Via The Guardian:
Britain’s largest banks have agreed to scrap nearly £8bn worth of dividends in light of the coronavirus crisis, giving banks an additional cushion to weather an economic downturn.
The Bank of England has also ordered lenders to cancel plans for cash bonuses for executives, as it asked financial institutions to boost their strength ahead of a likely recession.
In a series of coordinated statements the UK’s largest lenders – including Barclays, HSBC, Lloyds, Royal Bank of Scotland and Standard Chartered confirmed on Tuesday that they would temporarily halt shareholder payouts and share buybacks for 2019 and throughout 2020 following discussions with the Bank.
The cancellation of the 2019 dividends will give the banks an additional financial cushion worth nearly £8bn in total, as they are pushed to increase lending to businesses and households during the Covid-19 lockdown.
In a letter to chief executives, the head of the Bank’s Prudential Regulation Authority – which is in charge of financial stability – said any bonuses that have not yet been paid out should also be scrapped.
“The PRA also expects banks not to pay any cash bonuses to senior staff, including all material risk takers, and is confident that bank boards are already considering and will take any appropriate further actions with regard to the accrual, payment and vesting of variable remuneration over coming months,” PRA boss Sam Woods told executives.
It doesn’t make much sense for banks to pay out a wad of capital only have to raise it again does it? Unless you work at the RBA and APRA!
But wait, there’s more, at the AFR:
In Europe, the second epicentre of the coronavirus crisis, governments and the European Central Bank (ECB) have moved to ban dividend payments by companies as infection numbers and deaths balloon at shocking rates, inviting questions about how shareholder returns and state support can coexist.
France’s finance minister, Bruno Le Maire, has demanded a ban on dividend payments by companies receiving state support. The minister threatened any company with penalties, including additional tax liabilities, if it pays dividends until the virus is beaten.
In Germany, the government has advised that all companies receiving financial assistance should stop dividend payments to prevent capital being distributed to shareholders that could be allocated to fight the virus.
Bravo. Someone still recalls moral hazard.
In Straya…crickets…
