It’s been a while since the European Central Bank worried about lenders making too much money. Yet the Frankfurt-based body is examining how to prevent banks from pocketing a windfall when it begins hiking interest rates later this month, the Financial Times reported on Sunday, citing three people familiar with the plans.
A symphony of light consisting of bars, lines and circles in blue and yellow, the colours of the European Union, illuminates the south facade of the European Central Bank headquarters in Frankfurt, Germany, December 30, 2021. REUTERS/Wolfgang RattayLONDON, July 4 - It’s been a while since the European Central Bank worried about lenders making too much money.
The risk of arbitrage does exist. Indeed, banks took advantage when the ECB pushed the rate on the loans to minus 1% between 2020 and 2022, before reverting to minus 0.5% in June. But deciding whether the bonanza is unseemly is a political choice. Banks will pay corporate tax on their extra profits. It’s up to governments to decide whether they should hand over a larger chunk.
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