Tax could make banks vulnerable to economic downturn
Some banks may report losses when paying tax in mid2024
Italian lawmakers preparing proposals to soften measure

FRANKFURT, Sept 13 Reuters The European Central Bank ECB on Wednesday criticised the Italian government39;s proposed tax on windfall bank profits, saying it did not consider lenders39; longterm prospects and could make some of them vulnerable to an economic downturn.

Last month, Rome dealt a surprise blow to the country39;s lenders by imposing a oneoff 40 tax on their profits resulting from higher interest rates, after reprimanding them for failing to reward deposits.

Bank shares tumbled before the economy ministry clarified that the new tax would amount to no more than 0.1 of lenders39; total assets.

The amount of the extraordinary tax might not be commensurate with the longerterm profitability of a credit institution and its capital generation capacity, the ECB said in a nonbinding legal opinion.

As a result of the general application of the extraordinary tax, credit institutions that have lower solvency positions or are more focused on lending activity such as small banks or have challenging capital projections could become less able to absorb the potential downside risks of an economic downturn, the ECB added.

Italian lawmakers are expected to table proposals this week to soften the impact of the tax, including allowing banks to partly deduct what they have to pay from their overall corporate…