BoE and PRA on ESRB Recommendation for Payout Restrictions Amid Crisis
BoE and PRA issued a joint statement on the ESRB recommendation for restriction of dividend distributions and other relevant voluntary payouts during the COVID-19 pandemic. The statement refers to the ESRB recommendation that was issued on June 08, 2020 and is applicable to the UK authorities during the transition period, which is a part of the withdrawal of UK from EU. The statement highlights that BoE and PRA have previously announced a number of measures to ensure the resilience of the financial system and financial market infrastructures, support bank lending through this period, and maintain the safety and soundness of firms, which are consistent with the objectives of the ESRB recommendation. Therefore, BoE and PRA do not consider it necessary to extend the guidance further at this time.
ESRB recommended that the relevant authorities should request financial institutions under their supervisory remit to refrain—at least until January 01, 2021—from undertaking the actions that have the effect of reducing the quantity or quality of own funds at the EU group level (or at the individual level where the financial institution is not part of an EU group), and, where appropriate, at the sub-consolidated or individual level. The actions to be refrained from include dividend distribution, buy-back of ordinary shares, and creation of an obligation to pay variable remuneration to a material risk-taker.
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Keywords: Europe, EU, UK, Banking, Insurance, COVID-19, Brexit, Dividend Distribution, FMI, PRA, BoE
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