Planned or existing bank levies in most countries serve to establish financial stability, while the tax in Hungary aims to plug the budget gap, National Bank of Hungary deputy governor Julia Kiraly said in an interview with origo.hu on Monday.
While the average bank levy in European countries is 0.1-0.2pc of GDP, it is 0.7pc of GDP in Hungary, which is unrealistically high, Ms Kiraly said. The levy could cause banks to cut back on lending, impeding growth just at the time the country needs to develop, she added.
The bank levy creates a clear risk that foreign-owned banks will tone down their lending activities while transferring their capital and financing for lending to other countries in the region, Ms Kiraly said. Although Hungarian banks’ profit margins are still much higher than those in Western Europe, the same cannot be said in a comparison with their peers in Eastern Europe, she added.
Ms Kiraly said a recently approved pay cap for NBH staff hurt the central bank’s independence, reiterating the stand of the NBH.