Opinion of the European Central Bank of 12 September 2023 on the imposition of an extraordinary tax on credit institutions (CON/2023/26)
Date: 2023-09-12
Institutions: European Central Bank
Subjects: banking supervision, financial stability, monetary policy

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 12 September 2023  

on the imposition of an extraordinary tax on credit institutions  

(CON/2023/26) 

Introduction and legal basis 

On  11  August  2023  the  European  Central  Bank  (ECB)  received  a  request  from  the  Italian  Ministry  of 

Economy  and  Finance  for  an  opinion  on  a  Decree  Law  introducing  urgent  measures  on  consumers’ 

protection and on economic activities and strategic investments (hereinafter the ‘Decree 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  Decree  Law  concerns,  inter  alia,  rules  applicable  to  financial  institutions  insofar  as  they  materially 

influence the stability of financial institutions and markets, and the ECB’s tasks concerning 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 Decree Law 

1.1 

The Decree Law introduces, inter alia, an extraordinary tax applicable to credit institutions3. The tax 

is determined by applying a rate of 40 % to the greater value of:  

- 

the amount of the interest margin referred to in item 30 of the profit and loss account, drawn 

up in accordance with the schemes approved by the Banca d’Italia, for the financial year before 

the one pending as of 1 January 2023, which exceeds by at least 5 % the same margin for the 

financial year before the one pending as of 1 January 2022; or 

- 

the amount of the interest margin referred to in item 30 of the profit and loss account, drawn 

up in accordance with the schemes approved by the Banca d’Italia, for the financial year before 

the one pending as of 1 January 2024, which exceeds by at least 10 % the same margin for 

the financial year before the one pending as of 1 January 2022. 

1.2 

The amount of the extraordinary tax for each credit institution, in any case, cannot be greater than a 

share equal to 0.1 % of the total of its assets for the financial year preceding 1 January 2023.  

1.3 

The  extraordinary  tax  is  to  be  paid  in  the  course  of  2024.  It  is  to  be  paid  within  the  sixth  month 

1  

2  

3  

Decreto Legge 10 Agosto 2023 n. 104, Disposizioni urgenti a tutela degli utenti, in materia di attivita'  economiche e 
finanziarie e investimenti strategici, pubblicato nella Gazzetta Ufficiale n. 186 del 10 Agosto 2023. 
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). 

See Article 26 of the Decree Law. 

 
 
 
 
 
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subsequent  to  the  end  of  the  financial  year  preceding  that  in  progress  as  of  1  January  2024. 

Taxpayers  who  approve  their  budget  beyond  the  deadline  of  four  months  from  the  close  of  the 

financial year are required to make the payment within the month subsequent to the approval of the 

budget. Taxpayers whose  financial year does  not coincide with the calendar year are required to 

make the payment in 2024 and, in any case, by 31 January if the term referred to expires in 2023. 

The extraordinary tax paid cannot be deducted from taxable income for the purposes of corporate 

income tax and regional tax on productive activities. The ordinary provisions of income tax law will 

apply  for  the  purposes  of  assessment,  penalties,  the  collection of  and  litigation  related  to  the 

extraordinary tax. 

1.4 

The higher revenue from this tax will be allocated to the financing of the fund for mortgages on first 

homes and for interventions aimed at reducing the tax burden of households and businesses. 

1.5 

The  Decree  Law  is  not  accompanied  by  any  explanatory  memorandum  explaining  its  rationale. 

Furthermore,  the  technical  documentation  submitted  to  the  Italian  Senate  on  the  Decree  Law 

contains  a  summary  of  the  main  legislative  provisions  but  no  explanation  of  the  rationale 

underpinning the Decree Law.  

2. 

General observation 

The  ECB  recently  adopted  an  opinion  on  a  Spanish  draft  law  on  the  imposition  of  temporary  levies  on 

operators in the energy sector, credit institutions and financial credit establishments4 and an opinion on a 

Lithuanian  draft  law  establishing  a  temporary  solidarity  contribution  applicable  to  credit  institutions, 

including branches of other Member States’ credit institutions and foreign banks established in Lithuania5. 

In both of these opinions the ECB considered similar initiatives to the Decree Law from the monetary policy, 

financial stability and prudential supervision perspectives. 

3. 

Monetary policy context 

3.1 

The ECB understands6 that the Italian Government’s decision is motivated by the potentially large 

social costs for households and firms associated with the high interest rate environment.   

3.2 

The  euro  area  inflation  rate  reached  record  levels  over  the  course  of  2022  and  posed  significant 

challenges for the conduct of monetary policy. Guided by its primary objective of maintaining price 

stability7, the ECB has taken determined action to ensure a timely return of inflation to the 2 % target 

over  the  medium  term.  Key  ECB  policy  rates  have  been  raised  with  the  intention  of  dampening 

demand and guarding against the risk of a persistent upward shift in inflation expectations. In parallel, 

net  purchases  of  assets  have  ended,  the  asset  purchase  programme’s  portfolio  is  declining  at  a 

measured  and  predictable  pace,  and  the  ECB  stands  ready  to  adjust  all  instruments  within  its 

mandate to ensure that inflation returns to the ECB’s medium-term target and to preserve the smooth 

4  
5  
6  
7  

See Opinion CON/2022/36. All ECB opinions are published on EUR-Lex. 
See Opinion CON/2023/9. 
See the Italian Government - Presidency of the Council of Ministers website at www.governo.it.  

See Article 127(1) of the Treaty.  

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functioning of monetary policy transmission8. 

3.3  As key ECB interest rates will be set at sufficiently restrictive levels for as long as is necessary to 

achieve a timely return of inflation to the 2 % medium-term target, it is important to keep in mind that 

monetary policy operations always have some distributional implications. Naturally, they have effects 

on  incomes  and  the  profitability  of  credit  institutions.  From  a  monetary  policy  perspective,  credit 

institutions play a special role in ensuring the smooth transmission of monetary policy measures to 

the wider economy. In this context maintaining an adequate capital position helps credit institutions 

to avoid abrupt adjustments to their lending to the real economy9. 

3.4  Evidence shows that net interest income typically tends to expand on impact as policy rates increase. 

This effect is faster the greater the weight of short-term or variable interest rate loans within bank 

balance sheets. However, as the tightening cycle proceeds, this positive income effect can be offset 

by lower lending volumes, a higher cost of funding, losses recorded in the securities portfolio and an 

increase in provisions resulting from potential deterioration of the quality of the credit portfolio. The 

realisation  of  downside  risks  in  the  current  environment  may  significantly  reduce  the  repayment 

capacity of debtors and translate into lower bank profitability. The net effect of tighter monetary policy 

on bank profitability when measured across the policy cycle may therefore be less positive, or even 

negative, over an extended horizon.  

3.5  As the determination of the addressees of the extraordinary tax is also based on net interest income 

in 2023, these credit institutions may record lower profits or losses at the point in time when the tax 

is actually collected. In addition, a tax levied on net interest income under the Decree Law would still 

be binding even if the credit institutions subject to that tax were making losses on the non-net interest 

income  components  of  their  profits.  More  generally,  caution  must  be  taken  to  ensure  that  the 

extraordinary  tax  does  not  impact  the  ability  of  individual  credit  institutions  to  build  strong  capital 

bases  and  adequately  provision  for  increased  impairments  and  a  deterioration  in  credit  quality. 

Curtailing the ability of credit institutions to maintain adequate capital positions or to prudently build 

provisions against the backdrop of a possible downturn in credit quality could endanger a smooth 

bank-based transmission of monetary policy measures to the wider economy.  

4. 

Financial stability context 

4.1 

The ECB has previously opined on draft legislation introducing taxes applicable to credit institutions 

in  several  Member  States10.  It  has,  in  this  respect,  underscored  in  general  that  imposing  an 

extraordinary tax on the banking sector could make it more difficult for credit institutions to build up 

additional capital buffers, as their retained earnings will be reduced,  making them less resilient to 

economic  shocks.  In  effect,  such  extraordinary  taxes  could  have  negative  economic  effects  by 

limiting credit institutions’ ability to provide credit, contributing to less favourable terms for customers 

when providing loans and other services. It is essential that credit institutions have a sound capital 

base in order for them to fulfil their role as credit intermediaries within the economy. Higher costs and 

8  
9  
10  

See paragraph 2.1 of Opinion CON/2023/9. 
See paragraph 2.2 of Opinion CON/2022/36 and paragraph 2.2 of Opinion CON/2023/9. 
See  Opinions  CON/2020/28,  CON/2019/44,  CON/2019/40,  CON/2019/18  and  CON/2016/1.  All  ECB  opinions  are 
published on EUR-Lex. 

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reduced credit supply, or higher costs of other banking services, can adversely affect real economic 

growth11. 

4.2 

The Decree Law envisages that the extraordinary tax is to be one-off in nature. In this respect, the 

ECB has previously recommended that a clear separation is necessary between the extraordinary 

nature of the proceeds and the general budgetary  resources of a government to avoid their use for 

general fiscal consolidation purposes12. 

4.3  Higher  net  interest  income  of  credit  institutions  can  initially  ensue  as  interest  rates  increase.  But 

increasing  interest  rates  can  also  contribute  to  a  higher  cost  of  funding  and  eventual  losses  on 

outstanding  bank  securities  portfolios.  Moreover,  in  a  long-term  perspective,  higher  interest  rates 

may negatively impact borrowers’ financial situations, thereby increasing credit risk. These effects 

are not taken into account by the design of the extraordinary tax, as this latter is calculated on the 

net interest margin and not on net profits. These different factors should be  properly evaluated in 

order to ensure that credit institutions remain well positioned to absorb potential future losses13. 

4.4 

The extraordinary tax may make attracting new equity capital and wholesale funding more costly for 

banks, as domestic and foreign investors may have less appetite to invest in Italian credit institutions 

that have a more uncertain outlook. Moreover, the introduction of an ad hoc retroactive tax unduly 

increases  policy  uncertainty  regarding  the  tax  framework,  damaging  investor  confidence  and 

potentially also affecting the cost of funding for non-financial corporations. In addition, its retroactive 

nature may fuel perceptions of an uncertain taxation framework and give rise to extensive litigation, 

creating problems of legal uncertainty. 

4.5 

The extraordinary tax may lead to fragmentation in the European financial system because of the 

heterogeneous  nature  of  such  taxes  for  the  banking  sector.  The  risk  of  double  taxation  for  credit 

institutions  that also operate through branches  in other jurisdictions where an extraordinary tax is 

also levied may be a further source of such fragmentation.   

4.6 

In the light of the above, the ECB recommends that in order to assess whether its application poses 

risks to financial stability, and in particular whether it has the potential to impair the banking sector’s 

resilience and cause market distortion, the Decree Law be accompanied by a thorough analysis of 

potential negative consequences for the banking sector14. This analysis should detail, in particular, 

the specific impact of the extraordinary tax on credit institutions’ longer-term profitability and capital 

base, access to funding and the provision of new lending and competition conditions in the market, 

and its potential impact on liquidity.  

5. 

Considerations relating to the prudential supervision of credit institutions 

5.1 

The ECB understands that the extraordinary tax would, as a practical matter, apply to both significant 

credit  institutions  directly  supervised  by  the  ECB  and  less  significant  credit  institutions  directly 

11  

12  

13  
14  

See  paragraph  3.2.1  of  Opinion  CON/2010/62,  paragraph  2.1  of  Opinion  CON/2011/29,  paragraph  3.1  of  Opinion 
CON/2022/36 and paragraph 3.1 of Opinion CON/2023/9. 

See paragraph 3.2.2 of Opinion CON/2010/62, paragraph 3.1 of Opinion CON/2022/36 and paragraph 3.4 of Opinion 
CON/2023/9. 
See paragraph 3.2 of Opinion CON/2023/9. 

See paragraph 3.4 of Opinion CON/2022/36 and paragraph 3.7 of Opinion CON/2023/9. 

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supervised by national competent authorities under the oversight of the ECB within the framework of 

the Single Supervisory Mechanism. On this point, the ECB stresses that the extraordinary tax will 

particularly affect less significant institutions, which tend to be more concentrated on lending activity, 

while significant institutions tend to have a larger proportion of fee-based income. 

5.2 

The basis on which the extraordinary tax would be established does not take into consideration the 

full business cycle and does not include, inter alia, operational expenses and the cost of credit risk, 

as stated above. As a result, the amount of the extraordinary tax might not be commensurate with 

the longer-term profitability of a credit institution and its capital generation capacity. As a result of the 

general application of the extraordinary tax, credit institutions that have lower solvency positions or 

are more focused on lending activity (such as small banks) or have challenging capital projections 

could become less able to absorb the potential downside risks of an economic downturn. As noted 

in the ECB’s press release of 28 July 2023 on the 2023 stress test15, improved capital position was 

a key factor in helping banks stay resilient amidst highly adverse conditions.  

5.3 

The ECB understands that the amount of the extraordinary tax would not, in any event, exceed a 

share  of  0.1  %  of  the  total  assets  for  the  financial  year  preceding  the  current  financial  year  to  1 

January 2023. It is not fully clear whether the notion of total assets refers to the same perimeter as 

for  the  computation  of  the  tax,  or  whether  it  refers  to  total  assets  at  consolidated  level.  Further 

clarification  on  this  point  would  be  welcome  for  determining  the  foreseeable  charge  applicable  to 

credit institutions directly supervised by the ECB, which consolidate assets of non-domestic entities, 

and whose assets include insurance operations and, in turn, the implications of the extraordinary tax 

for their profitability and capital position.    

5.4 

The Decree Law neither considers nor clarifies the treatment of credit institutions with mergers and 

acquisitions  occurring  during  the  estimation  period  for  the  calculation  of  the  tax  and  the  related 

impact,  in  terms  of  different  perimeters  at  the  different  reference  dates,  on  the  calculation  of  the 

extraordinary tax. The ECB would welcome further clarification of this aspect. 

This opinion will be published on EUR-Lex. 

Done at Frankfurt am Main, 12 September 2023. 

[signed] 

The President of the ECB 

Christine LAGARDE 

15  

Available on the ECB’s banking supervision website at www.bankingsupervision.europa.eu. 

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