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Bank of Italy calls for caution in review of dividend ban

Kitco News

ROME, Nov 20 (Reuters) - The uncertainty fuelled by a second COVID-19 wave calls for caution in the debate among European supervisors on whether to extend a recommendation that euro zone banks refrain from paying dividends, the Bank of Italy said on Friday.

Banks across Britain and the euro zone were prevented from distributing 2019 profits to shareholders during the first virus wave. Supervisors urged banks to preserve capital in the face of the emergency, in return easing regulation and flooding the system with funds lent at negative rates.

The recommendation has been extended until the end of year and banks expect the European Central Bank to give indications soon on how long the ban will last.

The decision is a crucial one for cheaply-valued European banks and their shareholders in a phase of earning compression and cloudy outlook on credit quality.

Speaking at a press briefing to present the Bank of Italy’s twice-yearly Financial Stability Report, Deputy Governor Luigi Federico Signorini said supervisors were still discussing the matter and no indication could be provided on the final outcome.

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