Opinion by Mathew Carr
Aug. 8, 2023 — Hopefully, Italy’s move to place windfall costs on banks is the start of something bigger.
Reuters’ report on Italy’s surprise tax indicates that’s possible (see below). Bring it on, I say.
Record profits at banks because they deliberately failed to put up interest rates on savings accounts when reserve banks belatedly raised official rates to deal with inflation shows how politicians should deploy a much firmer regulatory hand.
It’s outrageous that companies that are effectively utilities can rip off society to such an extent.
Banks should be forced to boost interest rates for savers in lock step with official rate rises. That’s what regulators should have learned from the past two years.
Now, regulators can also tap the banking sector to help finance the climate crisis, which is an even worse problem than inflation.
The levy to finance emission cuts and climate adaptation could be permanent rather than temporary.
Regulators and politicians should find the bravery to be strong enough to stand up for what’s right and to insist that giant corporations, especially banks, do their bit to solve big societal problems that current market rules are making worse.
Reuters’ story is here. Snip is below.
Italy shocks banks with 40% windfall tax for 2023
August 8, 2023
- To tax income from gap in lending, deposit rates
- Govt had criticised lenders for keeping deposit rates low
- Banks have earned record profits in recent quarters
ROME, Aug 8 (Reuters) – Italy dealt a surprise blow to its banks and sent shockwaves across the sector in Europe by setting a one-off 40% tax on profits reaped from higher interest rates, after reprimanding lenders for failing to reward deposits.
Sharply higher official interest rates have yielded record profits for banks, as the cost of loans soared while lenders held off paying more on deposits.
Countries such as Spain and Hungary have already imposed windfall taxes on the sector and others may now follow suit.
See link for more.
A quick survey of banking news shows the industry is borderline corrupt or actively corrupt at its core.
This story by The Street shows how financial rules have been watered down under President Donald Trump. This has allowed corruption to return.
Here are some key snips: