Santander boss hits out at bank windfall taxes

Santander boss Ana Botín has hit out at windfall taxes on banks’ profits as cash-strapped European governments consider raiding lenders that are benefiting from rising interest rates.

As the eurozone’s third-largest bank, Santander would be one of the hardest hit under proposals by the Spanish government to raise €3bn from banks to cushion the impact of surging energy prices.

Countries including Hungary and the Czech Republic have already announced extra taxes on banks to reduce the impact of energy prices.

“Higher taxes should be the same for all companies and . . . governments need to figure out what is the right level of taxes that really allows sustainable growth and investment,” Botín, who is executive chair of the bank, said in an interview for the Financial Times Global Banking Summit.

She cited figures from the Spanish Banking Association, which showed that if banks were forced to pay €3bn in taxes, it would reduce their lending capacity by €50bn because it would cut the amount of regulatory capital they could hold against those loans.

“We need . . . sustainable growth, non-inflationary growth — and banks are fundamental in that equation,” she added. “This is what governments need to understand.” 

The European Central Bank has also criticised Spain’s proposed windfall tax, saying it could damage bank capital positions, disrupt monetary policy and be difficult to enforce.

Pedro Sánchez’s Socialist-led coalition government plans to impose a 4.8 per cent tax on banks’ income from interest and commissions for two years, arguing that rising interest rates are yielding “extraordinary” profits for the sector.

Last month Santander reported an 11 per cent year-on-year increase in net income to €2.42bn in the third quarter. Other European lenders have also reported bumper profits thanks to rising interest rates.

But Botín said rising profits were a sign of a return to normal business conditions for banks after more than a decade of low and negative interest rates.

“When there is talk of extraordinary profits, that is not the case in the banking sector.

“This is good news — you need strong banks to have a strong economy. If you look at what the US economy has done over the past 10 years compared to the UK and Europe in general, a lot of it is actually based on [the US having] a very strong banking sector.” 

In his Autumn Statement on Thursday, UK chancellor Jeremy Hunt cut the country’s surcharge on bank profits from 8 per cent to 3 per cent, which will come into place next April alongside a rise in corporation tax from 19 per cent to 25 per cent.

In the UK, banks will therefore pay an effective rate of 28 per cent, 5 percentage points less than under the previous plans, a move aimed at improving the City of London’s attractiveness following the turmoil of Brexit.