Future reserve and dividend policy

Question discussed at the 2009 general meeting

One of the key points of the new rules on the distribution of the financial income from the National Bank’s activities (law of 3 April 2009) is that a clear and appropriate frame of reference will form the basis for the dividend policy, namely half of the proceeds, net of tax, from the assets forming the counterpart to all of the previously reserved profits.

On this basis, the Council of Regency will be able to adopt any reserve and dividend policy safeguarding the continuity of the National Bank as a central bank listed on the stock exchange, without incurring the reproach that, as a result of the Bank’s listing on the stock exchange, the proceeds from its monopolistic activities as the country’s central bank will be distributed unfairly or disproportionately with private shareholders.

The legislator has tasked the Council of Regency with ensuring that the financial interests of the National Bank, of its shareholders and of the sovereign State are taken into account in a balanced manner (Explanatory Memorandum, page 7, second paragraph, in fine) when adopting the reserve and dividend policy.

The National Bank will adopt this reserve and dividend policy, adjusted in line with the new financial provisions of the Organic Law, once the law has been published in the Moniteur belge/Belgisch Staatsblad (M.B. 28 April 2009). The future reserve and dividend policy will be publicly announced as soon as it has been drawn up. The National Bank will then arrange an information session in order to offer shareholders the chance to ask any questions regarding the new policy.

The policy announced will detail, in particular, the extent to which the second dividend will be protected against the volatility of the Bank’s result, if – and where necessary under which conditions – the available reserves can be used for purposes other than to offset losses or to distribute a second dividend, and how the net proceeds of the portfolio of assets held as a counterpart to the reserves will be calculated.

When the level of profits is sufficiently high , the law of 3 April 2009 provides for a minimum second dividend for an amount equal to half of the proceeds (net of taxes) from the assets forming the counterpart to the reserve fund and the available reserves.
In this context, the Council of Regency has already decided, by anticipating the new policy which it has yet to finalise, that the amount of the provision for contingencies and of the provision for future exchange losses (a total of EUR 954 million) will be transferred in full to the available reserves. In future, these reserves will be allocated for the same purposes for which the general provisions had been established (to offset losses and to protect the dividend against the volatility of the Bank’s result).
The transfer of the whole of the two general provisions to the available reserves will therefore have a major positive impact on the amount of the minimum dividend.