ECB wants to extend dividend ban to banks by 6 months

The European Central Bank (ECB) insists on extending the dividend ban on banks for a further six months. Banks hoped to be able to pay dividends back to their shareholders early next year. In the past year, many European banks saw the price of their shares cut off due to the ban on dividend payments.

The ECBs supervisory branch points to the continuing uncertainty caused by the coronacrisis and a need to have enough cash to lend as reasons for a possible extension of the ban. The question is, according to the Irishman Ed Sibley who is sitting on it, how should the ECB enforce that? The central bank cannot enforce such a ban.

The supervisory comments come while the major European banks are still struggling with the dividend restriction. It is also likely that the United Kingdom will allow the distribution of dividends again. Banks in the United States were only asked last year to set a limit on dividend payments, preventing them from falling stock prices.

At

the end of March, the ECB asked banks not to pay dividends during the coronacrisis. That money could be better kept by the financial institutions in order to have an extra buffer to deal with, for example, loans to businesses and consumers that could not be repaid. The purchase of own shares was also out of the way.

In July, the central bank repeated the call asking for the money to be used differently until the end of the year. The ECB had previously indicated that it would take a new decision again in December.