In a strongly-worded letter, the International Banking Federation (IBF) also said that the “cascade effect” of the proposed levy would hit ordinary citizens and businesses of all sizes and from all sectors.



Germany, France and nine other European states are pressing ahead with the new transactions tax, which they hope will discourage speculative trading and bolster debt-laden public finances.



Although Britain has opted out of the FTT, George Osborne recently launched legal action against the plan. The Chancellor believes the levy will discourage trades with the City of London.



The letter written by the IBF – which represented high street banks such as Barclays and HSBC as well as leading investment banks – warns that the “naive” new charge could be counter-productive, reducing tax receipts and making it harder for Europe’s ailing economies to prop up their public finances with borrowing from financial markets.