The European Commission has reportedly asked Warsaw on some aspects of the recently introduced tax on financial assets to check if they violate the EU’s regulation on competition and public aid, local media reported on March 3.

Poland’s government of law and Justice (PiS) introduced a tax on financial assets in February to secure extra revenue for the country’s budget, which is coming under strain from the party’s programme of enlarged social expenditure. The banking sector is especially sceptical about the tax, as it has seen profitability hit hard by low interest rates and deposit insurance schemes. A conversion of forex loans to the Polish zloty is also a possibility.

According to newspaper Rzeczpospolita, the Commission has asked Poland questions with regard to the bank tax’s compliance with EU rules on competition and public aid because the tax is not being universally levied on all financial institutions in the country.

With the threshold of assets value set at PLN4bn (920mn), smaller institutions, such as the controversy-ridden credit unions, are exempt from paying the new tax. That, in turn, raises questions about favouring them over large, mostly foreign-owned banks, that will have to pay the levy, the Commission suspects, according to the newspaper. Credit unions, known as SKOK, are seen as close to PiS.

Earlier in 2016, the European Central Bank criticised plans for the introduction of the new tax. The 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.