The Italian representative on the board of the European Central Bank (ECB), Fabio Panetta, has seen it "reasonable" that, as economic conditions improve, a "case by case" approach should be adopted with respect to the resumption of dividend payments by banks, to which the issuing institute has recommended refraining from carrying out capital distributions and share buybacks at least until January 2021.
Panetta has indicated during an interview with the Portuguese media 'Expresso' that "while it is not clear how the situation will develop, banks must be prudent. If they don't pay dividends this year, they can distribute more next year, and in the meantime they are better positioned to face a serious crisis situation. "
He also added that "if I could choose between the two approaches, I would prefer to be more prudent, but this could mean a cost for banks. I think a reasonable solution, as economic conditions improve, would be a case-by-case approach by bank supervisors".
The favorable position to the lifting in 2021 of the veto on bank dividends selectively seems to gain support among the members of the Executive Board of the ECB, after the Luxembourg representative on the board of directors, Yves Mersch, who will leave office in December, will be in favor of allowing remunerate the shareholders of the healthiest banks.
"It would all depend on the conservatism of banks' internal models, conservatism in provisioning, and a solid view of a bank's capital trajectory. All of this will need to be taken into account and then we will arrive at a proposal by the end of the year", he clarified in an interview with the newspaper 'Financial Times'.
Regarding the bank consolidation process in the euro area, Fabio Panetta has warned that successful mergers and acquisitions are usually those that involve a strong buyer and a weaker target. "I have not analyzed all the transactions in detail, but I have the feeling that the most cases fit this pattern".
In this line, he has warned that today we are experiencing a consolidation mainly within national markets, instead of between countries, valuing that a consolidation between countries "would be more beneficial" for the entities themselves and for the European financial market as a whole, as it would allow diversification and reduction of the impact of adverse events in the different Member States.