Bank shareholders can be left without paying dividends


The regulator believes that the protection of capital by banks is necessary to maintain the economy during a crisis.

Shareholders of banks can be left without paying dividends: what the National Bank says. Photo:

The National Bank of Ukraine recommends that banks refrain from distributing profits to pay dividends no less until October 2020. The letters were sent to the press service of the Ukrainian financial institutions, the National Bank, with the same recommendation from the NBU.

It has been reported that the regulator considers maintaining capital extremely important for banks to sustain the economy amid economic problems caused by the coronovirus epidemic.

Ekaterina Rozhkova
First Deputy Chief of NBU

The National Bank expects that it will be possible to accurately assess the impact of the economic crisis on the banks’ financial performance and level of capital adequacy over the next six months. Therefore, in October, after a second assessment of the situation, the NBU will determine the advice to retain recommendations on temporary restraint from the distribution of dividends, the regulator’s website reports.

The National Bank also noted that the unfavorable macroeconomic scenario is unfolding in Ukraine, in many respects similar to the unfavorable economic scenario that the NBU has used to stress test banks in recent years. A temporary refusal to distribute dividends will strengthen banks’ financial stability during the crisis and provide additional confidence to their customers, the press service of regulatory notes.

The National Bank recalled that after the postponement of the implementation of the requirements for the formation of capital buffers, banks should follow minimum standards (Н3 at 7% and Н2 at 10%) for the adequacy of fixed and regulatory capital. The NBU clarified that current law prohibits banks from paying or distributing capital in any form if it violates standards N2 and N3.

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We previously wrote that the inevitable recession of the domestic economy and increased banking risks due to quarantine would automatically increase the cost of loans for businesses. In this regard, banks have already started revising the rates on their loan products. Therefore, TAScombank decided to continue lending to the business, however, with interest rates increasing by 1-2% for the loan for a period of 180 days, and Globus Bank increased the requirements for the initial payment to 40%. Extended from.

Read: How loans work during quarantine in Ukraine: analysis


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