EU Tax-Asset Moves Boost Banks While Sustaining Doom Loop
This article is for subscribers only.
Governments across struggling southern Europe are allowing banks to shore up their capital with tax credits, even though this runs counter to the European Union’s drive to disentangle the finances of lenders and states.
Portugal last month joined Italy and Spain in permitting the conversion of some deferred tax assets into credits that banks can count toward the capital they’re required to have on hand. When a company overpays taxes in one period, it can book a deferred tax asset that reduces its liability in the future. Greece is considering a similar move. All but Italy received bailouts during the debt crisis that included aid for banks.