ECB’s Panetta Open to Case-by-Case Resumption of Bank Dividends

(Bloomberg) -- European Central Bank Executive Board member Fabio Panetta said he’s open to allowing some banks to resume paying dividends as the economy improves.

Panetta said that while he would prefer that lenders be “prudent” and hold off from payouts, he understands that approach comes with costs. Banks have been frustrated by lagging share prices that could make it harder for them to attract investors.

“If they don’t distribute dividends this year, they can distribute more next year and in the meantime they will be in a better position to face a situation of serious crisis,” Panetta said in an interview with Portuguese newspaper Expresso.

“If I had to choose between the two approaches, I would opt to be more prudent, but that could imply a cost for banks,” he said. “I consider that a reasonable solution, as economic conditions improve, would be a case-by-case approach by banking supervision authorities.”

Supervisors in Frankfurt and London are set to decide in coming weeks whether European banks are strong enough to withstand further Covid shocks -- and hold a conservative line on bonuses -- without more taxpayer assistance.

The ECB effectively froze payouts in March in a trade-off for unprecedented regulatory relief and government loan guarantees. It has said the de facto ban kept about 30 billion euros ($36 billion) in the banking system that otherwise would have gone to investors.

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