JOHANNESBURG - South Africa’s central bank said on Monday it was advising banks not to distribute dividends and put bonuses for senior executives on hold, joining its peers around the world in asking lenders to cancel shareholder returns amid the coronavirus outbreak.
The South African Reserve Bank’s (SARB) Prudential Authority also said it would implement relief measures to ease pressure on banks, including relaxing capital and liquidity requirements and rules on when restructured loans attract an additional capital charge.
In a statement, the bank said there was already evidence of stress in the economy as a result of the outbreak, and banks were a key shock absorber for the South African economy.
“With the high probability that the impact of COVID-19 will result in heightened stress in the banking system, the [Prudential Authority] is issuing a guidance note advising banks not to distribute discretionary ordinary dividends during this period,” the statement said.
“Similarly, bonuses for senior executives should also be put on hold during this period.”
The SARB joins other central banks like the Bank of England and the European Central Bank in asking banks to skip dividends as the coronavirus and efforts to stem its spread deliver severe shocks to economies around the world.
Banks pay dividends as a means of rewarding shareholders and disposing of excess profits, and scrapping them would mean freeing up capital that banks can instead lend out.
A three-week nationwide lockdown has been enforced in South Africa, to help halt the spread of coronavirus, but the move threatens to tip many struggling businesses and consumers over the edge after the country already fell into recession last year.