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Covid-19: ECB asks banks not to distribute dividends this year

2020-07-28T09:01:20.336Z

This “temporary and exceptional” recommendation must “preserve the capacity of banks to absorb losses”.Shareholders will have to tighten their belts. The European Central Bank on Tuesday asked euro area banks not to pay dividends or buy back own shares until January to deal with the health crisis, according to a statement. Read also: Euro zone: credit growth slows in June (ECB) The institution is thus extending by three months this “ temporary and exceptional ” recommendation which aims to “ pres...



Shareholders will have to tighten their belts. The European Central Bank on Tuesday asked euro area banks not to pay dividends or buy back own shares until January to deal with the health crisis, according to a statement.

Read also: Euro zone: credit growth slows in June (ECB)

The institution is thus extending by three months this “ temporary and exceptionalrecommendation which aims to “ preserve the capacity of banks to absorb losses and support the economy in this particularly uncertain environment ” initially issued in March.

She also asked the banks to be " extremely moderate " in the payment of bonuses, " for example by reducing the amount of the variable part of salaries ", adds the ECB.

" Building up robust capital reserves since the last financial crisis has enabled banks to continue lending to businesses and households and it is all the more important to encourage banks to use their capital to focus on this core task. to lend ”, explains the president of the banking supervisor, the Italian Andrea Enria.

"The banking sector can resist "

The ECB will reassess " in the fourth quarter " whether or not these recommendations should be extended. In general, " the European banking sector can resist " the crisis but a deterioration of the situation would lead to a " significant decrease in the capital of banks " requiring " additional measures " on the part of the States, explains the ECB in a simultaneous press release. separate.

Following March's recommendations, the biggest banks in the euro area have given up paying 27.5 billion euros in dividends for fiscal year 2019, according to an ECB study published at the end of May.

Between March and May, the European economy was hit hard by the shock of the coronavirus pandemic, which crippled production and curbed consumption in many countries. The ECB, master of monetary policy in the euro area, has launched an unprecedented emergency program of 1.35 billion euros to support the economy in the euro area.

Read also: The euro retreats against the dollar after an ECB without surprise

Regarding banks, to ensure their ability to support the economy by lending, the Frankfurt-based institution has also temporarily eased equity capital requirements and risk lending measures.

Source: lefigaro

All news articles on 2020-07-28

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