HSBC Weighs Early Challenge To BoE's Bank Dividend Ban

By Najiyya Budaly
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Law360, London (October 27, 2020, 1:16 PM GMT) -- The board of HSBC said on Tuesday that it is considering whether to pay out a "conservative dividend" for 2020, setting up a challenge to the Bank of England's demand that banks should scrap payments to shareholders and pump money into the economy during the coronavirus pandemic.

HSBC has said it is considering paying a dividend for the current year, even though the Bank of England wants banks to stop making such payments. (AP Photo/Frank Augstein)

The Prudential Regulation Authority — the regulatory arm of the central bank — warned major lenders in April not to line their shareholders' pockets during the COVID-19 crisis and to use their capital to lend to households and businesses. The regulator said at the time that it will consider using its supervisory powers against banks that do not comply.

But HSBC said in its third-quarter results on Tuesday that it is considering paying a dividend for the current year. The bank said it will decide by February 2021, when it is due to publish its full results for 2020, whether to press ahead.

"A decision on whether to pay a dividend for the 2020 financial year will depend on economic conditions in early 2021, and be subject to regulatory consultation," Noel Quinn, HSBC's group chief executive, said Tuesday. "We will seek to pay a conservative dividend if circumstances allow."

The PRA said in July that it will decide by the end of this year whether banks should avoid paying dividends into 2021. The Bank of England declined on Tuesday to comment on HSBC's proposal.

HSBC said on Tuesday that defaults on payments for the three months to September were $8 million, lower than the $13 million predicted in August. The Bank of England has said that it expects banks' losses from businesses and households that are not able to pay back loans to be lower than it had forecast at the start of the pandemic.

The group reported a profit after tax of $2 billion for the three months to the end of September, down from the $3.8 billion it reported during the same period of last year.

"These were promising results against a backdrop of the continuing impacts of COVID-19 on the global economy," Quinn said on Tuesday.

--Editing by Ed Harris.

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