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ECB raises bar for banks' payouts if capital is low
[FRANKFURT] The European Central Bank is raising the bar on how much a bank can pay out in bonuses, dividends and coupons if its capital level falls below the regulatory minimum, it said on Tuesday.
Euro zone bank managers and investors had been left scratching their heads after EU rules failed to specify whether banks should take into account capital requirements set by national supervisors, known as Pillar 2, when they calculate their maximum distributable amount (MDA).
The MDA determines how much a bank can pay out in bonuses, dividends and coupons on certain debt instruments if its capital level is below their combined buffer requirement.
The ECB's supervisory arm, which had so far been quiet on the matter, said on Tuesday it would follow the opinion of the European Banking Association, which said last month Pillar 2 requirements should be part of the MDA calculation. "For the application of maximum distributable amounts (MDAs), the SSM approach refers to the opinion published by the EBA," the ECB's Single Supervisory Mechanism said in a document published on its website on Tuesday.
The EBA's opinion, which is in line with that of the Bank of England, was likely to lead European national supervisors to harmonise their stances, which have so far differed across the region.