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2020/03/31 / Erste Group Research

ECB recommends dividend stop until October

On 27 March 2020, the ECB issued a recommendation to banks not to pay dividends or to make irrevocable commitments to pay dividends at least until 1 October 2020.

The measure is intended to help the banks to provide households, small and medium businesses and corporations with sufficient credit during the Corona crisis.

At the same time, the reserves created by withholding dividends are intended to cushion the burdens arising from an increase in loan defaults.

In our view, it makes sense to limit dividend payments and share buybacks while easing capital requirements. Ultimately, the flexibility granted should benefit the borrowers of the banks and not thir shareholders.
Since the temporary emergency measures can also have undesirable side effects, the pros and cons of the measures must be carefully considered the longer they last.

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General information

AuthorErste Group Research
Date2020/03/31
Languageen
Product nameCredit News
Topic in focusMacro/ Fixed income
Economy in focusEurozone
Currency in focusEuro
Sector in focus-
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