Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }
Coronavirus information
Coronavirus information
The Zero Canada Project provides resources to help you make the most of staying home.
Visit the hub

The Unicredit headquarters stands in Milan, Italy, on March 2, 2020.

Yara Nardi/Reuters

Banks across the euro zone are tearing up plans to return cash to shareholders at the behest of regulators, instead shoring up reserves as the coronavirus outbreak threatens to tip the world into a deep recession.

As measures to fight the pandemic lead to a paralysis of economic activity, banks are on the front line in a battle to keep cash-starved businesses alive, although lenders in other countries such as Switzerland and the United States, in stark contrast, are pushing ahead with dividend payments regardless.

The European Central Bank told lenders last week to skip dividends and share buybacks until at least October, estimating they could save 30 billion euros through such steps, and instead direct profits towards supporting the economy.

Story continues below advertisement

The ECB’s demand was something of a quid pro quo after it helped banks cope by letting them eat into their capital and cash buffers, as well as turning on the cheap credit taps.

In Italy, the current epicenter of the outbreak in Europe, UniCredit on Sunday put its planned dividend for 2019 and share buyback on hold, becoming the first Italian bank to respond to the ECB’s demands.

Dutch bank ABN Amro, which has been hit by a loss of roughly $200 million during the recent market turmoil, followed suit and said it too would scrap dividend payouts for now, while online banking specialist ING, agricultural lender Rabobank and Belgium’s KBC did the same.

In Ireland, which was forced to take an international bailout during the last financial crash, Bank of Ireland and Allied Irish Banks ditched planned dividend payouts for last year.

The moves will come as a relief to regulators and help allay fears that multi-billion-euro efforts by central banks and governments to stem the economic impact of the coronavirus outbreak on businesses, including banks, will end up in investors’ pockets.

Investors were less happy and banking stocks fell sharply on Monday morning with ING, ABN Amro, AIB and Bank of Ireland all down more than 6 per cent.

GLOBAL FREEZE

Agustin Carstens, general manager of the Bank of International Settlements, an umbrella organization for central banks, at the weekend said “a global freeze on bank dividends and share buybacks” was needed in the face of the coronavirus outbreak.

Story continues below advertisement

But some lenders are determined to push on with payouts to shareholders. Banks in Switzerland have ignored guidance from local regulators, lenders in the United Kingdom have remained tight lipped so far, while in the United States, the eight biggest banks have halted stock repurchases but none have cut dividends despite mounting political pressure.

The largest Swiss bank and the world’s largest wealth manager UBS said it would press ahead with its 2019 dividend despite guidance from markets supervisor FINMA and the Swiss government to limit payouts.

The bank, rescued a decade ago by the Swiss federal government with a 6 billion Swiss franc ($6.28 billion) capital injection during the financial crisis, said it was able to support the economy as well as pay shareholders a dividend.

Cross-town rival Credit Suisse also said it did not plan any changes to its proposed dividend.

Meanwhile, the Bank of England has warned lenders not to use stimulus money for the benefit of shareholders but has not yet issued any guidance on payouts.

Barclays is due to pay around a 1 billion pound dividend on Friday, while HSBC is due to pay its shareholders on April 14 and RBS, which is still more than 60 per cent owned by the UK taxpayer, is scheduled to pay on May 4.

Story continues below advertisement

The chief executive officers of eight UK banks will take part in a teleconference with Christopher Woolard, chief executive of the Financial Conduct Authority (FCA), on Monday to discuss ways to ease the burden on customers and could also discuss the payment of dividends and staff bonuses.

“It is hard to believe that the UK banks will not be requested to suspend dividends and buybacks,” John Cronin, Goodbody analyst, said in a note.

The Bank of England’s Prudential Regulation Authority declined to say whether it would ask banks to scrap dividends.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies