BOT allows financial institutions to make dividend payments in line with overall economic stability, impact on stakeholders
The Bank of Thailand’s deputy governor Ronadol Numnonda said on Thursday that the central bank has come up with guidelines for 2020 dividend payments, which takes into account financial institutions’ capital plans and stress test results for 2020-2022.
He said results show that financial institutions have adequate levels of capital and loan-loss provisions to withstand the impact of Covid-19.
Furthermore, financial institutions have enhanced their awareness and readiness to deal with uncertainty by continuously increasing their loan-loss provisions.
According to data, the coverage ratio for non-performing loans (NPL) and bank for international settlements (BIS) ratio for the Thai banking system in the third quarter of this year are 150 per cent and 19.8 per cent respectively.
However, owing to high uncertainty in the near future, the BOT is supporting preventive measures by allowing financial institutions to pay dividends for 2020 that do not exceed last year’s pay-out ratio and are at 50 per cent of this year’s net profit.
This is in line with the guidelines of many overseas regulators and will benefit financial institutions’ shareholders, depositors and debtors in the long run.
This policy will also help ensure the Thai financial system’s resilience as well as maintain a high level of capital to safeguard against uncertainties and serve as an important mechanism to support economic recovery as the Covid-19 situation improves.
The central bank had previously issued an order asking banks to suspend interim dividend payment in the fallout of the Covid-19 outbreak.
