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Bank of England scraps curbs on bank dividends as pandemic crisis fades

The historical building of the Bank of England, London, UK

The Bank of England scrapped its remaining pandemic curbs on dividends paid by HSBC, Barclays and other top lenders with immediate effect. This is by saying that its stress tests showed they could cope with the fallout from COVID on the economy. Bank of England Governor Andrew Bailey said that the Britain’s rapid vaccination rollout had led to an improvement in the economic outlook. This allows the central bank to relax its controls on how much lenders can pay to shareholders.

Bailey stated that the risks to the recovery still remains. Households and businesses are likely to need continuing support from the financial system. As Britain shut down much of its economy for the first time in March last year, the BoE told lenders to suspend dividends and share buy-backs until the end of 2020. The BoE initially eased its curbs last December as the pandemic’s fallout became clearer. The BoE’s Financial Policy Committee (FPC) said the extraordinary guardrails on shareholder distributions are no longer necessary. This is after its annual stress test of banks’ financial health.

Bailey told a news conference that, unlike its move on dividends, the BoE had no plan to lift its guidance on bonuses. But Deputy Governor Sam Woods said that it was important to get back to a more normal setting for bankers’ pay. The BoE urged giant cloud computing firms not to be secretive about their operations. Because it fears that it could hinder its checks on the stability of the banking sector, which is increasingly using firms such as Amazon, Microsoft and Google to improve efficiency and cut costs. The buffer is intended to rise and fall over the course of the economic cycle to limit lending at the top of a boom. The BoE said that the FPC expects banks to use all elements of their capital buffers as necessary to support the economy through the recovery.

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