Response to interpellation 2023/24:137 on the banks' excess profits
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
1 S wants to introduce a temporary tax on the banks' interest net to help households in the cost crisis 1. S believes that the banks can bear the cost without raising fees 2, that the proposal is feasible 3 and that it is about political will rather than populism 3. S argues that the banks' excess profits occur at the customers' expense 3. 4 M believes that the banks' profitability is important for the financial system's resilience and that a new bank tax will likely be passed on to the customers 4. M criticizes the proposal as short-sighted and populist 5. M argues that there is a lack of analysis regarding the tax's impact on Kommuninvest 6 and that it is not the right time to make it more expensive for households 7.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Statsrådet Niklas Wykman (M)
Madam Speaker! Gunilla Carlsson has asked the Minister of Finance what the Minister intends to do for all those households that today are financing the banks' excess profits and if the Minister can consider introducing a temporary tax on the banks' excess profits for the purpose of returning a portion of the excess profits to the households.
The interpellation has been handed over to me.
To begin with, it is good that Swedish companies are profitable. For banks, this is especially important, as it builds resilience in the financial system and the capacity to maintain lending in poorer economic times. But profitability must not come at the expense of strong consumer protection and well-functioning competition between the banks.
The banking market in Sweden is concentrated and dominated by a few large banks. Some indicators do point to the fact that competition has increased in recent years. The large banks have lost market shares, mortgage margins are, according to Finansinspektionen, the lowest in ten years, and customers have become more mobile. But the large banks have continued to maintain a strong position. An example of the latter is that the banks have been able to be so quick to raise the interest on their lending but only recently started adjusting the interest on salary and savings accounts. The Minister for Finance has in conversations with the CEOs of the larger banks pointed out that this discrepancy has been remarkable and that it raises questions about the competition situation on the Swedish banking market.
As the Competition Authority has pointed out, one of the most important explanations for the major banks' dominance is that customers are reluctant to change banks. It is therefore important to strengthen the position of bank customers in various ways and increase their opportunities to negotiate with their bank. The Government therefore already at the end of last year gave the Financial Supervisory Authority a mandate to review how consumers' position on the banking market can be strengthened. The mandate is to be final reported by May 25 next year at the latest.
Households' economic situation is under heavy pressure from inflation, which is at its highest level in over 30 years. It is likely that a new bank tax would be passed on to customers through increased interest rates and fees. This would mean that households' situation would become even more strained. This is not the right way to go. The most important thing for Sweden's economy right now is that inflation is fought. It is largely the root of the troublesome economic situation that Sweden finds itself in. The Government has therefore placed a restrained budget on the Riksdag's table, which both fights inflation and supports households and welfare.
Since the interpellator reported that she was prevented from attending the meeting, the second Deputy Speaker granted that Eva Lindh (S) instead was allowed to participate in the debate.
Eva Lindh (S)
Madam Speaker! I thank Niklas Wykman for the answer. It was, as mentioned, Gunilla Carlsson who submitted the interpellation, but she was prevented from attending. Therefore, I am here and taking the debate.
The economic crisis is, as said, hitting ordinary Swedes very hard. The interest rates are carving holes in household budgets, and more and more households are struggling to make ends meet. Many are having a tough time right now. We also have an upcoming healthcare crisis in the country.
But the economic crisis does not seem to affect everyone. While ordinary people are on their knees, the big banks are making record profits in the tough economic situation. They are not just profitable; they are making record profits.
In recent times, we have seen several quarterly reports showing that the banks' profits are truly exploding. The vast majority of the profits are taken from what is called the net interest margin – what the banks earn on the difference between lending and deposit rates. Everything indicates that the banks' dividends will increase significantly in the wake of these record profits. The market's dividend processes show that the major banks top the list of highest direct yield, and many point to record-high dividends.
Madam Speaker! Efforts are required to strengthen competition in the banking sector in the long term, as the Minister for Finance also touched upon. For the sake of the bank customers, the thresholds for households to change banks need to be lowered. But it is a task that takes time. Just as the Minister touched upon, it is a matter of years ahead. What needs to be done now is to support people who are having a tough time and are affected by a cost crisis here and now.
That is also why we Social Democrats want to introduce a temporary tax on the banks' net interest. We did the same thing during the energy crisis. When the electricity companies earned large sums, we introduced a temporary tax on the electricity producers' excess profits. In the same way, the banks can join in and contribute now.
It is a question of a tax on the surplus - 23 percent on the net interest that exceeds 150 percent. The assessment is not that the banks would need to incur any increased costs from the customers, but the assessment is that they manage well by paying off this profit. They also contribute to making it easier for the households - ordinary Swedish people - who are hit very hard by the economic crisis.
Therefore, I now repeat Gunilla Carlsson's questions: What does the minister intend to do for all those households that today are financing the banks' excess profits? That is what this is about. It is the customers who are financing the excess profits. Can the minister imagine a temporary tax, as we Social Democrats have proposed? That would mean that we could distribute money from the banks to the Swedish people.
Statsrådet Niklas Wykman (M)
Madam Speaker! Short-sightedness and populism are always bad in politics. Short-sightedness and populism are particularly bad when it comes to the financial systems, because there one can cause an almost unmanageable damage with short-sightedness and populism.
I went to school in the 90s. There, one had to learn what savings and cuts mean and what it means when hundreds of thousands of people become unemployed. For the most part, this happened because control over the financial systems was lost.
I worked together with the then Minister for Finance Anders Borg in the aftermath of the financial and euro crisis. At that time, the Swedish state was left without tools and was forced to replenish and build an entire toolbox to handle the problems in the financial systems that arose when control over them was lost.
If one engages in short-sightedness and populism in politics, one eventually ends up with unmanageable problems in the financial systems. Ultimately, Madam Speaker, it risks spilling over into poorer economic living conditions for the Swedish people and high unemployment. It is so easy to engage in populism in these issues and think: We can do this – it is easy. There is plenty of money here – let us distribute it somewhere else! But let me state clearly and distinctly to the Social Democrats and the Swedish people that the stability and resilience of the financial systems is something that one must not compromise on, but that we must safeguard together.
There are obviously many questions. Hopefully, Madam Speaker, Eva Lindh can clarify one thing and another.
When the Social Democrats presented their short-term tax, the question was asked: Who will pay this tax? As I understood it, the Social Democrats admitted at that press conference that it will probably, at least to some extent, be the mortgage holders. Is it now the right time to make it even more expensive for those who have mortgages, Eva Lindh?
How long will it take to introduce this tax? How long did previous bank taxes take to introduce? The Social Democrats are crediting themselves with these funds already in next year's budget. How long did it take to get the existing bank tax in place? What does the reasonableness assessment look like for this tax? Is it in fact the case that the Social Democrats have dug a large hole in the public finances at a time that is very vulnerable for Sweden?
How shall the net interest be calculated? How shall it be defined in the legislation? Is it a question of what the households borrow and the banks then lend out? Is it the deposit one has with the Riksbank on capital? How shall this look? How shall it be defined? How shall it work in practice?
What is the situation with the existing bank tax, Eva Lindh? Does Eva Lindh, for example, have any comments on how it looks for Kommuninvest at the moment? We have Kommuninvest to finance common welfare investments. How is it going with the existing bank tax and the municipalities' financing of Kommuninvest? Does Eva Lindh have any analysis of this? How does it look with the tax we already have? It was controversial when it was introduced precisely because it was intended to create different types of problems. How does Eva Lindh view the existing problem for Kommuninvest?
Eva Lindh (S)
Madam Speaker! I see that the Minister is very upset about several things. But he does not seem upset at all by the large profits that the banks are making. That is what I am upset about. It is happening simultaneously at the expense of the bank customers. It is ordinary people who today are having a very tough time with high inflation and high interest rates. Furthermore, it means something for the bank customers. That should be something to be upset about, and that is what I am upset about. But I hear nothing of that in the Minister's answer.
What is the unquantifiable damage? What is the unquantifiable damage that we would cause by introducing a tax of 23 percent on that which exceeds 150 percent of what is the historical average? We do not even tax any profits. Those are words, but we tax the excess profits that the banks make. That is what I am upset about, and the Minister should also be upset about. The question is: Why is the Minister not upset about the injustice that it is?
In what way would we lose control if we introduce a bank tax? I don't understand that either. I agree that stability and long-term perspective are very important. It is important. That is also what the Social Democrats stand for. It is that we have a stable economy and a long-term perspective in the economy.
But right now, it is extremely tough for many people out in Sweden. People feel the inflation and the raised interest rates in their very skin. It affects people today. There are single mothers who cannot afford to put nutritious food on the table for their children. That is what I am upset about.
We in the Social Democrats are trying to do something about this in our budget. We have a number of proposals. Part of financing our budget is to tax the banks' excess profits. It is completely unreasonable that it looks the way it does today. People are on their knees while the banks are making excess profits.
Our assessment is not that the fees should be raised in any particular way and increase the costs for the bank customers. It is enormous profits that the banks have made at the expense of the households. They make such large profits that the banks should not take it out on the bank customers, because it is precisely such large profits that they make.
I continue to ask the Minister: Why is the Minister not more upset that the banks are making these large profits at the expense of people's finances?
Statsrådet Niklas Wykman (M)
Madam Speaker! I note that Eva Lindh is seeking an emotional state. The thing is that it does not help the work as a politician, policymaker, and responsible person if one is angry, happy, sad, or upset. It is a matter of taking the right type of measures and not walking around feeling different things in front of different phenomena. That will not change or improve reality. What matters is that measures are taken.
The measures we are taking are the assignments we have given to the Financial Supervisory Authority regarding the increased competition in the mortgage market for consumers. It has concerned the interest rate differential compensation investigation which is under consultation. It concerns how one can be able to settle a fixed-rate mortgage at a more reasonable cost.
It is therefore about concrete things that need to be done to increase competition and improve the consumers' position. I do not believe that the member seeking for me to be upset will help the Swedish people very much.
If we look at the tax that Eva Lindh is seeking to introduce, it is reasonable to first make an assessment of the bank tax that we already have. I asked a very clear question here to Eva Lindh which Eva Lindh did not answer. I give her a chance again. What does Eva Lindh think about the effect on Kommuninvest of the bank tax that we already have? What does Eva Lindh think it does to Kommuninvest's operations and the welfare's possibility to finance investments?
Madam Speaker! It is reasonable to first ask what the existing system has for effects before expanding it, rebuilding it, or doing more. It would therefore be desirable with a clear answer from Eva Lindh to the country's municipalities and Kommuninvest regarding the long-term investments in our welfare.
One must not succumb to short-sightedness and populism. Is all of this interest net from Swedish households as Eva Lindh claims, or is this interest net at least partly arisen from the banks' deposits at the Riksbank? Does Eva Lindh have views in such cases? Should it, in such cases, also be taxed?
These types of questions obviously seek answers before one proceeds with claiming that one will have billions in revenue to the state treasury from this type of tax. This type of tax has proven to be very difficult to construct and implement. Nevertheless, the Social Democrats and Eva Lindh say that those funds will be available as early as next year. How is that going to happen?
All the assessment I have received from experts in the field is that even if one wanted to introduce such a tax, it would take years to get it in place. But Eva Lindh says that we can have those funds already now. How is that going to work? Which experts has Eva Lindh consulted on this? Which investigation has Eva Lindh consulted on this? How can that tax be put in place?
There are questions about the existing tax. There are questions about this tax, instead of just saying: The banks are making very large profits. It is wrong, and now we are going to collect those money for the state. If one does not have answers to the other questions, it lies dangerously close to a populist stance.
But Eva Lindh may have answers to give here today. Then there will, of course, be reason to reconsider. Are there answers to this type of questions? Is it the interest net between households and banks? Is it the interest net on the deposits that the banks have with Riksbanken? Which interest net is it that is to be taxed?
What expertise says that this is possible? Is it really possible to do by next year? Where is the analysis of the bank tax that we already have and how it, for example, affects Kommuninvest? What is the legal definition of this interest net that is to be introduced in the legislation? How will it affect?
Eva Lindh makes a different assessment than what emerged at the press conference, namely that it will not affect the consumers. But is there any tax that is never fully paid by the consumers in the economy? Which tax is that in such a case? How much more expensive will the mortgages become with Eva Lindh's and the Social Democrats' proposal? There are many unanswered questions here.
Eva Lindh (S)
Madam Speaker! I shall begin by answering the questions.
The first one is about Kommuninvest. Kommuninvest's interest net has not increased in the same explosive way as the major banks' have. This means that no excess profits are being made at the customers' expense. Since we want to tax the excess profits, it will not hit Kommuninvest in that way.
The second thing is that we have introduced it earlier. I believe the Minister can be reassured that we would be able to manage to do that. I do not intend to discuss that further here in the rostrum.
Then I come to this with feeling. The reason I even brought up feeling is that my feeling is that the Minister is very upset about the Social Democrats' proposal.
I said that instead he should be upset that the banks are making such large profits at the expense of the bank customers, that is to say, the Swedish people. That is what he should be upset about, and not whether our proposal is feasible or not. That is it. We could implement that.
I agree that stability and long-term perspective were needed. I think that is good. I do not think the proposal is populist. We are doing politics.
I want to conclude by speaking about this with feeling. Politics is will. I want something with politics. I expect and hope that the Minister also wants to do something with politics. It is to want and then also to make the change.
It is not populist. It is political will. I ask the question again, and I will move the question away from feeling: Does the Minister believe that the banks are making large profits and that it is a problem that they are doing so at the expense of the bank customers?
Statsrådet Niklas Wykman (M)
Madam Speaker! Wanting things is good. But it is far from enough to run a country or, for that matter, to get particularly much done at all. It is about ability, knowledge, and analysis. You won't get very far by just wanting or feeling. It easily becomes a platitude, a platitude that is close to the populist. It is about what one can do and what effects it has.
What will happen with such a tax - how much will it be passed on to the mortgage holders? What about other taxes, and how much do they be passed on between producer and consumer? It is probably a reasonable assessment that a good deal will be passed on to the mortgage holders. Is this the right time to place additional burdens on Swedish households, to introduce even more taxes and make it even more expensive to live?
This is the difference between populism and analysis. In a populist world, one can say: Here, a company is making a large profit – let's tax it! But in a world where one performs an analysis and an assessment, one can ask the question: What happens if we introduce this tax – who will pay, and how much more expensive will it become for the consumer? And is now the right time to make it more expensive for the mortgage holders?
The answer from the government's side is very clear. An analysis, an assessment, is very valuable, and one can also state that this is not the right time to make it more expensive for the mortgage borrowers.
Are there things to be done to improve the competition situation on the Swedish banking market? There, the answer is a clear yes. Is it more that the banks need to do to contribute to fighting crime, stopping fraud, and the terrible things that happen when, for example, pensioners are subjected to scams and fraud? There, the answer is yes. I am very clear that I think Swedish banks should do more there.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.