Fidelity International

Fidelity encourages pragmatic dividend deferrals for banks to combat coronavirus financial risks

26 March 2020

Romain Boscher, Global Chief Investment Officer, Equities, Fidelity International

“Considerable uncertainly is impacting the global economy as the spread of coronavirus threatens to create a financial crisis. The economic disruption caused by the virus will likely lead to a considerable increase in corporate debt burdens and defaults. Even after years of capital strengthening, banks, particularly in Europe, are heavily exposed to falling asset prices and non-performing loans in a world of ultra-low and in some cases negative real interest rates. By providing the financing clients require, banks, working alongside governments, will have a crucial role to play to ensure our economies will be able to recover.

“Fidelity International welcomes and supports calls from some European regulators requesting that European banks temporarily defer dividend payments until uncertainty abates. Should the economic outlook deteriorate further, pragmatic deferrals will create an additional capital buffer for banks to absorb potential financial shocks and reduce the risk of highly-dilutive capital raises.

“We know that dividends play an invaluable role in the economy, especially for long-term savers and this should not be underestimated. It’s important to emphasise that we are not advocating the cancellation of dividends. Santander’s announcement to consolidate payments to next year is a good exemplar. As soon as the situation stabilises, or the impact of any impaired loans improves, then dividends should be paid out.

“As active investment managers we believe a dividend deferral is in the best interest of our clients because it prioritises financial stability in uncertain times and ensures banks are well capitalised and able to help people and small businesses as they should. We would advocate for European banks to act on this now.”

ENDS

About Fidelity International

Fidelity International offers investment solutions and services and retirement expertise to more than 2.4 million customers globally. As a privately-held, purpose-driven company with a 50-year heritage, we think generationally and invest for the long term. Operating in more than 25 countries and with $582 billion in total assets, our clients range from central banks, sovereign wealth funds, large corporates, financial institutions, insurers and wealth managers, to private individuals.

Our Workplace & Personal Financial Health business provides individuals, advisers and employers with access to world-class investment choices, third-party solutions, administration services and pension guidance. Together with our Investment Solutions & Services business, we invest $448 billion on behalf of our clients. By combining our asset management expertise with our solutions for workplace and personal investing, we work together to build better financial futures. Data as at 31 December 2019. Read more at fidelityinternational.com

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