increase marginally, to about €23 million from €22 million last year. Sources said that AIB’s is on track to jump to almost €100 million from €37 million, while Bank of Ireland’s charge is expected to come to close to €90 million, up from €25 million previously.

The combined estimates provided by sources point to a figure of as much as €213 million. However, the initial figures will be tightened in the coming weeks.

Barclays Bank Ireland, as a taker of deposits, had also been subject to a €3 million levy in recent years. It will be exempt under the revised plan.

Minister for Finance’s move to increase the haul from the levy has occurred against the backdrop of soaring interest income across the banks as they benefit from rising interest rates internationally.

AIB saw its net profit soar 79 per cent to €854 million in the first half of this year, while Bank of Ireland’s earnings surged 200 per cent to €853 million – driven by interest they received on the combined €60 billion of surplus deposits they had stored with the Central Bank.