Pressure growing on UK’s largest banks to cut bosses’ bonuses and shareholder payouts to preserve cash in face of growing coronavirus crisis
Pressure is growing on the UK’s largest banks to cut bosses’ bonuses and shareholder payouts to preserve cash in the face of the growing coronavirus crisis.
Spanish bank BBVA yesterday announced senior management would forego more than £44m of bonuses. It is the latest lender to make such a decision.
Banco Santander announced last week its chief executive and chairman would donate 50 per cent of their entire pay package to charities working to alleviate the pressures caused by coronavirus.
Under pressure: British lenders are due to pay out more than £7.5 billion to investors over the next few weeks
Major accountancy and law firms are also known to be reviewing payouts to their partners, in an effort to preserve cash.
Now the Bank for International Settlements, the European Central Bank, and former Bank of England officials Sir John Vickers and Robert Jenkins have all called for dividends to be suspended, as British lenders are due to pay out more than £7.5 billion to investors over the next few weeks.
Chief executives of the country’s eight largest High Street banks joined a call with the Bank of England and the Financial Conduct Authority (FCA) yesterday to discuss how the industry was coping with the disruption caused by the Covid-19 pandemic.
But it is understood the regulators did not touch on the dividends issue, even though Barclays is due to share £1 billion among investors on Friday. Conservative MP Kevin Hollinrake, who chairs the All Party Parliamentary Group on Fair Business Banking, said: ‘I don’t think anyone who’s sensible should be paying bonuses and dividends right now.
‘Shareholders will understand the seriousness of the situation – lenders would be far better being cautious now and paying the dividend in six months’ time.’
Barclays is understood to be keen to pay its dividend, which is for the second half of 2019, later this week and review any future payouts when they come up.
The regulators’ conference call did however look at how Britain’s major banks may be able to help households struggling under the economic pressure caused by Covid-19.
The FCA and the Bank of England were understood to have zoned in on overdraft charges, credit card debt and unsecured personal loans. Barclays and Metro Bank have already agreed to temporarily waive new increased fees on overdrafts to help out consumers who may slip into the red.
And several lenders have offered customers ‘payment holidays’ on their mortgages over the next few months.
But with the unemployment rate expected to shoot up to 7 per cent by the third quarter of this year, the FCA is concerned that more borrowers may need to be given breathing space on repayments.
Justin Modray, of Candid Financial Advice, said: ‘Given banks have a long track record of profiting at the expense of their customers, it feels like they should be giving something back during these difficult times.’
Regulators are expected to announce a range of measures designed to help borrowers over the coming days.