ECB Vice-President recalls that entities will face the impact of rising corporate insolvencies in the coming months
The Vice-President of the European Central Bank (ECB), Luis de Guindos, has recommended to the government, and the rest of the European authorities considering this, that “it cannot be blinded” by “the short-term effects”. of this measure, that is to say for the tax collection it will generate for the State, calculated at approximately EUR 3,000 million in two years in the case of the bank tax. Because, he warns, the cost of deposits for banks will also rise – they will have to pay customers more for these products – and especially because there will be insolvent companies, more delinquent accounts and entities will be forced to increase their provisions, which is a entails additional costs.
The ECB has spoken publicly for the first time about the bank tax that the government has filed, warning that “it should not affect borrowing costs”. For example, the ex-Minister of Economy, who took part in a Banco Sabadell forum, sees it as referring to the possibility that the approach to taxation -which will in principle tax the entities’ income and not promote net profit- the banks to raise even more the interest rates it applies to the mortgages and consumer loans it applies when putting them on the market.
The proposed tax law includes the prohibition to pass on this tax cost to the final consumer, although the text in the hands of the National Competition Commission (CNMC) leaves the possibility of enabling a formula to avoid this situation. However, Guindos has warned about the collateral effect of the tax and has also done so, insisting that the tax would “affect neither the granting of credit nor the solvency” of financial entities.
In this regard, Banco Sabadell’s president, Josep Oliú, has maintained that the tax is an “attack” on the banking system, at least as proposed so far. He has also indicated that “although it is necessary to lend a hand”, he says they should do so “by giving one or more spins” to the Treasury’s proposal, which chooses to taxing entities. In addition, he has complained that the tax “affects only a few banking groups” because of what he considers “discriminatory”.
Banco Sabadell’s CEO, César González Bueno, has also asked management that the new tax on banks, proposed along with that on energy companies, is “temporary and does not distort competition”. The executive has assumed that this tribute may come, “even if it is unexpected”. “Nobody likes to pay taxes,” acknowledged González-Bueno, recalling that the entity paid more than 800 million euros in taxes in 2021, “compared to a net profit of 530 million.”
In any case, Sabadell sees “favourable winds driven by interest rate hikes” that will improve the bank’s results. Although at the same time he believes that “the effect of inflation and rates on non-performing loans will be more manageable”. In other words, it does not foresee major problems of default due to the rise in interest rates.
What Luis de Guindos has insisted is that the ECB should continue to raise interest rates in the eurozone in the coming months “depending on the data” because the situation “would be much more complicated”. He has even insisted that “the first pain the European population has is inflation.” And for that, the ECB has the only instrument in its hands, namely the rate hike, which acts on demand – as mortgages and loans rise, the population spends less – which should influence the inflation curve.
In any case, it has acknowledged that tariff increases will not take effect until 12 to 24 months after application. And that the institution will continue to raise interest rates “depending on the data” of price developments.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
