ESBG Statement: “New Taxes on Banking May Affect Economic Growth”

In the current context of high inflation and economic slowdown, with the possibility of a recession looming, it is more important than ever for savings banks and retail banks to preserve their solvency. In this regard, the recent decision by some EU countries to impose new taxes on the banking sector will further reduce their lending capacity to businesses and individuals.

Savings banks and retail banks in Europe played a fundamental role during the Covid-19 pandemic, helping to sustain businesses and families during lockdown periods and their consequences, while closely cooperating with authorities to avoid a credit contraction. They have also been publicly recognized in many jurisdictions as a relevant part of the solution for economic recovery after the pandemic.

While the effects of the Covid-19 pandemics are still being felt, the EU economy is now facing a new crisis due to supply chain shortages and the war in Ukraine, in which savings banks and retail banks continue to support their customers and economic activities in general. Furthermore, they are actively contributing to ensuring that the funds from the Next Generation EU reach the real economy, providing additional financing through their extensive branch network covering the entire territory of the EU and leveraging their expertise in risk assessment.

In the current context of high inflation and economic slowdown, with the possibility of a recession looming, it is more important than ever for savings banks and retail banks to preserve their solvency. In this regard, the recent decision by some EU countries to impose new taxes on the banking sector will further reduce their lending capacity to businesses and individuals. These sector-specific taxes are discriminatory and unjustified, as the anticipated increase in interest rates is unlikely to generate extraordinary profits for the banking sector (it may even decrease if delinquency starts to rise). In fact, marginally higher rates simply represent a return to a normal situation after many years of very low profitability due to the negative interest rate environment, which has also negatively affected shareholders’ returns. These new taxes have also placed financial institutions in a difficult position with their supervisors, as the requirement not to pass on their costs to customers contradicts EU legislation (the