COVID-19 + Brexit = Policy Uncertainty
The Prudential Regulation Authority (PRA) at the Bank of England today provides an excellent tutorial in how economic uncertainty regarding both COVID-19 and Brexit generate an additional layer of policy uncertainty for financial institutions, their customers,and their shareholders.
Earlier, the European Central Bank (ECB) had requested that banks refrain from paying dividends and other distributions at least through January 2021. Policymakers in London must have been under pressure by local banks to provide at least clarity if not convergence.
The PRA instead issued this statement:
Firms seeking clarity regarding dividend payments policy will have to wait until at least October 2020.
The statement above suggests strongly that sentiment is strengthening in London regarding the need to chart independent policy trajectories post-Brexit at year-end. The willingness to leave open the possibility that dividend payments might resume also implies that at least some policymakers at the PRA continue to hold out hope that the economy might improve at year-end.
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