(Bloomberg) — The European Central Bank prolonged a de facto ban on banks returning capital to shareholders and urged them to point out restraint on bonuses after the coronavirus outbreak, dealing a blow to lenders who lobbied for enterprise as standard.The supervisor requested that banks not pay dividends or purchase again shares at the least till January, three months longer than initially indicated, and “to be extremely moderate with regard to variable remuneration,” in line with an announcement Tuesday. The ECB mentioned it would overview its stance once more within the fourth quarter.Individually, the Bank of England mentioned it would additionally conduct a overview on the finish of the 12 months of any plans by Britain’s largest banks to pay dividends or resume buybacks. On the BoE’s urging, HSBC Holdings Plc, Barclays Plc and Lloyds Banking Group Plc, amongst different massive corporations, suspended payouts earlier this 12 months.Each central banks had informed lenders in March to preserve capital as lockdowns to fight the pandemic introduced the economic system to a standstill. Whereas the transfer was painful for some corporations and their buyers, the ECB indicated it was a trade-off for unprecedented regulatory reduction it had granted them to climate the disaster.Since then, banks together with BNP Paribas SA have been lobbying to renew dividend funds as they search to shore up slumping share costs, Bloomberg reported. A historic buying and selling rally, regulatory reduction, and intensive authorities loan ensures have bolstered earnings at a number of banks. Switzerland’s UBS Group AG indicated final week that it may return extra capital to shareholders towards the top of the 12 months.“We know that investors have not been particularly pleased with our decision, but we think this is a necessary action to be taken at this stage of heightened uncertainty,” Andrea Enria, the ECB’s high banking watchdog, informed reporters on Tuesday. “It is important to ask banks to focus their capital resources on lending and loss absorption.”Bloomberg reported final week that the ECB was leaning towards extending the ban on dividends till at the least the top of the 12 months.The ECB mentioned it would have in mind the financial atmosphere, stability of the monetary system and banks’ capability to plan their future capital ranges when it critiques its stance once more. Banks may resume dividends as soon as the uncertainty subsides, even with ranges of economic energy which might be under the ECB’s general calls for, so long as the lenders can present “that their capital positions are sustainable in the medium term,” the watchdog mentioned.The BoE mentioned its evaluation within the fourth quarter “will be based on the current and projected capital positions of the banks and will take into account the level of uncertainty about the future path of the economy, market conditions and capital trajectories prevailing at that time.”Stress TestThe 23-member Euro Stoxx Banks Index was little modified as of 12:35 p.m. in Frankfurt, after falling 34% this 12 months.The ECB additionally performed an evaluation of how weak euro-zone banks are to varied eventualities for the way the economic system might be affected by the pandemic. The findings included:Within the central state of affairs of a “harsh” recession, banks’ combination widespread fairness Tier 1 ratio would fall by about 1.9 share factors to 12.6% by the top of 2022Within the “severe” state of affairs, the ratio would decline by 5.7 share factors to eight.8percentIn that case, “several banks would need to take action to maintain compliance with their minimum capital requirements, but the overall shortfall would remain contained”“Overall, the results show that the euro-area banking sector can withstand the pandemic-induced stress”The outcomes ought to reassure buyers that eurozone banks will have the ability to face up to the shock simulated in the principle state of affairs, analysts at Citigroup Inc. mentioned in a report on Tuesday in London.The central bank has beforehand mentioned its dividend request stored about 30 billion euros ($35 billion) of capital within the euro-area banking system. It has urged banks to conform on a voluntary foundation, though Enria mentioned the ECB can put in place binding measures if particular person lenders don’t do as requested.Germany’s cooperative banks mentioned the ECB went too far and doesn’t acknowledge that some lenders are sturdy sufficient to make funds.“It’s clear that if a bank has very significant capital buffers above minimum requirements, those banks would be particularly annoyed,” Enria informed reporters. “It is appropriate at this stage to have a one size fits all recommendation” given the uncertainty and want to stop banks from slicing again on lending, he mentioned.Story continuesThe ECB reiterated a name for banks to dip into their capital buffers to keep up the movement of credit score. The supervisor mentioned it received’t require banks to start out replenishing buffers till after capital depletion reaches its peak, at any charge not earlier than the top of 2022.The central bank mentioned that it received’t prolong a lot of the operational reduction it afforded banks in addressing deficiencies comparable to insufficient threat models, though lenders with ranges of dangerous money owed shall be granted an extra six months to submit their plans for coping with such soured loans.(Updates with Citi remark in 12th paragraph, German banks in 14th)For extra articles like this, please go to us at bloomberg.comSubscribe now to remain forward with probably the most trusted enterprise information supply.©2020 Bloomberg L.P.