Italy has watered down its proposed bank windfall tax, which aimed to raise revenue from the financial sector, after facing opposition from banks and the European Central Bank. The revised tax will now only apply to banks that have benefited from state aid, rather than all banks as initially planned. The move is seen as a compromise to appease the financial sector while still generating some government revenue.
The European Central Bank (ECB) has criticized Italy's plan to impose a windfall tax on banks, stating that it would harm financial institutions that are already vulnerable to economic shocks. The ECB expressed concerns that the tax amount might not align with the long-term profitability and capital generation capacity of credit institutions. The widespread application of the tax could particularly impact banks with lower solvency positions, a focus on lending activity, or challenging capital projections. The ECB urged Italy to conduct a thorough analysis of the potential negative consequences of the tax on the banking sector.
