Slovenia’s central bank announced on September 5 that a bank tax is planned in the country as a temporary measure, slated to remain in effect for five years.

The primary objective of this taxation is to support the extensive flood reconstruction efforts, following the August floods that inflicted approximately €5bn in damages across Slovenia.

The central bank said that taking into consideration the current state of the Slovenian banking sector, it's noteworthy that banks in Slovenia experienced increased profitability throughout 2022, and this trend is expected to continue in the first half of 2023.

The driving factors behind this profitability surge are primarily the rising loan interest rates and the sustained low deposit interest rates. Additionally, the banking sector has continued to maintain low net impairments and reservations. Consequently, the profitability of banks is on an upward trajectory, surpassing the averages of previous years.

“Given these circumstances, a decision has been made to implement additional temporary taxation on banks. This taxation will amount to 0.2% of the balance sheet total and will be enforced for a period of five years,” the central bank said.

The planned temporary taxation of banks, coupled with other measures that impact the banking sector, will be incorporated into a legislative package. This package will encompass systemic measures aimed at mitigating the consequences of the most significant natural disaster in Slovenia's history.

“While recognising the banking sector's reluctance to bear new tax burdens, the government emphasises the importance of the sector's role within the financial and broader economic landscape,” it said.

The floods that hit Slovenia last month were the most severe natural disaster to impact the country since 1991.

The parliament has already approved a budget revision that allocates €520mn to provide assistance to those impacted by recent floods and mitigate the aftermath of this natural disaster. The changes were unanimously adopted on August 31.