ECB Publishes Recommendation on Dividend Distributions During Covid-19 Pandemic
On March 27, the European Central Bank published a recommendation on dividend distributions and share buy-backs during the Covid-19 pandemic (the Recommendation).
In the Recommendation, the ECB advises that credit institutions should conserve capital to support the economy during the Covid-19 pandemic. The ECB notes that capital resources to support the real economy and absorb losses should take priority at present over discretionary dividend distributions and share buy-backs. As a result, the ECB recommends that:
credit institutions should refrain from paying dividends until October 1;
no irrevocable commitment to pay out dividends should be undertaken by credit institutions for the financial year 2019 and 2020;
credit institutions should refrain from share buy-backs aimed at remunerating shareholders until October 1; and
credit institutions that are unable to comply with this Recommendation because they consider themselves legally required to pay-out dividends should immediately explain the underlying reasons to their joint supervisory team.
The Recommendation is also addressed to EU financial regulators with regard to less significant supervisory entities and less significant supervisory groups, which are expected to apply the Recommendation to such entities as they deem appropriate.
The Recommendation is available here.