Bank tax rise could lower deposit rates or raise loan rates

A proposed increase in the bank tax is likely to lead to lower deposit rates or higher lending rates over time, Central Bank of Iceland Governor Ásgeir Jónsson said, according to mbl.is.

Jónsson spoke at an open meeting of Parliament’s Economic Affairs and Trade Committee on a report by the Central Bank’s Financial Supervisory Committee.

The increase, set out in the 2027–2031 fiscal plan, is expected to bring the state an additional six billion krónur in revenue. It would raise the tax on financial companies’ liabilities by 75%, to 0.254%.

Jónsson said the effects could be different if the increase included a sunset clause, which would cause a law or provision to expire automatically at a set time or under specified conditions. He said the Central Bank had not analysed the proposal, but that responses to taxes can differ depending on whether they are temporary or permanent.