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June 30, 2021

Singapore conducts additional stress tests to assess pay out curbs

Monetary Authority of Singapore (MAS) is reportedly conducting additional stress tests on banks to evaluate if the current curbs on dividend pay outs need to be extended.

According to a Bloomberg report, the programme was undertaken to ensure that the lenders are resilient to the uncertainties that continue to impact the economy. The results of the test will guide future decisions on pay outs.

In July last year, MAS directed the banks to limit dividends for 2020 at 60% of 2019 levels. The move was taken as a precautionary measure despite stress tests showing that local lenders are resilient to shocks.

Recently, the US Federal Reserve cleared all 23 large banks in the annual stress tests. The results facilitated the withdrawal of restrictions that were imposed on buybacks and dividends due to the pandemic.

Subsequently, the US banks announced plans to pay their shareholders an additional $2bn in dividend pay outs. The payments will be made in the next quarter.

The Financial Times said that Wells Fargo doubled its dividends to 20 cents, while US Bancorp plans a 9.5% increase to its third quarter pay out.

In a statement, US Bancorp chairman, president and CEO Andy Cecere said: “We are committed to creating and delivering value to our shareholders and we continue to do so every day.

“The results of this year’s stress test are a testament to our strong financial profile and well-established financial discipline which allowed us to maintain strong capital and liquidity positions throughout the recent adverse economic conditions.”

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