Australian regulator eases dividend rules on banks, insurers

They have been told to maintain caution on capital distributions.

The Australian Prudential Regulation Authority (APRA) has eased restrictions on paying dividends for banks and insurers as the sectors manage the disruption caused by the pandemic.

The update on its capital management guidance replaces the recommendation released in April saying that banks and insurers must consider delaying decisions on dividends.

APRA has reviewed banks’ and insurers’ financial projections and stress testing results and has told them to maintain caution in planning capital distributions, including dividend payments.

For the remainder of the calendar year, both sectors should aim to retain at least half of their earnings when deciding on dividend reinvestment and other initiatives to counteract capital declines.

They should also regularly conduct stress tests to show ongoing lending capacity, utilise capital buffers to absorb stresses, and continue their support for households and businesses.