PRA issued a statement confirming that it will undertake an assessment of the distribution plans of firms beyond the end of 2020. PRA will conduct this assessment in the fourth quarter of 2020. The assessment will be based on the current and projected capital positions of the banks and will take into account the level of uncertainty on the future path of the economy, market conditions, and capital trajectories prevailing at that time.
Earlier, on March 31, 2020, PRA had issued a statement welcoming the decisions by the boards of the large UK banks to suspend dividends and buybacks on ordinary shares until the end of 2020 and to cancel payments of any outstanding 2019 dividends in response to the PRA request. PRA had also set out its expectation that banks would not pay cash bonuses to senior staff. PRA regards distributions as an important and necessary part of the functioning of the banking system; however, these decisions were a sensible precautionary step, given the unique role of banks in supporting the wider economy through the period of economic disruption.
Keywords: Europe, UK, Baking, COVID-19, Dividend Distribution, Share Buybacks, Cash Bonuses, Distribution Plans, Regulatory Capital, Basel, PRA
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