Basel clarifies FAQ dividend stopper confusion

Author: | Published: 15 Jul 2011

The Basel Committee has clarified to IFLR its inconsistencies over allowing dividend stops on hybrid capital.

Following a Frequently Asked Questions (FAQ) document released by the Basel Committee on July 5, financial institutions have been concerned about the treatment of dividend stops, with a discrepancy between the original Basel framework and the FAQs.

The Basel III: A global regulatory framework for more resilient banks and banking systems states:

"Cancellation of distributions/payments must not impose restrictions on the bank except in relation to distributions to common stockholders."

But while the original document states that dividend stoppers are permitted for common stock only, last week’s...