The hope of the German credit industry for the return of funds from the national bank levy has been shattered. The government intends to retain the amount of 2.3 billion euros and channel it into the Financial Market Stabilization Fund (SoFFin), commonly known as Soffin. As a consolation, banks and savings banks will now be able to deduct the bank levy from their taxes in Germany starting from 2024 – a practice common in many other European countries. Federal Finance Minister Christian Lindner (FDP) has reportedly submitted a corresponding draft to the department for approval. The procedure has been generally coordinated within the German government, including the Chancellery and the Federal Ministry of Economics.

A decision on the use of the funds from the national bank levy must be made soon as its purpose has expired at the beginning of 2024. The levy was collected from 2011 to 2014 in the "Restructuring Fund," a special fund of the federal government. The fund was created after the financial crisis of 2008/2009 to stabilize financial institutions in case of emergency. The financial sector had to contribute to it through the bank levy.

In 2016, a European solution was introduced with the Single Resolution Fund (SRF), where the contributions from European credit institutions and other payers in the financial sector flow into national compartments. The funds from 2015 have also been transferred. During the establishment phase of the SRF, the national bank levy in the Restructuring Fund served as a safeguard and potential bridge financing in case the European funds in the German compartment were insufficient to support a German institution.

Meanwhile, the establishment of the European Single Resolution Fund (SRF) has been completed. By the end of 2023, almost €78 billion has accumulated there, far more than initially planned. The purpose of the German Restructuring Fund as a safety net has become obsolete since the establishment of the European SRF. "Since the old funds were raised in the form of a special levy, the federal government is obliged to promptly legislate a new, constitutionally permissible use," the draft states.

The financial industry had hoped to receive a refund or offset the old funds with the European levy. As it is a special levy and not a tax, the state must use it for the benefit of those who paid it. The transfer of the old funds to the general federal budget or any other special fund of the federal government would be unconstitutional. As of the summer of 2022, the German Banking Industry (DK) envisioned the old funds being refunded or offset against the European levy. There were also considerations for a special fund for the banking industry to finance transformation projects. Activists like Bürgerbewegung Finanzwende had suggested to reduce the debts of the bank rescue fund Soffin. This is likely to happen if the draft is implemented.

In a legal opinion commissioned by the Federal Ministry of Finance in March 2022, Heidelberg researchers for financial and tax law, Anđela Milutinović and Ekkehart Reimer, considered the transfer of the old bank levy to the Soffin as possible but pointed out legal risks. It would raise questions about special levy law that are yet to be clarified by the highest court. In the spring of 2023, State Secretary Katja Hessel (FDP) had expressed the ministry's sympathy for the refund of the funds to the Finance Committee of the Bundestag. This could support banks in financing the transformation of the German economy. Now, the draft notes that a refund of the funds would be problematic under European state aid law. By transferring the funds to the Soffin, the federal government and the states reduce possible obligations. The special fund financed stabilization measures by credit institutions during the financial crisis, strengthening liquidity and equity. At the final settlement, the federal government and states will share any shortfall proportionally. Until then, the federal government finances the Soffin.

Since 2018, the fund has been managed by the Federal Finance Agency. According to the latest known figures, the fund achieved a surplus of 1.3 billion euros in 2022. The accumulated uncovered deficit thus decreased to 21.5 billion euros. The Soffin still holds the federal government's shares in Commerzbank (15.6%), Hypo Real Estate Holding (100%), and a silent contribution of 2 billion euros in Portigon, the legal successor to WestLB. During the financial crisis, the Soffin was equipped with funds for guarantees of 400 billion euros and for recapitalization of 80 billion euros. In the peak phase, 168 billion euros in guarantees and 29.4 billion euros for capital measures were granted. All guarantees were repaid without a single default. The Soffin received 2.0 billion euros from guarantee fees. Of the capital measures, 14.6 billion euros remained at the end of 2022.

The banking industry has been resisting the tax-deductible operating expenses prohibition since the inception of the banking levy. At its peak, the German financial industry paid 3.8 billion euros in 2022, and in 2023, it was 2.63 billion euros. Germany thus took a special position. The bank levy was intended to work in full to promote less risky business models, justified the Federal Ministry of Finance for the deduction ban. If tax deductibility had been allowed, the effect would have been partly neutralized.

"With the now-changed European framework conditions, the deduction ban is no longer necessary to maintain the steering effect in the future," the draft states. It refers to the improved resolution capacity of credit institutions, successes in risk reduction, the binding minimum requirements for equity, special liabilities for loss absorption and recapitalization, as well as the requirement for German institutions to be resolution-ready. However, the abolition of the tax deduction ban as operating expenses is of little relevance now: As per the draft, there are likely to be no tax shortfalls. The ministry does not expect additional levies for the well-filled European SRF.