The chair of the Supervisory Board of the Single Supervisory Mechanism (SSM), Andrea Enria, said that the big banks in the euro area banking union would pay “€10 billion” in dividends to their shareholders in early 2021 as part of a gradual resumption of such payments after the ban imposed in 2020 due to the outbreak of the Covid-19 pandemic.
Asked by Ernest Urtasun (Greens/EFA, Spain) and Aurore Lalucq (S&D, France), Mr Enria said that the 2020 ban was justified. In 2021, he argued, uncertainty about the economic situation will gradually dissipate, but banks will nevertheless be able to gradually resume dividend payments before returning to normality in September 2021 (see EUROPE 12624/6).
Mr Enria pointed out that EU supervisors have been stricter on this issue than their counterparts in the UK and the US. He noted that the €10 billion in dividends that will be paid is one third of what European banks wanted to pay in September 2020.
However, the former chair of the European Banking Authority considered it necessary to “differentiate” the situations in which banking groups find themselves, even in a difficult macroeconomic scenario. The right to pay dividends is “ essential” for banks issuing securities in the market to attract investors, he said.
Top priority to credit risk monitoring
Mr Enria outlined the oversight priorities of the SSM Supervisory Board during the pandemic: - to ensure careful monitoring of the impact on credit portfolios of the lifting of emergency public support measures (moratoria on loan repayments, public guarantees); - to ensure that banks are prepared to manage the expected increase in non-performing loans (NPLs), including through adequate provisioning.
Giorgos Kyrtsos (EPP, Greece) and Luis Garicano (Renew Europe, Spain) asked him when the SSM Board expected a new avalanche of NPL loans. According to Mr Enria, the increase in NPL loans will occur with the phasing out of government support during the “second half” of this year. He noted that a significant number of loans had already been classified as “underperforming loans” (category 2) at the end of 2020.
Asked by Jonas Fernández (S&D, Spain) about the European action plan on NPLs (see EUROPE 12624/5 and 12622/21), Mr Enria supported the initiatives put forward, notably the convergence of national insolvency regimes and the creation of secondary markets for NPLs (see EUROPE 12634/25).
On the possible creation of networks of “bad banks”, the President of the SSM Supervisory Board called for regulatory harmonisation. “As a supervisor, it is essential that banks are able to use the same type of measures to clean up their balance sheets, regardless of the flag that flies over their headquarters”, he said, citing the issue of methodology in pricing NPL loans.
On the other hand, in response to a question from Antonio Maria Rinaldi (Identity and Democracy, Italy) on the advisability of relaxing the rules governing the processing of NPL loans to support the economy, Mr Enria said it is necessary “to not hide the dust under the carpet”. In the interests of transparency, banks should continue to be required to properly classify a loan to an individual or business in terms of its evolution with the Covid-19 pandemic so that banks can respond quickly to any deterioration. (Original version in French by Mathieu Bion)