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Swedish Bankers Reject Government Calls to Drop Dividends

Swedish Bankers Reject Government Calls to Drop Dividends

(Bloomberg) --

Bankers in Sweden dismissed government calls to cut dividends, arguing the industry isn’t to blame for the latest economic crisis.

Hans Lindberg, the head of the Swedish Bankers’ Association, said the financial industry in his country has ample cash, and that any decision on whether to suspend dividends should be left to supervisory boards.

“This is not a crisis globally for the banking system, the financial sector,” he said in an interview. “This is a pandemic, a disruption to demand and supply, which has ripple effects throughout the economy.”

Read More: Swedish Banks Told to Immediately End Dividends to Save Cash

The issue of dividends has united governments across Europe as they call on the financial industry to show restraint and help avert a credit crunch. In Sweden, the authorities have axed a key capital requirement to free up about $90 billion for loans, and the Riksbank is providing tens of billions of dollars in emergency liquidity.

But Lindberg says that’s not what banks need. “The banks have no problems whatsoever with liquidity,” he said.

Banks bid for just about a third of the 400 billion kronor ($40 billion) in new loans that the central bank has so far offered. Still, the Riksbank is considering extending the 500 billion-krona program, citing signs that the economic effects of the crisis may be long-lasting.

What Bloomberg Intelligence Says:

“In stark contrast to their peers in the U.S., Europe’s banks and insurers are under mounting regulatory pressure to suspend dividends during the coronavirus pandemic as regulators aim to facilitate lending to the real economy.”

--Sarah Jane Mahmud, BI Senior Analyst

So far, Sweden’s biggest banks have delayed their annual general meetings, at which decisions on dividends were due to be made. In the meantime, proposals are being reviewed at Swedbank AB, Svenska Handelsbanken AB and SEB AB, according to the latest announcements.

“Dividends are a question for boards and owners,” Lindberg said. “The banks aren’t receiving any support from the government. Banks will, like other businesses, be affected by the downturn, of course. Dividends will be distributed in the light of what has been.”

Lindberg says Swedish banks have been able to meet a sudden spike in demand for credit in the past 1 1/2 months that was “twice the size of a whole normal year.” He also says the Riksbank’s emergency program “should be seen as a last resort for banks.”

Instead, Lindberg says the government should provide more direct support through shouldering a larger part of the cost of furloughing workers, as well as related costs for employers. He also urged the government to look into asking landlords to cut rents.

“Companies can’t live on loans, they are bleeding right now,” Lindberg said.

Read more: Here’s How Payouts Are Shrinking in Europe: Dividend Tracker

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