MILAN, Sept 25 Reuters Italy39;s larger banks are still expected to pay a oneoff banking tax despite the government at the weekend offering lenders a way out in return for putting aside cash to boost reserve buffers.

The government sparked a market rout last month with the surprise announcement of a 40 tax on the profits banks are reaping from rising interest rates.

Now documents show it is planning to give lenders the option to instead boost nondistributable reserves by an amount equivalent to 2.5 times the tax, which will be capped at 0.26 of riskweighted assets RWAs rather than the 0.1 of total assets initially proposed.

The option would benefit banks that hold a higher proportion of Italian government bonds among their assets relative to loans.

The toptier banks will probably opt to pay the windfall tax rather than allocate the amount to capital, as the impact of the tax is manageable and payment would seem more ethical, Societe Generale said.

Banca Akros and broker Equita also expect most banks to pay the tax.

Akros pointed to the already abundant excess capital of Italy39;s listed lenders and investment cases based on high capital distribution to shareholders. Equita also said paying the levy would allow lenders to maintain more flexibility over their remuneration policy.

Equita listed stateowned Monte dei Paschi di Siena and unlisted cooperative lender ICCREA, neither of which plans to pay dividends this year, as the biggest beneficiaries.

They will…