Opinion of the European Central Bank of 15 December 2023 on the imposition of a tax on credit institutions (CON/2023/45)
Date: 2023-12-15
Institutions: European Central Bank
Subjects: financial stability

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 15 December 2023 

on the imposition of a tax on credit institutions 

(CON/2023/45) 

Introduction and legal basis 

On  6 November  2023  the  European Central  Bank (ECB)  received  a  request  from  the Dutch  Ministry of 

Finance for an opinion on a proposal of the Dutch House of Representatives to amend certain provisions 

of the Law on bank tax (hereinafter the ‘draft proposal’). 

The ECB’s competence  to deliver an opinion  is based on  Article 127(4), second paragraph, and Article 

282(5) of the Treaty on the Functioning of the European Union, as the draft proposal relates to the European 

System of Central Banks’ task to contribute to the smooth conduct of policies relating to the stability of the 

financial system pursuant to Article 127(5) of the Treaty 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 draft proposal 

1.1  The  draft  proposal  proposes  to  amend  the  Law  on  bank  tax,  which  was  introduced  in  2012  and 

imposed  a  tax  applicable  to  credit  institutions  with  activities  in  the  Netherlands.  According  to  the 

explanatory memorandum to the Law on bank tax, the tax was imposed after the financial crisis in 

order to put a price tag on the implicit State guarantee that the Dutch government provides to credit 

institutions  in  the  Netherlands.  To  a  lesser  extent,  by  taxing  certain  parts  of  a  credit  institution’s 

balance  sheet,  the  original  aim  of  the  Law  on  bank  tax was  to  discourage  credit  institutions  from 

financing activities using unsecured debts. Finally, the Law on bank tax was intended to counteract 

perverse incentives within a board’s remuneration policies. 

1.2  Under  the  Law  on  bank  tax,  the  tax  is  levied  on  the  balance  sheet  total  resulting  from  the  credit 

institution’s commercial annual accounts. However, certain elements of that balance sheet total are 

exempt  from  the  taxable  amount.  Regulatory  capital,  deposits  covered  by  the  national  deposit 

guarantee  scheme  (DGS)  and  liabilities  related  to  the  business  of  insurer  are  not  counted.  The 

remaining  debts  on  the  balance  sheet  are  only  taxed  to  the  extent  that  they  exceed  a  minimum 

threshold of EUR 23.5 billion (the ‘efficiency exemption’). 

1.3  Under the Law on bank tax, the amount of the tax comprises the sum of: (1) 0.044 % of the part of 

the  taxable  amount  (balance  sheet  total  after  the  deductions  of  regulatory  capital,  DGS  covered 

deposits,  insurance  business  liabilities  and  the  efficiency  exemption)  obtained  by  multiplying  the 

 
 
 
 
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taxable amount by A/B, where A is the total amount of the debts on the balance sheet or consolidated 

balance sheet to be taken into account  that have a term of  less than one year and B  is the total 

amount of all debts on that balance sheet or consolidated balance sheet, and (2) 0.022 % on the 

remaining part of the taxable amount. 

1.4  Under the draft proposal the amount of the tax would be raised from 0.044 % to 0.058 % of the taxable 

amount set out under point (1) in paragraph 1.3 of this opinion and from 0.022 % to 0.029 % of the 

remaining taxable amount under point (2) in paragraph 1.3 of this opinion. 

1.5  According to the Ministry of Finance, the Law on bank tax in its existing form raises approximately 
EUR 470 million per year. Under the draft proposal, the tax would be increased by EUR 150 million 

in aggregate per year. 

1.6  As noted in the draft proposal, the amendment aims to structurally cover part of the costs of raising 

the social minimum of households, for instance by increasing the minimum wage. 

2. 

General observations  

2.1  The ECB recently adopted opinions on a draft Slovenian law on the imposition of a temporary tax on 

credit institutions1, a draft Italian law on the imposition of an extraordinary tax on credit institutions2, 

a draft Lithuanian law establishing a temporary solidarity contribution applicable to credit institutions3 

and  a  draft  Spanish  law  on  the  imposition  of  temporary  levies  on  operators  in  the  energy sector, 

credit  institutions  and  financial  credit  establishments4.  In  these  opinions,  the  ECB  considered 

legislative  initiatives  introducing  temporary  levies  and  taxes  from  the  monetary  policy,  financial 

stability and prudential supervision perspectives.  

2.2  The ECB was not consulted on the adoption of the Law on bank tax. Therefore, this opinion considers 

the draft proposal in conjunction with the Law on bank tax. 

3. 

Monetary policy context 

3.1  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 

stability5, the ECB has taken determined action to ensure a timely return of inflation to its medium-

term 2 % target. Key ECB policy rates have been raised by a cumulative 450 basis points between 

July 2022 and September 2023, with the intention of decreasing 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 

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2  
3  
4  
5  

See Opinion CON/2023/35. All ECB opinions are published on EUR-Lex. 
See Opinion CON/2023/26.  

See Opinion CON/2023/9. 
See Opinion CON/2022/36. 
See Article 127(1) of the Treaty. 

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to  the  ECB’s  medium-term  target  and  to  preserve  the  smooth  functioning  of  monetary  policy 

transmission6.  

3.2  As key ECB interest rates will remain 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  decisions  always  have  some  distributional  implications.  In  particular,  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 economy7. 

3.3  Evidence shows that net interest income typically expands on impact as policy rates increase. This 

effect is faster the greater the weight of short-term or variable interest rate loans on the asset side of 

banks’ 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 horizon8. 

3.4  More generally, caution must be taken to ensure that the tax does not impact the ability of individual 

credit institutions to build strong capital bases, adequately provide for increased impairments and 

deterioration in credit quality. While the ECB notes that regulatory capital is exempt from this tax, 

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. 

3.5  The ECB also takes note of the fact that the tax is levied on the total bank balance sheet less some 

specific  deductions.  Caution  must  be  taken  so  that  such  a  tax  base  does  not  incentivise  credit 

institutions to contract their balance sheet by reducing their lending activity beyond what would be 

warranted from a monetary policy perspective9. Moreover, the incentive scheme embedded in the 

tax risks reducing  the remuneration of shorter-term deposits that are not covered by the DGS as 

these are subject to a higher tax rate. This distorts the competitive pressures that are an integral part 

of the impact of the transmission of the tightened monetary policy on composite deposit rates and 

broader financing conditions. 

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 a special 

6  
7  
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 paragraph 3.4 of Opinion CON/2023/26 and paragraph 3.4 of Opinion CON/2023/35. 
See paragraph 3.5 of Opinion CON/2023/35. 
See Opinions CON/2016/1, CON/2019/18, CON/2019/40, CON/2019/44, CON/2020/28 and CON/2023/26.  

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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  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 for them to fulfil their 
role as credit intermediaries within the economy. Higher costs and reduced credit supply, or higher 
costs of other banking services, can adversely affect real economic growth11. 

4.2  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  and  reducing 

bank profitability. As the tax is calculated on certain parts of the balance sheet total and not on net 

profits,  it  also  applies  to  credit  institutions  that  are  recording  net  losses,  further  damaging  their 

resilience12. In that regard, the tax may put additional pressure on banks’ capacity to maintain a solid 

capital position or to rebuild buffers in an environment in which profits are lower and (credit) losses 

occur. These different factors should be properly evaluated in order to ensure that credit institutions 

remain well positioned to absorb potential future losses13. 

4.3  The 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 in other 

jurisdictions where a special bank tax is also levied may be a further source of such fragmentation. 

4.4  A structural increase of the tax is at odds with the developments since it was originally imposed. As 

noted  in  paragraph  1.1,  the  tax  was  originally  imposed  to  put  a  price  tag  on  the  implicit  State 

guarantee that the Dutch government provides to credit institutions in the Netherlands. Although this 

implicit guarantee might still exist, as demonstrated by the evaluation of the tax that took place in 

2021,  its  scope  has  been  limited  by,  inter  alia,  the  establishment  of  the  resolution  scheme,  the 

creation  of  the  Single  Resolution  Fund,  and  the  phase-in  of  buffers  for  systemically  important 

institutions14. 

4.5 

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  draft  proposal  should  be  accompanied  by  a  thorough 

analysis of potential negative consequences for the banking sector15. This analysis should set out in 

detail, the specific impact of the tax on credit institutions’ longer-term profitability and capital base, 

11  

12  
13  
14  

15  

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, paragraph 3.1 of Opinion CON/2023/9 and paragraph 4.1 of Opinion CON/2023/26. 

See paragraph 3.3 of Opinion CON/2022/36. 
See paragraph 3.2 of Opinion CON/2023/9 and paragraph 4.3 of Opinion CON/2023/26. 

See the letter and in particular attachment 1 sent to the parliament on 11 November 2021 by the Dutch Ministry of 
Finance, available on the website of the Government of the Netherlands at www.government.nl. See also Financial 
Stability  Board  (2021),  ‘Evaluation  of  the  Effects  of  Too-Big-To-Fail  Reforms’,  available  on  the  Financial  Stability 
Board’s website at www.fsb.org. 
See paragraph 3.4 of Opinion CON/2022/36, paragraph 3.7 of Opinion CON/2023/9 and paragraph 4.6 of Opinion 
CON/2023/26. 

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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 higher tax percentage envisaged by the draft proposal will in practice, 

as is the case for the Law on bank tax in its existing form, currently apply only to significant institutions 

directly supervised by the ECB16 given the impact of the efficiency exemption on the calculation of 

the tax. 

5.2  The basis on which the 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 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 

tax, credit institutions that have lower solvency positions 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 test17, improved capital position was a key 

factor in helping banks stay resilient amidst highly adverse conditions. 

This opinion will be published on EUR-Lex.  

Done at Frankfurt am Main, 15 December 2023. 

[signed] 

The President of the ECB 

Christine LAGARDE 

16  

17  

In the meaning of Article 6(4), third paragraph, of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring 
specific  tasks  on  the  European  Central  Bank  concerning  policies  relating  to  the  prudential  supervision  of  credit 
institutions (OJ L 287, 29.10.2013, p. 63). 
Available on the ECB’s banking supervision website at www.bankingsupervision.europa.eu. 

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