EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 2 November  2022   
on the imposition of temporary lev ies on certain credit institutions   
(CON/20 22/36) 
 
Introduction  and legal  basis  
On 23 September 2022 the European Central Bank (ECB) received a request from the Banco de España, 
on behalf of the Spanish Parliament, for an opinion on  a draft l aw on the imposition of temporary lev ies on 
operators in the energy sector, credit institutions and financial credit establishments ( hereinafter the ‘draft 
law’).  
The ECB’s competence to deliver an opinion is based on Articles  127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third and sixth indent s of Article 2(1) of Council Decision 
98/415/EC1, as the draft law concerns  the Banco de España, rules applicable to financial institutions 
insofar as they materially influence the stability of financial institutions and markets , and the ECB’s tasks 
concer ning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty . In 
accordance with the first sentence of Article 17.5 of the Rules  of Procedure of the  European Central  Bank, 
the Governing  Council  has adopted  this opinion.  
 
 
1. Purpose  of the draft law 
 
1.1 The draft law  imposes  an obligation on certain credit institutions  and financial credit establishments,  
as well as  operators in the energy sector , to pay temporary levies. The statement of reasons 
accompanying the draft law identifies the banking and energy sectors as sectors where inflation 
may further increase profits . However, for  wages  the situation is different as they  are increasing 
below the rate of inflation , which reduces  the purchasing power of households. In this regard, and 
in relation to  the banking sector, reference is made to the Banco de España’s Spring 2022 Financial 
Stability Report, which states that a possible increase in interest  rates could have a positive impact 
on banks’ interest margins. It is intended that the proceeds f rom these temporary levies should 
contribute to the national income pact ( pacto de rentas ) to ensur e an equitable distribution of the 
burden of inflation across  Spanish society. The national income pact is considered a key element 
in enabling public authorities to adopt measures to sustain the population, particularly certain 
vulnerable citizens, in a cl imate of substantial inflation.  
 
1  Council  Decision  98/415/EC  of 29 June  1998  on the consultation  of the European  Central  Bank by  national   authorities 
regarding  draft legislative  provisions (OJ L 189, 3.7.1998,  p. 42). 
ECB -PUBLIC  
2 1.2 As concerns credit institutions  and financial credit establishments , the draft law provides that credit  
institutions and financial credit establishments , including consolidated tax groups that encompass 
credit institutions and financial credit establishments ( ‘affected  credit and financial  institutions ’), 
whose total reported interest income and commission income for 2019 equals or exceeds EUR 800 
million , are required to pay a temporary levy2. For the affected credit and financial institutions, the 
levy would be paid in 2023 and 2024. The amount of the temporary levy is 4.8 % of the sum of the 
net interest  income and the net fees and commission  income shown in the relevant institution’s 
profit and loss account corresponding to the calendar year prior to the date on which the obligation 
to pay arises.  
1.3 The obligation imposed by the draft law arises on the first day of the relevant calendar year s. 
Without prejudice to an advance payment to be made during the first twenty  calendar days of 
February , which amount s to 50 % of the total levy for the given year, the levy must be paid in full 
by the end of the twentieth calendar day of September.  
1.4 The draft  law provides that the amount of the temporary levy and its advance payment will not have 
any direct or indirect financial impact, meaning that the levy may not be passed on to the clients of 
the affected credit and financial institutions . A breach of this requirement is considered a serious 
infringement subject to a proportional pecuniary fine of 150 % of the amount passed on  to the 
institution’s clients . The Comisión Nacional de los Mercados y la Competencia ( National Markets 
and Competition Commission,  CNMC)  is responsible for ensur ing compliance with this obligation , 
without prejudice to  the competences of the Banco de España and its duty to cooperate  in this 
respect.  
1.5 The proceeds from the temporary levy are to be paid to the S tate Treasury . 
 
2. Monetary policy context  
 
2.1 The current surge in euro area inflation in relation to the Harmonised Index of Consumer Prices has 
reached record levels  and poses  significant challenges for the conduct of monetary policy. Energy 
price inflation continues to be the dominant component of overall inflation. However , inflation has 
become broad- based. In view of these developments , and guided by the ECB’s primary object ive 
to maintain price stability over the medium term3, determined action has been taken to ensure a 
timely return of inflation to the target of 2 %. Net purchases of assets have ended, policy rates have 
been raised, and further rate increases are expected along th is normalisation path, with the intention 
of dampen ing demand and guard ing against the risk of a persistent upward shift in inflation 
expectations.  
2.2 As the normalisation of the ECB’s monetary policy continues, it is important to recall that monetary 
policy operations always have distributional implications. Naturally, they have effects on incomes 
and the profitability of credit institutions. From a monetary policy perspective, credit  institutions play 
 
2  Affected credit and financial institutions with a  total reported interest income and commission income lower than EUR 
800 million for  2019 are exempt  from paying the temporary levy .  
3  See Article 127(1) of the Treaty.  
ECB -PUBLIC  
3 a special role for ensuring the smooth transmission of monetary policy measures to the wider 
economy. In this context, an adequate capital position helps credit institutions to avoid abrupt 
adjustments to their lending to the real economy.   
 Evidence shows that net interest income typically tends to expand on impact as policy rates increase, and this effect is higher the lower the weight of long- term loans and, among these, the 
lower the proportion of fixed interest rate operations. However, t his effect can be offset by lower 
lending volumes, by losses recorded in the securities portfolio and by an increase in provisions 
resulting from a deterioration of the quality of the credit portfolio. The realisation of downside risks in the current envir onment may significantly reduce the repayment capacity of debtors. The net 
effect of monetary policy normalisation on bank profitability might therefore be less positive, or even negative, possibly over an extended horizon. As the determination of the addr essees of the 
temporary levy is based on total reported interest and fee commission income in 2019, it may be 
that these institutions record low profits or losses at the point in time when the levy will actually be 
collected.  If the ability of credit insti tutions to attain adequate capital positions is damaged, this could 
endanger a smooth bank -based transmission of monetary policy measures to the wider economy . 
2.3 The strong rise of energy prices is reduc ing the incomes of households and companies with diverse 
implications for  different sectors and activities . Low-income households are hit harder as they 
typically spend a higher proportion of their budget on energy -related goods. Concerns about an 
equitable income and profit distribution need to be addressed by appropriate fiscal measures. From a monetary policy perspective, these measures  – depending on their design – may entail different 
implications for  macroeconomic stabilisation and sustainability. For a good policy mix, fiscal support 
measures to cushion the impact of higher energy prices should be temporary and targeted at the most vulnerable households and companies to limit the risk of fuelling inflationary pressures, to 
enhance the efficiency of public spending and to preserve debt sustainability .  
 
3. Financial stability  context  
 
3.1 The ECB has previously  opined on draft legislation introducing levies  for credit institutions in several  
Member States
4. In this respect the ECB  has stated that  it would be undesirable to use the proceeds 
from taxes levied against credit institutions  for general budgetary purposes if and to the extent that 
doing so would make credit institutions  less resilient to economic shocks and, as a result, limit their 
ability to provide credit , pushing them to offer less favourable terms to customers when providing 
loans and other services and reduc ing certain activities . This would creat e uncertainty  and adversely 
affect real economic growth5. In line with the se considerations , the ECB has recommended in the 
past that a clear separation is necessary between the extraordinary account created out of the levy 
proceeds and the general  budgetary  resources  of a government  to avoid their use for general fiscal 
consolidation purposes6.  
 
4  See Opinion  CON/2020/28, Opinion  CON/2019/44, Opinion  CON/2019/40, Opinion CON/2019/18 and Opinion 
CON/2016/ 1. All ECB opinions are published on EUR -Lex. 
5  See paragraph 2.1 of Opinion CON/2011/29 and paragraph 3.2. 1 of Opinion CON/2010/62  
6  See paragraph 2.1 of Opinion CON/2019/40  and paragraph 3.2. 2 of Opinion CON/2010/62.  
ECB -PUBLIC  
4 3.2 Imposing any ad hoc taxes or levies on credit institutions for general budgetary purposes should be 
preceded by a thorough analysis of potential negative consequences for the banking sector to 
ensure that such taxes do not pose risks to financial stability, banking sector resilience and to the 
provision of credit, which could eventually adversely affect real economic growth.  Hence, the levy 
should be carefully considered with regard to its impact on the profitability of affected credit 
institutions, and thereby on their internal capital generation and lending.   
3.3 Furthermore, in the event that an affected credit institution might qualify as a temporary levy payer 
while it is recording net losses, such a situation would be significantly distor ting and would further 
damage the resilience of a loss-making bank . Moreover, the application of the levy only to certain 
Spanish credit institutions could distort market competition and impair the level playing field both 
within the c ountry and across the banking union.  
3.4 In light of the above, the ECB recommends that the legislative proposal be accompanied by a 
thorough analysis of potential negative consequences for the banking sector , detailing in particular  
the specific impact of the temporary levy on the profitability of the affected credit  and financial  
institutions  and on the competition conditions  in the market  to ensure that its application does not 
pose risks to financial stability, banking sector resi lience and the provision of credit . This request is  
particularly relevant in the current economic and financial environment , which features high 
uncertainty , and credit institutions ’ loan loss provisions are expected to increase due to a foreseen 
marked slow -down in real economic activity7. In this contex t, it should be taken into consider ation  
that credit institutions  have  already had to record higher provisions with respect to their exposure 
to non- financial corporates active in high energy -intensive sectors8.   
 
4. Considerations relating to the prudential supervision  of credit institutions  
 
4.1 The ECB understands that the temporary levy would, as a practical matter, only apply to credit 
institutions directly supervised by the ECB within the framework of the Single Supervisory Mechanism (SSM) .  
4.2 The basis on which the temporary levy would be established does not  take into consider ation the 
full business cycle and does not  include, inter alia, operational expenses and the cost of credit risk. 
As a result,  as already stated, the amount of the temporary levy might not be commensurate with 
the profitability of a credit institution.  Thus, as a result of the general application of the temporary 
levy, credit institutions that are not necessarily benefitting from current market conditions could  
become less able to absorb the potential downside risks of an economic downturn.  
4.3 A generic provision stating that the temporary levy may not be passed on to the clients of credit 
institutions  might generate uncertainty , as well as related operational and reputational risks for 
those institutions. It is appropriate to clarify that increases in prices to be applicable to customers 
 
7  The Banco de España ’s Spring 2022 Financial Stability Report  not only identified the effect of higher rate scenarios 
on net interest income, but also explored the net effects on profitability and solvency of the overall, potentially adverse 
scenarios, in which those rises can take place. These net effects can be negative if  the scenarios are adverse enough. 
See pp . 89-90 and 105 -108. 
8  On this topic see for example , speech by Governor Pablo Hernandez de Cos  (2022) , “The Spanish banking industry 
and the economic challenges ahead” , Meeting with the Spanish Financial Press Association / Menéndez Pelayo.  
ECB -PUBLIC  
5 due to: (i)  increases in costs  other than the temporary levy, such as operational, funding and capital 
costs;  (ii) increase s in cost s relating to covering risk s; and (iii) adjustments of commercial margins , 
are all legitimate  increases.   Moreover, the ECB generally  expects  credit institutions , in accordance 
with international best practices, to consider and reflect in loan pricing all relevant cost s, including 
tax considerations, when relevant9. In addition, it should be clarified which v erification mechanisms 
will be implemented  by the CNMC to ensure compliance with this requirement . Considering all the 
different circumstances that may cause an increase in prices in the current context of interest rate 
rises, inflation or deteriorating risk premi a, it appears to be difficult to differentiate whether the 
temporary levy would actually be  passed on to clients or not.  
 
5. Miscellaneous  
 
5.1 There is a discrepancy between the wording used in the draft law in order to establish the criterion 
to determine those  credit  and financial  institutions affected by the temporary levy , which makes 
reference to “ the total interest income and commission income, as determined in accordance with 
the applicable accounting legislation”10, and the wording for determining the base to which the 4.8 
% temporary levy is applied , which refers  to “the sum of the interest margin and commission income 
and expenses shown in its profits and loss account for the preceding calendar year ”11. In this 
respect, and as concerns the determination of the base to which the temporary levy is applied , the 
ECB understands that the temporary levy is applicable to the net interest  income and net fee and 
commission income.  A clearer terminology  in the final text  in the criterion to determine the affected 
credit and financial institutions  for the purpose of legal certainty may be desirable in this context.  
5.2 It is not clear what the cooperation role of the Banco de España will be  as regards ensuring 
compliance by credit institutions with the requirement established in the draft law of not passing on 
the amount of the temporary levy to their clients.  In this respect, the ECB underlines that this matter 
could be further clarified, in particular , that th is does not amount to the conferral of  any new task on 
the Banco de España.  
 
 
 This opinion  will be published on EUR -Lex. 
 
 
 
 
9  For instance, EBA/GL/2020/06 , Guidelines on loan origination and monitoring, states as follows in paragraph 202 (e): 
“Institutions should consider, and reflect in loan pricing, all relevant costs until the next repricing date or maturity, 
including, among others, any other real costs associated with the loan in question, including tax considerations, when 
relevant” . 
10  Article 2.1 of the draft law . 
11  Article 2.4 of the draft law . 
ECB -PUBLIC  
6 Done at Frankfurt  am Main,  2 November  2022.  
 
[signed]  
 
The President  of the ECB 
Christine LAGARDE