News story | Date: 01/07/2020 | Ministry of Finance
On 8 June, the ESRB published a recommendation on restriction of distributions addressed to relevant national authorities.
The ESRB recommends that the authorities request credit institutions, investment firms, insurers and central counterparties to refrain from making voluntary pay-outs in light of the economic uncertainty as a result of the Covid-19 pandemic. The recommendation encompasses refrainment of dividend distributions, share buy-backs and the creation of obligations to pay variable remuneration to certain employees at least until 1 January 2021. The purpose of the recommendation is to ensure that financial institutions maintain a sufficiently high amount of capital to mitigate systemic risk and contribute to economic recovery.
Today, the Ministry of Finance has sent a communication to the ESRB describing the actions undertaken in response to the recommendation. The Ministry in particular refers to a press release of 25 March, whereby the Ministry expressed a clear expectation that Norwegian credit institutions and insurers refrain from distributing profits in any form until the uncertainty regarding the economic outlook has subsided. As described in today’s communication, this also applies to share buy-backs, although this form of distributions was not mentioned explicitly in the March press release. The Ministry also refers to a circular from the FSA asking the institutions to review their remuneration policies, in order to ensure that the policies are conservative.