APRA demands banks halve dividends

APRA has updated its capital management guidance for banks and insurers, saying Australia’s financial system is well positioned to withstand a severe downturn and easing restrictions around paying dividends. The guidance replaces its recommendation in April this year that banks and insurers “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer”.

“Today’s announcement strikes a balance in recognising the strength of the financial system, while at the same time acknowledging the difficult path ahead,” said APRA chairman Wayne Byers. “Although the environment remains one of heightened risk, we now have a stronger sense of how Australia’s economy and financial institutions are being impacted by COVID-19.”

“On that basis, APRA believes that banks and insurers do not need to continue to defer capital distributions, provided they moderate payments to sustainable levels based on robust stress testing, and continue to prioritise supporting their customers and the economy.”

However, APRA expects dividend payout ratios for ADIs to be maintained below 50 per for this year.

More to come.