In Italy, the tax on excess profits of banks was limited after a negative market reaction

The Italian Ministry of Finance released last night “clarification” in connection with the government’s decision to impose a 40 percent tax on excess profits “multi-billion dollar profits of banks.” The clarification of the Ministry of Finance states that the tax will not exceed 0.1% of the total assets of a particular bank.

This statement was published a few hours after speeches Italian Deputy Prime Minister Matteo Salvini, who heads the far-right populist League party, which is part of the country’s coalition government. The current Italian cabinet considered that Italian banks are making extremely high profits due to the increase in ECB discount rates this year, thus earning on citizens.

According to sources Reutersthe Italian government expected to receive about €3 billion from the tax on banking excess profits by the end of the year.

The government’s decision was an unpleasant surprise for both analysts and stock markets – shares of Italian banks fell by 6-9%. In aggregate, the capitalization of Italian banks fell by about €10 billion yesterday. After the “clarification” of the Ministry of Finance, investors’ concerns have noticeably decreased, and shares of Italian banks began to recover today, having risen in price by 4-6%. “Given the tax cap, we believe that this measure will not prejudice banks’ capital return policies,” the agency said. Bloomberg Mediobanca analyst Andrea Filtri.

Evgeniy Khvostik