ECB criticizes proposed hike to bank levy

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ECB criticizes proposed hike to bank levy

28. 11. 2019 15:26

The European Central Bank (ECB) has warned Slovakia of the potential negative impacts of the special bank levy hike being debated by the Slovak Parliament. According to the ECB, the measure is likely to jeopardise financial stability in Slovakia, as it might disproportionately lower the profitability of the banking system. This would lead to "negative impacts on internal capital generation and lending". "It could have cyclical consequences, as banks may be subject to the levy even in periods of adverse macroeconomic conditions", reads the assessment signed by ECB President Christina Lagarde.

The rate of the levy originally planned for 2017-20 stood at 0.2% of the bank's liabilities reported in its balance sheet. It was introduced almost a decade ago in response to the financial crisis and was supposed to expire as of next year.

However, the bill is aimed at increasing the levy rate to 0.4% of liabilities as of 2021. Thus, banks are expected to pay an additional €144 million into the state budget. The initiative has been fiercely criticised by banks and the opposition.

Moreover, on Wednesday, the Slovak Parliament agreed to discuss the bill on increasing the bank levy in fast-tracked proceedings.

Mojmir Prochazka, Photo: AP/TASR

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