ECB Issues Opinion on A Draft Law Under Resolution Regime in Slovakia
ECB published an opinion (CON/2019/40) on a draft law from Slovakia that involves increasing the special levy on selected financial institutions. The proceeds of this special levy are state financial assets for covering costs related to the resolution of financial crises in the banking sector and protecting the financial stability of the Slovak banking sector; this includes the replenishment of the Deposit Guarantee Fund necessary for expenses due to the payment of compensation for unavailable deposits. The opinion was issued in response to a request from the Ministry of Finance of the Slovak Republic on a draft law amending Law No 384/2011 Coll. on a special levy on selected financial institutions and on amendments to certain laws. In its opinion, ECB has expressed certain concerns about the material adverse consequences of the increase in this levy and has recommended a robust impact assessment detailing the net benefits of the proposed changes.
In accordance with Law No 384/2011, the rate of the levy during the period from 2017 to 2020 is 0.2% of each bank’s liabilities reported in its balance sheet and 0% as of 2021. The draft law increases the rate of levy to 0.4% of each bank’s liabilities, as reported in the balance sheet, and does not provide for temporal limitation for the applicability of the levy. ECB has recommended that it is necessary to introduce a clearer separation between the extraordinary account created out of the levy proceeds and the general budgetary resources of the Slovak Government. ECB understands that the obligation of the banks to pay the bank levy is additional to their obligation to pay contributions to the Resolution Fund and the Deposit Guarantee Fund. ECB understands that the bank levy proceeds would serve as a funding backstop that is not covered by the resolution fund and for refinancing the deposit guarantee fund.
According to ECB, the draft law could have unintended and material adverse consequences on financial stability. The levy proceeds already constitute a significant share of bank profits, in addition to the contributions to the Deposit Guarantee Fund and the Resolution Fund. The proposed increase in the levy could disproportionately impact profitability of the banking system, with negative consequences for internal capital generation and lending. Moreover, removing the temporal limitation on the levy could have procyclical consequences. Therefore, ECB recommends the legislative proposal be accompanied by a robust impact assessment detailing the net benefits of the proposed changes. At a minimum, the draft law could maintain a proportionate temporal limitation for the applicability of the levy, in line with the impact assessment, to reduce ambiguity regarding the overall effects of the levy going forward.
Related Link: ECB Opinion (PDF)
Keywords: Europe, Slovakia, Banking, Special Levy, Resolution Fund, Deposit Guarantee Fund, Proportionality, CON/2019/40, Resolution Framework, Opinion, ECB
Previous Article
FIN-FSA Grants Five Registrations as Virtual Currency ProviderNext Article
IAIS Publishes Newsletter for October 2019Related Articles
UK Government to Set Out Rules on Wind-down of Critical Benchmarks
HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks.
EIOPA Launches Stress Test for Insurance Sector in EU
EIOPA launched the 2021 stress test for the insurance sector in EU.
UK Authorities Publish Third Edition of Regulatory Initiatives Grid
UK authorities jointly published the third edition of Regulatory Initiatives Grid setting out the planned regulatory initiatives for the next 24 months.
EC Consults on Regulation on Non-Financial Sustainability Disclosures
EC is requesting feedback on the proposed Commission Delegated Regulation on the content, methodology, and presentation of information that large financial and non-financial undertakings should disclose about their environmentally sustainable economic activities under the Taxonomy Regulation.
OSFI Outlines Prudential Policy Priorities for Coming Months
OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.
BIS Announces TechSprint on Innovative Green Finance Solutions
Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.
ACPR Publishes Version 1.0.0 of RUBA Taxonomy
ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.
EBA Proposed Regulatory Standards for Central Database on AML/CFT
EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.
ECB Responds to EC Consultation on Crisis Management Framework
ECB published its response to the targeted EC consultation on the review of the bank crisis management and deposit insurance framework in EU.
BCBS, CPMI, and IOSCO to Survey Market Participants on Margin Calls
BCBS, CPMI, and IOSCO (the Committees) are inviting entities that participate in market infrastructures and securities markets through an intermediary as well as non-bank intermediaries to complete voluntary surveys on the use of margin calls.
