Major UK banks have seen their share prices fall after reports the chancellor is set to raise tax on lenders in the budget.
Lloyds and NatWest have been impacted by roughly 2% price falls on Friday morning, making them the biggest fallers of the FTSE 100, the UK's flagship stock index.
Barclays too is down about 0.3% after front-page stories in The Guardian and Daily Telegraph said Chancellor John Healey is poised to increase taxes on banks at the budget later this month.
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Banks have been fighting to head off any tax raid, with Sky News reporting on trade associations circulating a letter to send to Mr Healey warning that increasing the banks' tax burden risks driving business out of Britain without raising any additional revenue.
A draft version seen by Sky News said an additional tax "could reduce the availability of finance and protection for households and businesses, and risk undermining the growth that both you and the prime minister have rightly identified as the key to the country's long-term success".
But Mr Healey could announce the policy as he faces pressure to balance the books amid high government borrowing costs and seeks to avoid further spending cuts and household tax rises.
Banks have been beneficiaries of the high interest rates brought about by waves of inflation, initially from the energy price shock and now the Iran war. They have seen large profit rises.
Other beneficiaries of the energy price spike when Russia invaded Ukraine - fossil fuel producers - have been subject to a windfall tax.
What could the chancellor do?
A possible way of implementing a higher bank tax is to reverse the reduction in the banks' surcharge announced by the Conservative former chancellor, Jeremy Hunt.
Such a reversal would bring the levy back to 8% from the current 3%.
Banks pay this charge in addition to corporation tax of 25%.
The move has been sought by the Trades Union Congress (TUC), which says £9bn could be raised over four years.
Support for the policy has also come from the Institute for Public Policy Research (IPPR) thinktank who say commercial banks should temporarily be subject to a windfall tax, which would generate £1bn a year.
(c) Sky News 2026: Bank shares fall as tax on lenders expected in budget
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