Standard Chartered\’s London costs

Not quite, not really:

Standard Chartered is taking a $700m annual hit on its bottom line as a result of being based in the UK, it can be disclosed.

The Asian-focused bank, which is headquartered in London, is booking the hit to profits as the result of the bank levy, the cost of funding and other regulatory costs.

The bank evy is a little different from the other things. The bank levy is the cost of purchasing government deposit insurance on those deposits (to the bank, liabiities) which are not covered by other schemes. This, at least presumaby, has vaue to the bank as it reduces the cost of the bank of those funds.

I don\’t doubt that there are stupid costs which have been loaded onto them for being UK domiciled but the banking levy is rather over egging that particular pudding.

1 thought on “Standard Chartered\’s London costs”

  1. Sorry, Tim, that’s not right – the bank levy is just a tax. It’s calculated on a bank’s liabilities/capital base excluding certain items, e.g. tier 1 equity and insured retail deposits. So it’s certainly not the government’s charge for insuring retail deposits – it’s designed to incentivise banks to obtain more of their funding from retail deposits and other “safe” sources and less from borrowing from the market.

    Tim adds: Quite: it’s a levy on liabiities that are not already insured under some other scheme. The rate is set on what looks like an actuarial basis too: it’s not far off what the FDIC charges US banks for the same insurance cover.

    Note, I didn’t say it’s a charge for insuring retai deposits: it’s one for insuring deposits which are not aready covered by other such schemes: as retail deposits are.

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