British banks cancel dividend payments

UK Banks CANCEL Dividends This Year❗️😒 – Stock Market For Beginners

British banks cancel dividend payments

Major UK banks agree to abolish about £ 8bn in dividend payments to tackle the economic impact of the coronavirus epidemic, providing banks with an additional cash cushion to tackle the downturn.

The Bank of England also ordered the cancellation of cash bonuses for executives, the regulator asked lending institutions to strengthen their positions on the eve of a likely recession.

Major UK banks, including Barclays, HSBC, Lloyds, Royal Bank of Scotland and Standard Chartered, confirmed on Tuesday that they will temporarily suspend share payments and buybacks in 2019 and throughout 2020..

The cancellation of dividends in 2019 will give banks an additional financial cushion totaling around £ 8bn as they are forced to increase lending to businesses and households.

The letter to the heads of the Bank of England’s executive body, which is responsible for financial stability, says that any bonuses that have not yet been paid should also be canceled..

While most UK banking executives have already received their 2019 cash bonuses, the decision is expected to be scaled back to the 2020 executive compensation level..

Last week, the observed early indicator of economic activity fell to its lowest level on record. This prompted economists at Capital Economics to predict a 15% contraction in the UK economy in the second quarter of the year..

Banks were criticized during the financial crisis 12 years ago, when they paid out dividends months before they needed the largest financial bailout from a government in history..

British banks cancel dividend payments

Since then, banks have been forced to maintain an increased capital base to prevent the need to spend more government money on them, although not all banks have fully recovered. For example, the state still owns 62% of Royal Bank of Scotland.

Barclays investors will be primarily affected by the suspension of dividends. Its shareholders were due to pay out over £ 1 billion on Friday..

Barclays Chairman Nigel Higgins said the suspension of payments was "difficult decision".

“The bank has a strong capital base, but we believe it is right and prudent that many of the companies and people we support are taking these steps now and ensuring that Barclays is well positioned to continue to do its best to help get through this crisis.", – he added.

The cancellation of dividends is also increasing pressure on other sectors that have received money for leaving workers – or even direct government support – to also consider canceling dividend payments..