BoT to consider dividend payments
Measure to cover 2021 and 2022
The Bank of Thailand plans to assess on a yearly basis whether to allow SET-listed financial institutions to undertake dividend payments and stock buybacks for 2021 and 2022.
Commercial banks were ordered by the central bank in June to temporarily freeze interim dividend payments to shareholders and suspend stock buybacks for this year to preserve capital in an economy devastated by the pandemic.
Amid rampant uncertainty, the regulator required banks to submit a stress test and capital increase plan for 2021 and 2022 by October this year to affirm financial stability for the next two years.
The central bank supports preventive measures by allowing financial institutions to pay dividends for 2020, not exceeding last year's payout ratio and 50% of this year's net profit, said Ronadol Numnonda, deputy governor for financial institutions stability.
This is in line with guidelines of many overseas regulators and will benefit financial institutions' shareholders, depositors and debtors in the long run, said Mr Ronadol.
The policy will also help ensure the resilience of Thailand's financial system through continuously maintaining a high level of capital to safeguard against uncertainties and serving as an important mechanism to support the economic recovery, he said.
On average, the dividend payments in the banking sector stood at 40% last year.
The central bank has provided a guideline for 2020 dividend payments, taking into account financial institutions' capital plans and stress test results for 2021 to 2022.
The results show financial institutions have adequate levels of capital and loan-loss provisions to withstand the Covid-19 impact.
Financial institutions have also enhanced their awareness and readiness to deal with uncertainties by continuously increasing their loan-loss provisions, said Mr Ronadol.
The non-performing loan coverage ratio and the BIS ratio of the banking system were registered at 150% and 19.8%, respectively, in the third quarter.
Given the strong financial status of the commercial banking industry under the stress test, the regulator found that the industry's BIS ratio stood at 19.8% in the third quarter, higher than 19.2% logged in the previous quarter.
The higher BIS ratio was attributed to retained profit, additional tier-one capital increases as well as the central bank's temporary prohibition on interim dividend payment.