Dividend waiver at banks – LBBW postpones decision

Frankfurt, Zurich, Stuttgart Numerous banks suspend their dividend payments according to instructions from the European Central Bank (ECB).

Landesbank Baden-Württemberg (LBBW) now also wants to postpone the decision on a dividend to its owners until autumn. The board decided to propose to the state of Baden-Württemberg, the Sparkassenverband and the city of Stuttgart, the largest German state bank announced on Thursday.

The board of directors had originally planned to propose a distribution of 259 million euros to the three owners at the general meeting in May after 250 million euros in the previous year.

Despite the ongoing low interest rate phase, LBBW had significantly increased its profit last year. At around 444 million euros, earnings after taxes were 7.5 percent higher than in 2018.

Many banks had previously declared that they would not distribute profits, most recently Aareal Bank.

Helaba and BayernLB have also suspended their dividends. According to financial circles, DZ Bank also wants to postpone the decision and payment of the dividend.

The second largest German cooperative bank after DZ Bank, the Deutsche Apotheker- und Ärztebank (Apobank), on the other hand, wants to maintain a dividend payment.

At the end of March, the Commerzbank announced in an ad hoc announcementthat she will not propose a dividend for 2019. “For the current fiscal year 2020, the Executive Board will not provide for a dividend payment until the uncertainties caused by Covid 19 have ended. After that, he will decide about it again, if necessary, ”it said.

The Dutch institutes had previously ABN Amro, ING, Rabobank and the Italian UniCredit, as well as numerous smaller financial houses in the euro area, have announced that they will not initially distribute any money to shareholders.

ECB had asked banks to waive dividends

In March, the ECB asked banks not to pay dividends for 2019 and 2020 due to the virus pandemic until at least October 1.

A similar request came from the Swiss authorities. They advised banks to “carefully consider” how high the dividends should be in the current environment. The ECB has no supervisory powers over Swiss banks.

“Although we are well capitalized and financed, we believe it is wise to follow the ECB’s recommendations,” said ING chief Ralph Hamers, who will become UBS’s chief executive officer later this year.

This gives the bank more flexibility to help customers and society fight the corona crisis. “These are exceptional times for all of us.” After October 1, ING will make further decisions about its dividend policy.

ABN Amro said that the consequences of the virus crisis for customers, the quality of the loan portfolio and the entire economy could not yet be estimated. The bank expects a record loss in the first quarter, also because a customer in the US had gambled on risky securities. ABN Amro will therefore follow the advice of the ECB and initially put the dividend plans on hold.

The major Spanish bank Santander had also announced that the planned interim dividend would be canceled. The funds should be used to help people and companies in need, the largest bank in the euro zone justified the move.

UniCredit also planned not to make a profit distribution and also to suspend share buybacks. The Munich HypoVereinsbank, which belongs to UniCredit, can, however, transfer a dividend of almost 3.3 billion euros to the Italian parent company, as Bundesbank board member Joachim Wuermeling told the “Handelsblatt”.

“With the recommendation, we want to prevent that in the current uncertain situation, distributions that may be urgently needed later flow out of the banking system. This is not the case with payments between parent companies and subsidiaries within banking groups. “

The Deutsche Bank does not meet the ECB’s dividend council, as it had already announced that it would not distribute profits for 2019 and 2020 due to its restructuring of the group.

More: The European banking supervisors are asking the credit institutions not to squander their equity but to use it primarily in Europe.

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DZ Bank and Helaba postpone dividend

NAccording to information from the F.A.Z. DZ Bank, the top institution of the Volks- und Raiffeisenbanken, will not vote on the dividend at the Annual General Meeting in May, contrary to plan. Decisions on this will only be made in autumn. The Landesbank Hessen-Thüringen (Helaba) is also, according to the F.A.Z. – Contrary to the announcement made on March 25th – now make no partial profit distribution to its owners, i.e. to savings banks and the federal states of Hesse and Thuringia. The boards of the Sparkassen-Fondsgesellschaft Deka had already adjourned the decision on the dividend on Thursday. Bayern LB is also postponing, as announced on Friday.

Hanno Mussler

The top institutes of the Volksbanken and Sparkassen have had to learn in the past few days that they cannot trust the words of Bundesbank board member Joachim Wuermeling. The latter had told them last weekend that they were not affected by the European Central Bank’s (ECB) supervision of the dividend block until October. After all, the banking system did not lose the dividends that these top institutions distributed, after all, Wuermeling’s argument was that their owners themselves were banks. The EU banking regulator Eba had only advised against profit distributions that flow outside the banking system.

ECB stricter than Bundesbank

However, the ECB’s chief supervisor, Andrea Enria, increased the pressure again this week and made the recommendation of March 27 an “urgent recommendation” to the major banks it oversees to hold the money together in the crisis. As a result, Commerzbank canceled its dividend, but Aareal Bank and Deutsche Pfandbriefbank, which are also represented in the M-Dax, are – still – sticking to it.

While the planned distribution of Aareal and Pfandbriefbank is lavish in terms of the low share prices, the dividends at the top institutions of the financial associations are rather symbolic. Bayern LB, which is 75 percent owned by the Free State of Bavaria and 25 percent by the Bavarian savings banks, wants to pay a total of 150 million in dividends from the net profit of 463 million euros in 2019. DZ Bank plans to distribute a net profit of EUR 330 million from EUR 1900 million in autumn, while Helaba plans to distribute EUR 90 million from EUR 480 million.

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More and more banks are foregoing dividends

ECB in front of the Frankfurt skyline

The European Central Bank asked banks last week not to distribute profits.

(Photo: Jan Huebner)

Frankfurt, Zurich Numerous banks suspend their dividend payments according to instructions from the European Central Bank (ECB).

The Dutch institutes ABN Amro, ING, Rabobank and the Italian UniCredit, as well as numerous smaller financial houses in the euro area, are not distributing any money to shareholders for the time being. The Swiss banks UBS and Credit Suisse however, are sticking to their dividend plans, as announced on Monday.

The ECB asked banks last week not to pay dividends for 2019 and 2020 until at least October 1 because of the virus pandemic.

A similar request came from the Swiss authorities. They advised banks to “carefully consider” how high the dividends should be in the current environment. The ECB has no supervisory powers over Swiss banks.

“Although we are well capitalized and financed, we think it is wise to follow the ECB’s recommendations,” said ING chief Ralph Hamers, who is to become chief executive officer of UBS later this year.

This gives the bank more flexibility to help customers and society fight the corona crisis. “These are exceptional times for all of us.” After October 1, ING will make further decisions about its dividend policy.

ABN Amro said that the consequences of the virus crisis for customers, the quality of the loan portfolio and the entire economy could not yet be estimated. The bank expects a loss in the first quarter, also because a customer in the US had gambled on risky securities. ABN Amro will therefore follow the advice of the ECB and initially put the dividend plans on hold.

The major Spanish bank Santander had also announced that the planned interim dividend would be canceled. The funds should be used to help people and companies in need, the largest bank in the euro zone justified the move.

UBS maintains dividend

UBS, on the other hand, still wants to pay out $ 0.73 per share to shareholders. The institute has a strong capital base and is strategically well positioned, said a spokeswoman for the money house, which had to be supported by the state during the global financial crisis of 2008/09. “As the largest Swiss bank, UBS is able to support the economy and at the same time pursue an appropriate dividend policy.”

Credit Suisse also said it was pursuing a sustainable dividend policy and would continue to do so. “There are no plans to change existing policies.

UniCredit already announced at the weekend that it would not make a profit distribution and would also suspend share buybacks. The Munich HypoVereinsbank, which belongs to UniCredit, can, on the other hand, transfer a dividend of almost 3.3 billion euros to the Italian parent company as planned, as Bundesbank board member Joachim Wuermeling told the “Handelsblatt”.

“With the recommendation, we want to prevent that in the currently uncertain situation, distributions that may be urgently needed later flow out of the banking system. This is not the case with payments between parent companies and subsidiaries within banking groups. “

The Deutsche Bank does not meet the ECB’s dividend council, as it had already announced that it would not distribute profits for 2019 and 2020 due to its corporate restructuring. The Aareal Bank and the Commerzbank put question marks behind their dividend plans, but haven’t made a final decision yet.

More: The ECB demands that dividends be waived. DZ Bank and top public law institutions may still distribute profits.

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Suspension of dividends for savings banks and Volksbanks

Sparkassen logo

In addition to the savings banks, the ECB is also demanding that the Volksbanks waive dividends.


(Photo: dpa)

Frankfurt Financial supervision has loosened the rules for banks significantly in the wake of the corona crisis. This should enable the institutes to support companies in this difficult time. However, the authorities want to prevent banks from using the additional scope to keep their shareholders on line with dividends.

The European banking regulator has therefore tightened its pace on this subject. On Friday evening, it asked the largest institutes in the euro zone not to pay dividends until at least October 1, 2020. The same applies to the buyback of own shares.

“With the recommendation, we want to prevent that in the current uncertain situation due to distributions, much needed capital may later flow out of the banking system,” Bundesbank board member Joachim Wuermeling told Handelsblatt. “However, this is not the case for payments between parent companies and subsidiaries within banking groups. That is why the recommendation does not extend to such transactions. ”The Munich-based HypoVereinsbank can therefore pay its Milan-based parent company UniCredit a dividend of EUR 3.29 billion as planned.

“The situation within groups is comparable, even if it is not legally a group,” said Wuermeling, who is responsible for banking supervision on the Bundesbank board.

Here too, a dividend payment remains “within the financial group of the savings banks or cooperatives” and thus in the banking system. “That’s why I don’t assume that distributions will be waived within alliances,” emphasized Wuermeling.

DZ Bank, fund provider Deka and individual Landesbanken are therefore likely to be able to pay dividends to their owners after a case-by-case assessment. DZ Bank belongs to the Volks- und Raiffeisenbanken, some of which have factored in the distribution of their central institution in their plans.

The same applies to the savings banks, to which Deka belongs 100 percent. The ownership structure of the Landesbanken is very different. The savings banks hold only 25 percent of BayernLB, but more than 80 percent of Helaba.

As in the previous year, Helaba plans to distribute 90 million euros to its owners for the 2019 financial year. “This corresponds to a payout ratio of less than 20 percent,” said CEO Herbert Hans Grüntker on Wednesday. “We believe that we are careful with our capital resources.”

DZ Bank plans to pay dividends to its owners totaling EUR 322 million. This corresponds to a payout ratio of around 17 percent.

“Basel IV” rules are postponed

In contrast to DZ Bank and Deka, German private banks like that Commerzbank, the Aareal Bank or the Deutsche Pfandbriefbank will probably have to suspend or cancel their planned dividend payments for 2019.

On the other hand, the institutes can look forward to further relief. International banking regulators announced on Friday that they will postpone the introduction of tougher capital requirements because of the corona crisis by a year. The set of rules, which is called “Basel IV” in the industry, should only be gradually introduced in 2023.

More: So far, almost everything has been about relieving companies of labor costs. Now relief is also being discussed in the cost of capital.

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Savings banks and Volksbanks can continue to receive dividends

Sparkassen logo

In addition to the savings banks, the ECB is also demanding that the Volksbanks waive dividends.


(Photo: dpa)

Frankfurt Financial supervision has loosened the rules for banks significantly in the wake of the corona crisis. This should enable the institutes to support companies in this difficult time. However, the authorities want to prevent banks from using the additional scope to keep their shareholders on line with dividends.

The European banking regulator has therefore tightened its pace on this subject. On Friday evening, it asked the largest institutes in the euro zone not to pay dividends until at least October 1, 2020. The same applies to the buyback of own shares.

“With the recommendation, we want to prevent that in the current uncertain situation due to distributions, much needed capital may later flow out of the banking system,” Bundesbank board member Joachim Wuermeling told Handelsblatt. “However, this is not the case for payments between parent companies and subsidiaries within banking groups. That is why the recommendation does not extend to such transactions. ”The Munich-based HypoVereinsbank can therefore pay its Milan-based parent company UniCredit a dividend of EUR 3.29 billion as planned.

“The situation within groups is comparable, even if it is not legally a group,” said Wuermeling, who is responsible for banking supervision on the Bundesbank board.

Here too, a dividend payment remains “within the financial group of the savings banks or cooperatives” and thus in the banking system. “That’s why I don’t assume that distributions will be waived within alliances,” emphasized Wuermeling.

DZ Bank, fund provider Deka and individual Landesbanken are therefore likely to be able to pay dividends to their owners after a case-by-case assessment. DZ Bank belongs to the Volks- und Raiffeisenbanken, some of which have factored in the distribution of their central institution in their plans.

The same applies to the savings banks, to which Deka belongs 100 percent. The ownership structure of the Landesbanken is very different. The savings banks hold only 25 percent of BayernLB, but more than 80 percent of Helaba.

As in the previous year, Helaba plans to distribute 90 million euros to its owners for the 2019 financial year. “This corresponds to a payout ratio of less than 20 percent,” said CEO Herbert Hans Grüntker on Wednesday. “We believe that we are careful with our capital resources.”

DZ Bank plans to pay dividends to its owners totaling EUR 322 million. This corresponds to a payout ratio of around 17 percent.

“Basel IV” rules are postponed

In contrast to DZ Bank and Deka, German private banks like that Commerzbank, the Aareal Bank or the Deutsche Pfandbriefbank will probably have to suspend or cancel their planned dividend payments for 2019.

On the other hand, the institutes can look forward to further relief. International banking regulators announced on Friday that they will postpone the introduction of tougher capital requirements because of the corona crisis by a year. The set of rules, which is called “Basel IV” in the industry, should only be gradually introduced in 2023.

More: So far, almost everything has been about relieving companies of labor costs. Now relief is also being discussed in the cost of capital.

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DZ Bank wants to pay despite dividend freeze

NNo German bank has responded to the request from the European banking regulator not to distribute dividends by October. Rather, according to information from the F.A.Z. As of Sunday, DZ Bank assumes that, as planned, it will pay 320 million of 1900 million euros in annual profit to its owners, around 800 Volksbanken and Raiffeisenbanken, as dividends. Because apparently the dividend stop should not apply to institutions that, like DZ and Deka, are wholly owned by other banks and savings banks. Deka will decide in the course of the coming week whether it will keep its distribution plans.

Hanno Mussler

Listed Aareal, Commerzbank and Deutsche Pfandbriefbank remained on Friday’s averages to responsibly review their dividend proposals for the upcoming general meetings in May and the payout dates immediately following. Apparently, the legal nature of the “recommendation” from the banking supervisory authority is not clear to many banks. After all, it is not a prohibition, but an expectation to be taken into account by the management, according to in-house lawyers. Spanish banks such as Santander, Caixa and Bankia, on the other hand, had already responded to initial demands from regulators last week and cut their dividends.

As the F.A.Z. reported, the European Central Bank asked European banks on Friday evening not to distribute a dividend for 2020 and – if not yet done – for 2019 to October. The Basel Committee at the Central Bank of Central Banks (BIS) also postponed the stricter capital requirements for banks (“Basel IV”) by one year to 2023. In return for this relief, the BIS on Sunday asked banks worldwide to stop share buybacks and dividends . The banks should therefore fully retain their profits and create additional reserves in order to continue lending in the Corona crisis and to be more resistant to loan defaults.

The Federal Association of Private Banks, which Commerzbank and Aareal belong to, considers this measure to be justifiable in the current crisis situation. However, CEO Christian Ossig emphasizes “that the prerequisite for banking supervision must be an exception”. Only the extraordinary plight of many companies justifies such an intervention in the autonomy of the banks. “In the interest of financial stability, the supervisory authority must make it clear that further interventions in the distribution policy of the institutes will not take place,” said Ossig. Otherwise it would be difficult for banks to find investors in the long term. This would affect the stability and performance of the financial sector. In this statement by the banking association, there is a noticeable concern that the advised dividend block on the capital market could be interpreted as a weakness in the banking sector.

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ECB recommendation: dividend block for banks

Dhe supervisors of the European Central Bank (ECB) are calling for a ban on distribution for banks in the Corona crisis with their unforeseeable economic damage. As the ECB regulator announced on Friday evening, the institutes should refrain from distributing their profits or buy back their own shares by October.

Markus Frühauf

Hanno Mussler

ECB supervisors expect banks that have proposed a dividend for 2019 to refrain from doing so. The banking regulator is calling on banks to deal responsibly with the additional financial flexibility given the deteriorating outlook. The ECB had adopted various eased capital requirements so that banks could continue to provide credit to businesses and households, and to absorb potential losses from credit defaults and financial market turmoil. According to the ECB, the relief will free up equity of 120 billion euros, which they believe should not be used to increase dividends and bonuses.

The head of the ECB’s banking supervisory authority, Andrea Enria, expects the dividend block to generate additional equity of 30 billion euros. As a result, the banks’ lending capacity, which the ECB had put at EUR 1.8 trillion only on the basis of capital relief, could expand.

MTU Aero Engines as a role model?

In addition, the Basel Committee on Banking Supervision, which is responsible for international capital requirements, announced that the introduction of stricter requirements (Basel IV) will be postponed to 2023 by one year. The European Banking Association EBF urged its members to refrain from distributing profits for 2020. This week, Felix Hufeld, President of the German Financial Supervisory Authority Bafin, recommended that banks carefully consider dividends, profits and bonuses.

Many banks have already announced their dividends for 2019, but the general meetings will decide on the distribution. With the impending recession and the ECB recommendation, a cancellation of the dividend for 2019 can be justified. This has been demonstrated by companies like MTU Aero Engines.

The German institutions regulated by the ECB, such as Commerzbank and Aareal Bank, still explicitly adhered to their dividend proposals for the Annual General Meetings in May. Deutsche Bank will not pay a dividend due to its high loss for 2019. Commerzbank and Aareal Bank want to cut their dividends in the face of a drop in profits: Commerzbank significantly from 20 cents to 15 cents and Aareal Bank slightly from 2.10 to – after a price drop of 50 percent now very generous – 2.00 euros.

“We look closely at the topic”

These dividend proposals are set out in the 2019 annual reports that both banks have published in the past few days. Since then, however, the discussion about dividends has gained momentum. With a view to the recommendations of the Bafin, the EBF and the recommendations of the ECB, a spokeswoman for Commerzbank said: “We take a close look at the issue and then make responsible decisions.” Aareal Bank, with a core capital ratio of 19.6 percent, better against loan defaults Armed as Commerzbank with 13.4 percent, said similarly.

The banks should follow the order of the ECB. This also includes the central institutes of the savings banks and the Volksbanks. These generally distribute very little of their profits, DZ Bank less than 20 percent to its owners, the Volks- und Raiffeisenbanken. While the Landesbanken dividend not only flows to savings banks, but also to the federal states, DZ Bank and the Volksbanken remain fully in the banking system and are available as a liability for losses.

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ECB calls on banks to suspend dividend payments

European Central Bank in Frankfurt

The discussion about dividend cuts has recently gained momentum.


(Photo: dpa)

Frankfurt In view of the virus pandemic, the ECB’s banking supervisory authorities are asking euro area banks to forego profit distributions. Banks should not pay dividends for 2019 and 2020 at least until October 1 of this year, the European Central Bank (ECB) said in Frankfurt on Friday. You should also not buy back shares. Rather, the institutes should use the money to support households and companies with loans in times of the virus crisis.

The ECB and other European supervisors have made various adjustments to the money houses in recent weeks. They allow banks to attack the buffers built up for economic crises so that the credit gates remain open. It would be difficult to understand if the institutes would instead use the leeway to distribute profits – especially since loan defaults could sooner or later hit the banks.

“Now is not the time for banks to flatter their shareholders or to maintain prices,” said Green MEP Sven Giegold and called on the German financial regulator Bafin to act. “The order from the ECB should give BaFin an opportunity to also issue a hard dividend freeze.”

Since autumn 2014, the ECB has been responsible for the control of large financial institutions in the euro area, including those Deutsche Bank and the Commerzbank. For the smaller banks, the ECB and national supervisors share this task.

The German Association of Private Banks BdB spoke of an “acceptable” measure by the ECB. “Banks have to support their customers in this extraordinary crisis,” said BdB general manager Christian Ossig. “This also means that the institutes handle their capital reserves responsibly.”

BdB: The default should be an exception

However, Ossig also emphasized that the prerequisite for banking supervision must be an exception that is only justified by the exceptional crisis. “In the interest of financial stability, the supervisory authority must make it clear that further interventions in the distribution policy of the institutions will not take place.” Otherwise it would be difficult for banks to find investors in the long term.

The Deutsche Pfandbriefbank, which announced at the beginning of March that it would distribute three quarters of its profits to shareholders, now wants to react quickly. “The Executive Board and the Supervisory Board will carefully review the ECB’s recommendation and take a decision at short notice,” a spokesman told Reuters.

Commerzbank, which actually wanted to pay a dividend of 15 cents per share for 2019, is also reviewing the profit distribution. “We take a close look at this and then make responsible decisions,” said a Commerzbank spokeswoman.

Also the Aareal Bank had already put a question mark behind their 2019 dividend. Deutsche Bank had already announced in July that it would not pay a dividend for 2019 and 2020 because of the costs of the corporate restructuring.

More: European banking association calls for dividend waiver for 2020

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Investor Teleios reduces stake in Aareal Bank

Aareal Bank

The activist hedge fund Teleios has reduced its stake in the real estate financer.


(Photo: dpa)

Frankfurt The activist investor Teleios is involved in the Aareal Bank lowered. The hedge fund has reduced its stake in the Wiesbaden real estate financier to 2.69 percent in the past few days from a good five percent previously, as can be seen from voting rights notices published on Friday.

For some time now, the investor has been asking Aareal Bank to sell or spin off its IT subsidiary Aareon.

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Greens demand ban on dividends for banks

Brussels The season of the general meetings begins with the spring at the banks – and with it the hour of dividends and bonuses. Several German money houses have already signaled that there should be distributions to shareholders and employees.

In times of crisis, the institutes are on politically sensitive territory. The corona pandemic will also have negative consequences for banks. The longer the crisis lasts, the greater the risk of corporate and private bankruptcies – with corresponding consequences for the balance sheets of financial institutions: you would have to write off more bad loans.

European banking supervisors are well aware that the money industry could face significant problems. On March 12, the European banking regulator Eba asked the institutes to pursue a “prudent distribution policy”. This also applies “for variable remuneration”.

The same day, the ECB’s banking regulator warned the money houses not to “increase their dividends and variable remuneration”. On March 24, the German supervisory authority Bafin recommended that the institutes postpone share buybacks and handle “dividends and bonuses responsibly”.

Politicians are now under increasing pressure not to leave it at vague recommendations of this kind. The Greens in the European Parliament are demanding that regulators ban dividends and bonuses this year.

“If the banks do not act responsibly in this severe crisis, the supervisory authorities must make full use of their powers and strictly restrict dividend payments, share buybacks and bonuses,” said MEP Sven Giegold. This had to be done in good time before the general meetings, because the recommendations for the votes had already been given.

In Germany, according to the current status Commerzbank, the Aareal Bank and the Deutsche Pfandbriefbank will pay dividends for the past financial year. The Deutsche Bank however, had already decided against a dividend before Corona because of the ongoing corporate restructuring.

Aareal Bank has meanwhile announced that it will reconsider the planned dividend of two euros per share. However, the recommendation has not yet been paid for. One will follow the current developments in connection with the corona crisis “attentively” and “evaluate responsibly”, it said in a statement. Commerzbank does not currently want to move away from its plan to distribute 15 cents per share.

The Federal Association of German Banks was open to cuts. “Given the high dynamics of the corona crisis, a suspension of dividend payments for 2019 should not be ruled out,” it said in a statement. In this way, the banks would make a contribution to maintaining their performance for customers.

As a result of the corona crisis, southern European banks are likely to face even greater difficulties than German banks. They had struggled to get rid of bad loans in recent years.

The proportion of unused loans in the balance sheets now threatens to rise sharply again. This initially leads to a higher risk provision, in the end, large-scale depreciation could also follow. In the end, this also affects the capital of the institutes. Experts therefore do not rule out that individual banks have to apply for help from the national or European bank rescue fund as a result of the corona crisis.

Outside the EU, too, the question is being asked whether banks can still pay dividends and bonuses in this situation. The Norwegian banking regulator has asked the government in Oslo to ban all distributions. A recommendation by the Norwegian regulator to waive dividends had not previously been effective at all institutions.

More: The rating agency Moody’s warns of corona risks for Europe’s banks.

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