(Bloomberg) -- The European Central Bank warned that special taxes on banks could contribute to tighter financing conditions for the region’s economy because they exacerbate the already low valuations of the region’s lenders on stock markets.

While European banks’ earnings have reached multi-year highs, their shares haven’t risen substantially from levels seen before the Covid-19 pandemic, the ECB said in a report Monday. One reason for that divergence is that special bank taxes proposed in several countries have raised concerns about shareholder payouts, the ECB argued.

“In the long run, this may adversely affect financial stability as banks which are valued by investors at a discount will likely find it more challenging to raise new equity when needed,” the ECB wrote in the report. “As capital required to support lending is remunerated by lending rates, weak valuations translate directly into stricter terms and conditions for finance to the real economy.”

Special taxes on banks have been growing increasingly popular as governments seek to plug budget holes in the face of rising borrowing costs. Many politicians argue that banks have benefited disproportionately from the rapid pace of interest rate increases while being slow to share the windfall with consumers.

Proposals introduced over the past two years are supposed to bring in a total of more than €6 billion for governments next year, according to a Bloomberg News tally. However, the final number may ultimately be substantially lower because of loopholes allowing lenders in some countries, such as Italy, to get around the payments.

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