UPDATE 1-France's Villeroy says bank dividend curbs should be lifted in September

(Recasts and writes through)

PARIS, May 28 (Reuters) - Restrictions imposed last year on bank dividend payouts due to the economic crisis caused by the coronavirus pandemic are likely to be lifted in September, the head of the French central bank said on Friday.

“Restrictions on dividends can and should be lifted from next September,” Francois Villeroy de Galhau told journalists, speaking in his role as head of the ACPR French financial regulator.

“It’s a question of the attractiveness of our financial institutions against the backdrop of intense international competition,” he said.

The European Central Bank’s final decision is due by the summer break, he added.

The ECB is allowing banks to use some of their regulatory capital cushions to absorb losses resulting from the COVID-19 crisis. Villeroy said as that the economic and health situation starts to return to normal, there was no need to maintain those measures beyond next year.

Villeroy also said regulators were closely looking at the risk that a rise in bankruptcies could pose for banks, but so far had not detected a significant increase.

Borrowing by French companies climbed 13.3% last year while that of small and mid-sized firms surged 20.3%. Businesses took out 140 billion euros ($171 billion) in state-guaranteed loans to help them cope with drops in cashflow.

“Let’s be clear against some totally unfounded doubts. French banks are not under-provisioning,” Villeroy said.

$1 = 0.8207 euros Reporting by Leigh Thomas; Editing by Alex Richardson and Edwina Gibbs