Hungary To Cut Special Bank Levy Even Further
25 November 2015 - 3:23PM
Dow Jones News
By Margit Feher
BUDAPEST--Hungary plans to cut its widely criticized bank-sector
levy even more than originally planned next year, a bill submitted
to parliament shows.
According to the draft legislation submitted to lawmakers late
Tuesday, in 2016 the special levy may not exceed 45% of the amount
paid by a lender this year. In 2017 and 2018, the tax may not
exceed the amount paid in 2016. Banks to boost their lending to
businesses and/or households next year will only be required to pay
30% of their 2015 tax payment in 2017 and 2018, the bill says.
Prime Minister Viktor Orban's government launched the special
bank levy soon after his Fidesz party won general elections in
2010. The tax, which is the highest bank levy in Europe according
to the EBRD, is one of the various sector-specific taxes the
government installed to boost budget revenues instead of
introducing cost-cutting austerity measures amid the global
financial crisis.
In Hungary, both corporate and household lending has been in the
doldrums since the crisis, apart from lending to small firms, which
has been boosted by a lending program subsidized by the central
bank. The bank tax, which significantly lowered the profitability
of the banking sector--which, until recently, was mostly
foreign-owned--has been criticized by several international
organizations and investors.
The latest measures reflect the government's commitment to
restore its stormy relationship with banks and prompt them to step
up lending. It is also a major step on Hungary's path to reclaim an
investment-grade credit rating.
Lowering the bank levy "would support a strengthening in the
banking sector and a recovery in bank lending. It would also be
consistent with the government's shift in favor of greater policy
predictability towards the private sector," credit rating firm
Fitch said last week, when it left its positive outlook for
Hungary's non-investment grade sovereign debt in place.
The latest tax plans will also replace earlier government bills
the European Union had competition concerns about.
Introducing a cap on the bank levy will lower the anticipated
payment obligation of OTP [OTP.BU], Hungary's biggest lender, to 13
billion forints ($44.3 million) next year from HUF18 billion, the
bank said. Analysts at Erste Bank said in a research note that this
would be a pleasant surprise to OTP, and rated the lender's shares
at hold, with a HUF6,000 target price.
At around 1200 GMT, OTP shares were trading down 0.3% at
HUF6,011.
Write to Margit Feher at margit.feher@wsj.com; Twitter:
@margitfeher
(END) Dow Jones Newswires
November 25, 2015 10:08 ET (15:08 GMT)
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