The European Banking Federation (EBF, for its acronym in English) considers that the new taxes that some countries are applying to credit institutions in the face of rising prices they are “unjustifiable” and will not alleviate the problem of price increases.
“The initiatives that arise in some European countries aimed at to impose ad hoc taxes on banks are unjustified, discriminatory and, more importantly, they fail to address the crisis of the cost of life,” the EBF said in a statement.
Countries like Spain or Hungary have announced extraordinary taxes to the banking sector in a context of high inflation, but the federation sector pointed out that, in other similar initiatives, the Central Bank European Union (ECB) has indicated that these levies “could affect the capacity of recovery and the capacity of the sector to finance the economy”.
“To weather the economic storm and finance the future, Europe needs strong banks”, argues the EBF, indicating that the consequences of the pandemic, the Russian invasion of Ukraine and higher inflation “have resulted in a gloomy economic outlook” and notes that it is “crucial” to identify “the appropriate measures to help them during this uncertain period, especially the most vulnerable parts of the society”.
The banking sector “is ready to work with legislators to help them find the best way forward, as he did during the unprecedented crises of recent years”, playing a role “stabilizer together with the authorities” during the “prolonged period of uncertainty”.
The task of credit institutions, adds the EBF, is to finance investments to address climate change and power transformation in a context in which “geopolitical instability will continue affecting the costs of energy and other goods and services”.
“Discriminatory measures taken by governments, such as ‘ad hoc’ taxes, would only serve to weaken the resilience of the sector and hamper its ability to continue providing credit to companies and individuals,” adds the European Banking Federation.
The sectoral platform ensures that “there are no extraordinary benefits in the banking sector” but, “quite the contrary, what has been extraordinary is the prolonged period of time of negative interest rates”.
“It is reasonable to expect that a normalization of interest rates and the return to positive rates allows the interest margin to return at levels where profitability is restored above cost of capital, overcoming the anomalous situation due to the coexistence of negative interest rates in recent years,” he adds.
But he warns that the ECB’s recent decision to raise rates “will not necessarily translate into greater bank profitability, since which could be offset by a higher cost of financing, higher provisions and higher default rates of some companies”.
The European banking sector “is already suffering from lower profitability than their peers” in other territories, a circumstance aggravated by “the continuous uncertainty of additional regulatory and supervisory measures at a European level means that banks already face difficulties in attract investors.
“The adoption of unilateral measures by national governments will deteriorate the competitive capacity of credit institutions and will generate additional uncertainty, further discouraging investors at a time in which the EU countries, among other initiatives, need to invest in climate change mitigation projects,” he warns.