UK Chancellor Says Bank Tax Decision Still Open Ahead of Budget

UK Chancellor of the Exchequer John Healey told the heads of Britain’s big banks that he hasn’t yet decided whether to tax the sector in this month’s Budget, according to a person with knowledge of the matter.

The chancellor said the UK faces a tough fiscal position, but no decision on tax has been made, said the person, who asked not to be identified discussing private information. Healey met with banking leaders on Tuesday including HSBC Holdings Plc’s Georges Elhedery, CS Venkatakrishnan at Barclays Plc, Charlie Nunn from Lloyds Banking Group Plc and Paul Thwaite at NatWest Group Plc, the person said.

The meeting comes as bank leaders worry that Healey is considering levying extra taxes on domestic lenders in this month’s Budget to help raise revenues. That could be in the form of a windfall tax that won’t affect international banks, Bloomberg has reported .

There was also a discussion about how banks put savers’ deposits to work, with mainstream lenders cycling them into lending to small businesses and other areas, two people familiar with the talks said. A point was made on how institutions including some financial technology firms leave those deposits with the Bank of England, rather than deploying it into loans.

A spokesperson for the Treasury didn’t immediately comment.

Banking bosses who attended the breakfast meeting with Healey and City Minister Lucy Rigby argued that international investors own shares in big UK banks, the people said. The government will still depress overseas investment into the UK even if it limits an extra tax to domestic lenders, the CEOs argued in the meeting.

Mahesh Aditya, head of Banco Santander SA’s UK business and Debbie Crosbie, who runs the UK’s largest mutually-owned building society, Nationwide Building Society, were also in attendance, one of the people said.

The CEOs also raised concerns that the UK’s capital requirements, set by the Bank of England, are tougher than those in other jurisdictions, which holds back lending, according to the people with knowledge of the matter. Healey appeared sympathetic to the bankers’ calls for the BoE to revisit those standards, the people said.