PRA updates on shareholder distributions by large UK banks

On 10 December 2020, the PRA published a statement on “Capital distributions by large UK banks” in which it set out guardrails for distributions to ordinary shareholders in relation to full-year 2020 results and stated that for 2021 dividends the PRA was content for appropriately prudent dividends to be accrued but not paid out.

The PRA has now reviewed its approach to shareholder distributions. Taking into account the interim results of the 2021 solvency stress test (SST), the PRA says that banks remain well capitalised and resilient and that they should be able to support households and businesses through the post-Covid economic recovery. The PRA has therefore concluded that the extraordinary guardrails within which it asked bank boards to determine the appropriate level of distributions in relation to full-year 2020 results are no longer necessary and have been removed with immediate effect.

The full and final results of the 2021 SST, including bank-specific outcomes, will be published in 2021 Q4.

Lucy Hadrill