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By Huw Jones and David Milliken
LONDON, July 13 (Reuters) - The Bank of England scrapped
pandemic-era curbs on dividends from HSBC, Barclays and other
top lenders with immediate effect on Tuesday, saying its stress
test showed the sector is well capitalised to cope with the
fallout from COVID on the economy.
Bank of England Governor Andrew Bailey said that in recent
months, the rapid rollout of the UK's vaccination programme has
led to an improvement in the UK economic outlook.
"But risks to the recovery remain. Households and businesses
are likely to need continuing support from the financial system
as the economy recovers and the government's support measures
unwind over the coming months," Bailey said.
As Britain entered its first lockdown in March last year to
fight COVID-19, the BoE told lenders to suspend dividends and
share buy-backs until the end of 2020. It also recommended
scrapping bonuses for senior staff.
The aim was to make sure that banks had sufficient capital
to maintain lending to businesses hit by the worst economic
downturn in 300 years as pandemic unfolded.
The BoE eased its curbs last December as the pandemic's
fallout became clearer, saying payouts could continue within
"guardrails".
The BoE's Financial Policy Committee (FPC) said on Tuesday
that the "extraordinary guardrails on shareholder distributions
are no longer necessary and judges that the interim results of
the 2021 solvency stress test, together with the central
outlook, are consistent with this decision".
The U.S. Federal Reserve said in June that large banks would
no longer face pandemic-era restrictions on how much they can
spend buying back stock and paying dividends.
The European Central Bank's top banking supervisor Andrea
Enria said this month the ECB plans to let euro zone lenders
resume payouts to shareholders from October, barring a new
economic slump.
"The FPC expects banks to use all elements of their capital
buffers as necessary to support the economy through the
recovery," the BoE said in its twice-yearly Financial Stability
Report.
The committee decided to maintain the so-called
counter-cyclical capital buffer at zero percent until at least
December, meaning any subsequent increase would not take effect
until the end of 2022 at the earliest.
(Reporting by Huw Jones and David Milliken)
