The ECB, acting as the single banking supervisor in the euro area, asked banks on Tuesday 15 December to either not distribute dividends, or to limit them, until September 2021.
Calling for “extreme moderation” in the face of the economic uncertainty resulting from the Covid-19 pandemic, the ECB expects dividends and share buybacks to remain below 15% of cumulative earnings in the 2019 and 2020 financial years, or no more than 20 basis points of the best-quality capital ratio (Tier 1), whichever is lower.
Banks should also refrain from distributing interim dividends derived from their profits for the 2021 financial year.
By modifying a previous recommendation issued at the end of March and extended at the end of July (see EUROPE 12537/8), the single banking supervisor acknowledges the soundness of the banking sector and that there has been less macroeconomic uncertainty. However, the pandemic has not had its full impact yet on banks, which are still publicly supported.
Bonus. In a letter to the banks, the ECB also urged them to adopt extreme moderation with regard to variable remuneration until 30 September 2021. If it is not possible for legal reasons to limit bonuses, the banks concerned should delay payment at least in part, or should pay them out in the form of other instruments.
See ECB letter: https://bit.ly/3nli0Ex (Original version in French by Mathieu Bion)