Opinion of the European Central Bank of 26 November 2019 on increasing the special levy on selected financial institutions (CON/2019/40)
Date: 2019-11-26
Institutions: European Central Bank
Subjects: Slovakia, balance sheet, bank, financial stability, national law, tax

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 26 November 2019 

on increasing  the special  levy on selected financial  institutions   

(CON/2019/40) 

Introduction and legal  basis 

On  5  November  2019  the  European  Central Bank (ECB) received a request from  the Ministry  of Finance 

of the Slovak Republic for an opinion on  a draft law amending Law No 384/2011 Coll. on a special levy on 
selected  financial institutions  and on amendments  to certain laws (hereinafter the ‘draft law’) 1. 

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  sixth indent of Article 2(1) of Council Decision 98/415/EC2, as 

the  draft  law  relates  to  rules  applicable  to  financial  institutions  insofar  as  they  materially  influence  the 

stability  of  financial  institutions  and  markets.  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  Law  No  384/2011  Coll.  on  a  special  levy  on  selected  financial  institutions  and  on  amendments  of 

certain  laws  (hereinafter  the  ‘Law  No  384/2011’)  imposes  an  obligation  on  banks  and branches of 

foreign  banks  operating  in  Slovakia (hereinafter collectively referred to as ‘banks’) to pay a special 

levy.  The  proceeds  of  this  special  levy  are  state  financial  assets  with  the  designated  purpose  of 

covering  costs  related  to  the  resolution  of  financial  crises  in  the  banking sector and protecting the 

financial  stability  of  the  Slovak  banking  sector,  including  the  replenishment  of  the  Deposit 

Guarantee  Fund  necessary  for  expenses  due  to  the  payment  of  compensation  for  unavailable 

deposits.  In  accordance  with  Law No 384/2011, the rate of  the levy during the period  from 2017 to 
2020 is 0.2 % of each bank’s liabilities reported in its balance sheet3 and 0 % as of 2021. 

1.2  The draft law  increases the rate of levy to  0.4 % of each bank’s liabilities as reported in the balance 

sheet, and does not provide  for temporal  limitation  for the applicability of the levy. 

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Návrh zákona ktorým sa mení a dopĺňa zákon č. 384/2011 Z. z. o osobitnom odvode vybraných finančných inštitúcií 
a o doplnení niektorých zákonov v znení neskorších predpisov. 
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). 

The liabilities are subject to the following deductions: (i) the amount of the bank’s own funds, provided that its value 
is  positive;  (ii) the value of financial resources provided to the branch of a foreign bank on a long term basis; and 
(iii) the value of subordinated debt. 

 
 
 
 
 
                                                 
ECB-PUBLIC 

2. 

Impact of the increased bank levy 

2.1  The  ECB  has  in  the  past  opined  on  draft  legislation  introducing  bank levies in Slovakia4. The ECB 
has  stated  in  earlier opinions5 that taxes on financial institutions should be considered in relation to 

the  dual  objective  of:  (a)  ensuring  a  more  equitable  distribution  of  the  costs  arising  from  their 

potential  failure  between  taxpayers  and  the  financial  sector;  and  (b)  addressing  the  risks that they 

pose.  Using  the  proceeds  of  any  ad  hoc  taxes  imposed  on  banks  for general budgetary purposes 

would  be  undesirable,  to  the  extent  that  such  taxes  would  place  undue  burdens  on  banks, 
hampering  the  provision  of  credit,  with  a  knock-on  effect  on  growth  in  the  real  economy 6.  The 

proceeds  from  taxes  on  financial  institutions  should  be  ring-fenced  to  avoid  their  use  for  general 
fiscal  consolidation  purposes7.  The  ECB  has  recommended  that  it  is  necessary  to  introduce  a 

clearer  separation  between  the  extraordinary  account  created  out  of  the  levy  proceeds  and  the 
general budgetary resources of the Slovak  Government8. 

2.2  The  ECB  understands  that  the  obligation  of  the  banks  to  pay  the  bank  levy  is  additional  to  their 

obligation  to  pay  contributions  to  the resolution fund and the deposit guarantee fund. The ECB has 

in the past recommended  making clear in which part of the resolution financing process the income 

from  the  bank  levy  is  to  be  employed  and  how  bank  levy  proceeds  will  interact  with  the  resolution 
fund  in  order  to  avoid  duplication  of  instruments9.  In  this  regard,  the  ECB  understands  that  the 

bank  levy  proceeds  would  serve  as  a  funding  backstop  that  is  not  covered  by  the  resolution  fund 
and for refinancing the deposit guarantee fund10. 

2.3     While  the  draft  law  would  maintain  the  designated  primarily  financial  stability  purpose  of  the 

proceeds  of  the  bank  levy,  it  could  have  unintended  and  material  adverse  consequences  on 

financial  stability.  The  levy  proceeds  already  constitute  a  significant  share  of  bank  profits,  in 

addition  to  the  contributions  to  the  Deposit  Guarantee  Fund  and  the  Resolution  Fund.  The 

proposed  increase  in  the  levy  could  disproportionately  impact  the  profitability  of  the  banking 

system,  with  negative  consequences  for  internal  capital  generation  and  lending.  Moreover, 

removing the temporal limitation on the levy could have procyclical consequences as banks  may be 

subject to the levy  even in periods of adverse macroeconomic conditions. 

2.4  Therefore,  the  ECB  recommends  the  legislative  proposal  be  accompanied  by  a  robust  impact 

assessment  detailing  the  net  benefits  of  the  proposed  changes.  At  a  minimum,  the  draft  law could 

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See  Opinion  CON/2011/66,  Opinion  CON/2012/53,  Opinion  CON/2015/3  and  Opinion  CON/2015/43.  All  ECB 
opinions are published on the ECB’s website at www.ecb.europa.eu. 
See, for example, paragraph 2.1 of Opinion CON/2011/29 and paragraph 3.1.1 of Opinion CON/2015/43. 
See paragraph 3.1.1 of Opinion CON/2015/43. 
See paragraph 3.2.1 of Opinion CON/2010/62. 

See  paragraph  3.2.1  of  Opinion  CON/2011/66,  paragraph  2.1  of  Opinion  CON/2012/53  and  paragraph  3.1.2  of 
Opinion CON/2015/43. 
See paragraph 4.1 of Opinion CON/2015/3. 
See also paragraph 3.2.1 of Opinion CON/2015/43. 

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maintain  a  proportionate  temporal  limitation  for  the  applicability  of  the  levy,  in  line  with  the  impact 

assessment,  to reduce ambiguity regarding the overall  effects of the levy going forward. 

ECB-PUBLIC 

This opinion will  be published  on the ECB’s website. 

Done at Frankfurt am Main, 26 November  2019.  

[signed] 

The President of the ECB 

Christine LAGARDE 

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