Coronavirus: UK banks scrap shareholder payments

The Bank of England called on lenders to hold on to cash during the pandemic

People queue at Barclays Bank in St Albans, as the spread of the coronavirus disease continues. Reuters

Some of the biggest banks in the UK have scrapped billions of pounds in shareholder dividends and share buy-backs after the Bank of England said holding on to cash would help lessen the financial fallout from the coronavirus pandemic.

The BoE requested the move in a statement issued by its Prudential Regulation Authority division and said that cash bonuses should not be paid to senior staff.

Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander and Standard Chartered have all stopped payouts.

The lenders had been due to pay out over £8 billion (Dh36.34bn) between them in 2019 dividends.

Barclays shareholders were expected to be paid £1.03bn on Friday, and HSBC was expected to pay $4.2bn.

"The PRA welcomes the decisions by the boards of the large UK banks to suspend dividends and buy-backs on ordinary shares until the end of 2020, and to cancel payments of any outstanding 2019 dividends in response to a request from us," the regulator said.

"The PRA also expects banks not to pay any cash bonuses to senior staff, including all material risk takers, and is confident that bank boards are already considering and will take any appropriate further actions with regard to the accrual, payment and vesting of variable remuneration over coming months."

The lenders have yet to announce changes to their executive pay policies.

The regulator said that the banks had enough money in reserve to cope with a global recession and a shock in financial markets.

"Although the decisions taken today will result in shareholders not receiving dividends, they are a sensible precautionary step given the unique role that banks need to play in supporting the wider economy through a period of economic disruption, alongside the extraordinary measures being taken by the authorities," it said.

Commenting on the scrapping of payouts, Barclays chairman Nigel Higgins said: “These are difficult decisions, not least in terms of the immediate impact they will have on shareholders.

"The bank has a strong capital base, but we think it is right and prudent, for the many businesses and people that we support, to take these steps now, and ensure that Barclays is well placed to continue doing what we can to help through this crisis."

Bank shares fell on Wednesday on London's benchmark FTSE 100 index, which sank 3.7 per cent overall in early afternoon trading.

​Barclays shares were trading 7.6 per cent lower at £86.98 and HSBC shares were down 9.2 per cent at £412.70 by 2.10pm UK time.