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Bank Levy: Austrian Regional Banks Under High Pressure

Published: January 16, 2014; 23:43 · (Vindobona)

The Austrian government will raise the bank levy significantly. Smaller banks have to perform disproportionately high taxes, Oberbank´s CEO Franz Gasselsberger says.

Since 2010, the Austrian banking sector has to perform extraordinary taxes. Due to the partial nationalization of VBAG in spring 2013, the bank tax was raised from EUR 500m to EUR 625m. In 2014, the total bank levy is expected to reach about € 700m.

In the next weeks, the Austrian government will develop a new calculation model for the bank tax. A few details are already known.

As before, small banks with total assets below € 1.0bn do not have to perform bank taxes. Moreover, the bank tax will be independent from derivatives trading. As a result, Erste Group and Bank Austria will benefit from lower bank taxes. The Austrian Raiffeisen sector will be the main loser of the new calculation model. This year, the contribution of the Raiffeisen sector is expected to reach about € 120m.

According to a spokesperson at Raiffeisen, this new rule is a wrong signal. “When the bank levy was established, derivatives were recognized as cause of the bank crisis. As a result, the tax was linked to the derivatives trading volume. It would be wrong to change that.” Other lenders complained that bank levy “is a clear competitive disadvantage for the domestic banking sector.”

Above all, the change in the calculation method of the bank levy affects smaller banks. While large banks face a 29% increase in the bank levy, regional banks will have to suffer from a 64% increase, Gasselsberger argues. “This is simply inacceptable.” This year, Oberbank will have to pay a bank levy of € 13.1m after € 7.8m in 2013, he says. According to Gasselsberger, regional mortgage banks the change in the calculation method also affects mortgage banks heavily.

“In the end, the tax has to be paid by the real economy because banks are forced to reduce lending. In the end, the whole economy suffers from such a tax increase.” Michael Mauritz, spokesman of Erste Group commented. Gasselsberger underlines that particularly regional banks have stabilized the real economy during the financial crisis. Moreover, unlike large Austrian banks, regional banks did not need public support, Gasselsberger concludes.

At the moment, Oberbank is the tenth-largest Austrian bank. Last year, Oberbank´s operating result was up by 8.6% to € 212m. Despite a shrinking lending market, Oberbank´s total loan exposure rose by 4.0% to €11.7bn last year. Deposits and assets under management were up by 5.8% to € 22.8bn. The regional bank could improve the tier-1 capital ratio by 0.42 percentage points to 12.3%. In total, the banking group employs about 2,000 persons.