ECB wants liquidity buffer: banks criticise the extension of the dividend barrier

The Bank supervisors of the European Central Bank (ECB) have extended their dividend barrier for banks from October to the end of the year. They announced on Tu

ECB wants liquidity buffer: banks criticise the extension of the dividend barrier

The Bank supervisors of the European Central Bank (ECB) have extended their dividend barrier for banks from October to the end of the year. They announced on Tuesday. The head of the ECB Bank supervision, Andrea Enria, said in a Blog post: "All of our Supervisory measures and steps and will continue to be geared to ensure that the banking sector can remain robust and the economic recovery with adequate credit supply supported."

Markus Frühauf

editor in the economy.

F. A. Z. Twitter

According to the official rules "speech, the ECB recommend" overseer of the banks, dividend payouts and share buybacks in the current environment in sight. But you have to put up with the expectation that the banks will follow. Enria had explained that after the first dividend stop at the end of March. This also applies to the variable remuneration of the supervisors of the banks to an "extreme restraint rates".

you want to prevent dividends paid by the banks to the detriment of equity and thus the ability to lend, if possible. However, banks are allowed to distribute dividends to other institutions, if these are the share owner, or parent company, and the ECB's supervision agrees to this. Dividends may be paid in the Form of shares, as long as the own funds decrease or whose quality is weakened.

banks criticise ECB

The banks are opposed to the extension of the distribution ban. The German Association of Volks - and Raiffeisen banks criticized the proposal as too undifferentiated, since the ECB, de facto, want to ban all banks, regardless of their income and equity situation, to pay dividends or buy back own shares. BVR management Board member Gerhard Hofmann holds this intervention because of the lack of a legal basis for to a large extent. The Federal Association of German banks (BdB), among others, Deutsche Bank, Commerzbank, Hypovereinsbank and ING members, holds a General payout prohibition is not useful. It kidding the investors and verteure the refinancing of the banks, said BdB managing Director Christian Ossig. However, the Bank of England is considering whether to extend the suspension of share buybacks and dividends over the end of the year.

this is Flanked by regulatory relief. So banks are allowed to use up their capital buffers, to be able to businesses and households in the Corona-crisis credit support. In addition, the rules relating to the capitalisation of default of at-risk loans have been eased. Finally, the ECB provides the banks with targeted Refinancing operations (TLTRO) to very favorable conditions of liquidity. If certain requirements to be lending and get the banks a negative interest rate, therefore have to pay less back than you have taken.

fear of the second wave

Enria rating numbers to the current environment with a view to the re-rising of Infection as extremely unsafe. It should not come to a tightening of the Corona-crisis with further quarantine measures, should be prepared for the banks to survive the economic downturn and the associated credit losses. This applies both for the Central scenario in this year, the economic output (gross domestic product; GDP) in the Euro area of 8.7 per cent is likely to shrink, as well as for the hard scenario, with a GDP decline of 12.6 percent.

Updated Date: 28 July 2020, 09:19

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