Italy Backtracks on Windfall Bank Tax To Prevent Further Market Turmoil
Italy was forced to water down its new windfall tax on excessive banking profits after the surprise Tuesday announcement spooked capital markets and wiped out $10 billion from banks’ market value.
The finance ministry said Tuesday night the new levy won’t exceed .01% of the lender’s assets, and financial institutions that have already increased the interest rates offered to depositors “will not have a significant impact as a consequence of the rule.”
The backtrack was enough to send shares of Italian lenders higher on Wednesday, recouping some losses after shares tumbled on Tuesday.
Shares of UniCredit SpA were up 4%, Banco BPM +4%, Intesa Sanpaolo +3%, and Finecobank +7.5%. The FTSE Italia All-Share Banks Index was up nearly 4%. Italian banks recovered more than $4.2 billion in market capitalization.
Finance Minister Giancarlo Giorgetti spent Tuesday trying to extinguish the fire after Deputy Prime Minister Matteo Salvini’s surprise bank tax sent shockwaves across markets, according to Bloomberg, citing a person familiar with the discussions. A watered-down version of the tax was the best way to mitigate the fallout and prevent further deterioration in bank stocks.
