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Banque de France supports a return to dividends for banks

Published December 01, 2020 - 2 mins reading time
Bank watch
On November 27, 2020, Banque de France Governor François Villeroy de Galhau spoke out in favor of a return to dividends in the banking sector.

Keeping banks attractive to investors

At the start of the health crisis, the European Central Bank asked the eurozone's biggest banks to stop distributing dividends, so that they could preserve their capital. They were also asked to use their cash reserves to grant loans.

This request, initially issued in March, was described as "temporary and exceptional" by the European Central Bank, which wished to "preserve banks' ability to absorb losses and support the economy in this particularly uncertain environment".

Introducing an ACPR conference on Friday November 27, 2020, François Villeroy de Galhau, Governor of the Banque de France, said he was in favor of a return to dividends, in particular to "preserve the attractiveness of financial institutions for investors, which is essential to be able to raise capital".

Governor underscores banks' resilience

Another argument put forward by the Governor of the Banque de France in favor of a return to dividends: "the resilience of financial institutions to very significant shocks, as illustrated by their situation at the end of 2020", he declared.

While the crisis has had an impact on banks, it has not, according to François Villeroy de Galhau, called into question "the solid fundamentals of French banks, which have continued to make progress in terms of solvency". He therefore calls for "a cautious opening towards a distribution" of dividends, believing that "one must know how to be 'wise with sobriety', to paraphrase Molière".

However, this opinion is not unanimous, even within the European Central Bank, which is due to make a decision in mid-December on whether to lift this measure.