TY - BOOK

T1 - Evaluating the benefits of euro area dividend distribution recommendations on lending and provisioning

AU - Reghezza, Alessio

AU - Dautovic, Ernest

AU - Ponte Marques, Aurea

AU - Rodríguez d’Acri, Costanza

AU - Vila , Diego

AU - Wildmann, Nadya

PY - 2021/6

Y1 - 2021/6

N2 - This article studies the impact of the ECB’s dividend distribution recommendations on banks’ lending and loss-absorption capacity during the COVID-19 crisis. It finds that the policy has been effective in mitigating the potential procyclical adjustment of banks. Banks that did not distribute previously planned dividends increased their lending by around 2.4% and their provisions by approximately 5.5%, thus strengthening their capacity to absorb losses. Notably, the recommendations appear to have mitigated the procyclical behaviour of banks closer to the threshold for automatic restrictions on distributions. Overall, the recommendations were successful in conserving capital and helping the banking system support the real economy and facilitate the recognition of future losses.

AB - This article studies the impact of the ECB’s dividend distribution recommendations on banks’ lending and loss-absorption capacity during the COVID-19 crisis. It finds that the policy has been effective in mitigating the potential procyclical adjustment of banks. Banks that did not distribute previously planned dividends increased their lending by around 2.4% and their provisions by approximately 5.5%, thus strengthening their capacity to absorb losses. Notably, the recommendations appear to have mitigated the procyclical behaviour of banks closer to the threshold for automatic restrictions on distributions. Overall, the recommendations were successful in conserving capital and helping the banking system support the real economy and facilitate the recognition of future losses.

M3 - Other report

BT - Evaluating the benefits of euro area dividend distribution recommendations on lending and provisioning

PB - European Central Bank

ER -