Dividends Distribution to Be Stopped SBP Urged Banks



With a view to conserve capital and further enhance the lending and loss absorption capacity, the State Bank of Pakistan has advised all Banks/DFI/MFB to suspend distribution of profits by way of declaring dividends in any manner (cash or stock) for the quarter ending March 31, 2020 and half year ending June 30, 2020,

According to the notice issued by SBP, these instructions will not be applicable on dividend declared for the year ended December 2019.

The State Bank has advised all institutions to place the letter before the Board of Directors to discuss any possible issues pertaining to an institution’s specific circumstances.

However if the Board of Directors of any Banks/DFI/MFB considers it necessary to declare the dividend in wake of the institution’s specific circumstances, it may approach SBP with sound justifications for consideration of request on merit.

State Bank of Pakistan will review the above instructions on the distribution of dividends after June 30, 2020 keeping in view the severity and impact of the COVID-19 and economic dynamics on the safety and soundness of the banking system, noted the letter.

In order to mitigate the impacts of COVID-19 pandemic, SBP announced a host of regulatory relief measures. These measures, among others, include lowering the Capital Conservation Buffer (CCB) and relaxation of criteria for rescheduling/restructuring of loans.

The aim of these regulatory reliefs is to boost the lending capacity of the banks, avoid any adverse impact on their asset quality and to ensure a continuous flow of credit to support the economic activity in these pressing times’ the letter added.


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