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(Adds bank comments)
By Huw Jones
LONDON, Dec 10 (Reuters) - Britain's banks can resume paying
some dividends and bonuses as they appear well capitalised and
resilient to any further fall-out from the coronavirus pandemic,
the Bank of England said on Thursday.
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 going into economic
lockdown to fight the pandemic.
On Thursday the BoE said the time had come to relax this
advice for lenders including HSBC, Barclays,
Lloyds and NatWest.
Standard Chartered said in a statement it welcomed
the PRA's decision and would consider resuming investor payouts
alongside its full-year results in February.
A NatWest spokesperson said the bank's board would make a
decision on dividends at the year end. Barclays and HSBC
declined to comment, Lloyds was not immediately available for
comment.
"The Prudential Regulation Authority judges that an
extension of the exceptional and precautionary action taken in
March is not necessary and that there is scope for banks to
recommence some distributions should their boards choose to do
so," the BoE said in a statement.
Any distributions by large UK 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 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.
"The PRA will scrutinise proposed pay-outs closely to ensure
large banks have applied the PRA’s rigorous remuneration regime
in an appropriate fashion," it said.
There will be stress tests of banks in mid-2021, with
bank-by-bank results published at the end of that year, and 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 and Elaine Hardcastle)
