The Polish Financial Supervision Authority published its guidelines regarding the payment of dividends by local banks from their 2018 profits.
The key conditions for dividend payments are mostly in line with the FSA's midterm guidelines released in March 2018.
The regulator said in its Jan. 15 announcement that in order to pay a dividend, commercial lenders cannot operate under a restructuring program, and they need to have a leverage ratio of above 5%, as well as Tier 1 and total capital ratios at the minimum required levels plus 1.5 percentage points, among other things.
Banks that meet all the rules will be allowed to pay up to 75% of their profit as dividends. Lenders wishing to share their entire profits with shareholders will need to prove that they are not sensitive to capital shocks under negative macroeconomic scenarios, in addition to meeting all requirements mentioned above. In the case of banks with foreign-currency mortgage exposures, dividend levels will have to be adjusted, taking into account the size of the portfolios and the year of issuance of the loans.
Poland's largest lender, PKO Bank Polski SA, hopes to be able to earmark 50% of its 2018 net profit for dividend payments under the FSA's recommendations, the lender's CFO Rafał Kozłowski told news agency PAP on Jan. 16.
The regulator also updated its dividend guidelines for other local financial institutions, including pension and investment funds, brokerage houses and insurance/reinsurance providers. As far as insurance/reinsurance companies are concerned, the payment of dividends of up 75% of the 2018 profit will be possible for insurers that did not show any shortage of own funds to cover capital requirements and were not subject to a financial recovery program.
Such insurers will also need capital-requirements coverage of at least 110% for the quarter in which the dividend will be paid.
In addition, insurers/reinsurance companies will be allowed to pay up to 100% of their profits as dividends if their coverage of capital requirements — after deducting funds for dividend payments — is at least at 175% of the required capital levels for life insurers and at least at 150% for nonlife insurers at the end of 2018 and for the quarter in which the dividend will be paid.