Nordic Credit Rating (NCR) said today that Swedish government plans for a risk tax on the country's seven largest domestic banks and foreign branches is excessive given existing buffers and measures to reduce government intervention in future financial crises.
The proposed tax would add about SEK 6bn to Swedish banks' existing tax bill in 2022 and about SEK 7bn annually from 2023. The tax would coincide with declining payments to existing reserves designed to reduce the government's own obligations in future financial crises, the agency says in a new report.
"The proceeds from the new bank tax are ostensibly earmarked for defence spending, but the rationale for the additional tax focuses on the social and financial consequences of a possible financial crisis," said NCR credit analyst Sean Cotten, who wrote the report.
The report says the Swedish government is already well prepared for a future financial crisis. By the onset of the proposed new tax in 2022, NCR projects that the Swedish government will have over SEK 135bn in financial crisis reserves in the form of a resolution fund, a stability fund, and a fund backing the country's deposit guarantee scheme. In addition, banks' increased issuance of bail-in-able senior unsecured debt instruments will reduce government costs in future financial crises.
The report also considers consequences on bank employment and customers' access to cash as Sweden's largest banks attempt to reduce costs.
If you have any questions, please contact:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Geir Kristiansen, credit rating analyst, +4790784593, geir.kristiansen@nordiccreditrating.com