June 22, 2020 / 11:04 AM / 20 days ago

Slovakia to scrap tax in return for bank pledge to lend more

PRAGUE (Reuters) - Slovakia has agreed to replace a special tax levied on bank balance sheets with a commitment from banks to lend more to public and private projects, the prime minister said on Monday.

FILE PHOTO: Slovakia's Prime Minister Igor Matovic holds a joint news conference with Hungary's Prime Minister Viktor Orban (not pictured) in Budapest, Hungary, June 12, 2020. REUTERS/Bernadett Szabo/File Photo

The special tax was introduced in 2012 after the global financial crisis to create a buffer fund to help cope with future crises. It has raised about 150 million euros a year.

“We have agreed to introduce an entirely new scheme instead of the bank tax,” Prime Minister Igor Matovic told a televised news conference.

Under the new plan to be proposed to parliament, accumulated payments of the tax, amounting to about 1 billion euros ($1.1 billion), would be moved into a state development fund, he said.

Future payments would be scrapped and banks would instead use the cash saved to boost capital, enabling them to lend about 500 million euros for public projects each year and a further 1 billion euros on private projects, Matovic said.

Alexander Resch, the head of the euro zone country’s banking association, told the joint news conference with Matovic that banks backed the move.

“This will release resources necessary to increase our capital in order to give more loans to families, households and in the end ... support the Slovak economy with roughly 1.5 billion euros in additional loans per year,” he said.

The levy had faced criticism especially after the previous government doubled the rate from this year. The central bank said in April the higher rate would take half of bank profits.

The central bank welcomed the move to scrap the tax and to encourage lending instead. “Common sense has won,” Governor Peter Kazimir said in a statement.

Slovakia’s top banks include KBC Group’s CSOB (KBC.BR), Erste Group Bank’s Slovenska Sporitelna (ERST.VI), Raiffeisen’s Tatra Banka (RBIV.VI) and Intesa Sanpaolo’s VUB (ISP.MI).

($1 = 0.8916 euros)

Reporting by Jan Lopatka; Editing by Edmund Blair

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