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By Huw Jones
LONDON, Dec 10 (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)
