MAS Issues Guidance on Dividend Distributions by Banks

As part of the guidance on dividend distributions, MAS highlights that 60% cap on the dividend balances of local banks for financial year 2020 is in line with the objective of capital conservation within shareholder interests. While the capital positions of local banks are strong, the dividend restrictions are a preemptive measure to bolster their resilience and capacity to support lending to businesses and individuals through an uncertain period ahead for the economy. Earlier, in April 2020, MAS had encouraged banks in Singapore to ensure that sustained lending took priority over discretionary distributions. Nonetheless, given the substantial uncertainties ahead and that global economies are not yet showing sustained signs of recovery, it would be prudent for local banks to put aside a greater portion of earnings during this period. This will bolster the ability of these banks to continue to support the credit needs of businesses and consumers as well as absorb economic shocks should a more adverse scenario materialize. MAS encourages banks to conserve and carefully manage their capital, by exercising restraint in discretionary expenditure and management compensation. 

Keywords: Asia Pacific, Singapore, Banking, Dividend Distribution, COVID-19, Liquidity Facility, Credit Risk, MAS