The Italian government has backtracked from plans to levy a one-off 40 percent windfall tax on banks after the news caught markets by surprise and shares plummeted.
In a statement released late Tuesday, the finance ministry said a cap of 0.1 percent of banks’ total assets would be applied for the tax, announced 24 hours previously, in order to “safeguard financial stability.”
While no limit had been specified during the original announcement on Monday, the follow-up was widely perceived as a watering down of the proposal that had caused bank shares to sharply drop. The SX7E index, a key measure of eurozone banks, recovered slightly on what Italian media described as the evening’s “clarification.”
When the Italian government announced the plan ministers said the profits reaped by banks from rising interest rates had not been passed onto people hit by the cost-of-living crisis. It said the proceeds of the tax would be used to fund tax cuts and mortgage relief.
Markets had been especially spooked by analysis from Citi claiming that up to 0.5 percent of total bank assets could be affected by the tax, resulting in losses running into the billions.
The latest government statement played down remarks about bank profiteering made the day before by Italian Deputy Premier Matteo Salvini.
“The banking institutes already have adequate funding rates as recommended on February 15 … by the Bank of Italy,” the finance ministry said.
It also referenced a conference in early July in which the ministry had given approval to Italian banks to offer mortgage relief on their own terms — an agreement viewed at the time as a way to avoid the need for government intervention.
