World Overseer urges ECB to extend bank dividend ban

19:10  04 december  2020
19:10  04 december  2020 Source:   promipool.de

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Frankfurt — The European Central Bank ( ECB ) extended a recommendation to eurozone banks on Tuesday not to pay dividends until the end of Two German banking industry bodies complained that the blanket dividend ban did not take individual circumstances into account and risked unsettling

The European Central Bank extended on Tuesday a recommendation to euro zone banks not to pay dividends until the end of the year and allowed them to The ECB ’s announcement came the same day the Bank of England said it would assess whether to extend a suspension on payouts such as

(Bloomberg) - Europe should extend its de facto ban on bank dividends by six months, a high-ranking representative of the supervisory area of ​​the European Central Bank demands. This dampens the hopes of investors that distributions can be made again early next year.

In the coming weeks, regulators at the ECB and the Bank of England will decide whether and how to lift their recommendations on dividend payments. Distributions to shareholders were virtually frozen in March, in return for which the banks received unprecedented regulatory relief and government loan guarantees. However, the bankers later described them as more harmful than useful.

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The European Central Bank on Tuesday extended a ban on banks paying dividends and buying back their own stock. The ECB said the prohibition has been extended from October to the end of the year. Andrea Enria, chair of the supervisory board of the ECB , said the decision came alongside an

The ECB said banks could withstand a second wave of infections, but it called on authorities to be ready to intervene and prevent a credit crunch The euro zone's top supervisor extended a ban on dividends and share buybacks by three months until Jan. 1 and recommended that banks "exercise

The ongoing uncertainty and the need for banks to reserve capital for lending and reputational issues speak in favor of extending the regulator's existing recommendation, said Ed Sibley, a member of the ECB's supervisory body, in a Bloomberg interview. The question arises as to how this can be put into practice, given the increasing objections of credit institutions. Because the ECB is not authorized to enforce a general ban.

"Overall, it would be better if we held back another six months," said Sibley, who is also the deputy governor of the Irish central bank. "Whether we can do that in practice is a real challenge."

European bank stocks lagged U.S. peers for much of the year © Bloomberg European bank stocks lagged U.S. peers for much of the year

The BoE and the ECB have announced that they will announce their dividend decisions by the end of the year. The ECB recommended earlier this year that banks should not pay dividends or buy back shares until at least the end of 2020.

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Europe’s banking regulator has demanded that all EU lenders stop their planned dividend payments and share buybacks — stepping up its guidance in line with the latest call for a payout freeze during the coronavirus pandemic by the European Central Bank .

The decision comes after the European Central Bank on Friday recommended that lenders restrict payouts until at least October as the coronavirus On Friday Andrea Enria, the ECB ’s top banking watchdog, said it would be socially irresponsible to withhold dividends “in these exceptional times.”

"We didn't banned dividends, we gave our opinions and I think we can only go that far this time around," said Sibley. “You have to think about how we can do something that is workable and poses a certain challenge. I think that's where we will have the discussion. "

Other options for the central bankers would have been to allow only the strongest banks to return funds to shareholders.

This approach is also complicated, according to Sibley. He encouraged banks to prioritize the short-term interests of investors over their longer-term financial health. It also carries the risk of disclosing non-public information about how the ECB views governance deficiencies of certain credit institutions, he said.

“This creates a different collective or system-wide problem versus individual incentive,” he explained. “Overall I think we'd better wait. In practice, I don't know how to achieve this, so we have to come up with something in between. "

Heading of the original article:

ECB Urged to Extend Bank Dividend Ban Six Months by Top Watchdog

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usr: 6
This is interesting!