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The Bank of England removed a series of "temporary guardrails" implemented in December that restricted the amount HSBC, Standard Chartered and other United Kingdom-based lenders could distribute to shareholders when they resumed paying dividends for the 2020 financial year.
HSBC and Standard Chartered cancelled their final 2019 payments and suspended interim payouts last year at the request of the Prudential Regulation Authority (PRA), an arm of the Bank of England, to make sure banks had enough capital on hand to help fund the economy in light of the coronavirus pandemic. The dividend suspension raised the ire of retail investors, many of whom are in Hong Kong and rely on the regular payouts.
When banks were allowed to resume payouts, the regulator said that distributions to shareholders should not exceed 20 basis points of risk-weighted assets at the end of the year or 25 per cent of cumulative profits for all of 2019 and 2020 after deducting prior shareholder payouts.
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The regulator also asked banks to exercise a "high degree of caution and prudence" in determining the size of any cash bonuses to senior staff at the time. Top executives at HSBC and Standard Chartered waived their bonuses in 2020 and said they would donate part of their salaries to help fight the pandemic.
"The PRA judges that banks remain well capitalised and resilient to outcomes for the economy that are much more severe than the [central bank's] Monetary Policy Committee's central forecast, and that they should therefore be able to support households and businesses through the economic recovery," the regulator said in a statement on Tuesday.
"In addition, although considerable uncertainty remains, the level of uncertainty has decreased significantly since December 2020, in particular due to the progress of vaccination programmes."
The announcement will be welcome news for shareholders in Hong Kong as HSBC and Standard Chartered, two of the three currency issuing banks in the city, prepare to report their half-year results in August. The suspension spurred a rebellion among investors here.
HSBC and Standard Chartered are both based in London, but generate the bulk of their profit in Asia, with Hong Kong as their largest market.
After getting the greenlight from its regulator, HSBC said that it would pay a full-year dividend of 15 US cents a share for 2020 in April of this year and would target a payout ratio of 40 per cent and 55 per cent of reported earnings for 2022 onwards. Standard Chartered said at the time it would make a dividend payout of 9 US cents a share for full-year 2020.