Bloomberg News

Dutch Bank Tax to Have Limited Effect on Credit, Government Says

December 15, 2011

Dec. 15 (Bloomberg) -- A proposed Dutch bank tax may cut lending by as little as 0.05 percent, the government said, easing concern the levy would substantially restrict credit to households and businesses.

According to the country’s central bank’s estimates, the tax may reduce loans by about 500 million euros ($650 million), based on outstanding lending in September, Finance Minister Jan Kees de Jager said today in a memorandum explaining a draft bill. Loan spreads may rise by about 1 basis point, which may have an influence on demand, according to the memo.

Balance sheets of Dutch banks, including ING Groep NV and ABN Amro Group NV, total almost five times the size of the country’s economy, the central bank said last month. The tax is designed to raise 300 million euros annually, forcing banks to take on some of the costs of ensuring financial stability.

The Netherlands bought Fortis’s Dutch units, including ASR Nederland NV and parts of ABN Amro, in 2008 after the lender ran out of short-term funding, customers withdrew deposits and investors lost confidence. The government also provided aid to ING, SNS Reaal NV and Aegon NV in 2008 and 2009.

“In the recent past it has become clear that the state is willing to offer a helping hand to troubled banks when needed to guarantee financial stability,” De Jager said in the memorandum. “It is justified that the banking industry is asked for a contribution in the shape of a bank levy. That puts a price tag to the implicit state guarantee.”

The tax is to go into effect in mid-2012 for all lenders active and licensed in the Netherlands. The tax will apply to uncovered debt, with a 0.022 percent tariff on short-term debt and 0.011 percent on debt maturing in more than a year. That may have an additional benefit of stimulating long-term funding, the government said.

--Editors: Steve Bailey, Keith Campbell

To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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