Italy proposes bank tax, stocks plummet

The actions of the italian banks took a nosedive on Tuesday as the cabinet approved a proposal to apply a 40% tax to certain bank profits to help consumers and businesses cope with rising bills. interest rates.

Transport Minister Matteo Salvini announced the tax at a news conference Monday night, saying it was a “social equity” measure to offset a series of interest rate hikes from the European Central Bank.

The increases seek to combat inflation and make loans more expensive for the purchase of cars and homes by people or for the acquisition of equipment and the construction of facilities by companies.

UniCredit shares fell more than 7%Interested Sampaolo went down 8%, Bank BPM more than 8.5% and BPER and MPS Banking more than 10% in the evening operations of the Milan Stock Exchange.

The Association of Italian Banks has yet to make public statements about the tax, the approval of which apparently took financial institutions by surprise. Analysts said the banks would no doubt try to modify the proposal or go to court if approved by Parliament, the next step in the process.

The five largest banks reported combined net profit of 10.5 billion euros ($11.5 billion) in the first half, 64% more than in the same period of 2022, according to the credit rating agency DBRS Morningstar. It attributed the increase to higher interest income, sustained rates and cost management.

The tax of 40% it would apply to the difference between the interest they pay clients on their deposits and the interest they earn on loans. Salvino said that the collection would be “a few billion” euros and would be used to finance tax breaks and help first-time homebuyers obtain mortgages.

“It is a levy on the additional profits of the banks”he said, adding that the measure was proposed by Economy Minister Giancarlo Giorgetti, who did not attend the press conference.

The proposal must be drafted as a bill and approved by Parliament, where the right-wing government has a large majority.

“Banks are expected to resist the measure during the parliamentary process, but there is strong support for the proposal in the ruling coalition”Wolfango Piccoli, co-chairman of consultancy Teneo, said in a statement. “If there are no significant amendments before parliamentary approval, the retroactive tax is likely to be sued in court.”

Source: AP