The South African Reserve Bank (Sarb) is offering more Covid-19 relief to the country’s banking sector
Loading player...
Gugu Mfuphi talks to Sifiso Skenjana, Chief Economist And Thought Leadership Executive At Iq Business, About The South African Reserve Bank (Sarb) is offering more Covid-19 relief to the country’s banking sector. However, it has asked commercial banks to put a freeze on paying out ordinary dividends or bonuses to executives this year.
The move, announced by the Prudential Authority (PA) of the Sarb on Monday night, comes amid the worsening economic fallout from the global Covid-19 pandemic.
“With the high probability that the impact of Covid-19 will result in heightened stress in the banking system, the PA is issuing a guidance note advising banks not to distribute discretionary ordinary dividends during this period. Similarly, bonuses for senior executives should also be put on hold during this period,” the regulatory authority of the central bank said in a statement.
“The Basel framework, which provides clear rules on when discretionary dividend and bonus payments can be limited, is likely to be impacted. These constraints generally kick in when a bank breaches or is about to breach its capital buffer, which could become progressively tighter, leading it to dip into its capital buffers,” it added.
The PA welcomed measures already taken by banks to support customers during what it described as a “period of economic turmoil and uncertainty”
The move, announced by the Prudential Authority (PA) of the Sarb on Monday night, comes amid the worsening economic fallout from the global Covid-19 pandemic.
“With the high probability that the impact of Covid-19 will result in heightened stress in the banking system, the PA is issuing a guidance note advising banks not to distribute discretionary ordinary dividends during this period. Similarly, bonuses for senior executives should also be put on hold during this period,” the regulatory authority of the central bank said in a statement.
“The Basel framework, which provides clear rules on when discretionary dividend and bonus payments can be limited, is likely to be impacted. These constraints generally kick in when a bank breaches or is about to breach its capital buffer, which could become progressively tighter, leading it to dip into its capital buffers,” it added.
The PA welcomed measures already taken by banks to support customers during what it described as a “period of economic turmoil and uncertainty”
