* Govt considers levy on banks for protecting deposits
* Big Four bank shares fall as much as 3 pct before trimming
* Budget update due on Friday, ahead of looming elections
* Cigarette makers also hit with new taxes
(Recasts lead with new sourcing, updates with new reported
figures, Greens comment)
CANBERRA, Aug 1 Australia's Treasurer Chris
Bowen confirmed on Thursday he was in discussion with banks
about a possible new levy to protect customer deposits as the
government seeks new revenue to shore up its budget.
Initial reports of the levy sent shares in Australia's major
Bowen is expected to update Australia's budget forecasts on
Friday, ahead of national elections which could be called at any
time, and has said he is committed to returning a surplus budget
by 2016-17 despite falling revenues.
Citing unidentified sources, the Australian Financial Review
said the proposed levy is between 0.05 percent and 0.1 percent
on protected deposits, with the level set at A$100,000
($89,700). The paper had initially said the levy was between 0.5
percent to 1.0 percent.
Presently, the government guarantees bank deposits up to
A$250,000 without charging the banks.
The levy would provide insurance in case future bailouts
were needed, the paper said, adding it was estimated to raise
less than A$1 billion over four years.
Shares in Australia's Big Four banks - Australia and New
Zealand Banking Group Ltd, Commonwealth Bank of
Australia, National Australia Bank Ltd and
Westpac Banking Corp - fell by around 2 percent
following the initial report.
Bowen said he had held talks with banks about how to better
protect deposits in the unlikely event of a bank failure, but he
stopped short of confirming any new charge.
"The IMF has expressed the view for some time that there is
a gap in Australia's public policy when it comes to provisioning
for any bank or deposit-taking institution's failure. Our
financial regulators have expressed the same strong views,"
Bowen told Australian radio.
"I've been consulting with banks, and credit unions and
others about how we tackle that issue, how we make sure there is
money set aside in the unfortunate and very unlikely event that
a deposit taking institution in Australia comes into
Also on Thursday, Bowen said the government would impose a
12.5 percent increase in tobacco taxes per year for the next
four years, to raise an extra A$5.3 billion, over the period.
The Financial Review said the new bank levy was recommended
by Australia's Council of Financial Regulators, which includes
the Reserve Bank of Australia, the Australian Prudential
Regulation Authority, the Australian Securities and Investments
Commission, and the Treasury Department.
Australian banks are among the most stable and profitable in
the world, and analysts said they expect banks and bank
customers to absorb the costs of any new levy.
"Fundamentally, Australian deposits are protected because
the structure of our banks are such that deposits effectively
are the last in terms of hierarchy, the last to be touched,"
Nomura banking analyst Victor German said.
"I don't really see strong justification for it.
"The question will ultimately be to what extent pricing will
be impacted. Will banks just absorb additional cost, or they
pass on some of the cost to the consumer? I think there will be
both if this is to be implemented."
The Australian Greens, who hold the balance of power in
parliament's upper house Senate, welcomed the new levy, but said
the government needed to make sure the costs were not passed on
to bank customers.
($1 = 1.1143 Australian dollars)
(Reporting by James Grubel; Additional reporting by Maggie Lu
Yueyang; Editing by Paul Tait, Eric Meijer and Jacqueline Wong)