Norway's banks should not be allowed to pay dividends for now, regulator says

Norwegian banks and insurers should not be allowed to pay dividends for now given the grave consequences they face from the coronavirus outbreak, Norway's Financial Supervisory Authority proposed to the finance ministry on Wednesday. Banks could face significant losses due to the outbreak, while insurers risk lower income due to a fall in interest rates and could also see a drop in asset values, the FSA said.

A decision on whether to allow dividend payments to be made for the 2019 fiscal year will be made "as soon as possible", a finance ministry spokesman told Reuters. The financial industry's lobby said the ministry should reject the proposal.

"Creating uncertainty among those who make capital available to Norwegian banks and insurance companies now is very unfortunate," Finance Norway said in a statement. Most banks have proposed payments for 2019 and are due to hold shareholder meetings in the coming weeks to approve the plans.

Already on March 16, the regulator had urged banks to reconsider dividend payments and buybacks. Norway's private-sector activity is expected to contract by between 15% and 20% in the near term, the government has predicted, and unemployment has risen fivefold in recent weeks to its highest level since the 1930s.

Norway's largest bank, DNB, said on Monday it was still considering whether to maintain its plan of paying out a dividend at its annual general meeting at the end of April. Insurer Gjensidige dropped on Monday a proposal to distribute an extraordinary dividend of 5 Norwegian crowns per share but maintained plans for paying out an ordinary dividend of 7.25 crowns.

The regulator said any ban on dividends could be reversed at a later time if circumstances change.