MAS asks local banks to limit FY2020 dividends

Lenders are called to cap their DPS at 60% of FY2019’s DPS.

The Monetary Authority of Singapore (MAS) has called on Singaporean banks to cap their total dividends per share (DPS) for the fiscal year at 60% of FY2019’s DPS as a pre-emptive measure to bolster their resilience amidst the ongoing pandemic, the regulator announced in a press release.

Instead, MAS asked lenders to offer shareholders the option of receiving the dividends to be paid for FY2020 in scrip in lieu of cash.

In case a bank has already paid out interim dividends for Q1, the dividend restrictions and the offering of the dividends in scrip will be extended to Q1 2021 and the 60% cap still be applied but will still reference the FY2019 DPS.

MAS assured that local lenders remain in strong capital position as a result of years of built-up and are well-placed to weather the risks and uncertainties. Further, they performed well in the regulator’s stress tests.

“Whilst local banks’ capital positions are strong, the dividend restrictions are a pre-emptive measure to bolster their resilience and capacity to support lending to businesses and individuals through an uncertain period ahead for our economy,” MAS stated in a press release.

“Nonetheless, given the substantial uncertainties ahead and that global economies are not yet showing sustained signs of recovery, it would be prudent for local banks to put aside a greater portion of earnings during this period,” the regulator added, noting that the extra capital will bolster the local banks’ ability to continue to support the credit needs of businesses and consumers as well as absorb economic shocks should a more adverse scenario happen.

MAS also encouraged banks to conserve and carefully manage their capital, by ‘exercising restraint’ in discretionary expenditure and management compensation.