Banks get extra rent, not operating income – Lithuanian PM

VILNIUS - As Lithuanian lawmakers are set on Thursday to discuss the government's proposal to introduce a temporary solidarity contribution for banks, Prime Minister Ingrida Simonyte says what commercial banks earn due to the change in the European Central Bank's monetary policy is rent, not operating income.

"The economic reasons why this levy is being proposed are very serious and very important because what commercial banks are currently receiving in extra income as a result of the very rapid and abrupt change in the ECB's monetary policy is neither income from more efficient operations, nor that from more extensive operations. This is simply rent, speaking in economic terms," the prime minister told reporters at the Seimas on Thursday. 

In the current situation, such a temporary solidarity contribution for banks is also "a moral issue", she said.

The prime minister compared the temporary bank solidarity levy to the mechanism adopted by the European Union last year to share the excess revenue of electricity producers.

In her words, the bank situation in the Baltic states and the rest of the euro area is different as they are dominated by variable-rate loans.

If the Seimas does not approve the proposed temporary solidarity levy for banks, the state will have to borrow at 4.5 percent interest for national defense projects, the prime minister underlined.

Lithuania plans to raise around 410 million euros from the banking levy and spend the money on military mobility and dual-use – civilian and military – transport infrastructure as well as military infrastructure projects.

The contribution would make 60 percent of banks' net interest income exceeding the average of four regular financial years by more than 50 percent.