PRA says banks can resume dividend payments

The Bank of England’s Prudential Regulation Authority said on Thursday that banks can resume paying dividends, having pressured them in March to suspend payouts due to the coronavirus pandemic.

The PRA said in a statement that notwithstanding the impact of the Covid-19 crisis on the global economy, banks remain well capitalised and are expected to be able to continue to support the real economy through this period of disruption.

The Prudential Regulation Committee and Financial Policy Committee carried out two stress tests and found that banks are "resilient to a wide range of economic outcomes, including economic scenarios that are materially more severe than current central expectations".

As a result, an extension of the measures announced in March is not necessary, the PRA said, adding that there is scope for banks to recommence some distributions should their boards choose to do so, "within an appropriately prudent framework".

It stressed the need for prudence, highlighting "the still elevated levels of economic uncertainty and the need for banks to continue to support households and businesses through the continuing economic disruption, even in the event that this disruption is more prolonged and severe than currently anticipated".

The PRA asked that bank boards operate within a framework of "temporary guardrails" when deciding on dividends.

"The PRA will expect to be satisfied that any distributions would not create excess vulnerabilities to stress for a given bank or impede its ability or willingness to support households and businesses," it said.