FILE PHOTO: The skyline with its financial district is photographed in Frankfurt, Germany, March 24, 2020, as the spread of the coronavirus disease (COVID-19) continues. REUTERS/Kai Pfaffenbach

LONDON (Reuters) – Banks should not pay dividends for 2019 to preserve capital and keep lending to businesses and households hit by the coronavirus pandemic, the European Banking Federation (EBF) said.

The EBF said the European banking sector remained “fully committed” to helping businesses and households cope with the fallout from the health crisis and it would prioritize solvency in order to be able to fund the economy.

“It is the strong view of the European Banking Federation that any decisions by a listed bank to withhold its 2019 dividends at this stage needs to take into account the perception of investors about the solvency of the European banking sector and the expectations of shareholders,” the EBF said in a letter to the European Central Bank’s top banking regulator Andrea Enria.

Where 2019 dividend distributions and share buybacks have not yet been voted by shareholders, some banks could decide to put part or all the amount into reserves until the impact of coronavirus is clearer, the letter said.

“For 2020 the EBF believes that listed banks should not accrue dividends or undertake share buybacks so as to maintain maximum capital preservation and bank Boards will be deciding on dividend policy and any distribution amounts at year-end,” the EBF said.

Reporting by Huw Jones; Editing by Mark Potter

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