The European Central Bank has said it would end pandemic-era restrictions on banks’ payouts to shareholders but urged eurozone lenders to “remain prudent”.
AFP reports that the ECB “decided not to extend beyond September 2021 its recommendation that all banks limit dividends”, it said in a statement. But it warned that eurozone lenders “should remain prudent when deciding on dividends and share buy-backs”.
The ECB imposed a cap on banks’ rewards to shareholders at the onset of the coronavirus crisis in March 2020, to ensure lenders had enough liquidity to weather the fallout. The curbs were then extended twice, until September 2021.
With the eurozone recovery now firmly under way thanks to mass vaccinations and post-lockdown re-openings, the Frankfurt institution said it would return to the “pre-pandemic way of assessing” banks’ plans for dividends and share buy-backs, AFP reports.
But banks should “not underestimate the risk that additional losses may later have an impact on their capital trajectory as support measures expire”, the ECB said.
The US Federal Reserve and the Bank of England have also recently lifted their Covid-era restrictions on dividends after banks reportedly proved they had successfully weathered the changing economic circumstances.