EBA urges change in law to tighten bank payouts

Vienna

EUROPE'S banking law should be amended to prevent banks from depleting capital to pay shareholders, employees and junior creditors, the European Banking Authority (EBA) told lawmakers.

Restrictions on dividends, bonuses and hybrid bond coupons kick in as soon as banks start to eat into the common equity Tier 1 capital - common stock and retained earnings - needed for the various cushions that regulators can impose. When that happens, lenders are obliged to calculate the Maximum Distributable Amount, or MDA, which caps how much they can pay out.