Frankfurt (AFP)

The European Central Bank on Friday asked banks in the eurozone not to pay dividends or buy back own shares while the Covid-19 pandemic lasts, said a statement.

This recommendation from the supervisor of the major banks in the euro area concerns the dividends due for the years 2019 and 2020, and must apply "at least until October 1, 2020", specified the ECB.

The ECB supervisor recalls that he took temporary relief measures in March concerning the capital requirements or the approach to risk loans, in order to ensure that the banks continue to support the economy .

The Frankfurt Institute says now expect shareholders of banks that "they join this collective effort," said the statement.

Banks must also continue to "finance households, small businesses and corporations".

Because the capital which will have been kept by refraining from distributing dividends and buying back shares can be used "to support households, small businesses and borrowing companies" and also "absorb losses on existing exposures on these borrowers ".

The new recommendation does not retroactively cancel the dividends already paid by certain banks for the 2019 financial year, specifies the ECB.

However, banks that have put the vote on a dividend distribution proposal on the agenda of their next shareholders' meeting "should modify these proposals in accordance with the updated recommendation," according to the ECB.

The European Banking Federation has for its part recommended to its members to suspend the dividends for the financial year 2020, but to decide on 2019 according to "shareholders' expectations", according to a document consulted by AFP.

The ECB, master of monetary policy in the euro area, has adopted in recent days an unprecedented support plan providing for repurchases of public and private securities on the market for 750 billion euros by the end of 2020, in order to guarantee good financial conditions and prevent the economy from running out of cash.

© 2020 AFP