MNI BRIEF: Spain Must Consider Stability In Bank Tax Plans-ECB

The European Central Bank has recommended that Spanish legislation for a windfall tax on banks in 2023 and 2024 should take financial stability and competition risks more into account, the central bank said in a statement.

Legislators should gather more information on the “specific impact that the temporary tax would have on banks’ profitability,” the ECB said, adding that the tax law should be clear about which institutions should pay and would not be “desirable” if it limited lenders’ ability to make loans or affected their resilience. Its opinion was published after a request from the Bank of Spain on behalf of parliament, and comes as a windfall tax on banks has also been mooted in the UK. (MNI INTERVIEW: Bank Tax Better Than Tiering- Ex-BOE Deputy)

In its statement, the ECB noted the “great uncertainty” of the environment and the possibility that banks will have to increase provisions due to the “expected sharp slowdown” in the economy.

Banks could suffer low profits or losses during the period of the tax, which will be based on 2019 profits on interest and fees.

The bill, still to be approved by parliament, specifies the levy as 4.8% of net interest margins and commissions for the year prior to the pandemic, so long as that sum exceeds EUR800 million.