SARB Issues Guidance on Dividend Distributions and Bonus Payments
SARB published the guidance note (3/2021) on the distribution of dividends on ordinary shares and payment of cash bonuses to executive officers and material risk-takers, in light of the pandemic and the temporary regulatory capital relief provided by the Prudential Authority. The guidance note outlines the need for banks to act prudently when considering making the said distributions in 2021. This guidance note replaces the guidance note 4 from 2020 and is relevant for all banks, branches of foreign institutions, controlling companies, eligible institutions, and auditors of banks or controlling companies.
The note specifies that benefits of the regulatory relief measures provided by the Prudential Authority in 2020 should not be utilized for the distribution of dividends and payment of bonuses. on dividends and bonus payments in response to COVID-19. SARB considers it critical that banks continue to fulfil the fundamental role of providing the required funding, among other things, to households and businesses amid the pandemic. Thus, it is essential that banks continue to appropriately conserve capital to retain their capacity to support the real economy in an environment of heightened uncertainty that continues to be caused by COVID-19 pandemic. The Prudential Authority expects banks to take into consideration the adequacy of their current and projected capital and profitability levels, internal capital targets, risk appetite, and current and potential future risks of the global pandemic when making distributions of dividends on ordinary shares and payments of cash bonuses to executive officers and material risk-takers in 2021. The responsibility for approving the distribution of dividends on ordinary shares and the payments of cash bonuses to executive officers and material risk-takers ultimately rests with the board of directors of a bank. In those instances where bank boards of directors do approve the distributions of dividends on ordinary shares and/or payments of cash bonuses to executive officers and material risk-takers in 2021, payout ratios should be prudent and commensurate with the assessment of the current conditions and potential future uncertainty.
Related Links
Keywords: Middle East and Africa, South Africa, Banking, Dividend Distribution, COVID-19, Remuneration, Regulatory Capital, SARB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous Article
SARB Consults on Data and Reporting Requisites for Deposit InsuranceRelated Articles
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
SEC Extends Comment Period on Climate Risk Disclosures
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
APRA Reduces Committed Liquidity Facility, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.
EBA Updates Standards for 2023 Benchmarking of Internal Approaches
The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.
EIOPA Responds to Stakeholder Views on Blockchain in Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.
