BOT published a circular on the dividend payment policy for 2020, based on financial institutions’ capital plans and stress test results for 2020-2022. The circular applies to commercial banks registered in Thailand, commercial banks registered in foreign countries, credit foncier companies, and finance companies. BOT assessment showed that financial institutions have adequate levels of capital and loan-loss provisions to withstand the impact of COVID-19 pandemic. However, due to high uncertainty in the near future, BOT supports the preventive measures by allowing financial institutions to pay dividends for 2020 not exceeding last year payout ratio and 50% of this year’s net profit.
This dividend payment policy of BOT is in line with the guidelines of many overseas regulators and will benefit financial institutions’ shareholders, depositors, and debtors in the long run. The circular highlights that financial institutions have enhanced their awareness and readiness to deal with the uncertainty by continuously increasing their loan-loss provisions. The non-performing loan coverage ratio and the capital adequacy ratio of the Thai banking system in the third quarter of 2020 were 150% and 19.8%, respectively. The dividend payment policy would help ensure resilience of the Thai financial system, continuously maintain high level of capital, and would serve as an important mechanism to support economic recovery.
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Keywords: Asia Pacific, Thailand, Banking, COVID-19, Dividend Distribution, Stress Testing, Regulatory Capital, BOT
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