Hit the buffers: EU’s dividend ban overshadows reform effort

Banks may be reluctant to run down buffers even if regulators soften the MDA threshold for payouts

One of the fundamental ideas behind the reform of prudential regulation after the 2008 financial crisis was to ensure banks built up capital buffers during the good times that could then be depleted in the bad times. That would allow them to continue lending in a downturn, rather than amplifying the economic shock by cutting off credit to the real economy.

But the European Union’s capital requirements directive – and its post-Brexit UK reflection – stops banks from making distributions to