ROME, Nov 20 (Reuters) – The uncertainty fuelled by a second
COVID-19 wave calls for caution in the debate among European
supervisors on whether to extend a recommendation that euro zone
banks refrain from paying dividends, the Bank of Italy said on
Friday.
Banks across Britain and the euro zone were prevented from
distributing 2019 profits to shareholders during the first virus
wave. Supervisors urged banks to preserve capital in the face of
the emergency, in return easing regulation and flooding the
system with funds lent at negative rates.
The recommendation has been extended until the end of year
and banks expect the European Central Bank to give indications
soon on how long the ban will last.
The decision is a crucial one for cheaply-valued European
banks and their shareholders in a phase of earning compression
and cloudy outlook on credit quality.
Speaking at a press briefing to present the Bank of Italy’s
twice-yearly Financial Stability Report, Deputy Governor Luigi
Federico Signorini said supervisors were still discussing the
matter and no indication could be provided on the final outcome.
However, he called for caution.
“We are going through a strong second wave of contagion
across Europe. We hope it may be less severe than the first one,
but uncertainty is high,” Signorini said.
“This is why at the Bank of Italy we think it is necessary
to exercise extreme caution and carefully consider the
macroeconomic outlook,” he added.
(Reporting by Stefano Bernabei; writing by Andrea Mandala;
editing by Valentina Za)
