ECB may let some banks pay dividends after December

FRANKFURT (Reuters) - The European Central Bank (ECB) will in December revisit its recommendation for euro zone banks not to pay dividends and may move to a more flexible, case-by-case approach, ECB board member Yves Mersch said on Friday.

The ECB earlier this year told banks to halt share buybacks and dividend payments as a deep, pandemic-induced recession would deplete much of their available capital.

Some policymakers also argued that paying shareholders would be inappropriate as banks benefitted from various public subsidies and guarantees so they could continue lending to the real economy.

"This recommendation is, and must remain, exceptional and temporary," said Mersch, the deputy head of the ECB's bank supervision arm.

"We will review it in December and, unless we conclude that the banks’ capital projections remain clouded by high uncertainty, we will revert to our usual supervisory practice of assessing planned distributions of dividends on a bank-by-bank basis."

Banks have by and large followed the recommendation, which is not binding but if not adopted risked drawing closer supervisory scrutiny and more binding requirements from the ECB.

Euro zone banks shares <.SX7P> are down around 40% since the start of the coronavirus crisis, more than twice as much as the broader market.

(Reporting by Balazs Koranyi; Editing by Kevin Liffey and Mark Potter)