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* BoE lifts 'guardrails' on banks dividends and buy-backs
* CCyB risk buffer kept at zero percent to boost lending
* BoE warns some asset prices look stretched
* Bailey urges against lower regulatory standards
(Adds BoE on crypto-currencies, money market funds, regulatory
standards)
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 was well capitalised to cope with the
fallout from COVID on the economy.
Bank of England Governor Andrew Bailey said the rapid
rollout of the United Kingdom's vaccination programme had led to
an improvement in the economic outlook in recent months.
"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.
Shares in British lenders rose in early trading in London,
with HSBC and NatWest up 2%. Barclays, Standard Chartered and
Lloyds were all also up more than 1%, compared to a fractional
0.2% gain for the FTSE 100 index. HSBC shares traded in
Hong Kong also extended gains after the news, up 4%.
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 resume within
"guardrails".
The BoE's Financial Policy Committee (FPC) said on Tuesday
that the "extraordinary guardrails on shareholder distributions
are no longer necessary" following its annual stress test of
banks' financial health.
However, the regulator is still expected to keep a close eye
on bonuses for senior bankers to ensure they remain prudent.
The U.S. Federal Reserve said in June that large banks would
no longer face pandemic-era restrictions on how much they can
spend in 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.
CCYB KEPT STEADY
The committee also kept major banks' counter-cyclical
capital buffer (CCyB) at zero percent until at least December,
meaning any subsequent increase would not take effect until the
end of 2022 at the earliest.
The buffer is intended to rise and fall over the course of
the economic cycle to limit lending at the top of a boom and
boost it during a downturn.
"The FPC expects banks to use all elements of their capital
buffers as necessary to support the economy through the
recovery," the BoE said.
However, the central bank sounded a note of caution about
asset prices in its twice-yearly Financial Stability Report.
"There is evidence of increased risk-taking in financial
markets and some asset prices look stretched," it said.
On cryptocurrencies - about which the BoE has long had
concerns - it said risks mostly seemed concentrated among small
investors but there were signs of larger institutions getting
involved, which could lead to spillovers into the wider economy.
Bailey said he wanted to ensure regulation did not loosen as
Britain seeks to ensure London remains one of the world's
leading financial centres after Brexit.
"The UK's reputation for strong standards, independent
regulation and financial stability has been and will remain a
crucial component of its attractiveness to internationally
active financial institutions," he wrote in a regular letter to
finance minister Rishi Sunak.
(Reporting by Huw Jones and David Milliken
Editing by Gareth Jones)
