The European Central Bank’s top supervisor Andrea Enria appeared to call time on a season of large share buybacks by banks on Thursday as the economy weakens.
Banks including UniCredit (CRDI.MI) and Societe Generale (SOGN.PA) have been reporting bumper profits and announcing dividends and share buybacks, boosted by a sharp increase in interest rates and a trading boom after more than a decade of mostly meagre returns.
“Banks have been able to distribute big, until recently we had quite a number of hefty share buybacks,” Andrea Enria told an event at the Dutch central bank.
“What is changing now is not our policy, it’s the macro outlook. We want banks to recalculate their capital trajectory for a recessionary environment.”
Supervisors were urging banks to preserve capital in the face of a souring economic outlook after finding they were making overly optimistic assumptions about the economic outlook.
This year, the ECB has given the green light to all buybacks that were put up for approval, including from UniCredit, Societe Generale and ING (INGA.AS).