Bank Levy

DEFINITION of 'Bank Levy'

1) A type of taxation system on financial institutions, in which banks are forced to pay government taxes over and above any normal corporate taxes they may incur. This is done in order to maintain financial discipline and prevent outlandish spending, bonuses or possible overly risky behavior. Bank levies are generally viewed as punishment to financial institutions.


2) When a bank account is frozen due to a creditor trying to get the debtor to repay its debt. A bank levy can occur due to either unpaid taxes or unpaid debt. The IRS usually uses this method the most, but other creditors can use this method as well.

BREAKING DOWN 'Bank Levy'

1) Bank levies came into prominence following the 2008 global financial crisis, when many of the world's financial institutions were bailed out by their national governments to avoid a potentially even more disastrous outcome than what had already occurred. Subsequently, many economic leaders and pundits called for a tax on banks to prevent excessive employee bonuses, especially considering that many of the financial institutions would have ceased to existed had it not been for publicly funded government bailouts.


2) A bank levy is not a one-time event. A creditor can request a bank levy as many times as needed, in order to be repaid the debt due. Most banks charge a fee to their customers for processing a levy on their account. Some types of accounts, such as social security, income cannot be levied.

RELATED TERMS
  1. Levy

    The legal seizure of property to satisfy a debt. In the U.S., ...
  2. Taxes

    An involuntary fee levied on corporations or individuals that ...
  3. Mill Levy

    The assessed property tax rate used by local governments and ...
  4. Taxation

    Taxation refers to the act of a taxing authority actually levying ...
  5. Goods and Services Tax - GST

    A Canadian value-added tax levied on most goods and services ...
  6. Green Levy

    A tax imposed by a government on sources of pollution or carbon ...
Related Articles
  1. Economics

    Explaining Corporate Tax

    A corporate tax is a tax levied on the profits a corporation generates.
  2. Economics

    Macroeconomics: Government - Expenditures, Taxes and Debt

    By Stephen Simpson ExternalitiesIn a market economy there are important differences between public and private goods. Private goods are considered "rival and excludable" - one person consuming ...
  3. Home & Auto

    How Property Taxes Are Calculated

    Property taxes are calculated through use of the mill levy and the assessed property values.
  4. Home & Auto

    This Is How Property Taxes Are Calculated

    Understanding how property taxes work will ensure that you won't be overcharged.
  5. Taxes

    Understanding Taxation

    Taxation refers to the act of a taxing authority levying tax, typically a government – federal, state, county or city – collecting revenue from citizens.
  6. Investing News

    Box Inc: How Two Best Friends Launched a Potential Empire (BOX)

    Learn how Aaron Levie and Dylan Smith, along with other childhood friends, came up with the idea for Box Inc. in a backyard hot tub.
  7. Professionals

    Types Of Taxes

    These taxes are unavoidable for corporations.
  8. Taxes

    What's an Indirect Tax?

    An indirect tax is levied on goods or services rather than on an individual or a company.
  9. Taxes

    Understanding Income Tax

    Income tax is a levy many governments place on revenue of entities within their jurisdiction.
  10. Investing Basics

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
RELATED FAQS
  1. Can the IRS withhold your tax refund?

    Learn about the instances in which the IRS can levy your federal and state income tax refunds, and find out how the levy ... Read Answer >>
  2. Who first came up with the idea of a progressive tax?

    Learn how the progressive income tax system developed in the United States and became the federal government's primary revenue ... Read Answer >>
  3. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  4. What are key government regulations that affect investing in the banking sector?

    Discover how the global financial crisis of 2008 changed the face of banking in the United States and around the world by ... Read Answer >>
  5. What are the differences between preference shares and bonds?

    Learn what information banks keep on file for their customers, and understand how this information can be used to deny an ... Read Answer >>
  6. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center