On 27 March 2020, the European Central Bank (ECB) updated its recommendation to banks on dividend distributions.
The ECB recommends that at least until 1 October 2020 no dividends are paid out and no irrevocable commitment to pay out dividends is undertaken by credit institutions for the financial year 2019 and 2020 and that credit institutions refrain from share buy-backs aimed at remunerating shareholders.
The ECB adds that credit institutions that are unable to comply with the recommendation because they consider themselves legally required to pay-out dividends should immediately explain the underlying reasons to their joint supervisory team.
The ECB states that the capital conserved by refraining from dividend distributions and share buy-backs can be used to support households, small businesses and corporate borrowers and/or to absorb losses on existing exposures to such borrowers.