National Bank calls for prudent dividend policy after 30 September
The National Bank asks Belgian financial institutions to maintain a cautious dividend policy beyond the expiry of the specific recommendations issued during the COVID-19 period.
On 23 September, the General Board of the European Systemic Risk Board (ESRB) decided to let the ESRB Recommendation on the restriction of profit distributions by financial institutions during the COVID-19 pandemic (ESRB/2020/07) lapse at the end of September 2021 (see ESRB press release of 24 September).
In line with this decision, the National Bank of Belgium decided to let the following related Circulars and Communication lapse at the end of September 2021:
- Circular NBB_2020_049 of 22 December 2020, for Belgian less significant institutions
- Circular NBB_2021_005 of 26 January 2021, for Belgian insurance companies
- Macroprudential Communication of 18 December 2020
With this decision, as of 1 October 2021, the assessment by prudential supervisors of the prudent character of the distribution policies of financial institutions will again fall under the regular supervisory process.
However, the NBB reminds financial institutions on this occasion of the need to remain prudent when deciding on dividends, share buy-backs and variable remuneration. This prudence should be based on a forward-looking assessment of potential future capital needs for absorbing unexpected losses, supporting the economic recovery and, where applicable, replenishing the capital buffers that were released by micro- and macroprudential policymakers in the beginning of the pandemic.