Bank of England governor Andrew Bailey (pictured) has come under fresh pressure to halt British banks paying out over £7.5bn of dividends over the next few weeks and use the cash to support the UK economy hit by the coronavirus pandemic.
Agustín Carstens, head of the Bank for International Settlements — known as the central bank for central banks — called for a global freeze on dividends in the sector.
Carstens, writing for the Financial Times, said that “banks should be part of the solution” during the coronavirus crisis and “not part of the problem”.
He added: “Now is the time to draw on the accumulated balance sheet buffers that were built while the sun was shining.
Regulators call on banks to halt billions of investor payouts
“To boost lending capacity further, we need a global freeze on bank dividends and share buybacks.”
Shares in Barclays fell 4 per cent in Monday morning trading, HSBC dropped 4 per cent, Lloyds Bank dipped just under three per cent and Royal Bank of Scotland eased just under two per cent.
This follows a call on Friday from the European Central Bank (ECB), which told eurozone lenders to skip dividend payments and share buybacks until at least October and use profits to lend to firms and individuals impacted by the virus.
The ECB said: “To boost banks’ capacity to absorb losses and support lending to households, small businesses and corporates during the coronavirus (COVID-19) pandemic, they should not pay dividends for the financial years 2019 and 2020 until at least 1 October 2020,” the ECB said in a statement.
Banks under pressure to lend during the health emergency
“Banks should also refrain from share buy-backs aimed at remunerating shareholders.”
The move puts the largest banks in Britain and across Europe under pressure to cancel or delay plans to return billions to investors. Across the eurozone, this payout could amount to €30bn, said Andrea Enria, chair of the ECB’s supervisory board.
“As everything around us is being put on hold to focus all the efforts of our communities on the fight against the coronavirus, a contribution is also required from banks and their shareholders,” said Mr Enria in a blog post.
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