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Banks: Dividends, capital returns and SSM objections

Deferred tax appears to be re-entering the banks’ agenda, most likely in an attempt by the SSM to pressure banks to hold back the capital returns and dividend distributions they were planning.

It is true that the SSM does not see positively the fact that shareholders across Europe expect dividend yields and are “pushing” in this direction in a sector that has given significant profits. Besides, this is the reason why the shareholders supported the sector with fresh capital in difficult times.

There are countries which, despite the fact that their economies, as recorded by the rating agencies, are not booming (e.g. Italy) the SSM seems to be giving in to the announcements of their banks to return 100% of profits to shareholders, while in other countries like ours, it does not see the distribution of dividends in the same way.

The truth is that the deferred tax is a rather serious thorn in the capital of the banks, but this was known from the beginning when the institutions adopted the specific model and accepted the way to eliminate it, which is none other than achieving profits for the credit institutions.

Based on what was foreseen in the memorandums, the DTC is expected to be eliminated by 2040 or so (depending on the profitability of the banks).

Deferred tax is not a Greek phenomenon. It also exists in countries such as Spain, Portugal and Italy. However, with one essential difference: The activation of the State’s participation in the event of a loss is not automatic, as in our country, while both enacted the disputed legislation, having previously cleared their balance sheets of bad loans.