Bloomberg News

Bank of Spain Curbs Lender Dividends Amid Economic Uncertainty

June 27, 2013

Spain’s central bank capped lenders’ dividends for 2013 to safeguard their solvency after the industry was bailed out by the European Union last year amid the worst economic slump in the nation’s democratic history.

Madrid-based Bank of Spain said it wrote to banking associations yesterday to recommend “cautious” dividend policies that ensure “adequate levels of capital.”

“This requirement is especially necessary in the current environment, in which uncertainty persists on the economic situation, in Spain, the euro zone as well as in other countries where Spanish banks operate,” the bank said in an e-mailed statement.

The central bank is monitoring the impact on banks’ books of rising bad loans after the euro region’s fourth-largest economy contracted for seven straight quarters. Governor Luis Maria Linde, who said last week that the banking crisis isn’t over, has given lenders until July 31 to report on the impact of a Supreme Court ruling that may affect billions of euros of mortgages.

The Bank of Spain is pressuring lenders as the International Monetary Fund has called for close supervision because it expects lenders’ loan books to keep deteriorating. The central bank yesterday said banks should moderate dividends in 2013 depending on their individual situation and capped cash dividends at 25 percent of net income.

Concerning recurring scrip dividends, it said banks total dividend per share must be “reasonably” adjusted to profit and the number of outstanding shares.

To contact the reporters on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net; Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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