European governments eye new bank taxes as profits soar

Governments across Europe are stepping up efforts to tap the banking sector's robust profits, introducing a fresh layer of uncertainty for investors in one of the continent's best-performing industries.

Talk of taxing bank profits has intensified in countries including the UK, France, Portugal, Sweden, and Italy, according to Bloomberg. The push comes as European lenders continue to post strong results — a ten-bank median revenue growth accelerated to 6.7% in the first half of 2026, up from 0.4% a year earlier — making them a tempting target for governments struggling with budget deficits.reuters+1

Italy's League Leads the Charge

Italy has emerged as the most vocal proponent of new bank levies. Deputy Prime Minister Matteo Salvini said his League party would propose a three-year, 5% levy on the country's 10 largest banks as part of the 2027 budget. Speaking at the Ambrosetti Forum in Cernobbio earlier this month, Salvini praised Spain's approach to taxing banks, telling Bloomberg that the Spanish initiative on bank profits was "an absolutely intelligent one".investing+3

The League estimates the levy could generate between €2 billion and €3 billion annually if sector-wide profits reach roughly €30 billion. The proposed contribution would come on top of some €12 billion the Italian government already aims to collect from banks and insurers through 2028 via measures in the 2026 budget. Deputy Prime Minister and Forza Italia leader Antonio Tajani has said any contribution should be agreed with affected companies and take the form of advance tax payments rather than new levies.reuters+1

A Continent-Wide Trend

The pressure extends well beyond Italy. In the UK, advocacy group Positive Money argued in August that a windfall tax on Britain's four largest banks could raise £19 billion in 2026, though Chancellor Rachel Reeves opted not to increase bank taxes in her November 2025 budget. France, Portugal, and Sweden have also seen renewed discussions around bank taxation.positivemoney+2

The broader trend is fueled by a banking sector that remains, by historical standards, exceptionally profitable. Scope Ratings forecasts that European banks will maintain average return on equity in double digits, supported by recovering loan growth, expanding fee income, and modest credit losses. UBS ↘ 2.03% led the pack with pre-tax profit rising 72% to $7.4 billion in the first half of 2026, while Barclays ↘ 2.15% and BNP Paribas also posted strong growth.transactionfinance.tabinsights+1

For investors, the unpredictability of potential new levies adds risk to a sector that has otherwise delivered. As Bloomberg noted, this political uncertainty is precisely the kind of variable that markets dislike — and one that shows no sign of receding.bloomberg