Ruling parties of the Spanish government have submitted a proposal to amend the banking tax bill to impose tax on foreign banking group’s local units supervised by the European Central Bank (ECB), according to Reuters.

The tax proposal includes a 4.8% tax on the lenders’ net interest income and net commissions.

The tax would be charged above a threshold of €800m.

The original version did not cover smaller Spanish banks and the units of foreign lenders in the country.

In the joint amendment proposal, the ruling coalition said, “the tax must be paid by institutions subject to direct supervision by the ECB, including branches established in Spain by foreign credit institutions, regardless of the sum of their interest and commission income.”

In July this year, the Spanish government introduced the bill as part of the plan to raise €3bn to dampen the impact of inflation.

According to Spanish Prime Minister Pedro Sanchez, the tax would be temporary and would be imposed between 2023 and 2024.

As per the earlier media reports, the tax would also have a provision to penalise the lenders if they pass on the rising costs to the end customers.

The bill is still being debated in the Spanish parliament.

However, the ECB issued a warning last week about how Spain’s proposed banking levy might weaken banks’ capital, raise client expenses, and affect the whole domestic economy.

“If the ability of lenders to attain adequate capital positions is damaged, this could endanger smooth transmission of monetary policy measures to the wider economy,” the ECB was quoted by Reuters as saying.