FRANKFURT (Reuters) – The European Central Bank (ECB) criticized on Wednesday the proposed exceptional tax on bank profits approved a month ago by Italy, saying it did not take into account the long-term outlook for the sector and could leave some banks vulnerable to an economic downturn.
“The amount of the extraordinary tax may not be proportional to the long-term profitability of a credit institution and its ability to generate capital,” the ECB said in a non-binding legal opinion.
“Due to the general application of the extraordinary tax, credit institutions with lower solvency or which are more focused on lending activity (such as small banks) or whose capital projections are “difficult conditions could be less able to absorb the potential risks of a downturn in the economic situation,” added the ECB.
Italian parliamentarians are expected to present proposals this week to soften the impact of the tax, including allowing banks to deduct what they have to pay from their overall corporate tax bill.
Other amendments could revise the tax cap by anchoring it on risk-weighted assets instead of total assets, according to ruling politicians.
(Reporting Francesco Canepa and Giuseppe Fonte; Augustin Turpin, edited by Blandine Hénault)
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