December 18, 2015 / 6:36 PM / 3 years ago

Polish central bank warns bank tax could hurt financial stability

* says bank tax could push weaker banks into losses

* Tax could negatively affect financial stability

* New conservative govt plans 0.39 pct bank asset tax

* Polish banking sector has strong capital position

By Marcin Goettig

WARSAW, Dec 18 (Reuters) - A bank asset tax planned by Poland’s new conservative government could push weaker banks into losses with negative consequences for the stability of the financial sector, the central bank said in a judgment on the bank tax bill.

Introduction of the tax could also prompt banks to shift into riskier assets and may have other negative implications for the financial system and Poland’s economy, including a rise in shadow banking and weaker credit supply, the central bank said.

“Taxing assets, and not the financial results, may push some of the banks into losses,” the National Bank of Poland said in its opinion published by parliament on Friday.

Poland’s conservative Law and Justice (PiS) party swept into power after the October election on pledges to significantly raise social spending, financing it with revenues from new taxes on banks and supermarkets.

PiS lawmakers announced earlier in December plans to tax banks at 0.39 percent of their assets.

The tax would hit particularly hard banks with relatively low profitability on their assets. Plans of the tax have so far triggered sharp declines in the shares of lenders.

The Polish banking sector has a strong capital position compared to its European peers, with Tier 1 capital at 14.8 percent as of September, significantly above European Union requirements.

The bankruptcy in November of the small lender SK Bank, which had less than 4 billion zlotys in assets, cost local lenders about 2 billion zlotys.


The central bank said that “it would be advisable to reduce the risk of a further deterioration in the situation of these banks which currently are in a weaker financial situation.”

The central bank added that this should concern banks which “post losses, are at risk of posting a loss or at risk of becoming insolvent or losing liquidity.” These banks could be at least exempt from the tax, the central bank said.

Representatives of the PiS party said during the election campaign they would back a conversion of Swiss franc mortgages into zlotys and burden banks with at least some of the cost of the operation.

PiS seems to have toned down these calls, but has not officially dropped them, despite an earlier warning from the central bank governor Marek Belka that implementing both a bank tax and loan conversion could lead to a “serious crisis” in some banks.

The central bank said the planned bank tax could also have a negative impact on the effectiveness of monetary policy and could lower budget revenue from corporate income taxes, of which banks are major payers, among other potential drawbacks.

“Summarising, the National Bank of Poland doubts whether the introduction of the ... tax ... would be profitable for the state budget, especially in the medium- and long-term,” the central bank said.

“The NBP is at the same time pointing to a necessity of an in-depth assessment of side effects of the proposed solutions in the area of .. stability of the financial sector, the stability of the economy and costs of public debt.” ($1 = 3.9310 zlotys) (Reporting by Marcin Goettig; Editing by Richard Balmforth)

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