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Australian regulator eases restrictions around dividend payments for insurers

Written by Adam Cadle
29/07/2020

The Australian Prudential Regulation Authority (APRA) has updated its capital management guidance for banks and insurers, in particular easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19.

APRA’s updated guidance replaces its recommendation in April this year that banks and insurers “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer”.

Uncertainty in the economic outlook has reduced somewhat since then, and APRA has had the opportunity to review banks’ and insurers’ financial projections and stress testing results. Taking these and other developments since April into account, APRA has written to banks and insurers advising they should maintain caution in planning capital distributions, including dividend payments.

“Today’s announcement strikes a balance in recognising the strength of the financial system, while at the same time acknowledging the difficult path ahead,” APRA chair Wayne Byres said.

“Although the environment remains one of heightened risk, we now have a stronger sense of how Australia’s economy and financial institutions are being impacted by COVID-19. On that basis, APRA believes that banks and insurers do not need to continue to defer capital distributions, provided they moderate payments to sustainable levels based on robust stress testing, and continue to prioritise supporting their customers and the economy."

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