Regulation: British banks are allowed to pay dividends again

The largest UK banks will again be able to distribute unlimited dividends to their shareholders for 2020. The central bank lifted the restrictions imposed on the country's large financial institutions due to the corona crisis on Tuesday with immediate effect, as it announced in London in the morning. The interim results from the bank stress test had shown that the institutions were still well capitalized and could withstand severe economic turmoil. The Bank of England, as the supervisory authority, had already relaxed the restrictions in December. The current decision concerns Barclays, HSBC, Lloyds, NatWest and Standard Chartered as well as the British subsidiary of the Spanish Banco Santander. Barclays, HSBC, and Lloyds share prices are up as much as 1.5 percent on the London Stock Exchange in early business on Tuesday.

The European Central Bank (ECB) insists on moderate distributions from banks in the euro area despite the dividend freeze that is likely to expire soon.

As a supervisor, the ECB will call on the institutes to continue to be cautious, said the Spanish ECB supervisor Margarita Delgado in an interview published on Monday evening by the Bloomberg news agency.

The central bank could also take the necessary steps.

Excessive distributions could initially result in a recommendation from the ECB to return to a more average distribution policy, said Delgado.

"We have other tools if the bank does not follow the recommendation of the supervisory authority."

Stop expires in September

During the Corona crisis, the ECB imposed a dividend freeze on the largest banks in the euro area in order not to exacerbate a possible imbalance in the balance sheet in the economic crisis through excessive cash outflows. According to ECB boss Christine Lagarde, the stop could expire in September. The warning from the Spanish representative in the ECB's supervisory body should now dampen investors' hopes for excessively bubbly distributions. In exceptional circumstances and accompanied by "constructive dialogue," supervisors could ask banks to increase capital buffers or take other financial measures, Delgado said. In addition to financial strength, distribution plans would be compared to those of other banks of a similar size or business model.

The US banking supervisors of the Federal Reserve recently loosened their reins, which were not pulled as tightly as in Europe, after the large banks demonstrated higher capital reserves and thus greater resilience in stress tests. The Wall Street houses Morgan Stanley, JP Morgan, Goldman Sachs and Bank of America announced dividend increases, some of them significant. This Tuesday, JP Morfgan and Goldman Sachs report their second quarter results.