The Reserve Bank of NZ has eased the COVID-related dividend restrictions placed on retail banks, allowing the banks to now pay up to a maximum 50 per cent of their earnings as dividends to shareholders.
The banks have been banned from paying any dividends since April 2020, as an RBNZ measure to support financial stability and increase the provision of credit.
RBNZ deputy governor Geoff Bascand said the restrictions had succeeded in their purpose, but with the Kiwi economy rebounding to a stronger position than anticipated at the start of the pandemic, a complete restriction is no longer needed.
The cap on dividends at 50 per cent of earnings will remain in place until 1 July 2022, when the Bank expects to lift it completely.
But banks remain under scrutiny.
“We are writing to the country’s registered trading banks to advise them of our decision, and outlined our expectations that they will be prudent in determining the appropriate size of dividends paid to their shareholders,” Bascand said.
“Banks’ decisions should take into account the requirement to meet higher capital requirements resulting from the Reserve Bank’s Capital Review.“We have delayed the implementation timetable of the Capital Review twice over the course of last year to allow banks the regulatory relief needed to support their customers. As economic conditions improve, building strong capital buffers needs to be prioritised.”