Cyprus’s main opposition party, AKEL, has revived its push to impose an emergency solidarity levy on bank profits for the 2025 and 2026 tax years, bringing bank earnings back into the spotlight.
The new proposal comes as the external environment grows less favourable for banks, specifically citing Italy’s interventionist policy.
Italy has already imposed strict controls on bank acquisitions and increased taxation on profits, aiming to raise up to €11 billion in fiscal revenue over three years through tax burdens and higher rates on banks and insurance companies.
This has already triggered shareholder backlash and an investigation by the European Commission.
Impact on Cyprus and Greece
AKEL’s proposal, which the Parliament’s Finance Committee has not yet discussed, is causing concern not only within the domestic banking system but also in Greece.
The Cypriot banking market holds significant importance for Greece because Bank of Cyprus is listed on the Athens Stock Exchange.
Furthermore, Greek lenders Eurobank and Alpha Bank have become major players through recent large investments: Eurobank invested approximately €1.3 billion in Hellenic Bank, and Alpha Bank Group invested €205 million in acquiring Astrobank.
The new bill, submitted by party General Secretary Stefanos Stefanou, justifies the extraordinary taxation as a temporary but necessary measure to distribute the financial burden, boost public funds, and protect household real incomes. This rationale is expected to increase the chances of parliamentary approval.
Political and Analytical Outlook
The debate takes place approximately six months before the 24 May 2026 parliamentary elections. This is AKEL’s second attempt to tax bank excess profits, following the rejection of a similar bill by the Plenary of the House in December 2024 on a tied 25-25 vote, broken by the Speaker’s deciding vote.
AKEL bases its new proposal on a European Commission analysts’ report suggesting that similar measures in Baltic countries (Latvia, Estonia, Lithuania) did not affect financial stability and provided significant public revenue.
Cypriot banks oppose the move, arguing they already pay a special tax of 0.15% on deposits and that any additional levy would undermine stability and the business environment. They note this special deposit levy is imposed exclusively on Cypriot banks and automatically increases as deposits rise.
Alpha Finance analysed the proposed measure yesterday, explaining it would introduce a temporary solidarity contribution on credit institutions for 2025 and 2026. This would be calculated at 20% of the net interest income portion that exceeds the level recorded in 2022 by more than 40%.
Alpha Finance believes the AKEL proposal has a very low chance of approval this year. However, if the special levy passed, it would impact net profit estimates for Cypriot banks.
Specifically, for Bank of Cyprus, the levy is expected to reduce net profits by €71 million in 2025 and €69 million in 2026. This equates to an average drop of about 16% in Alpha Finance’s net interest income estimates, translating into an approximate -4% adjustment to the bank’s target price.
For Eurobank, the estimated impact would be approximately €20 million in both 2025 and 2026 from Eurobank Ltd, causing a -1.3% average drop in net interest income estimates with an insignificant effect on the target price.
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