Spain slams European Central Bank’s ‘copied and pasted’ recommendations on bank tax

ECB warns windfall taxes could pose risks to financial stability

Alyssa McMurtry  | 04.11.2022 - Update : 04.11.2022
Spain slams European Central Bank’s ‘copied and pasted’ recommendations on bank tax


Members of the Spanish government on Friday hit back at the European Central Bank’s (ECB) warnings about the country’s planned windfall taxes on banks.

“The bank has issued a report like this before. They must have copied and pasted it from other times when there was a different context … given the current situation, the statement is a bit surprising,” Spain’s Social Security Minister Jose Luis Escriva told Spanish broadcaster RNE.

He also said that it is “paradoxical” that the central bank warns that the windfall tax could restrict lending as it continues to raise interest rates.

On Thursday, the ECB issued a much-anticipated set of recommendations on Spain’s draft law to add a two-year levy of 4.8% on banks’ profits.

With the measure, Spain’s progressive government aims to raise around €3 billion ($2.9 billion). The Socialist-led government says the money will be redistributed to help residents cope with soaring inflation.

However, the ECB called into question the plan, recommending a “thorough analysis” of the risks it could pose to financial stability, fair competition, banking sector resilience, and the provision of credit.

On Friday, Spanish Presidency Minister Felix Bolanos said Spain will study the recommendations but insisted that they are “non-binding.”

“Our position is clear: We want big energy and financial firms to collaborate to pay for the social safety net,” he told broadcaster TVE.

Windfall tax is ‘limited’

In London, Spanish Economy Minister Nadia Calvino said the windfall tax will not negatively impact Spain’s financial system.

“Banks are bringing in record profits, so they have a lot of room to maneuver,” she said.

Calvino pointed out that the windfall tax is “limited,” Spanish banks have “very high levels of solvency and liquidity” as well as “extraordinary” profits due to higher interest rates.

She added that the Spanish government has already considered the risks mentioned by the ECB.

Spain is not the only country considering windfall taxes on banks to deal with inflation in the rising interest rate environment.

According to S&P Global Market Intelligence, Hungary announced a new bank tax in May, and the Czech Republic is planning a similar levy.

The measure is also being debated in the UK, where former Bank of England Deputy Governor Charlie Bean said earlier this week that banks’ gains could be tapped to cover the budget shortfall.

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