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By Huw Jones
LONDON, Oct 28 (Reuters) - The Bank of England's request in
March for banks to restrain dividend payments will not change
the amount of payouts over the longer term, its executive
director for financial stability said on Wednesday.
Investors in banks like HSBC were angered by the
BoE's request for banks to suspend dividends.
But Alex Brazier said it stopped about 8 billion pounds
($10.4 billion) leaving the sector at a time when the economy
was going into lockdown to fight the pandemic, leading to a 20
billion pound surge in provisioning for bad loans with analysts
anticipating a similar amount still to come.
"This is a dividend delayed rather than a dividend destroyed
forever. It does not change the amount of distributions banks
will make over the long run," Brazier told an online event held
by the CSFI think tank.
"It does require a degree of patience from investors," he
added.
The BoE regards payouts as an "important and necessary" part
of the functioning of the banking system, and will undertake
"very careful analysis" this quarter of banks' distribution
plans, Brazier said.
The BoE did not know in March that banks would be able to
deal with more severe stresses than the COVID-19 fallout which
is now clearer, Brazier said.
This is something the BoE would now take into account when
examining the banks' distribution plans, he added.
Britain's banks have been urged to tap their capital buffers
to keep lending to the economy, but are leery of doing so to
avoid raising market expectations of hefty cash calls.
Brazier said lenders should not be worried about facing a
"steep path" to rebuilding buffers once the COVID-19 crisis has
passed as this would not be consistent with still helping the
economy recover.
"We need to take into account bank profitability and their
ability to generate capital organically," he said.
($1 = 0.7673 pounds)
(Reporting by Huw Jones;
Editing by Alison Williams, Emelia Sithole-Matarise and Cynthia
Osterman)
