2023-08-09 11:05:08
After the start of a stock market storm, the government of Giorgia Meloni was forced to reduce the scale of its new tax on the superprofits of banks on Tuesday evening.
A sensational announcement. A crash in the stock market. And a step back. The Italian Deputy Prime Minister of the far-right government of Giorgia Meloni, Matteo Salvini, announced Monday evening that the State would levy a 40% tax on the “excess profits” of banks. A measure intended to offset the cost to households and businesses of soaring interest rates.
According to Matteo Salvini, these rate hikes by the European Central Bank (ECB) have boosted bank profits and hurt their customers who are bearing the brunt of the increase in their borrowing rates. “It’s not a few handfuls of millions, but a few billions. It is a measure of fairness, ”assured the boss of the League, a far-right party member of the government coalition.
The 40% deduction will be made either on the part of the net interest income for 2022 exceeding the amount for the 2021 financial year by at least 5%, or on the profits for 2023 for which the threshold is set at 10%, said the government. The President of the Council, Giorgia Meloni, thus intends to mobilize funds for the budget for 2024, which risks running out of resources due to the surprise drop in gross domestic product of 0.3% recorded in the second quarter.
A “ceiling” drawn in an emergency
On the markets, the reaction was not long in coming. The day following the announcement, on the Milan Stock Exchange, all bank shares fell. Intesa Sanpaolo and Unicredit lost 8.6% and 5.9% respectively at the close on Tuesday. Monte dei Paschi di Siena fell by 10.8%, Bper Banca by 10.9% and Banco Bpm by 9%.
This emerging stock market storm forced the Italian government to amend its plan. As of Tuesday evening, the Ministry of the Economy announced that it would add “a ceiling” to the new tax “in order to preserve the stability of banking institutions”. The decree thus provides that “the contribution [ne pourra] exceed 0.1% of a bank’s total assets. This should “significantly reduce the impact of the tax”, according to analysts at the investment bank Jefferies who now estimate the total cost for banks at 2.5 billion euros once morest 4.9 billion previously.
Like their European competitors, Italian banks have seen their income generated by interest soar in the wake of the rise in interest rates, without increasing the remuneration of their customers’ current accounts. Intesa Sanpaolo saw its net profit jump 80% to 4.2 billion euros in the first half. Its rival UniCredit posted a half-yearly net profit of 4.4 billion euros.
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