The Reserve Bank has removed the last of its emergency Covid-19 restrictions on retail banks by allowing them to resume normal dividend payments to shareholders but warned them to have regard to the plight of their customers.
Photo: RNZ / Samuel Rillstone
The central bank imposed a ban on dividend payments in March 2020 when the pandemic first hit to help shore up bank finances and ensure sufficient money to lend to customers.
That was eased last year when banks were allowed to pay up to 50 percent of dividends as the economy and financial system fared better than expected. The ban will be lifted on 1 July.
RBNZ Deputy Governor Christian Hawkesby said the restriction had helped during the pandemic and the economy had underlying strength with a strong labour market, sound household balance sheets, continued fiscal support, and strong terms of trade.
But he warned the economy still faced headwinds with uncertainty, cost pressures and low consumer confidence.
"As such, banks should ensure that they are well placed to manage the impacts of weaker activity on their balance sheets and to assist customers."
"I want to reiterate the Reserve Bank's ongoing expectation that banks put the need to support households and businesses at the centre of assessments of the appropriate level of dividends, and continue to be prudent in determining the appropriate amount of dividends paid to shareholders," he said in a letter sent to banks.
He says bank should also ensure they took into account the higher levels of capital they will be required to hold starting from next month when they set dividends.
Profits for the four major Australian owned banks have [https://www.rnz.co.nz/news/business/462961/banking-sector-bounces-back-as-covid-19-impact-falls-short-of-predictions
rebounded in the past] year as business and lending, particularly mortgages, recovered.