State Bank to suspend dividend distribution for March and June 2020 Quarters

• SBP advises institutions to conserve capital and enhance lending and loss absorption capacity by suspending distribution of profits
• This suspension refers to the quarters ending March 31st 2020 and half year ending June 30, 2020
• The measure is keeping in view of the severity of the COVID-19 pandemic impact and economic dynamics on the safety and soundness of the banking system

The State Bank of Pakistan has been actively working to mitigate the impacts of COVID-19 on the Pakistan economy. SBP has recently announced a host of regulatory relief measures through various circulars on 26th march, 2020. These measures, among others, include lower the Capital Conservation Buffer (CCB) and relaxation of criteria for rescheduling and restructuring of loans.

The aim of these regulatory reliefs is to boost the lending capacity of the banks, avoid any adverse impact on their asset quality and to ensure a continuous flow of credit to support the economic activity in these pressing times to be able to sustain business and serve customers continuously.

The State Bank, through a notice, informed banks/DFI/ MFB to conserve capital and further enhance lending and loss absorption capacity by suspending distribution of profits by way of declaring dividends in many manner for the quarter ending March 31st 2020 and half year ending June 30, 2020. The notification does not be apply on dividends declared for the year ending on December, 2019.

The State Bank has advised all institutions to place the letter before the Board of Directors to discuss any possible issues pertaining to an institution's specific circumstances and further inform SBP for consideration based on merit.

The State Bank has reserved the right to review the above instructions on dividend distribution after June 30, 2020 keeping in view the severity of the COVID-19 pandemic impact and economic dynamics on the safety and soundness of the banking system.