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Bank of England says banks' dividend curb won't have long-term impact

Credit: REUTERS/Peter Nicholls

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LONDON, Oct 28 (Reuters) - The Bank of England's request in March for banks to restrain dividend payments will not change the amount of payouts over the longer term, its executive director for financial stability said on Wednesday.

Investors in banks like HSBC HSBA.L were angered by the BoE's request for banks to suspend dividends.

But Alex Brazier said it stopped about 8 billion pounds ($10.4 billion) leaving the sector at a time when the economy was going into lockdown to fight the pandemic, leading to a 20 billion pound surge in provisioning for bad loans.

"This is a dividend delayed rather than a dividend destroyed forever. It does not change the amount of distributions banks will make over the long run," Brazier told an online event held by the CSFI think tank.

"It does require a degree of patience from investors," he added.

The BoE regards payouts as an "important and necessary" part of the functioning of the banking system, and will undertake "very careful analysis" this quarter of banks' distribution plans, Brazier said.

Britain's banks have been urged to tap their capital buffers to keep lending to the economy, but are leery of doing so.

Brazier said lenders should not be worried about facing a "steep path" to rebuilding buffers once the COVID-19 crisis has passed as this would not be consistent with still helping the economy recover.

"We need to take into account bank profitability and their ability to generate capital organically," he said.

($1 = 0.7673 pounds)

(Reporting by Huw Jones; Editing by Alison Williams and Emelia Sithole-Matarise)

((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters Messaging: huw.jones.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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