The Finnish bank ignores the ECB recommendation on dividend payments

European Central Bank

The largest banks in the Eurozone are directly monitored by the European Central Bank, while the responsibility for smaller banks rests with the national regulatory authorities.


(Photo: dpa)

Dusseldorf European banks must keep their capital together in the coronavirus crisis so they can support companies with loans. At least that’s what the European Central Bank (ECB) recommends. But a small Finnish bank is blatantly ignoring dividend guidelines. In your opinion, in the long run it would be risky to ignore your shareholders.

Alandsbanken criticizes that the regulatory recommendation does not make the difference “between the strongest and weakest bank in Europe”. She herself posted profits in 2019 that were “the highest in the bank’s 100-year history.” So the institute announced on Friday that it had decided not to follow the recommendations of the Finnish Financial Supervisory Authority and, more broadly, the European Central Bank.

The Board believes that “the bank’s long-term risk may be greater if we choose – based on our current income and risk levels – to follow regulatory recommendations rather than starting with other key stakeholder groups in the bank to take. The account,” the letter said.

Alandsbanken proposes a gross dividend of € 1 per share for 2019. This equates to 59 per cent of earnings per share and almost four times the ECB’s dividend policy.

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The head of the Finnish banking regulator expressed regret over the decision in an interview with Bloomberg Financial News. “We expect banks to follow the recommendation, but we can’t make it legally binding,” said Jerry Helenius, who heads the banking services at Helsinki Financial Regulatory. “It is a shame that a Finnish bank deviates from the common European line in this regard.”

Last month, the European Central Bank lifted its de facto ban on dividends, but urged banks to limit dividends for 2019 and 2020 to less than 15 percent of dividends or 0.2 percent of Tier 1 capital, depending on the situation. Where the value is lower. . Thus the European Central Bank has been tougher than other supervisors such as the Bank of England.

The largest banks in the Eurozone are directly monitored by the European Central Bank, while the responsibility for smaller banks rests with the national regulatory authorities. Some smaller banks in the union of states have been allowed to pay dividends, and German financial regulator Baffin said he would allow the disbursement if the banks had sufficient financial strength.

More: It is a good sign to criticize the European Central Bank’s decision on dividend policy.

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