ECB updated its recommendation to banks on dividend distributions. To boost the capacity of banks to absorb losses and support lending to households, small businesses, and corporates during the COVID-19 pandemic, ECB recommends that banks should not pay dividends for the financial years 2019 and 2020 (until at least October 01, 2020). Banks should also refrain from share buy-backs aimed at remunerating shareholders. To maximize the support to the real economy, it is also considered appropriate that discretionary dividend distributions should not be made by less significant credit institutions.
This recommendation does not retroactively cancel the dividends already paid out by some banks for the financial year 2019. However, banks that have asked their shareholders to vote on a dividend distribution proposal in their upcoming General Shareholders meeting will be expected to amend such proposals in line with the updated recommendation. The recommendation follows the earlier ECB announcements about the temporary relief measures to ensure that banks keep supporting the economy. ECB expects bank shareholders to join this collective effort.
Keywords: Europe, EU, Banking, Securities, COVID-19, Dividend Distribution, Recommendation, Pillar 2, ECB
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