Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Bank of England relaxes coronavirus curbs on bank dividends and bonuses

Published 10/12/2020, 16:14
Updated 10/12/2020, 19:20
© Reuters. FILE PHOTO: A pedestrian walks past the Bank of England, in London

© Reuters. FILE PHOTO: A pedestrian walks past the Bank of England, in London

By Huw Jones

LONDON (Reuters) - British banks can resume paying some dividends and bonuses after the Bank of England said they appeared well capitalised and resilient to any further coronavirus crisis fall-out.

The BoE told Britain's seven biggest lenders in March to suspend dividends and share buy-backs until the end of 2020, and to cancel payments of any outstanding 2019 dividends.

It also expected banks and building societies to scrap cash bonuses for senior staff to help maintain capital buffers and continue lending to companies and households.

On Thursday, the BoE said the time had come to relax this advice for lenders including HSBC, Barclays (LON:BARC), Lloyds (LON:LLOY) and NatWest.

Standard Chartered (LON:STAN) said it welcomed the decision and would consider resuming investor payouts alongside its full-year results in February.

A NatWest spokesperson said its board would make a decision on dividends at the year end. Barclays and HSBC declined to comment, Lloyds was not immediately available for comment.

Any distributions by large banks for this year should be "prudent" and fall within temporary "guardrails" published by the BoE on Thursday.

"In the meantime, for 2021 dividends the PRA ( Prudential (LON:PRU) Regulation Authority) is content for appropriately prudent dividends to be accrued but not paid out and aims to provide a further update ahead of the 2021 half-year results of large UK banks," it said. Under the guardrail, dividends should not exceed 0.2% of a bank's risk-weighted assets at the end of 2020, or 25% of cumulative profits over 2019 and 2020, after deducting prior shareholder distributions over that period.

Any bank that wants to pay more than under the guardrail, should engage with its supervisors and expect a "high bar" for justifying any exceptions, the BoE said.

Banks should also exercise a high degree of "caution and prudence" in determining the size of any cash bonuses, it added.

Despite the controls, the PRA's move was criticised by campaign groups.

"It is deeply concerning that the Bank of England is pandering to commercial banks and allowing them to prioritise shareholder payouts instead of supporting the Covid-19 recovery," Fran Boait, executive director at Positive Money, said.

There will be stress tests in mid-2021, the PRA said, with bank-by-bank results published at the end of that year.

© Reuters. FILE PHOTO: A pedestrian walks past the Bank of England, in London

The PRA said it will move to its standard approach to capital and dividends during 2021, with input from the stress test results.

(Additonal reporting by Andy Bruce and Iain Withers; Editing by David Milliken, Elaine Hardcastle and Alexander Smith)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.