Italy’s partial rollback of bank tax after stock market crash

2023-08-09 13:14:41

BarcelonaA drop of 2.1% in the main Italian index (which was echoed in all European stock markets) has been enough for the executive of Giorgia Meloni to backtrack and nuance his bank tax only 24 hours after having -announced by surprise. Italy’s Minister of Economy and Finance had to clarify in response that the new levy “provides a maximum ceiling for the contribution that cannot exceed 0.1% of total assets”, which lowers much the initial ambition of the tax.

Late on Tuesday, the ministry made public the proposal with the aim of shielding the stability of a fragile and vital sector, the banking sector, which in Italy has never completely left behind the problems experienced in the rest of the continent during the Great Recession. The press release from the ministry headed by Giancarlo Giorgetti clarifies that the new tax will be determined on banks with an interest margin that in 2022 exceeded by 5% that of the year before, on the one hand; and on banks whose interest margin in 2023 exceeded by 10% that of 2022. The interest margin is the bank’s main source of income and refers to the price difference between what the bank pays to get money and what it charges customers for loans.

In addition, the Transalpine Ministry of Economy assures that the banks that have already adjusted the remuneration of deposits as recommended by the Bank of Italy in February (a task that the Spanish entities are not doing) will not suffer impacts as a result of this rule .

Type upload context

With this new tax, the Italian executive intended to tax the increases in bank profitability in the last year and a half, since the abrupt increase in rates decreed by the European Central Bank to deal with inflation that shoot with the Russian invasion of Ukraine. Matteo Salvini, vice-president of the far-right government, claimed that the tax was “a rule of social equity” to help families affected by the rise in loan prices.

The markets have reacted to this nuance by bouncing and the FTSE MIB, the Milan stock exchange, almost recovered this afternoon all that it lost on Tuesday, with a rise of nearly 2%. The Spanish Ibex-35 also rose by 1%.