Singapore's central bank lifts dividend restrictions on local banks

The MAS said it had conducted additional stress tests to assess whether to extend the dividend caps. ST PHOTO: KUA CHEE SIONG

SINGAPORE - Restrictions imposed during the pandemic last year that capped dividend payouts from local banks and finance companies have been lifted.

This means financial institutions can begin paying their full dividends in the 2021 financial year, which began on Jan 1 for the three banks.

Banks had been told to cap total dividends per share for the 2020 financial year at 60 per cent of the previous year's level and offer shareholders the option of receiving the remaining dividends as shares instead of cash.

The dividend curbs were a pre-emptive measure to ensure that banks and finance companies maintained strong lending capacity to support the economy throughout the pandemic, given the significant uncertainties at that time.

However, the global economic outlook has since improved.

"While some uncertainties remain, Singapore's economy is expected to continue on its recovery path, given strengthening global demand and progress in our vaccination programme," the Monetary Authority of Singapore (MAS) said on Wednesday (July 28).

It noted that the banks have maintained strong capital adequacy ratios and continue to meet the credit needs of individuals and businesses, despite higher levels of provisioning made during the pandemic.

The MAS said in June that it was conducting additional stress tests to assess whether to extend the dividend caps.

These tests found that bank capital ratios are projected to remain resilient even under an adverse scenario of a stalled global recovery associated with delays in vaccine deployment and a worldwide resurgence in the pandemic that leads to the Singapore economy slipping again into recession in 2021.

MAS deputy managing director Ho Hern Shin said on Wednesday that the banks have weathered the pandemic well and are in a strong position to support the economic recovery.

"As downside risks remain, local banks and finance companies should exercise continued prudence in their discretionary distributions, whilst prioritising support to customers," she added.

Mr Lee Wai Fai, UOB's group chief financial officer, welcomed the MAS move: "We believe that our strong balance sheet ensures that we are well-placed to support the economic recovery and to see our customers through to better times."

OCBC chief financial officer Darren Tan said the bank will declare an interim dividend on August 4 when it is due to announce its half-year results.
"MAS also guided for us to exercise continued prudence in our discretionary distributions, whilst prioritising our support to our customers. We ... will determine and declare our interim dividend accordingly," Mr Tan said.

Ms Chng Sok Hui, DBS's chief financial officer, said the bank will announce its second-quarter financial results on August 5 and take into account the lifting of dividend restrictions.

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