Banks in Kuwait have been instructed not to distribute cash dividends this year to preserve funds and help companies through the coronavirus pandemic.
The decision was taken "to enable the banking sector to play the financial brokerage role, ensure liquidity flow and operations in various economic sectors", according to a Kuwait Banking Association statement carried by the state-run Kuwait News Agency on Wednesday.
“The announcement is in harmony with the criterion of Basel committee for overseeing the banking sector, adopted by the CBK [Central Bank of Kuwait] as part of the measures to cope with the coronavirus repercussions,” it said.
Lenders across the globe are being asked to extend support to cash-strapped firms by passing on the benefits of stimulus measures put in place by governments and central banks. The global economy is expected to contract 5.2 per cent in 2020, the World Bank said earlier this week, sharply revising an earlier forecast in January of a 2.5 per cent expansion downwards. It now expects per capita incomes to decline 3.6 per cent in all regions of the world as a result of the pandemic, which could push more than 60 million people into extreme poverty.
In April, Moody’s Investors Service changed its outlook for the Kuwaiti banking system to negative from stable due to the economic impact of the coronavirus outbreak and reduced government revenue from the sudden drop in oil prices.
“Kuwait banks hold ample capital and liquidity and are well able to absorb unexpected losses. But extensive measures to curb the spread of the coronavirus will weigh on business activity and we expect the deteriorating operating conditions to weaken banks’ loan portfolios and lead to rising loan-loss provisions,” the ratings agency said.
Britain's top banks have also axed dividend payments after pressure from the regulator, saving their capital as a buffer against expected losses from the economic fallout from the coronavirus.
Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Standard Chartered and the British arm of Spain's Santander all halted payouts in a co-ordinated industry response to a request from the Prudential Regulatory Authority (PRA), according to Reuters.
The lenders had been due to pay out over £8 billion (Dh36.5bn) between them in dividends from profits earned in 2019.
