(1)

On 27 March 2020, the European Central Bank (ECB) adopted Recommendation ECB/2020/19 of the European Central Bank (2) which recommended that at least until 1 October 2020 no dividends are paid out and no irrevocable commitment to pay out dividends is undertaken by credit institutions and that credit institutions refrain from share buy-backs aimed at remunerating shareholders. On 27 July 2020, the ECB prolonged this recommendation until 1 January 2021 by adopting Recommendation ECB/2020/35 of the European Central Bank (3).

(2)

Even with the improvement in macroeconomic conditions and the reduction of economic uncertainty due to the COVID-19 pandemic, the level of uncertainty remained elevated at the end of 2020 with a continued impact on banks’ ability to forecast their medium-term capital needs. In view of this persisting uncertainty the ECB adopted Recommendation ECB/2020/62 of the European Central Bank (4) repealing Recommendation ECB/2020/35 but recommending extreme prudence when credit institutions decide on or pay out dividends or perform share buy-backs aimed at remunerating shareholders.

(3)

The latest macroeconomic projections indicate the start of the economic recovery and a further reduction in the level of economic uncertainty. Accordingly, the ECB considers that the reasons underpinning Recommendation ECB/2020/62 are no longer present. The reduced economic uncertainty allows the thorough supervisory assessment of the prudence of banks’ plans to distribute dividends and conduct share buybacks on an individual basis with a careful forward-looking assessment of capital plans in the context of the normal supervisory cycle,