The PRA notes the European Central Bank’s (ECB’s) announcement on dividend payments and share buybacks ‘ECB extends recommendation not to pay dividends until January 2021 and clarifies timeline to restore buffers’.
In its statement on Tuesday 31 March ‘PRA statement on deposit takers’ approach to dividend payments, share buybacks and cash bonuses in response to Covid-19’, the PRA welcomed the decisions by the boards of the large UK banks to suspend dividends and buybacks on ordinary shares until the end of 2020, and set out its expectation that banks would not pay cash bonuses to senior staff.
The PRA regards distributions as an important and necessary part of the functioning of the banking system, but these decisions were a sensible precautionary step given the unique role of banks in supporting the wider economy through the period of economic disruption.
The PRA will undertake its assessment of firms’ distribution plans beyond the end of 2020 in Quarter 4 2020. The assessment will be based on the current and projected capital positions of the banks and will take into account the level of uncertainty on the future path of the economy, market conditions, and capital trajectories prevailing at that time.