Poland resurrects bank tax plan

By bne IntelliNews March 15, 2012

Tim Gosling in Prague -

The Polish government is to resurrect a plan for a bank tax that will feed a stability fund for the sector, the country's finance minister confirmed on March 14. Jacek Rostowski said that Warsaw now intends to introduce the tax this year.

The government first announced the plan for a tax on the sector during its last term, but put it on hold in July due to the likelihood it would fail to push it through parliament before general elections held in October. Having secured Poland's first ever post-communist consecutive term in the vote, the Civic Platform-led coalition is returning to the issue.

The final level of the tax is yet to be announced, but will depend on ownership. Polish owned banks, such as PKO BP, will pay a tax based on assets declared in the company's financial statement for the previous year, reports Warsaw Business Journal. However, the basis on which foreign-owned banks will be taxed remains unclear.

Poland shares the concern felt across Emerging Europe that the Eurozone banks that dominate much of its market will pull back on funding to local subsidiaries due to new requirements to boost their Tier 1 capital ratio to 9% by the end of June. The move is designed to stabilize the European sector as it faces the risk of huge losses on periphery state debt. PKO's head recently complained that his bank had been left out of the cheap financing made available to Eurozone banks by the European Central Bank, saying that Poland's biggest lender would have liked the opportunity to make more profit by taking advantage of the "subsidies."

Rostowski said in 2011 that the proceeds of the new tax would be paid into a special stability fund, under the auspices of the Bank Guarantee Fund, which will be used to guarantee deposits and protect the market from insolvencies.

Svetlana Kovalskaya at Renaissance Capital reports that "currently banks pay a fee equal to 0.099% (12.5x regulatory capital) to the Bank Guarantee Fund (BGF). The BGF's Council sets the percentage fee annually, up to a maximum of 0.3% (unchanging). The entire fee used to fund the deposit insurance programme; now some of it must go to the new stabilisation fund. The BGF's Council may increase the percentage fee, or keep it unchanged and reallocate it - there is no clarity at this stage."

Despite the lack of transparency at this stage, Kovalskaya forecasts that, based on the Polish authorities' track record, the new levy is unlikely to hit the sector hard. "In 2011, the BGF fee amounted to 3.6%/3.1% of earnings at PKO/Pekao. Worst-case scenario (if the fee increases from 0.099% to 0.3%), is that it would consume another 6-7% of earnings. However, we find this unlikely: the revenue will not go to the budget, and why would BGF collect twice as much for the new stabilisation fund as it used to collect for deposit insurance? We believe a marginal increase in the burden is more probable."

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