Despite positive signals, there is still considerable uncertainty about how the coronavirus pandemic will develop in the next few months in both Sweden and the rest of the world. To ensure the banks’ resilience in a situation that continues to be uncertain, the banks should suspend the payment of dividends to shareholders in 2020. This was the message from Finansinspektionen’s Director General Erik Thedéen at Fastighetsdagen today.
"The crisis is far from over. We therefore expect the banks to suspend dividend payments until at least after the end of the year," said Erik Thedéen.
Erik Thedéen clarified that Finansinspektionen (FI) considers dividends to normally be an issue to be handled by the businesses themselves, but since the banking sector carries out essential activities, the banks bear a responsibility to equip themselves to withstand the crisis. It is important for the economy of Sweden as a whole for banks to be able to both absorb credit losses and meet the borrowing needs of firms and households. Therefore, FI would like the banks to be particularly prudent during these uncertain times.
"Suspending dividend payments is a cheap insurance policy. If we experience a sharp decline, the banks will need the capital to boost the economy. If we experience a more positive development, the money will still be there, but shareholders should expect a delay in dividend payments until the situation has stabilised," said Erik Thedéen.
Once the uncertainty regarding the coronavirus crisis's impact on the economy has decreased, FI does not see any reason for profitable and well-capitalised banks not to reinstate normal dividend payments.
The European Central Bank and the European Systemic Risk Board have issued similar positions regarding other European banks.