The Federal Financial Supervisory Authority (BaFin) expects banks to maintain a cautious dividend policy in the future as well.

In an interview with the “BaFin Journal”, Raimund Röseler, Executive Director for Banking Supervision, said: “I don't expect there will be a catch-up effect.” The banking supervision of the European Central Bank (ECB) will no longer limit profit distributions by banks from October.

This means that institutions can again decide more freely how to distribute profits to shareholders or employees and whether they want to buy back shares.

Markus Frühauf

Editor in business.

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In the interview, BaFin's top banking supervisor pointed out that many institutions had already paid out in the course of the year, but at a very cautious level.

"I assume that it will stay that way," added Röseler.

The institutions that have already rewarded their shareholders this year include the real estate financiers Aareal Bank and Pfandbriefbank, which are listed on the stock exchange.

As the FAZ reported on Friday, both institutes want to pay their shareholders the dividend portion that has been withheld for the past year in the autumn.

In good condition

Röseler pointed out that BaFin would of course look at each individual case. In the ongoing supervision you can see how the banks dealt with the issue. "And whenever an institute is not doing well and we see that it is still paying dividends or dividends that are too high, we will intervene," he emphasized. He still sees the German banks in good shape in the pandemic. With regard to loan defaults, Röseler does not rule out higher provisions, but they would probably not increase so much that problems are to be expected here in the area.

According to him, the German banks have surplus capital of more than 150 billion euros and the value adjustments actually required are significantly smaller than the budgeted ones. According to Röseler, the major institutions, i.e. the 21 directly monitored by the ECB, have planned write-downs of 6 billion euros for this year, but only consumed a few hundred million in the first five months. The situation is similar for the smaller institutes. Although the need for write-downs could increase and the risk indicators could turn out to be worse in isolated cases, the German banking sector as a whole has come through the crisis well so far. "And according to our current knowledge, it will stay that way."

The banking supervisor is also relaxed about the effects of the rulings of the Federal Court of Justice (BGH) on premium savings contracts and the increases in account fees due to changes to the general terms and conditions. "I believe that the burdens from reimbursements will not be as dramatic as initially thought." In mid-May, he still expected that the BGH ruling would be really expensive for banks and, in the worst case, that some institutions could cost half of the annual net income. Now he expects an acceptable framework. He considers the question of the price level to which the banks will have to go back in the future to be much more serious.