EU Rejects Complete Ban on Bank Payouts in Response to Ukraine Crisis

European regulators won’t ban bank dividends and share buybacks because of the Ukraine crisis, the Financial Times reported Tuesday (March 15).

Instead they’ll be looking to a more relaxed supervisory response.

Eurozone lenders are looking at paying tens of billions of euros to shareholders this year – even some with big Russian operations.

But Andrea Enria, chair of the European Central Bank’s supervisory board, said he was “not concerned by the overall ballpark of dividends and buybacks.”

The war in Ukraine has damaged global stock markets, and given way to fears of another recession in Europe.

The report noted that the banks have been among the worst affected. The Stoxx Europe 600 Banks index has lost around 15% of its value since Russia invaded Ukraine Feb. 24.

Early in the pandemic when the banks were hit by the economic affects of that crisis, the ECB ordered them to make more resources available by abandoning dividends and share buybacks.

However, with the restrictions lifted, 46 of the biggest lenders will likely spend around €90 billion on share buybacks and dividends in 2022, and another €83 billion the next year.

According to an unnamed regulator speaking with FT, he and his peers are wary of more across-the-board bans in the future. Instead, their preferred approach would be “more tailor-made [restrictions] for some specific institutions.”

The ECB ended its bond-buying program earlier than it originally thought, PYMNTS wrote.

Read more: ECB Ends Bond-Buying Program Early, Prepares for Interest Hikes

The ECB anticipates an interest rate hike later in the year. The program is likely to be done by September. The rate hikes are probably going to happen on a gradual basis “some time” after the end of the program.

The move, according to The Wall Street Journal, indicates the bank shifting its priorities towards concerns about inflation. Inflation is currently sitting at around 6% in the EU, though it is even higher in the U.S.

In the U.S. the Fed is indicating a desire to raise interest rates, too.