Erroneous bank tax

I do not agree with the new tax on banks. The assumptions on which it is based are incorrect. Nor does it help to significantly resolve potential collection problems. It is a media charge that misses the mark. It creates more problems than solutions. The tax structure of our country has been in need of reform for a long time, among other reasons, due to its insufficiency, but neither the energy tax nor the bank tax is the way to go. Taxing some sectors for their supposed “extraordinary profits” and not others that may also be having them facilitates a criticism as simple as discrimination by branches of activity.

The conceptual key lies in what “extraordinary benefits” are. The exceptional situation in the oil and gas markets and the marginalist pricing system have been able to lead to “extraordinary profits” in some energy companies. On the contrary, it is very difficult to solidly argue that the banks are having similar “extraordinary benefits”. We have barely four months of rises in official interest rates and the Euribor. Although some banks have announced an increase in profits in recent quarters, this does not mean that the sector does not continue to have profitability problems. In most cases it does not cover the standard cost of capital required by investors, as indicated by the low market value compared to book value.

It is not a problem that affects only Spanish banks, but international ones. It is an activity with large administrative and regulatory compliance costs to guarantee financial stability. If this is lost, it creates serious social problems, analogous to a public health crisis. These supposed “extraordinary profits” would rather be the result of the normalization of interest rates, which are once again positive after a decade close to zero or negative. Now they are close to 3%, quite low in historical perspective. And we will have to see if the weakening of the economy does not increase delinquency.

The argument for linking this “pick-up” levy to the bank bailout of ten years ago is weak. Deposits from entities in difficulty were mainly rescued. Failure to do so would have caused a cascade of more serious events. In cases where there was negligent management, the prosecution acted, so it is not possible to speak of “bailout of bankers.” In addition, the financial sector has adapted to the new, more demanding environment, as demonstrated by its active participation in ICO loans or in the recent agreement to alleviate the mortgage burden.

Finally, some weighty economic arguments. The tax makes credit more expensive in a context of inflation and a sharp slowdown. Likewise, as the ECB pointed out in its opinion on the matter, it can reduce the creation of bank reserves, a key pillar of its solvency and stability. Less growth in own resources entails a decrease in the banking capacity to assume new risks, which implies less credit. And finally weakens the Spanish banking competitive position globally. There is no comparison for such a tax in other latitudes.