ECB’s Enigma: To lift the ban on dividends by next year

ECB’s Enigma: To lift the ban on dividends by next year

ECB is moving towards freezing the dividend payments at the beginning of 2021, stated by Bloomberg. Several members of the supervisory board of the ECB, who supported the initial requests to forgo dividends seeing the extension of the ban doing more harm than good. 

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  • European banking sector recovers, with the Euro Stoxx Bank Index falling to 0.9% in Frankfurt after the initial drop of 1.6%. 
  • The ECB index, including several largest banks, has also fallen by 38% following the interventions. 
  • The ECB announced that position on dividends will be revised in the fourth quarter of 2020. However, a regulator’s spokeswoman declined to comment. 
  • The FED is considering extending the dividend caps and share buybacks it imposed on the largest U.S. banks. 

There is still a tensions on whether it’s appropriate that well-capitalized banks are not allowed to pay dividends if they are able to. It’s also been argued how paying dividends will impact the banks which are poorly performing as well as better performing lenders. It might weaken banks position further, said by Anneli Tuominen, head of Finland’s financial regulator and the supervisory board’s member.

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