The FCMC expects the credit institutions, even in cases where they comply with all regulatory requirements, including the requirement for total capital buffer laid down in the Credit Institution Law and would meet all regulatory requirements after the dividend payment as well, will review the policy on the dividend distribution and, in the current circumstances related to the effect of coronavirus (Covid-19) pandemic on the business and economy, will refrain from paying dividends with a view to continuing lending and ensuring the absorption of potential losses in the future.
On 27 March 2020, the Supervisory Board of the European Central Bank (ECB) also decided on limiting the dividend payment, issuing its recommendation to banks on dividend distribution during the Covid-19 pandemic. The ECB asks the banks not to pay dividends until at least 1 October 2020 and not to assume irrevocable commitments to pay dividends for financial years 2019 and 2020, as well as to refrain from share buy-backs aimed at remunerating shareholders.
The credit institutions which cannot meet this recommendation because they consider the dividend payment as legally binding, should immediately explain the reasons behind such action to supervisory authorities.
The ECB’ recommendations are applicable to significant credit institutions under the direct supervision of the ECB, and it is expected the ECB’s recommendations will be also be followed by less significant institutions under the supervision of national supervisory authorities, in Latvia – under the supervision of the FCMC. The ECB expects the national supervisory authorities to take measures to apply the recommendations. The ECB will continue to assess the economic situation and will consider whether the suspension of dividend payment should be continued after 1 October 2020.
The ECB’s press release.
Head of FCMC Communications Division
Phone: + 371 67774808