The UK's five major banks will each pay hundreds of millions of pounds to the UK government each year as a charge for their risks to the economy, under final draft legislation released today.

The bank levy, which aims to raise £2.5bn a year from 2012 and is part of the government's 2011 Finance Bill, has two objectives, said Financial Secretary to the Treasury Mark Hoban: "First, ensuring that banks make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy. Second, the final scheme design will encourage the banks to make greater use of more stable sources of funding, such as long-term debt and equity, working with the grain of our wider reform program."