MAS Issues Guidance on Dividend Distributions by Banks
MAS published a statement guidance on dividend distribution by banks. MAS called on locally incorporated banks headquartered in Singapore to cap their total dividends per share financial year 2020 at 60% of the dividends per share of the financial year and offer shareholders the option of receiving the dividends to be paid for financial year 2020 in scrip in lieu of cash. MAS also announced that it will continue to provide USD via the MAS USD Facility following the extension of MAS’ USD 60 billion swap arrangement with the US FED through March 31, 2021. The MAS USD Facility will offer up to USD 60 billion of funding to banks, to facilitate USD lending to businesses.
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
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