Bank of Italy Extends Dividend Payout and P2G Guidance Amid Crisis
Bank of Italy extended the application of the recommendations on the dividend distribution and variable remuneration policies. Bank of Italy also issued clarifications on the expiration of the flexibility granted on compliance with capital and liquidity buffers during the COVID-19 pandemic.
Earlier, in March 2020, Bank of Italy published a Recommendation asking less significant banks not to pay dividends and to abstain from buyback of treasury shares up to October 01, 2020. Now, in line with the provisions of the ESRB Recommendation from May 27, 2020 and the ECB guidance for significant banks, Bank of Italy recommends the less significant banks to not pay dividends, or make any firm commitments to pay dividends, for 2019 and 2020 and to not proceed with the repurchase of shares. The central bank will assess the adequacy of the adopted policies within the annual supervisory review and evaluation process (SREP). It will continue to monitor the situation and will consider the opportunity for further communication on the distribution of dividends and variable remuneration policies after January 01, 2021.
In line with what was communicated by ECB, Bank of Italy continues to encourage banks and non-bank intermediaries under its supervision to use the assigned Target Component following the SREP process (Pillar 2 Guidance or P2G), the Capital Conservation buffer (CCB), and the Liquidity Coverage Ratio (LCR) to absorb losses in an orderly manner to encourage loans to families and businesses. The Bank of Italy will, therefore, not request the restoration of the capital buffers before the end 2022 and the LCR level before the end of 2021; these dates may be postponed, if necessary. If it should be deemed appropriate to increase the level of the Pillar 2 Guidance for some intermediaries, the necessary time to reach the new levels will be granted.
Related Link (in Italian): Press Release
Keywords: Europe, Italy, Banking, COVID-19, Dividend Distribution, Pillar 2 Guidance, SREP, Regulatory Capital, Liquidity Risk, LCR, CRR/CRD, Less Significant Institutions, Bank of Italy
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Related Articles
Regulators Fine Goldman Sachs for Risk Management Failures
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
Canada Hosts International Conference of Banking Supervisors
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA Proposes More Measures to Help Insurance Customers Amid Crisis
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA Issues Opinion to Address Risk Stemming from Legacy Instruments
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury Publishes Policy Statement Amending Benchmarks Regulation
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA Initiates Action Against a Bank for Liquidity Compliance Breach
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies Finalize Rule to Reduce Impact of Large Bank Failures
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies Finalize Rule on Net Stable Funding Ratio Requirements
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.
