LONDON (Reuters) – British banks can resume paying some dividends and bonuses after the Bank of England said they appeared well capitalised and resilient to any further coronavirus crisis fall-out.
The BoE told Britain’s seven biggest lenders in March to suspend dividends and share buy-backs until the end of 2020, and to cancel payments of any outstanding 2019 dividends.
It also expected banks and building societies to scrap cash bonuses for senior staff to help maintain capital buffers and continue lending to companies and households.
On Thursday, the BoE said the time had come to relax this advice for lenders including HSBC, Barclays, Lloyds and NatWest.
Standard Chartered said it welcomed the decision and would consider resuming investor payouts alongside its full-year results in February.
A NatWest spokesperson said its board would make a decision on dividends at the year end. Barclays and HSBC declined to comment, Lloyds was not immediately available for comment.
Any distributions by large banks for this year should be “prudent” and fall within temporary “guardrails” published by the BoE on Thursday.
“In the meantime, for 2021 dividends the PRA (Prudential Regulation Authority) is content for appropriately prudent dividends to be accrued but not paid out and aims to provide a further update ahead of the 2021 half-year results of large UK banks,” it said. Under the guardrail, dividends should not exceed 0.2% of a bank’s risk-weighted assets at the end of 2020, or 25% of cumulative profits over 2019 and 2020, after deducting prior shareholder distributions over that period.
Any bank that wants to pay more than under the guardrail, should engage with its supervisors and expect a “high bar” for justifying any exceptions, the BoE said.
Banks should also exercise a high degree of “caution and prudence” in determining the size of any cash bonuses, it added.
Despite the controls, the PRA’s move was criticised by campaign groups.
“It is deeply concerning that the Bank of England is pandering to commercial banks and allowing them to prioritise shareholder payouts instead of supporting the Covid-19 recovery,” Fran Boait, executive director at Positive Money, said.
There will be stress tests in mid-2021, the PRA said, with bank-by-bank results published at the end of that year.
The PRA said it will move to its standard approach to capital and dividends during 2021, with input from the stress test results.
(Additonal reporting by Andy Bruce and Iain Withers; Editing by David Milliken, Elaine Hardcastle and Alexander Smith)