Bank levy cut cleared way for Erste deal

History

Hungary's bank levy will be reduced and calculated on the basis of balance sheets for the end of 2014 under a memorandum of understanding between the government and the European Bank of Reconstruction and Development (EBRD) achieved yesterday, Hungarian news agency MTI reported.

This decision is apparently what made it possible for the government and EBRD to buy into Erste Bank Hungary. Erste Bank said it will allow the two entities to buy into its Hungarian unit if the banking tax was lowered, and that purchase was announced yesterday.

The percentage applied will be reduced to 31bp from the beginning of 2016 and to 21bp from the start of 2017 to the end of 2018, according to the memorandum of understanding. From 2019, the amount of the levy will be "further aligned with the prevailing European Union norms".

The government said in the memorandum that it would "refrain from implementing new laws or measures that may have a negative impact on the profitability of the banking sector, other than those the government of Hungary may be obliged to implement due to its membership in the European Union".

A further commitment was made to "ensuring that there is fair competition between, and equal treatment of, all financial institutions active on the market in Hungary, irrespective of size or nationality of ownership, in line with the single market rules of the European Union and the principles of free and fair competition".

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