Spanish government unimpressed by ECB criticism of planned bank windfall tax

UNIMPRESSED by ECB criticism of planned bank windfall tax, Spain not only intends to proceed with it but is actually amending the draft bill in order to include more organisations.

The Government hopes to earn some €3 billion from charging those Spanish banks which have made more than €800 million profit a special 4.8 per cent tax and this is planned to run for two years.

There is little doubt that the merger of some Spanish banks has created very profitable organisations which have been able to reduce operating costs by closing branches and shedding staff.

Many have also benefitted from access to very generous loans from official organs such as the European Development Bank as well as having access to cheap Spanish Government funds during the pandemic.

The European Central Bank (ECB) has issued a non-binding opinion that the decision to introduce such a windfall tax could be damaging to the banks long term liquidity and could also discourage them from granting loans.

The Government response is that the larger banks are making record profits so can easily afford the temporary tax which will be used to benefit those suffering from the cost-of-living crisis.

Also, since the ECB itself is raising interest rates in order to slow down inflation as fewer loans will be affordable, the windfall tax would support the ECB if its observations are correct.

Prior to pushing the bill through parliament, the Government has realised that it only applied to Spanish banks so the amendment will include local units of foreign lenders supervised by the ECB.

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