The European Central Bank (ECB) urges that the dividend ban on banks be extended for a further six months. Banks were hoping to be able to pay dividends again to their shareholders at the beginning of next year. Over the past year, many European banks have seen the dividend ban reduce the price of their shares.
The ECB’s supervisory arm points to the continuing uncertainty caused by the COVID-19 crisis and the need to have sufficient cash in hand to lend as grounds for a possible extension of the ban. The question is, according to the Irish Ed Sibley who sits on it, how should the ECB enforce that? The central bank cannot enforce such a ban.
The comments from the regulator come while the big European banks are still struggling with the dividend reduction. There is also a good chance that the United Kingdom will allow dividends to be distributed again. Last year, banks in the United States were only asked to set a limit on dividend payments, so that they did not suffer from falling stock prices.
The ECB asked banks at the end of March not to pay dividends during the corona crisis. This money could be better managed by the financial institutions in order to have an extra buffer, for example, to take the hit from loans to businesses and consumers that could not be repaid. The purchase of own shares was also out of the question.
In July, the central bank repeated the call for a different use of the money until the end of the year. The ECB had previously indicated that it would take a new decision in December.
