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The European Central Bank (ECB) appealed to the European banks to hold off on dividends and not to buy back shares until January 2021, Reuters reported on Tuesday.

Key points

“ECB extends recommendation not to pay dividends until January 2021 and clarifies timeline to restore buffers.”

“ECB asks banks not to pay dividends and not to buy back shares until January 2021.”

“Expects banks to exercise extreme moderation on variable remuneration to conserve capital in crisis.”

“Banks to be extremely moderate with regard to variable remuneration.”

“It clarified that it will give enough time for banks to replenish capital and liquidity buffers in order not to act pro-cyclically.”

“ECB will review whether stance remains necessary in Q4, taking into account economic environment, financial system and capital planning.”

“Continues to encourage banks to use their capital and liquidity buffers for lending purposes and loss absorption.”

“It will not require banks to start replenishing their capital buffers before the peak in capital depletion is reached.”

“Exact timeline will be decided following the 2021 EU-wide stress test.”

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