Department of Finance officials warned forcing banks to pay higher levy would lead to extra costs for customers

Officials at the Department of Finance warned that forcing the state’s three banks to pay €150 million in the bank levy this year could lead to “further cost cutting”, higher costs for consumers, and would be “particularly onerous” for the smallest of them Permanent TSB.

In submissions for Minister Paschal Donohoe, officials said that maintaining annual income from the levy as KBC and Ulster Bank departed the Irish market would leave AIB, Bank of Ireland, and Permanent TSB to foot the full annual bill.

They said forcing the three banks to bear a “higher share” of the levy would ultimately hit consumers in the form of higher charges and lending rates.

In detailed arguments on the future of bank levy, they said it remained a factor that any new bank looking to enter the Irish market would consider if planning to do business here.

It also said that the levy – no matter what – would “never provide for the recovery of the costs of the financial crisis”.