Supervision release 29 July 2020 – 46/2020

Financial Supervisory Authority extends the validity of its profit distribution recommendation until 1 January 2021 and clarifies expectations related to capital and liquidity buffers

On 28 July 2020, the European Central Bank (ECB) issued a recommendation to the credit institutions under its supervision to refrain from distributing profits until 1 January 2021. The ECB recommendation calls on national supervisors to extend similar principles to cover the credit institutions under their own supervision. On 27 May 2020, the European Systemic Risk Board (ESRB) also issued a recommendation on the restriction of profit distributions until 1 January 2021.

Based on the recommendations of the ECB and the ESRB, the Financial Supervisory Authority (FIN-FSA) extends the validity of the profit distribution recommendation it issued on 28 March 2020 that credit institutions under its direct supervision do not pay nor commit to pay dividends or other profit distributions for financial years 2019 and 2020 until 1 January 2021. The recommendation also applies to repurchases and redemptions of shares when the purpose of the purchases and redemptions is to distribute profits.

The ECB has also clarified its stance on the use of capital and liquidity buffers in the exceptional economic situation caused by the coronavirus pandemic (ECB press release 28 July 2020). The FIN-FSA applies similar principles to credit institutions under its direct supervision. Credit institutions are expected to continue to use their capital and liquidity buffers for lending purposes and loss absorption.

In addition, the FIN-FSA recommends that the credit institutions under its supervision exercise great caution when deciding on variable remuneration in situations where remuneration could lead to a deterioration of the institution's capital adequacy position.

In Finland, the ESRB recommendation not only applies to credit institutions but also to insurance companies. The FIN-FSA has issued a supervision release to insurance companies to refrain from profit distribution and payment of variable remuneration (supervision release 6 April 2020 – 19/2020) and it remains unchanged.

For further information, please contact

Jyri Helenius, Deputy Director General of the FIN-FSA, and on the practical application of the recommendation, until 7 August, Aleksi Kaakinen, and from 10 August, Minna Sahari. Requests for interviews are coordinated by FIN-FSA Communications, tel. +358 9 183 5030 (weekdays 9.00–16.00).

See also

The corresponding Finnish-language supervision release was published on 28 July 2020.