ECB decides not to extend recommendation restricting profit distribution at banks and savings banks
Given the improvement in the economy and the health situation, the ECB today decided not to extend beyond September its recommendation restricting profit distributions by banks and savings banks. This means that after the recommendation expires at the end of September supervisors will return to their pre-pandemic approach to assessing capital and dividend plans. In so doing we expect banks to take a conservative approach and to act prudently, while taking account of the individual circumstances of each bank, and emphasise that banks should not underestimate future risks in the planning of profit distribution.
The economic picture in the euro area improved sharply in the second quarter of this year. The health situation, the vaccine rollout and the easing of containment measures have given rise to a broad-based recovery. In these circumstances the ECB has decided not to extend the recommendation restricting profit distribution at banks and savings banks. The supervisory assessment of the adequacy of capital planning will be made for each bank within the framework of the ordinary SREP approach.
In light of today’s decision by the ECB, Banka Slovenije should highlight that at the beginning of the year it extended and adjusted the macroprudential measure temporarily restricting profit distributions by banks and savings banks during the adverse conditions brought about by the coronavirus epidemic. The measure remains in force until the end of September. When the measure expires, we will again examine all the circumstances, including in the light of today’s decision by the ECB, the macroeconomic situation at that time, and the situation in the Slovenian banking system.