STOCKHOLM (Reuters) - Sweden’s financial watchdog on Tuesday called on banks to cancel dividend payments and retain the cash to support the supply of credit at a time of stress caused by the coronavirus outbreak.
In Sweden and elsewhere authorities have stepped in to boost companies’ access to credit to ensure the financial system does not seize up like it did during the 2008-9 financial crisis. Still, there is also concern taxpayer money could end up in the pockets of shareholders rather than with companies trying to weather the crisis.
“The FSA will today send a letter to all banks and credit finance companies under the FSA’s oversight with a recommendation to their boards to immediately change their dividend proposals and that the spring AGMs decide not to pay out a dividend,” the Financial Supervisory Authority said in a statement.
“The aim is to ensure that these companies have continued good resilience against possible future credit losses and the capacity to maintain the supply of credit.”
Of the banks, SEB (SEBa.ST) said earlier this month it would postpone its AGM and look at whether to pay a dividend.
Swedbank (SWEDa.ST) has said it would review its dividend decision, but that it had the ability to pay, despite a record fine it was hit with last week for breaches in anti-money laundering work.
The Financial Supervisory Authority has already eased capital buffer rules and liquidity requirements for banks to support their ability to continue to supply credit to Swedish companies.
The central bank is also offering 500 billion Swedish crowns (42.08 billion pounds) in loans to banks at generous terms to help boost the credit supply.
Reporting by Stockholm Newsroom; editing by Niklas Pollard