ECB Says Italy Windfall Tax May Hit Banks’ Attractiveness

The European Central Bank warned of potential negative side effects from a controversial windfall profit tax on banks introduced by the Italian government.

(Bloomberg) — The European Central Bank warned of potential negative side effects from a controversial windfall profit tax on banks introduced by the Italian government.

“The extraordinary tax may make attracting new equity capital and wholesale funding more costly for banks, as domestic and foreign investors may have less appetite to invest in Italian credit institutions,” the ECB Governing Council said in an opinion published on its website Wednesday. 

The statement adds a powerful voice to a chorus of opponents to a tax adopted by the Italian government in mid-August. The Italian bank lobby ABI said in a statement yesterday that the tax “raises doubts about its compatibility with constitutional principles.”

The Italian government under Prime Minister Giorgia Meloni imposed the levy on additional profits earned by banks because it accuses the industry of being too slow in passing the benefits from higher interest rates on to clients. The tax applies to 40% of banks extra profits, as defined against a 2021 benchmark and won’t exceed 0.1% of a firm’s assets. 

The tax surprised investors and weighed on stock valuations of the country’s financial industry. While the government hasn’t publicly said how much it expects to raise, the cost for Italy’s five biggest lenders may exceed €2 billion according to Bloomberg News calculations based on their assets.


Intesa Sanpaolo SpA Chairman Gian Maria Gros-Pietro said in an interview with Bloomberg earlier this month that the bank will pay lower dividends “if we have lower profits.”

Read more: Italian Bank-Tax Confusion Shows Flaws in Meloni’s Coalition

“The introduction of an ad hoc retroactive tax unduly increases policy uncertainty,” the ECB said in the opinion. “Its retroactive nature may fuel perceptions of an uncertain taxation framework and give rise to extensive litigation, creating problems of legal uncertainty.”

The ECB also published critical assessments when Spain and Lithuania announced similar windfall levies on banks. In both cases, the ECB argued that the taxes could make lenders more vulnerable to economic shocks. 

The statement echoes comments made by ECB banking supervision head Andrea Enria in an interview with Bloomberg News published on Monday. 

A tax like the one adopted by Italy could “hit a bank in a specific moment of a transition – when margins widen during the hiking cycle, just before the catch-up and the pass-through to depositors erode this temporary effect,” Enria said in the interview. 

“Giving the impression that whenever European banks make profits, there is somebody who steps in and reduces them could reduce the attractiveness” of banks for investors, Enria said. The low market valuations of many European banks are a concern to him, he said.

The ECB Governing Council is meeting in Frankfurt as part of a two-day gathering to set interest rates.

–With assistance from Zoe Schneeweiss and Alessandra Migliaccio.

(Updates with previous ECB assessments in eighth paragraph)

More stories like this are available on

©2023 Bloomberg L.P.