Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/226708
Authors: 
Bremus, Franziska
Tonzer, Lena
Year of Publication: 
2020
Citation: 
[Journal:] DIW Weekly Report [ISSN:] 2568-7697 [Volume:] 10 [Year:] 2020 [Issue:] 35 [Pages:] 367-371
Abstract: 
Following the global financial crisis of 2008/2009, many European countries introduced bank levies to enable financial institutions to share in the costs of future banking crises via resolution and restructuring funds. Simultaneously, bank levies can set an incentive for banks to reduce their leverage, thereby achieving a more stable capital structure. Using information from banks' balance sheets, this report investigates to what extent bank levies have reduced leverage ratios and what role the corporate income tax rate plays in this. Preferential tax treatment of debt capital means that higher corporate tax rates favor a higher leverage ratio. The empirical findings show that banks in countries with a bank levy on bank debt have lower leverage and thus higher capital buffers than banks in countries without a levy. The higher the corporate tax rate, however, the less bank levies reduce leverage. To ensure regulatory levies are effective, how they interact with other taxes must be taken into account.
Subjects: 
bank leverage
bank levy
debt bias of taxation
JEL: 
G21
G28
L51
Persistent Identifier of the first edition: 
Document Type: 
Article

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