HSBC, Standard Chartered dividend limits removed by Bank of England

The Bank of England removed a series of “temporary guardrails” implemented in December that restricted the amount HSBC, Standard Chartered and other United Kingdom-based lenders could distribute to shareholders when they resumed paying dividends for the 2020 financial year.

HSBC and Standard Chartered cancelled their final 2019 payments and suspended interim payouts last year at the request of the Prudential Regulation Authority (PRA), an arm of the Bank of England, to make sure banks had enough capital on hand to help fund the economy in light of the coronavirus pandemic. The dividend suspension raised the ire of retail investors, many of whom are in Hong Kong and rely on the regular payouts.

When banks were allowed to resume payouts, the regulator said that distributions to shareholders should not exceed 20 basis points of risk-weighted assets at the end of the year or 25 per cent of cumulative profits for all of 2019 and 2020 after deducting prior shareholder payouts.

The regulator also asked banks to exercise a “high degree of caution and prudence” in determining the size of any cash bonuses to senior staff at the time. Top executives at HSBC and Standard Chartered waived their bonuses in 2020 and said they would donate part of their salaries to help fight the pandemic.

“The PRA judges that banks remain well capitalised and resilient to outcomes for the economy that are much more severe than the [central bank’s] Monetary Policy Committee’s central forecast, and that they should therefore be able to support households and businesses through the economic recovery,” the regulator said in a statement on Tuesday.