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MONEY

Spain to slap windfall taxes on banks, energy firms

The Spanish government said Tuesday it will slap temporary taxes on banks and energy firms to cover the cost of state measures put in place to help Spaniards grapple with soaring inflation.

Published: 12 July 2022 17:55 CEST
Spain to slap windfall taxes on banks, energy firms
Spain's Prime Minister Pedro Sanchez delivers a speech during the parliamentary debate on the State of the Nation, at the Congress of Deputies in Madrid on July 12, 2022. Photo by PIERRE-PHILIPPE MARCOU / AFP

The new taxes should generate around 7.0 billion euros ($7.0 billion) in revenues in 2023 and 2024, Socialist Prime Minister Pedro Sanchez told parliament in a state of the nation speech.

They will include a tax on windfall profits of big energy firms, which will generate around 2.0 billion euros per year for state coffers, he said.

A tax on lenders, “who have started to benefit from higher interest rates”, will bring in 1.5 billion euros per year, he added.

The profits generated by rising prices “must be returned to citizens” instead of “fattening” the “salaries of big business leaders,” Sanchez said.

“This government will not tolerate that companies profit from the crisis to enrich themselves,” he added.

Countries around the world are experiencing decades-high inflation as the Ukraine conflict pushes up energy and food prices.

Spain’s inflation rate hit 10.2 percent in June, its highest level in 37 years.

Sanchez’s government has rolled out a swathe of measures to help consumers, including a subsidy on fuel prices at the pump, direct grants to truck drivers and financial support for some farmers.

Several other European nations which have imposed temporary taxes on large firms recently to help cover the cost of measures to tackle the fallout from rocketing inflation.

Britain, for example, introduced in May an exceptional levy on soaring profits enjoyed by the likes of BP and Shell that have benefited massively from surging oil and gas prices.

Sanchez’s announcement sent the Madrid-listed shares of Spain’s biggest banks, including Santander, and its large energy firms like Repsol sharply lower.

He also unveiled several new measures, including free travel on commuter trains between September and December and an increase in monthly scholarship payments to students.

Sanchez’s Socialists were thrashed last month in a regional election in Andalusia, a long-time party stronghold.

The vote was won by Spain’s main opposition conservative Popular Party, which currently tops national opinion polls ahead of a general election expected at the end of 2023.

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BANKING

How would the BBVA takeover of Sabadell affect customers in Spain?

Spain's second-largest bank BBVA is attempting a takeover of rival bank Sabadell. What would it mean for both banks' customer accounts, cards, mortgages and loans?

Published: 9 May 2024 14:24 CEST
How would the BBVA takeover of Sabadell affect customers in Spain?

Following news that Spain’s second-largest bank BBVA is attempting a hostile takeover bid for smaller rival Banco Sabadell, many customers may be wondering what impact this could have on them if the takeover goes through.

The Spanish government has since vowed to block the move, but BBVA’s new bid came three days after Sabadell’s board of directors rejected a merger proposal, saying it was “not in the best interest” of the bank.

READ ALSO: Spain’s Banco Sabadell rejects BBVA merger offer

The takeover proposal values Sabadell, Spain’s fourth-largest banking group in terms of capitalisation, at nearly €11.5 billion ($12.3 billion).

Though the situation is still developing and Economy Minister Carlos Cuerpo has warned the government “will have the last word when it comes to authorising the operation”, there are a few things that would likely happen in the case that this takeover goes through.

Here’s how it could potentially affect millions of BBVA and Sabadell customers.

What if I have a mortgage with one of the banks?

In case of a takeover or merger, mortgages or loans would not be affected. This is because mortgages are essentially contracts with defined terms and conditions, so they could not be modified unilaterally by a bank after a takeover.

The requirements for interest rates on loans would also stay the same. However, the conditions of linked products (insurance premiums, for example) could theoretically be changed if they aren’t outlined in the contract.

What will happen to my bank card and account number?

After mergers and takeovers, as a general rule, the resulting banks tend to standardise the terms and conditions of their products, as well as their fees. This means that your card or account could gain (or lose) some fees, such as those for issuing a new card or maintaining the account.

This is not usually an immediate process, but be aware that banks can change the terms and conditions of accounts and cards following a merger or takeover.

It is likely your conditions will initially remain the same without much change, but the new/resulting bank may change the conditions later down the road.

However, banks are always obliged to inform customers months in advance of any changes so you can decide whether to accept the conditions or to change bank.

In practice, it is most likely that customers of the absorbed bank, in this case Sabadell, will see their IBAN code changed, although this is a procedure that shouldn’t really change much as it is the bank itself that does it. You’d just need to update your payment details where necessary.

What about investment funds and pensions?

In the case of investment products such as pensions, customers are likely to be forced to transfer their funds into the products marketed by the new bank, as not all banks market the same investment funds and pension plans on offer.

As such, doing this may oblige customers to assume the fees of the other bank.

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