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EU banks shouldn't pay dividends this year, watchdog says

FRANKFURT (Reuters) - Banks in the European Union shouldn’t be allowed to pay dividends, bonuses, or buy back shares at least until the end of this year, the European Systemic Risk Board (ESRB) said on Monday.

The ESRB’s recommendation, if followed, would extend a euro zone ban on such payouts by three months, or potentially longer, to help banks build up a buffer and withstand the worst economic slump in living memory.

“Over the past two months, the depth and length of the crisis have become clear,” the ESRB, which is hosted by the European Central Bank and chaired by ECB chief Christine Lagarde, said.

“This further highlights the need for banks to refrain from paying dividends, buying back shares and paying variable compensation until at least 1 January 2021 – and possibly even longer if additional data indicate a slower release from containment policies and potentially a deeper economic slump.”

The ECB told euro zone banks on its in March not to pay any dividend or buy back shares until Oct. 1.

Set up after the financial crisis, the ESRB acts as a pan-European financial stability watchdog but its recommendations are not binding for supervisors.

Reporting by Francesco Canepa; Editing by Balazs Koranyi