[Italy] Banks offered new windfall tax get-out clause

In Italy, the government has modified a divisive windfall tax on banks to give lenders an option to avoid paying if they set aside additional capital reserves, Yahoo reports.

The changes are expected to receive parliamentary approval and become binding this week. They represent a compromise from the Meloni government in the wake of a slump in Italian bank stocks and criticism from the European Central Bank.

The impact of the change reportedly remains unclear. The government still expects inflows of almost €3 billion.

Luigi Tramontana - an analyst at Banca Akros - told Bloomberg News that, given the abundant excess of capital and the banks’ willingness to give high returns to shareholders, “we do not expect the majority of the listed Italian banks to opt for the capital strengthening.” 

According to an amendment to the law, lenders will be able to opt out of the tax if they allocate 2.5 times the amount owed to strengthening their common equity tier 1 ratio as non-available reserves. 

If those reserves are later distributed as dividends, banks will have to pay the full tax plus matured interest, an amendment seen by Bloomberg News said.

In addition, the amendment caps the tax at 0.26 per cent of lenders’ risk-weighted assets on an individual basis instead of 0.1 per cent of their total assets.

“The revision implies that for most banks the impact is a touch lower compared to previous calculations,” Marco Nicolai - an analyst at Jefferies - wrote in a report on September 25.

The levy will reportedly apply to 40 per cent of banks’ extra profits measured by the difference in net interest income between 2023 and 2021 above a 10 per cent gain. 

The new draft has been calculated to generate the same amount of income for the government as the original version of the tax.

On September 24, Deputy Premier Antonio Tajani said that the change was made to demonstrate that the government isn’t punishing investors, however, the overall inflow won’t vary dramatically. Meloni said earlier this month that even if the levy is modified, the state will still expect inflows of almost €3 billion.

The amended levy will protect savings and market stability and create more credit for families and businesses, according to a September 23 Twitter post from Tajani.

In an interview with Corriere della Sera the following day, Nicola Calabrò - Chief Executive Officer of Cassa di Risparmio di Bolzano-Sparkasse - reportedly said that it is positive that the amended law includes the possibility of opting for strengthening capital instead of paying the tax, even if it’s still unclear how it will be applied.

Source: Yahoo

(Quotes via original reporting)

In Italy, the government has modified a divisive windfall tax on banks to give lenders an option to avoid paying if they set aside additional capital reserves, Yahoo reports.

The changes are expected to receive parliamentary approval and become binding this week. They represent a compromise from the Meloni government in the wake of a slump in Italian bank stocks and criticism from the European Central Bank.

The impact of the change reportedly remains unclear. The government still expects inflows of almost €3 billion.

Luigi Tramontana - an analyst at Banca Akros - told Bloomberg News that, given the abundant excess of capital and the banks’ willingness to give high returns to shareholders, “we do not expect the majority of the listed Italian banks to opt for the capital strengthening.” 

According to an amendment to the law, lenders will be able to opt out of the tax if they allocate 2.5 times the amount owed to strengthening their common equity tier 1 ratio as non-available reserves. 

If those reserves are later distributed as dividends, banks will have to pay the full tax plus matured interest, an amendment seen by Bloomberg News said.

In addition, the amendment caps the tax at 0.26 per cent of lenders’ risk-weighted assets on an individual basis instead of 0.1 per cent of their total assets.

“The revision implies that for most banks the impact is a touch lower compared to previous calculations,” Marco Nicolai - an analyst at Jefferies - wrote in a report on September 25.

The levy will reportedly apply to 40 per cent of banks’ extra profits measured by the difference in net interest income between 2023 and 2021 above a 10 per cent gain. 

The new draft has been calculated to generate the same amount of income for the government as the original version of the tax.

On September 24, Deputy Premier Antonio Tajani said that the change was made to demonstrate that the government isn’t punishing investors, however, the overall inflow won’t vary dramatically. Meloni said earlier this month that even if the levy is modified, the state will still expect inflows of almost €3 billion.

The amended levy will protect savings and market stability and create more credit for families and businesses, according to a September 23 Twitter post from Tajani.

In an interview with Corriere della Sera the following day, Nicola Calabrò - Chief Executive Officer of Cassa di Risparmio di Bolzano-Sparkasse - reportedly said that it is positive that the amended law includes the possibility of opting for strengthening capital instead of paying the tax, even if it’s still unclear how it will be applied.

Source: Yahoo

(Quotes via original reporting)