The European entity fears the new rule jeopardizes financial stability and economic growth
The European Central Bank (ECB) this Thursday asked the Spanish government for a “comprehensive analysis” of the bank tax, which is currently under discussion in Congress. The European entity has demanded from Spain an in-depth study of the “potential negative impact” of the rule on the sector, so that it “does not pose any risks to financial stability”, to the banking sector and to lending. The body chaired by Christine Lagarde is also concerned that the new tax threatens economic growth.
It is not the first time that the ECB has spoken out on bills that introduce taxes on credit institutions. The agency has told several member states that it “would not be desirable” to use revenues from credit institutions for general fiscal purposes, as the institutions would be “less resilient” to economic shocks. This could lead to “less favorable” loan terms for its customers, creating “uncertainty” and “affecting economic growth”.
The proposed law imposes an obligation on certain credit and financial credit institutions, as well as operators in the energy sector, to pay temporary taxes, as these are the sectors in which inflation can increase their profits to a greater extent.
However, the ECB points out that the temporary tax proposed by Spain “does not take into account the whole economic cycle” and does not include operating costs or the costs of credit risk. The tax could therefore be “disproportionate to a credit institution’s profitability” and those not benefiting from current market conditions “may be less able to absorb the potential downside risks of an economic recession”.
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.
