MAS Calls on Local Banks to Moderate FY2020 Dividends

Singapore, 29 July 2020… the Monetary Authority of Singapore (“MAS”) has called on locally-incorporated banks headquartered in Singapore (“Local Banks”) to cap their total dividends per share (“DPS”) for FY2020 at 60% of FY2019’s DPS, and offer shareholders the option of receiving the dividends to be paid for FY2020 in scrip in lieu of cash [1] .

2   While the 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.  Earlier, in April 2020, MAS had encouraged banks in Singapore to ensure that sustained lending took priority over discretionary distributions [2] .

3   Local Banks have built up strong capital positions over the years and are well-placed to weather the risks and uncertainties ahead. MAS’ stress tests have shown that the Local Banks remain resilient even under adverse conditions consistent with a serious and prolonged public health crisis.  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. This 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 materialise.

4   MAS encourages banks to conserve and carefully manage their capital, by exercising restraint in discretionary expenditure and management compensation. The 60% cap on Local Banks’ FY2020 dividends balances the objective of capital conservation with the interests of shareholders.

5   Mr Ravi Menon, Managing Director, MAS said, “We are fortunate that banks in Singapore entered the COVID-19 pandemic with strong capital positions.  All the same, MAS wants to ensure the banks’ capital buffers remain ample in the face of significant uncertainties ahead, so that they can sustain lending to the economy.  We have carefully calibrated the restriction on dividends, taking into account the needs of investors who may rely on this income.”