ECB to Let Some Banks to Pay Out 15% of Profit in Dividends

By Nicholas Comfort

(Bloomberg) — The European Central Bank said it will allow some banks to resume partial dividend payments next year, while urging them to maintain financial reserves to weather the pandemic.
For the first nine months of next year, banks should keep dividends and share repurchases to less than 15% of profit for 2020 and 2019 or 0.2% of their key capital ratio, whichever is lower, the ECB said.

European lenders, whose shares have lagged behind the broader market this year, have repeatedly warned that the ECB’s de-facto ban on dividends risks driving investors away. Despite optimism that the end of the pandemic is in sight, some regulators remain concerned that allowing a full return to payouts may leave banks without the financial reserves to bear losses without taxpayer bailouts.

The Bank of England said last week that it will allow lenders to make payouts that don’t exceed 0.2% their risk-weighted assets, or 25% of cumulative quarterly profits over 2019 and 2020 after deducting shareholder distributions.
Bloomberg reported last week that European regulators planned to take a more conservative approach than the BOE.