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The Bank of England (BoE) said on Thursday that financial institutions that clear and settle transactions will no longer be required to discuss advanced plans to make dividend payouts to shareholders.
The measure was first initiated in June last year, during the pandemic, as part of a wider series of curbs on dividends. This was to ensure firms had enough capital to survive through the pandemic.
Sir Jon Cunliffe, deputy governor of the Bank of England for Financial Stability, said in a letter to UK financial market infrastructures and specified service providers, that “these additional expectations are no longer necessary and have been removed with immediate effect”.
“We will now return to the approach in place to consider dividend payments prior to the COVID-19 pandemic,” he said.
Earlier this year, the BoE scrapped its remaining curbs on dividends paid by banks as its stress tests revealed that lenders could cope with the fallout from COVID on the economy.
Last year, the central bank told lenders to suspend dividends and share buybacks until the end of 2020, to ensure they had sufficient capital to maintain lending to businesses.
Officials at Threadneedle Street also recommended scrapping bonuses for senior staff.
It eventually curbed measures in December as the outcome of the pandemic became clearer, saying payouts could continue within “guardrails”.
The news comes just a week after the BoE held the UK’s interest rates at an all-time low of 0.1% despite widespread anticipation it would increase the rate to 0.25%.
The MPC voted by a majority of 7-2 to maintain the Bank rate as it is.
The UK’s main interest rate has been at an all-time low of 0.1% since the pandemic began, having been set at 0.75% pre-pandemic.
A rise to 0.25%, which had been anticipated, would have been the second lowest rate the bank has ever set.
Analysts have said that they expect the rate to be hiked to pre-pandemic levels in the next 18 months as the economy resumes a more steady course.
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