TOP NEWS: Bank of England lifts restrictions on UK bank dividends

Tue, 13th Jul 2021 08:53

(Alliance News) - The Bank of England on Tuesday removed restrictions on large UK banks paying dividends, saying they are well-capitalised and that Covid vaccination programmes have reduced economic uncertainty.

The central bank's Prudential Regulation Authority said the restrictions are "no longer necessary and have been removed with immediate effect." The rules affected FTSE 100 listings Barclays PLC, HSBC Holdings PLC, Lloyds Banking Group PLC, NatWest Group PLC and Standard Chartered PLC, as well as the UK arm of Banco Santander SA.

Shares in the banks rallied on Tuesday morning. Barclays was up 0.8% to 174.14 pence in London, HSBC 1.6% to 419.37p, Lloyds 1.3% to 47.80p, NatWest 1.7% to 210.40p, and Standard Chartered 0.9% to 458.80p. The wider FTSE 100 index was up 0.3%. Santander was down 0.5% to EUR3.12 in Madrid.

The regulations dated back to December and stated that distributions to shareholders should be no higher than either 20 basis points of risk-weighted assets or 25% of cumulative eight-quarter profits. Banks also were told to be cautious in paying bonuses to senior staff. They were allowed to accumulate potential 2021 dividends but not pay them out.

In March of last year, large UK banks had suspended dividends and buybacks on the outbreak of the pandemic. The Bank of England also a year ago had asked them to cancel any pending dividends and to restrict staff bonuses.

But all pandemic restrictions have now been lifted after the central bank concluded they are no longer necessary. The banks remain "well-capitalised and resilient to outcomes for the economy that are much more severe than the Monetary Policy Committee's central forecast," and can therefore "support households and businesses through the economic recovery," the statement said.

The level of economic uncertainty has dropped significantly since December thanks to the vaccines, the Bank of England added, although "considerable uncertainty remains". There also was uncertainty over Brexit trade negotiations in December, the central bank pointed out at the time.

Dividends and buybacks still will be subject to the Bank of England's standard regulatory framework, which includes an annual stress test.

By Ivan Edwards; ivanedwards@alliancenews.com