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Online debate: Restraining Dividends (and other Pay-Outs)

On 24 June, the Florence School of Banking and Finance teamed up with the Centre for Economic Policy Research (CEPR) and the Leibniz Institute for Financial Research SAFE to discuss the rationale, merit and scope of a recent ESRB Recommendation on the restriction of pay-outs during the COVID-19 pandemic.

The recommendation by the European Systemic Risk Board outlines a number of proposals to achieve a uniform approach to restraints on pay-outs across the European Union and across different segments of the financial sector, which were presented by Francesco Mazzaferro, Head of the Secretariat of the ESRB. The Recommendation, which comes in support of previous initiatives from the European Central Bank, the European Banking Authority, the European Insurance and Occupational Pensions Authority and national authorities to insist on the need for banks, insurance companies to refrain from paying dividends and variable compensation and buying back shares until at least 1 January 2021 – and possibly longer in case of necessity.

After the initial presentation, the discussion was opened by initial remarks by commentators Sylvie Mathérat (Independent member of the EU commission High Level Forum on Capital Market Union), Viral V. Acharya (New York University, Stern School of Business and CEPR) and Jan-Pieter Krahnen (Goethe University, Leibniz Institute for Financial Research SAFE and CEPR). In their addresses and in the subsequent discussions, moderated by Elena Carletti (Bocconi University, Florence School of Banking and Finance and CEPR), the speakers explored the merits of the recommendation in terms of macro-prudential arguments, the impact of a wide-ranging restrictions on pay-outs across the different segments of the financial system, and commented on the implementation of the proposals outlined in the ESRB recommendation.

This debate is part of a COVID-19 online event series organised by the Florence School of Banking and Finance to discuss Europe’s economic policy response to the pandemic.