D.he British banks have received the green light from the Prudential Regulatory Authority (PRA) in the central bank to be able to pay dividends again next year. After examining the banks, the PRA came to the conclusion that their capital buffers were sufficiently large and resilient to cope with a significantly worse than expected economic development.
During the beginning of the corona crisis, the PRA under its chairman Sam Woods had exerted strong pressure in March for a dividend freeze. The five major banks in Britain – HSBC, Barclays, Natwest (formerly RBS), Lloyds and Standard Chartered – had then withheld about £ 7.5 billion in dividend payments for 2019.
Hope for the vaccine
Now they can again distribute profits to their shareholders. The PRA now considers the outlook to be better than in March, also because a vaccine against the corona virus has been approved. But the regulator is urging banks to continue to be reluctant to make bonus payments. And it has set an upper limit for dividends of 25 percent of the accumulated profits of the past two years or a maximum of 0.2 percent of the risk-weighted total assets. Standard Chartered and other banks welcomed the decision.
A decision on dividends will not be made until spring. Bank share prices have suffered badly this year. In the EU, a decision by the banking supervisors of the European Central Bank (ECB) on the extension of the dividend block beyond the end of the year is expected before Christmas. In the ECB, too, there have recently been voices in favor of moving away from the general recommendation to waive dividends in favor of individual consideration.