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by Tiziana Di Giovannandrea March 27, 2020 The Coronavirus pandemic has tightened the economy in a destructive grip. For this reason the Bank of Italy, taking up the recommendation expressed by the European Central Bank, to support families and businesses invites credit institutions under its supervision not to distribute dividends to shareholders.

In a note the Institute of Via Nazionale states: "The country is engaged in an unprecedented collective effort to contain the spread of Coronavirus, with important limitations to the entire Italian economic and production system. In the current emergency situation, the Bank of Italy, by accepting the invitation of the ECB, extends to the less significant banks subject to its direct supervision the recommendation addressed today by the European Central Bank to significant banks. The purpose of the recommendation is to allocate profits to the strengthening of own funds, and to put the financial system in the best position to absorb the losses that will materialize due to the health emergency and to continue to support the economy ".

The Bank of Italy then stresses that: "This recommendation reinforces the decision, announced by the SSM (Single Supervisory Mechanism, entrusted to the ECB, ed.) For significant banks and adopted by the Bank of Italy last Friday for less significant banks, to allow intermediaries to temporarily operate below the level of the assigned target component ".

In particular, the Bank of Italy recommends to all banks and banking groups falling under its supervision at least until 1 October 2020 "not to pay dividends, including the distribution of reserves, and not to make any irrevocable commitment for the dividend payments for the financial years 2019 and 2020 ". In addition, the institutions involved: "Refrain from repurchases of shares aimed at remunerating shareholders. Banks and banking groups that do not consider themselves to comply with this recommendation are required to contact the Bank of Italy immediately to explain their reasons.

Like dividend distribution policies, variable remuneration policies can also have a significant impact on the capital base of banks. The Bank of Italy requires intermediaries to adopt a prudent and forward-looking approach in establishing remuneration policies. In line with the ECB's provisions, the Bank of Italy will continue to monitor the economic situation and will assess the desirability of further suspension of dividends after October 1st ".

The halt to the distribution of dividends, from the first calculations, would be worth about 30 billion euros and should allow the possibility of obtaining 450 billion euros in loans for families, small businesses and large companies.