The global economy is experiencing an unprecedented shutdown brought about by the COVID-19 pandemic. A shutdown of this magnitude has not been experienced in our lifetime and is bringing with it fiscal and monetary support in the trillions of dollars. The impacts are monumental to governments, businesses and individuals and we have not yet begun to appreciate their long-term potential consequences. We do not yet know how long the shutdown will last, what shape recovery will take and whether there will be missteps as we start to reopen economies. We will continue to understand the impacts of today’s decisions over the coming weeks, months and years.
Within this context, regulators around the globe have been providing guidance to banks and insurance companies on how to proceed with dividends and share buybacks. It will be critical for financial institutions to achieve the appropriate balance between capital preservation for purposes of safety and soundness and the requirement to ensure they have the firepower to support their clients. The regulators expect this and in some cases are mandating requirements immediately. Importantly, all financial institutions’ boards and senior management teams must seek to understand the magnitude and potential impact of their decisions being made while contending with many uncertainties and unknowns about the future.
There have been varied responses around the globe and we have captured them in order to help inform decision making.