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Bank profits have been rising in Europe, so of course, politicians want a cut. Patricia Kowsmann reports on European governments’ new taxation plans in The Wall Street Journal, writing:

European banks have started to reap higher profits from rising interest rates—and governments are already starting to clamp down on them.

In Spain, the government has laid out plans to tax lenders on their rising income and use the money to alleviate higher living costs for the population. Hungary has imposed a similar measure, and the Czech Republic, where inflation is above 17%, is also considering such a move. In Poland, where mortgages carry variable rates that are quickly rising, the government placed a moratorium on repayments to help borrowers.

Banks in Europe have long struggled with anemic growth and slim profit margins. Even the continent’s larger lenders have market values that are a fraction of those of U.S. giants such as JPMorgan Chase & Co.

A big part of the challenge: years of negative central-bank interest rates. Subzero rates cut banks’ margins on loans and made them unattractive for investors, since the lenders struggled to earn returns above their cost of capital.

Rising rates had looked like a light at the end of the tunnel. Banks are usually beneficiaries in such an environment, since they can increase the rates they charge borrowers faster than they lift payouts to depositors.

Germany’s Commerzbank AG CRZBY 3.46% said it could take a revenue hit of as much as 290 million euros, equivalent to $290 million, in the third quarter from its business in Poland. Its second-quarter revenue was €2.4 billion. Spain’s Banco Santander SAN -0.21% SA could potentially lose more than €1 billion in revenue through 2023 from Spain’s and Poland’s moves, according to analysts. Last year, the bank made €8.6 billion in revenue from both countries.

“The first thing that worries me is that the sector is stigmatized,” Santander Chief Executive Officer José Antonio Álvarez said after the Spanish plan was unveiled. “Regardless of who is affected by the tax, inflation cannot be fought with taxes.”

Shares of banks in both Spain and Poland fell after the plans were unveiled. The Stoxx Europe 600 banks index is down 13% this year through Aug. 31, roughly in line with the broader market.

In other areas too, European governments are acting quickly when judging companies to be earning abnormally large profits. The U.K. has said it would introduce a windfall tax on energy companies, and Spain is imposing a similar levy as well as the new tax on banks. Such regulatory risk for investors helps explain why returns on European stocks have long lagged behind those on their U.S. equivalents.

Read more here.