SBP suspends dividend distribution by Banks/DFIs for two Quarters

Amid  the  growing  concerns  of  coronavirus pandemic,  the State  Bank  of  Pakistan  (SBP)  has announced a number of regulatory relief measures for the financial sector and real economy.

In line with facilitating the economy of the country, banks/DFIs have been advised to suspend the dividend distribution for the next two quarters.  The banks/DFIs that have approved dividend declaration for quarter ended March 2020 by 22nd April 2020 have been advised to suspend dividend distribution for June and September quarters 2020.  All other banks have been advised to suspend dividend distribution for March and June 2020 quarters. 

This important decision has been taken keeping in view uncertainty arising out of COVID 19 pandemic and probability of higher infections in loan portfolios of banks as a result of that.  This measure will also enhance loss absorption capacity of the banking system and will enable them to further support the real sector in Pakistan. 

Notably,  while  releasing    prescribed  capital  buffers  and  taking  other  regulatory  relief  measures,  a number of other jurisdictions across the globe have also placed moratorium on dividend distribution and payment of cash bonuses to senior/executive officers and material risk takers. 

The SBP was of the view that the suspension of dividend payout will further increase the resilience of the banking sector and improve their ability to provide much-needed credit support to the real economy.

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