Italian authorities moved to clarify after the surprise announcement of a tax on banks’ excess profits, which caused a sharp drop in the stock market on Tuesday, saying a ceiling of 0.1% of total bank assets had been set, Reuters reported.

A stock index that regroups shares of Italian banks ended Tuesday’s session down 7.6%, while shares of Intesa Sanpaolo, Italy’s biggest bank, fell 8.6% and shares of BPER fell 10.9%.

Even if other European countries, such as Spain and Hungary, introduced taxes on the additional profits of banks, analysts believe that the decision of the Italian authorities caught the market by surprise and seriously hit the confidence of investors.

The market value of Italian banks fell by 9.5 billion euros shortly after Deputy Prime Minister Matteo Salvini announced that Italy had agreed to “cut 40% of the banks’ multibillion-dollar additional profits” by 2023.

In an attempt to reassure markets, Italian authorities clarified on Tuesday evening that the impact could be limited for some banks and that the new tax would not exceed 0.1% of a bank’s total assets.

In addition, banks that have already increased the interest rates they offer to depositors “will not feel significantly affected by the rules adopted yesterday,” the Finance Ministry in Rome said.

Like the rest of European banks, Italian banks registered a significant increase in net profit as a result of higher interest rates. For example, net profit at Intesa Sanpaolo, Italy’s biggest bank, jumped 80% to 4.2 billion euros in the first half, while rival UniCredit reported a half-year net profit of 4.4 billion euros. (Agerpress)