ECB Lifts Latest Dividend Limits on Banks

As of October, the European Central Bank intends to lift its recommendation to banks to limit the payment of dividends. After a period of complete freeze in March 2020, these payments were limited since last December.

Dividends supervised since December 2020
This posture contrasts with that of the President of the ECB, Christine Lagarde, who was worried Thursday about “the growing uncertainty” linked to the rise in the curves of Covid-19 infections, which confirmed the maintenance of an accommodating monetary policy.

Since December, banks wishing to pay dividends were invited to cap their payment at 15% of cumulative profits for fiscal years 2019 and 2020, or 20 basis points of the hard capital ratio known as “CET1”, whichever is lower. retained.

Previously, the ECB had imposed a period of complete dividend freeze at the end of March 2020, at the height of the first wave of the pandemic.

Resumption of dialogue in October
From October, the ECB will resume a dialogue with the 114 banks under its supervision, such as the giants Deutsche Bank, BNP Paribas and Unicredit, to discuss on a case-by-case basis “the assessment of the capital and distribution plans of dividends ”and this under terms“ in effect before the pandemic ”, according to the press release.

The supervisor “also invites banks to adopt a cautious and forward-looking approach in setting their remuneration policies” for staff.