Spanish Premier Hints Bank Windfall Tax Could Be Permanent

(Bloomberg) -- Spanish Prime Minister Pedro Sanchez signaled that his government may make permanent a two-year windfall tax on banks.

Most Read from Bloomberg

• ‘It’s All Gone’: FTX Bankruptcy Has Retail Traders Bracing for Losses

• Bankrupt FTX Hit by Mysterious Outflow of About $662 Million

• Bankman-Fried’s Assets Plummet From $16 Billion to Zero in Days

• Elizabeth Holmes Asks for a Lenient 18-Month Sentence at Home

• Musk Warns Twitter Bankruptcy Possible as Senior Executives Exit

“In principle, it is temporary, but we will have to see over the coming months and years,” Sanchez said during an interview with the La Sexta television channel on Thursday when asked if the tax will remain in place after the two-year period expires. It was the first time he publicly said this is an option.

Shares of the country’s lenders declined Friday. The five Spanish banks were the worst performers on the Stoxx 600 Banks Index, led lower by Bankinter SA, down 3% at 9:32 a.m. in Madrid, and Banco Santander SA, which declined 1.9%.

Sanchez surprised markets in July with a proposal to set a 4.8% tax for two years on banks to help pay for a slew of measures to ease the impact of soaring prices on households. Sanchez reiterated in Thursday’s interview that lenders should share some of their earnings from rising interest rates to help the country.

Last week, the European Central Bank in a non-biding opinion warned the new tax could hurt lenders which don’t benefit from higher borrowing costs, potentially eroding competition in the local banking system. The tax is facing fierce opposition from banks, which say it is discriminatory and complain that it will be levied on revenues rather than profits.

Eaerlier on Thursday, Sanchez’s Socialist party made changes to the tax bill to include units of foreign banks in Spain “to avoid altering competition in the market between large entities,” according to the text of the amendments. The tax is expected to be approved by parliament before year’s end and take effect in 2023.

READ MORE: Spain’s Windfall Levy Proposal Opens Door to Legal Fight

--With assistance from Macarena Muñoz.

(Updates with shares move in third paragraph.)

Most Read from Bloomberg Businessweek

• Americans Have $5 Trillion in Cash, Thanks to Federal Stimulus

• One of Gaming’s Most Hated Execs Is Jumping Into the Metaverse

• A Narrow GOP Majority Is Kevin McCarthy’s Dream/Nightmare Come True

• The Golden Era of AI Chess Makes Things Tricky for Players

• Meta Investors Are in No Mood for Zuckerberg’s Metaverse Moonshot

©2022 Bloomberg L.P.