On the Incidence of Bank Levies: Theory and Evidence

Michael Kogler ()

No 1606, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: Several European countries have recently introduced levies on bank liabilities to internalise the fiscal costs of banking crises. This paper studies the tax incidence: Building on the Monti-Klein model, we predict that banks shift the burden to borrowers by raising lending rates and that deposit rates may increase as deposits are partly exempt. Bank-level evidence for 23 EU countries in the period 2007-2013 implies a moderate increase in lending and deposit rates and net interest margins. Market characteristics and capital structure influence the magnitude: The lending rate strongly increases in concentrated markets, whereas the pass-through is weak for well-capitalised banks.

Keywords: Taxation of banks; Tax Incidence; Pigovian taxes (search for similar items in EconPapers)
JEL-codes: G21 G28 H22 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2016-04
New Economics Papers: this item is included in nep-ban and nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: On the incidence of bank levies: theory and evidence (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2016:06

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