A new windfall tax on Spanish banks – coupled with mortgage holidays in Poland that will halve banks’ profits – should give lenders across Europe pause for thought. More intervention in the banking sector is coming. The question is how much, and what banks should do.
Poland’s mortgage holidays have been accompanied by rising pressure from politicians for higher deposit rates, even while banks have argued that the holidays will force them to keep deposit rates low. In Spain, where the windfall tax aims to raise €3 billion across 2023 and 2024, the government has said it will fine banks that try to pass the new tax onto customers – which is what Spanish bankers have previously muttered would happen from such policies.
Proving a link between the windfall tax and higher mortgage rates or current account fees seems complicated. Yet it will be bad for Spanish bank profits if this environment makes it harder for them to implement any price rises at all.
Much as it is painful for banks, it may not be the best thing for them to loudly protest windfall taxes and mortgage holidays – going all the way to legal action, like Commerzbank in Poland.
