CNB comments on banks’ dividend payout plans
The Czech National Bank has in recent weeks completed an assessment of the capital situation of individual banks and commented on their plans for paying dividends from their profits for 2019 and 2020. In the period ahead, the CNB will no longer restrict the amount of bank dividends across the board. However, it recommends that banks consider further payouts only after announcing their financial results for 2021.
The retention of dividend payouts from 2019 and 2020 profits was one of the anti-crisis measures aimed at mitigating the impact of the large-scale shutdowns of the economy during the COVID-19 pandemic on banks’ results and at preserving their capitalisation to maintain the stability of the domestic banking sector at a time of uncertainty.
In March 2021, the CNB informed banks about the formula for the calculation of dividends for the previous two years. Under this framework, the maximum dividend was determined using four indicators. The CNB announced that it would assess and comment on banks’ specific proposals during the third quarter of 2021.
In recent weeks, the CNB has completed its assessment of the capital situation and risk profiles of individual banks based on all available information, including their profits for the first half of this year. On the basis of the assessment, it has sent banks a statement on their plans (reflecting the CNB framework) for distributing profits for 2019 and 2020. The total amount of dividends may run to approximately 15% of the banking sector’s total profit for these two years.
The CNB has also informed banks that the amount of dividends in the period ahead will no longer be restricted across the board using the aforementioned indicators and that profit distribution proposals will be assessed in the standard supervisory process.
Information on banks’ current risk profiles and capital situation, including the results of the stress tests conducted by the CNB, which assess institutions’ resilience to potential adverse economic scenarios, will remain an important input in this process. Banks’ capital projections will also be assessed in terms of fulfilment of the minimum requirements for own funds and eligible liabilities (MREL, part of a package adopted to prevent future financial crises from affecting public budgets).
The CNB expects banks to maintain a conservative approach to profit distribution in order to preserve a safe level of capitalisation. At the same time, it has recommended that banks consider further payouts only when their final financial results for 2021 become available and when the impacts of the pandemic in the autumn and winter months are known.
Director of the Communications Division and CNB Spokesperson