BANK LEVIES IN THE SLOVAK REPUBLIC - IMPACT ON BUDGET REVENUES AND BANKS’ PROFITABILITY

Following the global financial crisis, several European countries introduced taxes on banks' balance sheet items, commonly referred to as bank levies.These measures were designed both to recover public expenditures associated with bank bailouts and to strengthen the stability of the banking sector.This paper investigates the fiscal significance of bank levies as well as their impact on the profitability of Slovak banks, measured by return on assets (ROA).Employing panel data for the largest Slovak and Czech banks over the period 2010-2024, we apply a difference-in-differences approach, with Slovak banks forming the treatment group and Czech banks serving as the control group.The findings indicate that, while bank levies constitute a meaningful source of public revenue, their introduction in Slovakia was associated with a statistically significant decline in banks' profitability.These results highlight a potential trade-off for policymakers between generating fiscal revenues and maintaining the profitability, credit supply, and long-term resilience of the banking sector.Despite the relatively limited dataset, this study contributes novel empirical evidence to the literature on bank levies in small open EU economies and represents, to the best of our knowledge, the first study focused specifically on the Slovak Republic.