Apr 1, 2020

UK bank shares plunge after sector halts dividends on BoE warning

UK bank stocks plunged on Wednesday after the sector halted dividends and buybacks in response to the Bank of England's warnings against paying out billions of pounds to shareholders during the coronavirus pandemic. "UK institutional investors and Hong Kong retail investors own bank shares for the dividend. This isn't billionaires and hedge funds, a lot of these people are ordinary folk." In a series of co-ordinated statements on Tuesday evening, Lloyds, RBS, Barclays, HSBC, Santander and Standard Chartered said they would cancel their dividends for 2019 and refrain from setting cash aside for investor payouts this year. The banks said they had made the dividend move following a "Formal request" from the PRA and that the decision would allow them to "Serve the needs of businesses and households" during the coronavirus shutdown, which will drive millions of Britons out of work and thousands of small businesses into bankruptcy. In letters to each of the chief executives of the six banks and Nationwide, published late on Tuesday night, the BoE warned that it was "Ready to consider use of our supervisory powers" if they did not comply with its recommendations on dividends and bonuses.

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