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No Retroactive Punishment

07 November 2018 by lberuti

A couple of weeks ago, Spanish banks experienced a few torrid sessions after a ruling said that they should be retroactively liable over four years for mortgage stamp duty payments. The decision would have cost them €5Bln. Overnight, it was announced that the Supreme Court had reversed the decision, and that home buyers would not be reimbursed their taxes and should actually keep footing the bill in the future. Investors’ reaction was very positive and protection for Spanish banks went bidless. But soon after, in response to the popular and political outrage that followed the decision, the government said that Spain will change its mortgage law, and that it will make banks pay the tax from the moment it publishes a decree on the matter. That somewhat dampened investors’ mood. Profit takers that had held long risk positions emerged to take chips off the table, and risk premia eventually stabilised. It is widely expected that banks will just raise fees or adjust mortgage interest to neutralise the measure, which means we are roughly back to where we were mid October.