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Report: Lithuania plans bank levy to fund social spending

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Report: Lithuania plans bank levy to fund social spending

Lithuanian Prime Minister Saulius Skvernelis plans to impose a levy of up to 0.4% on bank assets to finance social spending, Bloomberg News reported Oct. 9.

Skvernelis is looking to implement the levy as early as 2020, a move the Lithuanian Banking Association warns would hike mortgage costs and hamper economic growth. The proposed plan still needs to be submitted to the parliament, with specific details to be provided later, according to the report.

Swedbank AB (publ), Skandinaviska Enskilda Banken AB and Luminor Group AB are currently the biggest lenders in the country and the levy is expected to impact them the most, the report said, adding that the lenders declined to comment on the situation and said communication is currently being carried out through the banking association.

The country's central bank believes a tax on assets instead of performance could be detrimental to financial stability in case of an economic downturn and is demanding that it be consulted on the matter, the newswire reported.

Lithuania is not the first country in eastern Europe to consider such a move. Romania announced a surprise bank tax in December 2018 to support its plans of raising €2.1 billion to reduce its budget deficit but later watered it down after it led to a stock market rout and became a threat to its national rating.

In Poland, a 0.44% annual levy was introduced in February 2016 after the right-wing Law and Justice party came to power and Hungary took a similar step. Both Poland and Hungary are being asked to reconsider the levy to help boost credit supply in the countries.

In the Nordics, Sweden plans to implement a bank levy on lenders' assets from 2022 to help fund increases in defense spending despite a previous attempt at introducing the levy, which failed due to concerns around it disrupting competition and breaching European Union rules.