In March, the ECB, as the supervisor of European banks, had asked to wait until autumn before paying dividends or buying back own shares. Then there would be more insight into the impact of the pandemic on the loan portfolio. In response, according to ECB calculations, European banks had ‘saved’ 27.5 billion in dividends for the 2019 financial year.
It is important that banks use their cash buffers for their most crucial task: to provide credit
Saving will certainly last until 2021. The ECB refers in its communication to ‘extreme uncertainty’ about the impact of the corona pandemic, including on banks’ capital buffers. “The aim is to safeguard the capacity of banks to absorb losses and thus to support the economy,” it says.
“It is important that banks use their cash buffers for their most crucial task: to provide credit,” said Andrea Enria, CEO of European banking supervision.
The ECB also asks banks to be scant with bonuses for bankers. “If these are not possible, it is best for banks to postpone a large part of the variable remuneration and they should consider paying that remuneration not in cash, but in their own shares, for example.”