Connect with us

Popular World News

ECB eases COVID-19 crisis ban on dividends as outlook improves By Reuters

© Reuters. FILE PHOTO: ECB headquarters in Frankfurt


ECB eases COVID-19 crisis ban on dividends as outlook improves By Reuters

© Reuters. FILE PHOTO: ECB headquarters in Frankfurt

FRANKFURT (Reuters) -The European Central Bank decided on Tuesday to let banks pay out part of their cumulated 2019-2020 profits to shareholders if they have enough capital, easing a blanket ban on dividends and buybacks set during the first wave of the coronavirus crisis. The euro zone’s top banking watchdog was still asking banks to be prudent so to preserve capital for a wave of unpaid loans that could reach 1.4 trillion euros ($1.70 trillion). But it is now making room for some small payouts from the healthiest banks, heeding calls from disgruntled bankers and investors as the economic outlook improves. “The ECB expects dividends and share buy-backs to remain below 15% of the cumulated profit for 2019-20 and not higher than 20 basis points of the Common Equity Tier 1 (CET1) ratio, whichever is lower,” an ECB statement said. “Banks that intend to pay dividends or buy back shares need to be profitable and have robust capital trajectories.” This was first reported by Reuters on Monday. The recommendation will remain valid until September 2021 and includes a request that banks use “extreme moderation” with bonuses and use capital to finance households and companies instead. The euro zone is still struggling under the second wave of the coronavirus pandemic with delinquencies expected to rise in the coming months as some government support schemes are phased out and companies and households run out of savings. But the prospect of a vaccine means that the outlook further out seems rosier, leading the ECB to project the euro zone’s economy rebounding by 3.9% next year and 4.2% in 2022. “In revising its recommendation, the ECB acknowledges the reduced uncertainty in macroeconomic projections,” the statement said. “The revised recommendation aims to safeguard banks’ capacity to absorb losses and lend to support the economy.”
The Bank of England set its own dividend cap for UK banks at 25% of cumulative 2019/20 profits last week.
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link

Continue Reading
You may also like...
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


To Top
error: Content is protected !!