Australia's banking regulator said on Tuesday that starting next year banks will no longer have to hold a portion of their profit back, giving the green light to higher dividends, as economic conditions improve following the coronavirus pandemic.
Banks had been asked to limit paying dividends to less than half their profit for the rest of the year, a heavy hit to investors who rely on bank payouts for their consistency in a country where around 8% of the population manage their own retirement income.
The Australian Prudential Regulation Authority (APRA) said the economic outlook had improved since its guidance in July with repayments for most deferred loans starting again.
It said stress tests show that the banking system could handle a "very severe" economic downturn and still support the economy through credit to households and businesses.
However, despite the improving conditions and the new guidance, APRA Chair Wayne Byres said banks and insurers "are expected to maintain a prudent approach to capital management and dividend payouts."
Westpac Banking Corp was the only one of Australia's so-called 'Big Four' banks to not pay an interim dividend earlier this year, while payouts for the other three were constrained by the regulatory limit.
(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Lisa Shumaker)
