Bank shares fell in early morning trading after reports that the Chancellor is planning to increase taxes on banks.
Senior banking executives told the BBC that Treasury Secretary John Healey is planning the move in his first budget of the autumn this month.
Shares in NatWest and Lloyds Banking Group fell more than 2% in early trading.
The UK’s four biggest banks made profits of around £15bn during the first half of the year, prompting trade unions to demand the sector face higher taxes.
Banks and building societies currently pay a 3% surcharge on profits on top of the standard corporation tax rate of 25%.
They are also subject to bank tax, which is calculated according to the size and composition of their balance sheets rather than their profits.
The financial services sector contributed about £40 billion to the Treasury last year, after adding taxes paid by employees.
Of this, the bank levy raised around £1.4bn, while the corporation tax surcharge generated a further £1.2bn.
A UK Treasury spokesman says: “A strong banking sector is essential to a strong UK economy.
“Profitable banks can invest in better customer services, lend to households and businesses, and generate returns that support people’s savings and pensions.
“Banks also contribute significantly to the public finances and already face a materially higher overall tax rate in the UK than other leading financial centres.
“An increase in bank taxes in the Budget would weaken the UK’s competitiveness, discourage investment and job creation, and work against the Government’s ambition to deliver growth in every postcode.”
Nigel Green, chief executive of DeVere Group, says: “Raising bank taxes may seem like an easy win on the Treasury spreadsheet, but it is a tax on lending, and lending is how Britain grows.
“Every extra pound taken from banks is a pound that doesn’t go into a first-time buyer’s mortgage, a growing company’s overdraft, or the technology that keeps British finance at the top of the world.
“Borrowers pay through higher-rate loans, savers pay through lower returns, and millions of ordinary people pay through pension funds and investment agencies that hold bank shares and rely on their profits. A tax sold as hitting the City ends up hitting households.”
