Bank of England eases restrictions on bank dividends and bonuses

Bank of England eases restrictions on bank dividends and bonuses

The Bank of England announced on Thursday it can resume paying dividends and bonuses, lifting its COVID-19 curb on these payouts imposed earlier this year.  The move is seen as a good sign that the bank is well-capitalized anew, displaying resiliency to any further backlash from the coronavirus pandemic.

Earlier in March, the BoE ordered its biggest lenders to hold dividends and share buy-backs until the end of 2020, as well as to defer payments of any outstanding 2019 dividends. The bank also expected other banks and entities to drop cash bonuses for senior staff to help maintain capital buffers and continue lending to companies and households amidst lockdowns to curb the spread of the virus.

The BoE also warned other banks that wish to pay beyond the guardrail to engage with its supervisors and expect a high bar for justifying any exceptions. Banks should also observe a high level of caution and prudence in identifying the size of any cash bonuses, added the bank.

Stress tests of banks will take place in mid-2021, with bank-by-bank results published at the end of that year.

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