Opinion of the European Central Bank of 5 August 2025 on a tax on certain financial institutions (CON/2025/20)

OPINION OF THE EUROPEAN CENTRAL BANK of 5 August 2025 on a tax on certain financial institutions (CON/2025/20) Introduction and legal basis

On 28 May 2025 the European Central Bank (ECB) received a request from the Polish Parliament for an opinion on a draft law amending the Law on tax on certain financial institutions (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and Article 2(1), sixth indent, of Council Decision 98/415/EC , as the draft law relates to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets, and the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The draft law introduces a tax incentive aimed at lowering interest rate margins applicable to mortgage loans in Poland. According to the explanatory memorandum accompanying the draft law, such margins are high. Relying on ECB data, the explanatory memorandum states that in February 2025 the mortgage margin in Poland was 3,54 %, making it the highest among all Union Member States. According to the explanatory memorandum, the collection of high margins makes it difficult, sometimes even impossible, for Polish families to meet their basic housing needs. 1.2 To that end, the draft law proposes to amend the Law on tax on certain financial institutions. The Law imposes an obligation on certain financial and insurance institutions, including credit institutions, to pay a special monthly tax (hereinafter the ‘proposed tax’) amounting to 0,0366 % of the tax base, which is composed of an institution’s assets, subject to certain exemptions, thresholds and deductions. According to the draft law, for the part of the tax base that is composed of assets in the form of mortgage loans, the proposed tax is to be calculated as 0,055 % of the tax base per month multiplied by the weighted average interest margin of mortgage loans granted by the taxpayer expressed in percentage points less 1. The draft law further specifies that if the mortgage interest margin is 1 percentage point or less such assets are exempt from the proposed tax. Margin is calculated as the effective annual interest rate reduced by the three-month Warsaw Interbank Offered Rate (3M WIBOR). In the case of mortgage loans with a periodically fixed interest rate, the

margin for the entire period is to be determined on the basis of its amount on the day starting the period. 1.3 According to the explanatory memorandum accompanying the draft law, the amendments proposed by the draft law should translate into a reduction in the margin above 3M WIBOR to 1 %, as values above this level would be taxed at a marginal rate of 85 % (66 % in the form of a tax on certain financial institutions and 19 % in the form of corporate income tax), thus nullifying the economic sense of the application of higher margins by banks. 1.4 The explanatory memorandum accompanying the draft law also states that the costs of tax reduction for some assets should be offset by the increased taxes that will be imposed on other assets. 1.5 The proposed tax is to apply to (1) domestic banks; (2) Polish branches of banks incorporated outside of the Union; (3) Polish branches of Union credit institutions; and (4) credit unions. 1.6 The proposed date of entry into force of the draft law is 1 January 2026.

2. General observations

2.1 The ECB notes that Poland is a Member State with a derogation from participation in the third stage of economic and monetary union, and that the central banks of Member States with a derogation retain their powers in the field of monetary policy according to national law . Against this backdrop, the ECB refrains from commenting on the monetary policy implications of the draft law. 2.2 As previously noted by the ECB , Article 119(1) of the Treaty provides that Member States’ economic policies must be conducted in accordance with the principle of an open market economy with free competition. The ECB is as a rule not in favour of the regulation of interest rates charged by credit institutions, as further set out in paragraph 3, and more generally because such regulation would, under normal circumstances, diverge from basic economic and market principles. 2.3 With respect to the ECB data quoted in the explanatory memorandum accompanying the draft law, the ECB notes that in its recent Financial Stability Report Narodowy Bank Polski (NBP) specifically analysed the level of credit margins on housing loans in Poland versus the Union . NBP concluded that credit margins in Poland are currently below the long-term national average. In addition, whilst they remain higher than the average in other Union Member States, this is partly due to factors specific to the Polish banking sector, namely the tax on bank assets and the cost of early prepayment risk. In Poland, the expected cost of early prepayment is included in the credit margin at the time the loan is granted and applies to all borrowers, not only those who prepay their loans. Taking all of this into account, in NBP’s view, the margins do not differ significantly from the Union average, although they are indeed higher. 2.4 Given the statement in the explanatory memorandum accompanying the draft law that the costs of tax reduction for some assets should be offset by the increased taxes that will be imposed on other

assets, the ECB understands that the draft law is intended to apply not only to future mortgage loans, but also to outstanding mortgage loans (see also paragraph 4.5 below). 2.5 Finally, the ECB recalls that it was previously consulted by the Polish Parliament and adopted an opinion on the Law on tax on certain financial institutions .

3. Financial stability and prudential supervisory considerations

3.1 The ECB acknowledges that taxes of similar type to the proposed tax are sometimes justified given the social costs of high interest rates on households. High borrowing costs can impose strain on households, limiting their access to housing and other essential services. By incentivising lower interest rates margins, such taxes are intended to facilitate access to housing and support broader economic activity. Nonetheless, the ECB underlines the importance of balancing these social objectives against the potential adverse effects on the banking sector and on financial stability. A stable financial system is a prerequisite for sustainable economic growth and effective monetary policy. 3.2 In particular, the proposed tax may affect the profitability of banks and, over time, their solvency position. A reduction in profitability undermines banks’ ability to build additional capital buffers and adequately provision for impairments, especially during periods of economic uncertainty. Over time, this erosion may weaken the sector’s solvency, reduce its ability to extend credit, and hinder its capacity to weather economic shocks . Moreover, the proposed tax could increase the market cost of debt and the cost of capital for banks by imposing an additional financial burden on them. Such a development could ripple through the financial system, potentially leading to tighter credit conditions for businesses and households, reduced access to funding, and potentially adverse effects on broader economic growth. 3.3 While the proposed tax aims to reduce borrowing costs for households, its actual impact is uncertain and could vary significantly. On the one hand, the proposed tax could curtail lending to some categories of borrowers or increase interest rate margins. For instance, if banks perceive that the risks and costs associated with lending—such as operational expenses and potential credit losses— are not adequately compensated, they may reduce their willingness to provide mortgage loans altogether. Alternatively, banks might raise interest rate margins beyond pre-tax levels to ensure the after-tax margin covers their costs. Banks may also select the least risky borrowers, excluding riskier households from the mortgage market. These unintended consequences could lead to the proposed tax having the opposite effect to its intended goal and restricting access to credit for many households. On the other hand, if the proposed tax succeeds in lowering lending spreads and borrowing costs, it could incentivise borrowing by riskier households, potentially weakening credit standards and exposing banks to greater credit risks. This, in turn, could heighten financial stability concerns, particularly during economic downturns. These contrasting outcomes highlight the complexity and unpredictability of the proposed tax’s effects. They underscore the need for a

comprehensive impact assessment and ongoing monitoring to ensure the measure balances its social objectives with the stability of the financial system, as mentioned below. 3.4 At the same time, the limit on the profitability of a core business activity of the banking system, such as mortgage lending, might induce distortions in the banking sector depending on credit institutions’ business models and their involvement in mortgage lending versus other activities. These distortions could lead banks to engage in risk-taking behaviour in other business segments, adversely impacting the efficient allocation of credit in the economy and financial stability. 3.5 While providing a direct incentive mechanism to lower lending spreads, the Polish legislator is invited to consider alternative policies. For example, more targeted mechanisms are available to support housing for low-income households. For instance, governments could adopt fiscal policies that specifically target vulnerable groups, such as providing interest rate subsidies or direct financial assistance to lower-income families. These measures would avoid distortions in the banking sector while achieving the desired social outcomes more effectively. If well-targeted, these policies should not lead to an increase in residential property prices or exacerbate the unaffordability of homes. Additionally, favouring competition in the banking sector should also lead to lower spreads, thus reducing borrowing costs for households and businesses and making credit more accessible. Hence, policies that promote a competitive banking environment (e.g. reducing barriers to entry, promoting financial innovation, and enhancing transparency on pricing) may achieve similar objectives as taxation without the potential for distortion that taxation measures entail. 3.6 The ECB has consistently advised that the introduction of special taxes on banks or financial institutions should be preceded by a comprehensive impact assessment . The implementation of the draft law could entail financial costs for the Polish banking sector. The explanatory memorandum accompanying the draft law does not contain an impact assessment regarding the profitability, capitalisation and future lending capacity of the banking sector. This is crucial to mitigate unintended consequences and to ensure that the proposed tax achieves its intended objectives without harming the broader economy. At a minimum, the ECB recommends careful monitoring and assessment of the effects of such taxes on lending growth, state revenues, credit risk profiles, and the overall banking sector. This monitoring should be ongoing, allowing for timely adjustments if negative outcomes begin to materialise.

4. Specific observations

4.1 The draft law refers to the weighted average interest margin of mortgage loans granted by the taxpayer in the calculation of the proposed tax. The Polish legislator is invited to consider whether reference should be made to the weighted average interest margin of mortgage loans granted by the taxpayer during a specified reference period . 4.2 The draft law appears to apply to mortgage loans denominated in any currency, including Polish zloty (PLN). The Polish legislator is invited to consider whether the margin should be calculated under the

draft law as the effective annual interest rate reduced by 3M WIBOR in the case of mortgage loans not denominated in PLN . 4.3 The ECB understands that the 3M WIBOR or six-month WIBOR is usually used as a benchmark for floating-rate PLN-denominated loans in the Polish market. In the case of periodically fixed rate loans, where instalments do not change during the agreed period (usually of five years), the ECB understands that the interest rate is set on the basis of the benchmark reflecting the average level of interest rates expected by the market during that period, i.e. five-year interest rate swaps . Against this backdrop, the Polish legislator is invited to consider whether it is appropriate that margin should be calculated under the draft law as the effective annual interest rate reduced by 3M WIBOR for all mortgage loans denominated in PLN. 4.4 Although the main purpose of the draft law is to reduce margins on mortgage loans for housing purposes, the draft law does not specify that only such mortgage loans (and not mortgage loans for commercial purposes) fall within its scope. The Polish legislator is invited to consider this point. 4.5 Finally, the draft law should explicitly specify whether it applies to loans which are currently outstanding, or whether it only applies to future loans. Applying the proposed tax to existing loans could create significant challenges, as banks cannot adjust margins on loans that have already been issued. Such an approach could further strain banks’ financial positions and create legal uncertainties, undermining the predictability of the regulatory framework.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 5 August 2025.

[signed]

The President of the ECB

Christine LAGARDE