Bangladesh Bank sets conditions for issuance of bank dividends

Bangladesh Bank imposed stricter conditions for the issuance of 2020 dividends by banks in a bid to prevent the lenders from sinking into a capital shortfall, the Dhaka Tribune reported Feb. 8, citing the central bank.

Under the central bank's new guidelines, lenders can declare up to a 30% dividend with a maximum of a 15% cash dividend if they can maintain a capital adequacy ratio of at least 15% with a capital conservation buffer of at least 2.5% without the deferral provisioning facility offered by the central bank.

Banks that can maintain a capital adequacy ratio of 13.5% to 15% with a 2.5 % capital conservation buffer will be able to declare a 25% dividend with a maximum 12.5% in cash dividend.

Lenders than can keep a capital adequacy ratio of at least 11.875% with a 2.5% capital conservation buffer without the deferral provisioning facility can declare a total 15% dividend with a maximum of 7.5% in cash dividend, while lenders that maintain a ratio of 12.5% can declare a 12% dividend with a maximum of 6% in cash dividend.

In addition, banks that can maintain a capital adequacy ratio of 11.875% to 12.5% along with the central bank's deferral facility will be allowed to declare a total of 10% dividend and a maximum of 5% in cash dividend. Banks can declare a maximum 5% stock dividend if they maintain a minimum 10.625% and maximum 11.875% of capital.

The central bank noted that its prior approval is required for banks to declare dividends.