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Bank dividends not appropriate until the situation has stabilised

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As the crisis unrolled this past spring in full force, it required fast and extraordinary measures. For example, FI lowered the countercyclical buffer requirement for the banks and encouraged them at the same time to postpone their dividend payments until the situation had become clearer. During the autumn, FI repeated its message to the banks to not make any dividend payments in 2020.

The economic situation has improved since the spring, even if the risk of set-backs is still far from over. The recent jump in infections and the new restrictions could have a negative impact on demand and investments, which would slow the recovery. This means that there continues to be considerable uncertainty about the future.

The banks are still showing good profitability and strong capitalisation. The credit quality of their lending portfolios is currently judged to be satisfactory. The uncertainty about how the banks might be affected by the coronavirus crisis has been alleviated somewhat compared to before, but it still has not subsided completely.

“If the recovery continues into 2021, uncertainty does not increase, and the banks continue to demonstrate sound credit quality, it will be reasonable for profitable banks to pay some dividends. But I would really like to emphasise that this assumes that the situation and the forecasts have stabilised, the banks’ resilience to unfavourable economic outcomes is maintained, and the credit supply is functioning. So far, the banks have been part of the solution to the crisis, and it is important that this continues,” says FI Director General Erik Thedéen.

FI’s view on dividends over the next year will be determined by what happens moving forward. FI will analyse the situation on an ongoing basis and actively participate in the international supervision discussions regarding appropriate recommendations.

Erik Thedéen will speak more about this in his speech at the conference Di Bank this afternoon. The speech will be published on Finansinspektionen’s website.

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Regulator Information

Abbreviation: FI
Jurisdiction: Sweden

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