ECB urges 'prudence' from banks on dividends

29th January 2015, Comments 0 comments

The European Central Bank (ECB) recommended Thursday that banks err on the "conservative" side or even refrain from paying out dividends this year to help shore up their finances.

The Frankfurt-based ECB made the call in its role as Europe's banking watchdog which it assumed in November under a new system aimed at warding off another euro-threatening crisis.

"Banks should base their dividend policies on conservative and prudent assumptions, so that after any pay-out they can still fully cover their current capital requirements and prepare themselves to meet more demanding capital standards," ECB supervisory board chairman Daniele Nouy said in a statement.

Banks that both failed a stringent financial health check and still had a capital shortfall at the end of 2014 are urged not to pay any dividends.

That applies to 13 banks currently, an ECB spokeswoman told AFP.

The ECB said it had sent specific recommendations to each of the big European banks and had asked national central banks to do the same for the smaller institutions.

The recommendations by the ECB are however non-binding from a legal viewpoint, the spokeswoman added.

The ECB also warned banks it would review their policies on bonuses.

© 2015 AFP

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