The Bank of England removed the restrictions put in place regarding the distribution of bank profits last year as the banking system proved resilient to a wide range of risks.
The extraordinary guardrails on shareholder distributions are no longer necessary, the Financial Policy Committee said in its meeting held on June 30.
As the banking sector is well capitalized, the FPC scrapped the temporary curb imposed on paying dividend and share buybacks.
The FPC judged that the interim results of the 2021 solvency stress test, together with the central outlook, are consistent with the Prudential Regulation Committee’s decision.
Further, the FPC expects banks to use all elements of their capital buffers as necessary to support the economy through the recovery.
The committee expects to maintain the countercyclical capital buffer rate at zero percent until at least December, indicating that any subsequent increase would not be expected to take effect until the end of 2022 at the earliest.
The committee said it remains vigilant to debt vulnerabilities in the financial system that could amplify risks to the financial stability.