ECB published an opinion (CON/2020/28) in response to a request from the Ministry of Finance of the Slovak Republic for an opinion on a draft law abolishing a special levy on selected financial institutions and on certain measures in connection with this abolition. The abolition of the levy may contribute to an increase of the capital generation capacity of credit institutions and support lending to the real economy. In its opinion, ECB welcomed the intended use of part of the collected funds for strengthening the Slovak Deposit Protection Fund and the Slovak Crisis Resolution Fund, which will contribute to improving the resilience of, and confidence in, the financial sector.
The draft law stipulates that balances of the collected levies will remain State financial assets in accordance with Law No 523/2004 on general government budgetary rules and amending certain laws. The explanatory memorandum to the draft law states that the intention is to use these assets to fund the activities of the Slovak Development Fund, which will focus on supporting and financing development programs of the Slovak Government. A smaller part of the funds will also be used to strengthen the Slovak Deposit Protection Fund and the Slovak Crisis Resolution Fund and to reimburse eligible expenses of the Crisis Resolution Council, pursuant to Law No 371/2014 on resolution in the financial market and on amendments to certain laws.
ECB is of the view that the use of a large portion of levies already collected for purposes unrelated to financial stability would weaken the overall robustness of the financial sector if no concomitant safeguards to enhance the stability are put in place. An example of such a safeguard would be a mechanism designed to allow all the funds that have been already collected from the financial sector to be available in the event of a crisis. Law No 384/2011 imposes an obligation on banks and branches of foreign banks operating in Slovakia to pay a special levy. The proceeds of this special levy are State financial assets with the designated purpose of covering costs related to the resolution of financial crises in the banking sector and protecting the financial stability of the Slovak banking sector, including the replenishment of the Deposit Protection Fund necessary for expenses due to the payment of compensation for unavailable deposits. The draft law abolishes the special levy on selected financial institutions as of January 01, 2021 and repeals Law No 384/2011.
Related Link: Opinion (PDF)
Keywords: Europe, Slovakia, Banking, Resolution Framework, Special Levy, Opinion, Resolution Fund, Deposit Protection, ECB
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