May 5, 2019 / 1:09 PM / 2 months ago

Czech PM wants banks to pay part of their dividends to a state fund

PRAGUE (Reuters) - Czech banks should pay up to 20 percent of their dividends into a new state development fund, Prime Minister Andrej Babis said on Sunday, as his government sought new revenue streams against a backdrop of slowing growth.

FILE PHOTO: Czech Republic's Prime Minister Andrej Babis arrives at an extraordinary European Union leaders summit to discuss Brexit, in Brussels, Belgium, April 10, 2019. REUTERS/Yves Herman/File Photo

The country’s banks have been strong profit drivers for their mostly western parents, with their combined earnings rising 9 percent to 82.1 billion crowns ($3.58 billion) in 2018.

However, they have often faced criticism for dividends flowing abroad.

The largest Czech banks are all foreign-owned. CSOB is held by Belgium’s KBC, Ceska Sporitelna is part of Austria’s Erste Group, and Komercni Banka is majority-owned by France’s Societe Generale.

With economic growth predicted to slow and budget spending rising, the Czech Republic’s public finances are expected to fall back into deficit for the first time since 2015 from next year.

Babis has rejected introducing a sector tax on banks’ assets, which his junior ruling partner the Social Democrats had proposed to raise budget revenue. Instead, he said on Sunday banks could pay into a new state development fund being readied.

“We are talking with banks, and we are saying, from these dividends... leave us some part, obligatory. We can talk about 10 to up to 20 percent,” he said on a debate show on Czech television.

He added talks with banks were still ongoing and the amount of the payment was open to discussions. “We are saying, try to leave some of this (dividend) here, we will use it for investments, for the fund of national development.”

Babis on Sunday repeated that a sector tax on assets was not being planned as it would hurt the economy and consumers.

The Czech banking association has argued against a sector tax, saying it could hurt the banking system’s ability to finance the economy. The association could not be immediately reached for comment on Sunday.

Reporting by Jason Hovet; Editing by Jan Harvey

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