What if the EU slaps a permanent windfall tax on banks?
A permanent EU windfall levy on bank net-interest income is a European-bank-equity trade: it caps the NII tailwind, slashes dividend/buyback capacity, and reprices Unicredit, Intesa, BNP and the SX7E. Direct analogue is Italy's Aug-2023 surprise bank windfall tax (Italian banks -8% intraday before the cap was softened) and Spain's 2022 levy. The connected angle: lower payouts feed back into weaker bank credit and lending appetite, a mild financial-conditions tightener.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Brussels imposes permanent windfall levy on bank net-interest income, European bank shares and dividends slashed. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.