September 18
2021
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Trajan Shipley
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26th July 2021
Banking & Finance Covid-19

ECB to end recommendation on dividend limits

The European Central Bank (ECB) has announced that it will not renew a Recommendation (ECB/2020/19) it had introduced in the wake of the COVID-19 pandemic recommending all banks to limit dividends. Instead, the ECB will assess the capital and distribution plans of each bank as part of the regular supervisory process.

The Recommendation, which had been amended up and until 30 September 2021, called on banks to exercise extreme prudence on dividends and share buy-backs due to persisting uncertainty over the economic impact of the COVID-19 pandemic.

According to the ECB, the latest macroeconomic projections confirm an economic rebound and point to reduced uncertainty, which is improving the reliability of banks’ capital trajectories. Thus, it considers it appropriate to reinstate the previous supervisory practice of discussing capital trajectories and dividend or share buy-back plans with each bank in the context of the normal supervisory cycle, although it calls on banks to remain prudent when deciding on dividends and share buy-backs.

Read the ECB’s press release here.

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