A new dispute has erupted over the bank levy – this time between the federal government and the states. The Bundesrat opposes lifting the operating expense deduction ban, as set out in the states' response to the Restructuring Fund Transfer Act.

The law aims to transfer the national legacy funds from the bank levy, totaling 2.3 billion euros, to the Financial Market Stabilization Fund, known as SoFFin. The banking sector had hoped to have these funds returned, to help finance their transformation efforts more effectively. However, the federal government seeks to reduce SoFFin's deficit, which stood at 21.6 billion euros at the end of 2023. This is partially set off by assets within the fund, including shares in Commerzbank.

A potential consolation for the disappointed banking sector would be the elimination of the operating expense deduction ban for the bank levy – this is already considered a unique case in Europe, and an anomaly in the German tax system. Although this issue is now less relevant, since the EU Single Resolution Fund (SRF) is well funded with 78 billion euros, and no additional levy was imposed in 2024, the rationale for the special levy collected from 2011 to 2014 – whose usage is now under review – has diminished. During the accumulation phase for the SRF, the legacy funds remained as security.

If the bank levy were to be reinstated, the operating expense deduction ban would become a relevant issue once again. The states cite financial reasons alone: removing the ban would reduce tax revenues (also) at the expense of the states and municipalities in future bank levies. But the federal government rejects the states' request, and the draft legislation is now set for discussion in the Bundestag.

In its response to the Bundesrat's statement, the federal government argues that the purpose of the provision is not to secure tax revenues for the public sector. Moreover, the government does not anticipate that „bank levies will be imposed in the foreseeable future, leading to a decrease in tax revenues.“ The need for regulation and justification for the operating expense deduction ban has diminished as of the end of 2023, given that „significant milestones“ have been reached within the European legal framework. These milestones render any further incentive for banks to pursue less risky business models unnecessary. The federal government points to the fully funded SRF, and the additional loss buffers available for recapitalisation in case of banks being wound down. Furthermore, banks must comply with the requirements of the resolution authorities – to ensure their ability to be resolved.

The federal government is open to discussion on another point raised by the states. They want to benefit from the relief provided by the retained bank levy concerning their liability cap in the final settlement of SoFFin. Both the federal government and the states are jointly liable for the final outcome, at a ratio of 65:35. However, the states have a liability cap of 7.7 billion euros, which they want to reduce by 810 million euros to 6.9 billion euros. This amount corresponds to 35% of the total sum of the retained bank levy. The states would only miss out on relief if SoFFin ultimately shows a deficit of more than 24.3 billion euros, which does not seem likely at present. The federal government has indicated a willingness to review this point in its response.