ECB warns Poland on bank tax

By bne IntelliNews January 12, 2016

The European Central Bank (ECB) asked the Polish government in a letter on January 12 to consider the potentially negative effects of its plan for a bank tax.

The EU's central bank called on Warsaw to look thoroughly at any dangers the levy could pose to the stability of the banking sector, or to the wider economy should it limit lending. The country's banks have seen profitability hit hard by low interest rates, government schemes to help borrowers with forex loans and deposit insurance schemes.

The bank tax was a flagship campaign pledge from Law and Justice (PiS) in the run up to its victory in the October election. A bill introducing the levy has now passed most parliamentary procedures and is awaiting the nod from the upper house before it gets sent back to the lower house and then to the president.

The legislation seeks to apply a 0.44% on assets held by banks, insurers, credit unions, and loan companies. PiS hopes revenue from the tax will total as much as PLN6bn annually and has earmarked the funds to help drive a raft of social spending pledges.

According to the ECB, while there are examples of similar taxes in the EU, they were typically enacted in order to deal with “specific risks stemming from the financial sector” or related to “former public support to the financial sector.” In Poland “the proposed tax exclusively aims at increasing the amount of funds that are being contributed by the financial sector for financing public expenditure.”

The ECB urges the Polish government to carry out a careful analysis of potential negative impact to ensure it does not “pose risks to financial stability and the provision of credit, which could eventually adversely affect growth in the real economy.”

“Such an effect might result in banks offering less favourable terms to their customers when providing loans and other services, and may also induce certain banks to cut back on their activities, leading to a reduction in the availability of credit and creating uncertainty for these banks,“ the ECB warns.

The ECB also frets the tax may push financial institutions towards “changing their risk profile by restructuring their portfolios in favour of riskier products, by making use of off-balance sheet activities and/or by transferring their assets abroad.”

However,  the warning will likely have little effect in Warsaw. The PiS government has responded to EU criticism of its recent media law with fury. Meanwhile, it has shown more than once that it is happy to use its majorities in both house of parliament to turn bills into law in mere days.

The ruling party has made it clear it would like the bank tax to take effect from February 1. The haste owes to PiS’ pledge to roll out its key social spending promise – a child benefit payment of around €115 per month for every second and subsequent child – as early in 2016 as possible.  

 

Related Articles

Iran "hits impasse" in bid to set up Bank of England clearing accounts

Iran is failing to make headway with a request to the Bank of England (BoE) to set up special clearing accounts for its banks, Reuters reported on March 20. Sources said the BoE ... more

IMF delays new $1bn tranche to Ukraine due to Donbas blockade

Ukraine's main donor, the International Monetary Fund (IMF), has cancelled a board meeting scheduled for March 20 that was expected to see the release of a $1bn tranche to Ukraine, while demanding ... more

IIB’s new placement to support debt-ridden Development Bank of Mongolia

The International Investment Bank (IIB) is participating in a new placement of Mongolian international sovereign bonds denominated in US dollars alongside other international ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss