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Calls for an emergency bank tax are rekindling

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Claims are rekindling, on behalf of some parliamentary parties, for extraordinary taxation of windfall profits – Windfall gains tax – of the banks and related pressures are exerted, either at the level of the Presidency or at the level of the Ministry of Finance. was considering imposing an extraordinary tax on bank windfall profits.

The government's reasoning was to mitigate the significant impact that the sudden increase in interest rates has on borrowers.

However, the actions that followed on the part of the banks, without being completely satisfactory, in terms of the management of deposit and lending rates and in terms of their approach to vulnerable households and businesses, whose borrowing costs had “rocketed”, led the Ministry of Finance to second thoughts which, however, were not unrelated to the vertical intervention of the ECB.

The Frankfurt supervisory authorities, on the occasion of the decision of the Italian government, to impose an extraordinary tax of 40% on unanticipated bank profits, reacted and sent clear messages about risks inherent in the entire banking system, in such an eventuality.

In an opinion issued by the ECB specifically on this issue, it explained that the swing in interest rates on deposits and loans – which is responsible for the unexpected profits of banks – it will gradually close.

He had pointed out that interest-rate profits will decrease significantly in the coming months.

The advice of the PtD caused implications

PtD Nikos Christodoulidis, in his greeting yesterday in the framework of the Bank of Cyprus's 125th anniversary event, proceeded to the final part of his speech, in an exhortation – an appeal – to the administration of BOCH, to assist in the great effort to support households and businesses, especially those in real need.

The President did not elaborate on his report. But in the context of the reception that followed the event and StockWatch was there, it became clear from people with knowledge of the matter as they are interested and involved, that on the government's table is again a political demand for an extraordinary tax on the windfall profits of the banks.< /p>

The PtD, as assessed, bearing in mind that the windfall tax measure will clash with the supervisory authorities in Frankfurt, considered that interventionist moves by the banks, towards vulnerable households and businesses, would cut off any political reactions.

Indicative was the advice of the PtD, nominally to Panikos Nikolaou, Managing Director of the Bank of Cyprus:

“The Bank of Cyprus should not forget that Cypriot society paid a high price in 2013 with the well-known events, in order to support our banks. I am sure that in the context of the corporate responsibility of your organization, which I had the opportunity to see both as the Minister of Foreign Affairs and as PtD, you will continue to contribute to the great effort, as you have done in these 125 years of your history, to support households and businesses, especially of those in real need”.

Again at the politicians' table

The claim to reinstate the idea of ​​imposing an extraordinary tax on the unforeseeable profits of banks is not only the position of AKEL, which has also made it public very recently.

This position, as it has StockWatch was also informed by other political forces.

Both the Ministry of Finance, as well as the new Governor of the Central Bank, cannot escape from the line drawn by the banking supervisory authorities in Frankfurt in terms of enforcement of an extraordinary tax on the unforeseeable profits of banks, banking and economic factors commented yesterday.

They argued that the risks mentioned by the ECB last September have not disappeared and that the momentum of growth in bank profits is not expected to continue, due to three factors:

The gradual increase in deposit rates, the increase in costs financing in the money markets and reducing the demand for loans.

They warn that the imposition of an extraordinary tax on banks will hit small ones the most – non-systemic – among the largest, causing serious imbalances in the sector.

They noted that banks should prepare for a more unfavorable banking and macroeconomic environment, also due to the tightening of monetary policy, explaining that the timing of interest rate increases it is not going to be permanent.

They indicated that for 12 years the banks had not secured profits and the need to maintain strong “cushions” is imposed in order to deal with unforeseen negative developments, whether these are political or economic.

It is noted that the Banks Association has given a fund of approximately €400 thousand to the implementation of the state's grandiose energy project, which has as its essential objective that Cyprus be free, in the interim until 2030 and definitively until 2050, from carbon dioxide (CO2) emissions.

Irini Piki, Deputy Minister of Defense of the Presidents, also confirmed this in her interview with StockWatch.

source: Stockwatch/Lefkos Christos

Source: 24h.com.cy

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