The Monetary Authority of Singapore (MAS) has removed previous restrictions on dividend payments by locally incorporated banks and finance companies.

In a statement, MAS said that it will not extend the dividend restrictions imposed on local financial institutions.

Last year, MAS asked the local banks and finance companies to limit total dividends per share (DPS) for FY2020 at 60% of FY2019’s level.

The move was undertaken to ensure that local institutions maintain strong lending capacity amid the uncertainties of the pandemic.

MAS decided to withdraw the restrictions following an improvement in global economic outlook. It also noted that Singapore’s economy is expected to continue on its recovery path, despite some uncertainties.

Additionally, the central bank said that local banks and finance companies maintained strong capital adequacy ratios during the pandemic. These ratios are expected to remain resilient even under adverse scenarios, latest stress tests showed.

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MAS deputy managing director Ms Ho Hern Shin said: “Local Banks and Finance Companies have weathered the pandemic well and are in a strong position to support the economic recovery.

“As downside risks remain, Local Banks and Finance Companies should exercise continued prudence in their discretionary distributions, whilst prioritising support to customers.

“Particularly when Covid-19 is not yet endemic, businesses may face added liquidity strains when Covid-19 measures are tightened from time to time.

“Banks and Finance Companies will do well to proactively work with customers to navigate these challenges.”

In May, MAS joined the Mojaloop Foundation as a sponsor-level member to drive financial inclusion.