New recommendations from the European Supervisory Authorities on dividend distributions etc.
Published: 18 December 2020
The European Systemic Risk Board (ESRB), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have made new recommendations on restrictions on dividends and other distributions from banks and insurers.
On 18 December, the ESRB issued a new recommendation to national authorities to request banks and insurers to refrain from making dividend distributions, buying back shares and paying variable remuneration to individual employees until 30 September 2021, unless the institutions apply extreme caution and the distributions do not exceed the conservative thresholds set by the national authorities. The thresholds shall be set to ensure that the overall level of distributions is significantly lower than in the recent years prior to the Covid-19 crisis. The purpose of this measure is to strengthen financial institutions’ capital levels to promote financial stability and contribute to economic recovery.
On 15 December, the EBA issued a recommendation urging banks to refrain from distributing dividends and making other distributions, including share buybacks, unless extreme caution is applied. The reason for this request is the Covid-19 crisis and persistent uncertainty about its impact on the economy and potential further negative consequences for the banks.
On 18 December, EIOPA issued a recommendation, emphasising that uncertainty remains high and that it is vital that insurers preserve their capital levels. EIOPA also recommends insurers to maintain extreme caution and stresses that any dividend payments and other distributions should not exceed the thresholds set by the national supervisory authorities.
Finanstilsynet endorses the recommendations made by the European supervisory authorities.
In a letter dated 17 December, the Ministry of Finance, which is the Norwegian macroprudential authority, asked Finanstilsynet to assess how the recommendation from the ESRB should be followed up in Norway. Finanstilsynet will respond shortly.