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Bank of England drops dividend rules
London, 13 July 2021 The Bank of England has lifted restrictions on dividend payouts to shareholders at UK banks, after limits were imposed in March 2020 to encourage banks to preserve capital for lending to support the pandemic economy.
London, 13 July 2021
The Bank of England has lifted restrictions on dividend payouts to shareholders at UK banks, after limits were imposed in March 2020 to encourage banks to preserve capital for lending to support the pandemic economy. The Financial Policy Committee’s biannual report states that “extraordinary guardrails on shareholder distributions are no longer necessary” and announced a return to the “standard approach to capital-setting and shareholder distributions”.
Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority (PRA), told journalists at a press conference for the report this morning that “we’re taking [the guardrails] off, it’s back with bank boards, and we’ll expect them to take sensible decisions”.
Simon Youel, head of policy and advocacy at Positive Money, said:
“As ordinary people and businesses across the country have suffered the worst economic effects of Covid-19, banks have continued to rake in profits from government-backed loan schemes.
“British banks have proved time and time again that they can’t be trusted to make sensible decisions to support the public interest, and will instead prioritise short-term returns to shareholders over communities and the real economy.
“With unemployment expected to rise and a high level of economic uncertainty, it is concerning that the Bank of England has decided to pander to bankers and shareholders instead of preserving capital for lending to support the recovery.”
Notes
Financial Stability Report, July 2021: https://www.bankofengland.co.uk/financial-stability-report/2021/july-2021
Financial Stability Report Press Conference, 13 July 2021: https://www.youtube.com/watch?v=PAqvXXelFJY&ab_channel=BankofEngland
PRA statement on capital distribution, 10/12/20: https://www.bankofengland.co.uk/prudential-regulation/publication/2020/pra-statement-on-capital-distribution-by-large-uk-banks
UK banks agree to scrap £8bn dividends amid recession fears, March 2020: https://www.theguardian.com/business/2020/mar/31/uk-banks-agree-to-scrap-dividends-and-bonuses-due-to-recession-fears
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