The payout cap on European banks could be lifted by the end of September should conditions remain stable, according to European Central Bank President Christine Lagarde.
- Lagarde said the European System Risk Board could allow the cap to lapse as the vaccination rollout has boosted the economic outlook and reduced the possibility of “severe scenarios.”
- The cap on dividends and share buybacks cover the first nine months of the year amid economic uncertainties.
- ECB Supervisory Board Chair Andrea Enria said excessive payouts will not be allowed, which should be “helpful” for the sentiment.
- Enria said the ECB expects payouts to stay prudent and commensurate with the internal capital generation capacity of lenders.
- Analysts expect regulators to favor lifting restrictions as market appetite is shifting to dividends, noting that investors are looking for clarity on future payouts.
- Analysts noted, however, that the ECB is not expected to fully unwind restrictions on payouts and will likely take a more cautious approach.
- The Supervisory Board is scheduled to decide on the matter on June 23, while the ESRB will tackle the matter in September.