The Effect of Bank Levy Introduction on Commercial Banks in Europe

We evaluated the effects of the bank levy (BL) on the profitability of commercial banks and the balance sheet reconstruction, and the shifting of banks’ activities into countries with lower BL rates after BL introduction. Moreover, we investigated the effects of the Basel III and Single Resolution Fund (SRF) introduction on the amount of BL payment. We compared two different BL designs: the Hungarian and the German versions. The results clearly pointed to the negative effect of BL introduction on the ROA of larger Hungarian commercial banks and of smaller commercial banks in Germany. Moreover, the results showed that the introduction of the BL did not influence loan activity in Hungary. However, it decreased the value of the loans from German commercial banks. The results showed that commercial banks in Hungary prefer to restructure their balance or shift assets among different locations or entities to decrease the bank levy. The research findings also showed that Hungarian commercial banks decreased the value of paid BL after the Basel III introduction. On the other hand, the results also showed that the value of paid BL in German commercial banks increased after the Basel III and SRF introduction, especially in larger banks.

Effect of bank levy introduction on bank risk-taking

Risk-taking by financial institutions is widely regarded as the one of the causes of the global financial crisis. To reduce the probability of crises and internalize the costs of financial institution distress, policymakers have introduced bank levies (BLs). In this study, we evaluate the effects of the Hungarian and German BLs on the risk-taking behavior of financial institutions. We compare two totally different BL designs. The results unambiguously demonstrate that a BL on assets has a negative impact on the financial sector’s stability. The results of analyzing the influence that introducing BLs has had on the German financial sector demonstrate that BLs on liabilities decrease credit risk. An improved understanding of the determinants of the risk of EU financial institutions is very important for regulators and supervisors interested in benchmarking and validation issues related to the new EU banking regulation.

Bank levy

Research background: The bank levy was approved in 2011 and entered into force in 2012. Shortly after the economic crisis, Slovakia was not the only country to introduce it. Unlike other countries, the Slovak government did not have to help banks financially and then compensate for this help by increasing their taxation. The bank levy thus served mainly to improve the overall image of public finances in the country. Purpose of the article: The main goal of the article is to confirm the correctness of the abolition of the bank levy, which has distorted the management of banks in Slovakia for almost a whole decade. The abolition of the levy will contribute to greater stability of the banking sector, which will be helpful in the restart of the Slovak economy affected by the crisis caused by the covid-19 pandemic. Methods: Analysis of the legislation regulating the introduction of a bank levy in Slovakia, its development from the introduction of a bank levy to its abolition. Comparison of the expected benefits of this tool with reality. Findings & Value added: The article monitors the development of bank levies in Slovakia from its introduction to its abolition. The imposition of a bank levy resulted in additional taxation of the banking sector. The difference compared to other taxes was that the amount of the levy does not depend on the bank’s profit, but on the size of its liabilities.

The background of regulating non-bank loan institutions in Poland

<p>Non-bank loan institutions in Poland often face a bad reputation or a lack of trust, are compared to "parabanks" and frequently recognised as companies operating at the borders of the law. Despite their membership in the financial sector, until recently, public supervision had little control over loan companies and had little knowledge about the scale of their operations. The greater restrictiveness of the new regulations caused a slowdown in the development of loan companies. Changes such as the introduction of bank levy and the amendment to the Consumer Credit Act of 2016 had a significant impact on the financial results and the structure of products offered by loan companies. Along with the new regulations, however, there is doubt regarding whether these changes, which are intended to organise the market for non-bank loans, will actually lead to an exodus of loan institutions from the market and to significant limitation and financial exclusion on the part of Polish consumers.</p>