After the review of the strategy that set the symmetrical inflation target of the 2% in the medium term, confirmed by the Governing Council yesterday: “The main ECB interest rates will remain at current or lower levels”, today comes the announcement of a change of pace: from 1 October the European Central Bank will not impose limits overtime for the disbursement of dividends of European banks and share buyback plans.
The supervisor will evaluate the equity positions of each individual institution on a case-by-case basis and the profit distribution plans as part of the oversight process. According to the Frankfurt press release “it is appropriate to restore the previous prudential practice of discussing with each bank the capital trajectories and the plans for the distribution of dividends or for the repurchase of treasury shares in the context of the normal supervisory cycle”.
In any case, an invitation has come from the European Central Bank to “stay prudent in deciding dividends and repurchase of own shares, carefully evaluating the sustainability of their business model. They should also not underestimate the risk that further losses may later impact their capital trajectory upon expiry of the support measures. “” The latest macroeconomic projections confirm economic recovery and indicate less uncertainty, which is improving the reliability of the capital trajectories of banks “, highlights the Eurotower press release.