SARB published the guidance note (3/2021) on the distribution of dividends on ordinary shares and payment of cash bonuses to executive officers and material risk-takers, in light of the pandemic and the temporary regulatory capital relief provided by the Prudential Authority. The guidance note outlines the need for banks to act prudently when considering making the said distributions in 2021. This guidance note replaces the guidance note 4 from 2020 and is relevant for all banks, branches of foreign institutions, controlling companies, eligible institutions, and auditors of banks or controlling companies.
The note specifies that benefits of the regulatory relief measures provided by the Prudential Authority in 2020 should not be utilized for the distribution of dividends and payment of bonuses. on dividends and bonus payments in response to COVID-19. SARB considers it critical that banks continue to fulfil the fundamental role of providing the required funding, among other things, to households and businesses amid the pandemic. Thus, it is essential that banks continue to appropriately conserve capital to retain their capacity to support the real economy in an environment of heightened uncertainty that continues to be caused by COVID-19 pandemic. The Prudential Authority expects banks to take into consideration the adequacy of their current and projected capital and profitability levels, internal capital targets, risk appetite, and current and potential future risks of the global pandemic when making distributions of dividends on ordinary shares and payments of cash bonuses to executive officers and material risk-takers in 2021. The responsibility for approving the distribution of dividends on ordinary shares and the payments of cash bonuses to executive officers and material risk-takers ultimately rests with the board of directors of a bank. In those instances where bank boards of directors do approve the distributions of dividends on ordinary shares and/or payments of cash bonuses to executive officers and material risk-takers in 2021, payout ratios should be prudent and commensurate with the assessment of the current conditions and potential future uncertainty.
Keywords: Middle East and Africa, South Africa, Banking, Dividend Distribution, COVID-19, Remuneration, Regulatory Capital, SARB
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleSARB Consults on Data and Reporting Requisites for Deposit Insurance
APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.
EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).
HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks.
EIOPA launched the 2021 stress test for the insurance sector in EU.
UK authorities jointly published the third edition of Regulatory Initiatives Grid setting out the planned regulatory initiatives for the next 24 months.
EC is requesting feedback on the proposed Commission Delegated Regulation on the content, methodology, and presentation of information that large financial and non-financial undertakings should disclose about their environmentally sustainable economic activities under the Taxonomy Regulation.
OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.
Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.
ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.
EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.