(Bloomberg) -- The European Central Bank’s top regulatory official said he hopes to lift its cap on bank dividends “soon,” while tempering expectations for outsized investor payouts.
“We will exit from these dividend recommendations, hopefully soon,” said Andrea Enria, who chairs the ECB’s supervisory board. “We have tabled a decision at our board on July 23 and we will communicate shortly after that.”
European banking stocks slumped last year as the ECB essentially banned shareholder payouts to ensure banks had sufficient reserves to swallow losses and keep lending in the pandemic. The watchdog later capped such returns in the first nine months of this year and has said it will lift those limits unless the economy deteriorates.
“It’s clear that there is still a lot of uncertainty and credit risk has not materialized for the banks, in the books of the banks, so prudence should still be a polar star in the coming months,” he said on Tuesday.
Enria, who spoke at an online conference, also said:
- Some banks haven’t made sufficient progress in ensuring the viability of their business models and the ECB will step up its pressure
- Bankers are concerned that the ECB’s stress test next year of the risks that lenders face from climate change could result in a “direct mapping” for the capital levels they have to maintain
- “We clarified that next year there would be only qualitative reflection of the outcomes of the stress test and possibly only an indirect impact via the scores on the pillar 2 requirement. But gradually we will get into treating climate risk as any other risk, so with a reflection in pillar 2 requirements.”
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