ECB questions banking tax: can affect credit and must be passed on to customer

monetary authority criticism with the provision of bill offered by PSOE and United We Can At the request of the executive obstacles to banks change the cost from their lien customers. “The ECB, in general, in accordance with international good practice, reflect in prices all related costs of loans, including tax considerationswhen appropriate,” he underlined. “looks hard” He CNMC can determine whether the transfer to the customer occurred “in the current context of interest rate increases, inflation or deterioration in risk premiums”.

This is reflected in the non-binding opinion on tax issued by the monetary authority in response to a request by the Spanish legislature. With usually mid tone As it is often used in such a view, the ECB has made it clear in any case that: doesn’t like ‘tax’ has been supported by the Government with arguments very similar to those put forward by the organizations themselves since last July. From the beginning, the board, chaired by Christine Lagarde, question caused by the increase in the extraordinary profit or, as the Executive argues to justify the tax, it ‘fell from heaven’ on the banks.

positive and negative effects

True, the central bank admits, Income assets go up as men do. However, this increase in the price of money is also a low noise in the loan business casualties increase in securities portfolios, unpaid and increase provisions to deal with the corruption of assets. “For this reason net effect The impact of the normalization of monetary policy on the profitability of credit institutions. less positive or even negative over a long time horizon,” he concludes.

The ECB also references 2019 interest and commission income, not the final results of 2022 and 2023, assets with some “low profit or loss” let them see have to pay 2023 and 2024 taxes are based on the results of previous years. He underlined thatwill distort significantly and harms flexibility of a losing bank even more”.

The institution also warned about the ‘tax’ application. only certain assets Spanish companies (with less than 800 million interest and commission income in 2019) disrupt the competition in the market and undermine equal conditions both within the country and throughout the banking union.” separate income those obtained by the ‘tax’ of global tax collection “to prevent them from being used for general budget consolidation purposes”.

Government response

Despite these comments, the government commented “The ECB does not spread a dissent before the lien Suggestions and pronounces on technical aspects From the norm that, according to the sources of the executive, it considers necessary to clarify. develop in another country. All these thoughts taken into account by the government Before making the offer,” he added.

Likewise, the sources results of great assets known in recent weeks.strong increase Profit in the first nine months of the year as a result of, among other things, the increase in interest rates payment of deposits It’s still in control,” he said. The industry is “in a very solid position in solvency,” they added in the previous analysis by the Executive. does not foresee you have “significant influence” for lien due to its “temporary nature, calibration and design”. Finally, with regard to competition, the Government has minimizes any distortion effects“.

Along the same lines, the Minister of Finance, María Jesús Montero, downplayed the ECB’s opinion and assured that the Government did not envisage changes in the project. ” General recommendations “It’s a situation where we’re used to these kinds of views,” he said. banking, on the other hand, felt empowered in his arguments. “The European regulator is coming confirm harmful effects revealers by industry Since the measure was announced”, noting the management of former savings banks, MINTThis showed the hope that “the ECB’s opinion will be taken into account during the processing of the rule”.

Congress Petition

Congress adopted at the end of September ask the ECB via Bank of Spain non-binding opinion On the ‘tax’ on banking as this paper progresses. to be avoided That’s why the European institution own initiative, as you can. this legal departments analyzed this week as the previous step of the monetary authority and the financial supervisory authority. government council endorsed your opinion, usually a written procedure and without the need for a physical meeting.

In any case, senior officials of the monetary and financial supervisory authority, they had already announced since the establishment of the institution traditionally opposed to such taxes because he understands that reduce credit flow, make loans more expensive companies and families low solvency assets. This was warned by both Pablo Hernández de Cos (executive of the Bank of Spain and thus a member of the ECB governing council) and Luis de Guindos (ECB vice-president).

exceptional and temporary

The Head of Government, Pedro Sánchez, dealt an effective blow by surprisingly declaring a tax cut last July. “extraordinary and temporary” banking and energy. Although it was an initiative of the executive, it was introduced as a bill in Congress by the PSOE and United We Can to expedite its ratification. The two sides proposed taxing 1.2 percent of the sales of energy companies with a turnover of more than 1,000 million euros, as well as 4.8 percent of the interest margin, calculated by the commissions of banks with an income of more than 800 million euros. could be collect about 7,000 million next euro two years.

this assets financial companies came out in a storm to make their ideas public. opposition It has been increased as a rate to avoid legal pitfalls.patrimonial rule has a non-tax public character’. Depending on the industry, will reduce his ability to give credit worth 50 billion €who will do economy stops growing 3,900 million euros (approx. 0.32% of GDP with 2021 data) and that they stopped rendering between 25,000 and 35,000 jobs (According to data from the EPA at the end of June, the number of employed will lose growth of between 0.12% and 0.17%).

Changes

However, banks from the beginning practically impossible ie ‘tax’ get aheaddespite trying PP or Vox they will take him Constitutional Court. Therefore, they tried to influence in some parliamentary groups so what is finally approved tax least harmful. Thus, they suggested that intra-group activities should not be taxed, their payments should be deducted, and their costs should be passed on to customers.

this big banks with their international business outside activity with connections in Spain be exempt. In addition, some organizations have suggested that the tax be distributed among more banks, because now exempt from the smallest and foreign Companies operating in Spain through branches such as ING and BNP Paribas. Yes, an approach favored by the big banks. at the individual levelbecause the employers’ associations AEB and CECA also represent organizations that are currently exempt from payment.

court appeal

The industry is considering it anyway. unconstitutional in its current design. And while we await the changes the bill could pass through the parliamentary process, the most common opinion in banking today is: appeal in court. Could be, yes, a court battle too long up to eight yearsaccording to financial resources.

What is most likely today is that banks will have to wait for the Treasury to pass the first advance payment of the ‘tax’. in February He will take the matter to court next year. Later, the parties will be able to object, claim that it is against Magna Carta and ask the judges to send it to the Constitutional Court. Sources state that if the judge accepts this and accepts it for processing by the Constitutional Court, it will “take six to eight years to make a decision”.