Featured Product

    EBA and ECB Recommend Prudent Distribution and Remuneration Policies

    December 15, 2020

    In response to the continuing COVID-19 crisis, EBA and ECB have updated their guidance on capital distribution and variable remuneration policies of banks. Both EBA and ECB recommend that banks should continue to apply conservative approach on dividends and other distribution policies, including share buybacks. ECB has asked all banks to consider not distributing cash dividends or conducting share buybacks, or to limit such distributions, until September 30, 2021. In addition, ECB recommended that banks should adopt extreme moderation on variable remuneration until September 30, 2021. ECB also updated the frequently asked questions (FAQs) on supervisory measures in response to COVID-19 pandemic to reflect this updated guidance.

    As per the revised recommendation, ECB expects dividends and share buybacks to remain below 15% of the cumulated profit for 2019-20 and not higher than 20 basis points of the Common Equity Tier 1 ratio, whichever is lower. Banks that intend to pay dividends or buy back shares need to be profitable and have robust capital trajectories. They are expected to contact their Joint Supervisory Team to discuss whether the level of intended distribution is prudent. Banks should refrain from distributing interim dividends out of their 2021 profits. Post September 2021, in the absence of materially adverse developments, ECB intends to repeal the recommendation and return to assessing banks’ capital and distribution plans based on the outcome of the normal supervisory cycle. This recent recommendation replaces the March 2020 ECB recommendation that called for a temporary suspension of all cash dividends and share buybacks. ECB also recommends that national supervisors should apply the same approach to less significant banks under their direct supervision, as appropriate. 

    Furthermore, ECB specifies that, to achieve an appropriate alignment with risks stemming from the COVID-19 pandemic, a larger part of the variable remuneration of material risk-takers should be deferred for a longer period and a larger proportion should be paid out in instruments. Competent authorities should continue to monitor banks’ remuneration policies, to ensure that they are consistent with an effective risk management and long-term interest of a bank. ECB highlighted that the appropriateness of institutions’ remuneration policies and practices will form part of the supervisory assessment within the 2021 Supervisory Review and Evaluation Process. 

     

    Related Links

    Keywords: Europe, EU, Banking, COVID-19, Dividend Distribution, Share Buybacks, Remuneration, FAQ, Regulatory Capital, Basel, EBA, ECB

    Featured Experts
    Related Articles
    News

    EBA Publishes Standards on Disclosure of Investment Policy Under IFR

    The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).

    October 19, 2021 WebPage Regulatory News
    News

    EBA Updates Filing Rules for Supervisory Reporting

    The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.

    October 19, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Procedures for Collection of AnaCredit Data

    The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.

    October 19, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Procedures for Collection of AnaCredit Data

    The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.

    October 19, 2021 WebPage Regulatory News
    News

    APRA Finalizes Guidance for New Prudential Standard on Remuneration

    The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.

    October 18, 2021 WebPage Regulatory News
    News

    OCC Updated LIBOR Self-Assessment Tool for Banks

    The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).

    October 18, 2021 WebPage Regulatory News
    News

    TCFD Updates Guidance for Financial Disclosures on Climate Risk

    The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

    October 14, 2021 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel III Framework

    The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.

    October 14, 2021 WebPage Regulatory News
    News

    ACPR Implements Updates Related to DPM Version 3.1

    The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.

    October 14, 2021 WebPage Regulatory News
    News

    EBA Note Examines Transition Risks of Benchmark Rates

    The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.

    October 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7571