By Tobias Benedetto
Chancellor George Osborne has announced a levy on UK banks and building societies that will raise more than £2 billion a year.
He also announced that there will be a levy on the UK operations of foreign banks.
The banking sector desperately tried to limit any move to tax their liabilities or assets in the run-up to the Budget.
But the chancellor will be hoping that anger at the bank levy will be counter-balanced in the City by a cut in the rate of corporation tax and relief on national insurance contributions for firms outside London and the south-east.
The measures, to be implemented from April 2011, will not affect smaller banks.
During the election campaign the Conservatives proposed a flat levy on banks' assets - a modest percentage charged on the size of the loan books.
The Liberal Democrats were more radical, calling for a ten per cent increase on the tax charged on banks' profits.