HSBC postpones dividend payout on ECB recommendation

HSBC will not make payments with respect to the final dividend of 2020, in the light of recent recommendations by the European Central Bank.

In a statement issued today, HSBC Bank Malta overruled a company announcement issued on 18 March which outlined the bank’s position on the payment of the final dividend of 2019. Subsequent to that announcement, the European Central Bank (ECB) issued a recommendation on dividend distributions during COVID-19. That recommendation requires all Eurozone banks not to make dividend payments at this time, irrespective of the strength of their own capital positions. This is to ensure that the banking system as a whole deploys capital in support of the economy.

HSBC’s board met to discuss these requirements and concluded that the bank was obliged to delay the payment of all dividends, said the bank. This applied to the final dividend of 2019 already announced, and to potential future dividends. The bank said it had sufficient capital to support the previously announced dividend payment of 2019 and that “when it is appropriate to do so,” but not before the fourth quarter of this year, the Board will re-examine the situation and will update the market accordingly.

HSBC said it recognised the important role the bank plays to support the economy and the need for a consistent regulatory policy across the Eurozone. HSBC’s statement concluded with a commitment to taking “all necessary steps to support the country,” pointing out that it had introduced several initiatives to support local businesses and consumers.

The announcement comes soon after Bank of Valletta also postponed the payment of its dividend to 1 October 2020, in line with a recommendation from the European Central Bank on the COVID-19 crisis.

The European Central Bank has asked eurozone banks to freeze dividend payments until at least October 2020 to preserve liquidity that can be used to help households and companies through the coronavirus crisis.

The ECB also asked banks not to buy back shares, another tool to reward shareholders, at a time when policymakers everywhere are taking unprecedented steps to support the global economy.

The European Banking Authority has also requested institutions to refrain from the distribution of dividends or share buybacks for the purpose of remunerating shareholders and assess their remuneration policies in line with the risks stemming from the economic situation.