Bank Levy

AAA

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.

INVESTOPEDIA EXPLAINS '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. Financial Stability Plan (FSP)

    A plan unveiled by the Obama administration in April, 2009, that ...
  2. TARP Bonuses

    A buzzword coined by the financial media during the financial ...
  3. Bailout

    A situation in which a business, individual or government offers ...
  4. Credit Crisis

    A crisis that occurs when several financial institutions issue ...
  5. Troubled Asset Relief Program - ...

    A government program created for the establishment and management ...
  6. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
Related Articles
  1. Government Regulations: Do They Help ...
    Entrepreneurship

    Government Regulations: Do They Help ...

  2. Bailout Acronyms 101
    Bonds & Fixed Income

    Bailout Acronyms 101

  3. The Fall Of The Market In The Fall Of ...
    Active Trading Fundamentals

    The Fall Of The Market In The Fall Of ...

  4. The 2007-08 Financial Crisis In Review
    Mutual Funds & ETFs

    The 2007-08 Financial Crisis In Review

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. 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 ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center