Bank Profits and Bank Taxes in the EU
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Summary:
Since 2022, EU banks have been enjoying historically high profits. The profits are mostly driven by the delayed pass-through of the rapid monetary policy tightening to deposit rates and as such are likely transitory. Against this background, almost half of EU countries have introduced new taxes on banks. This paper documents the significant diversity in the design of the new bank taxes—in terms of their tax base, rate, duration, and burden. The paper discusses several trade-offs in the design of bank taxes and argues that an alternative or complementary policy response to temporarily high bank profits is to lock them in as usable bank capital, for example through an increase in countercyclical capital buffer rates.
Series:
Working Paper No. 2024/143
Subject:
Bank levy Deposit rates Financial services Taxes
Frequency:
regular
English
Publication Date:
July 9, 2024
ISBN/ISSN:
9798400281198/1018-5941
Stock No:
WPIEA2024143
Format:
Paper
Pages:
26
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