The ECB Published a Recommendation on Dividend Distribution Policies

On January 28, the European Central Bank (“ECB”) published a recommendation to establish dividend policies using conservative and prudent assumptions in order, after any distribution, to satisfy the applicable capital requirements.

The ECB has published recommendations with regard to Category 1, Category 2 and Category 3 credit institutions. Category 1 credit institutions should only distribute their net profits in dividends in a conservative manner to enable them to continue to fulfil all the Pillar 1 requirements. Category 2 credit institutions should not only distribute their net profits in dividends in a conservative manner but should also only pay out dividends to the extent which is consistent, at a minimum, with a linear path towards the fully loaded ratios required by the Common Equity Tier 1 capital ratio. Category 3 credit institutions which under the 2014 comprehensive assessment have a capital shortfall should, in principle, not distribute any dividend.  Recommendation.

FDIC Rule on Assessments, Dividends, Assessment Base, and Large Bank Pricing

On February 7, the FDIC approved a final rule on assessments, dividends, assessment base, and large bank pricing. The rule implements changes to the deposit insurance assessment system, as required by the Dodd-Frank Act, and revises the assessment system applicable to large banks to eliminate reliance on debt issuer ratings and make it more forward looking. FDIC Release.