The Capital Plans The ECB Will Require Banks Due To The War In Ukraine is not To Harm Dividends

ECB bonds

Renta 4 | The ECB plans to require banks to include the effects of the war in Ukraine in the internal capital adequacy assessment process as it is dragging on longer than expected.

The ECB wants banks to include analyses of various scenarios on the impact of second-round derivatives as a result of the war, such as downward revision of economic growth.

Opinion: We consider the ECB’s request to be logical in view of the second-round effects that the war in Ukraine may have on the development of the banking business. The internal capital adequacy assessment process is conducted every year and serves as a basis for the ECB to set capital requirements (SREP).

This request does not mean that banks will be required to hold more capital or that it will influence dividend policies, given that by the time the SREP requirements are set for 2023 it will have to be seen where we stand with the war.

Also, banks have an MDA buffer (Minimun Distributable Amount) on average of 400 bps, which means that they have 400 bps of margin in terms of capital vs. requirements before seeing their payout policies constrained.

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