ECB Says Tax Hit to Bank Valuations Can Create Stability Risks

The European Central Bank warned that special taxes on banks could contribute to tighter financing conditions for the region’s economy because they exacerbate the already low valuations of the region’s lenders on stock markets.

While European banks’ earnings have reached multi-year highs, their shares haven’t risen substantially from levels seen before the Covid-19 pandemic, the ECB said in a report Monday. One reason for that divergence is that special bank taxes proposed in several countries have raised concerns about shareholder payouts, the ECB argued.