MEPs demand clarification of bank payout rules

The European Commission is taking another look at when the so-called Maximum Distributable Amount mechanism for banks will be triggered.

Part of the Commission’s move to create a Banking Union, the MDA limits the amount of earnings distributions — such as dividends and bonuses — that banks can pay out in case they fail to meet their capital buffer requirements. But national supervisory bodies have been applying the rules inconsistently, a Commission spokesperson said.

This prompted criticism of the Commission from some MEPs at a European Parliamentary plenary session in Strasbourg on Thursday. Roberto Gualtieri, chair of the Parliament’s monetary and economic committee, called for a legal clarification of the MDA procedure while questioning Jonathan Hill, the commissioner in charge of financial stability, financial services and capital markets union.

Hill answered that he was aware of the confusion created by the existing legislation and said steps to solve the problem are being taken.

“We believe that there might be a need to make a clearer distinction between the use of so-called Pillar 1 requirements, which are laid down in law and apply to all banks, and Pillar 2 requirements that are institution-specific, decided on by the supervisor, and depend on the level of additional risks of a particular bank,” said the spokesperson.

Hill’s office sent a note earlier this week to the Commission Expert Group on Banking, Payments and Insurance to consult on the way forward to clarify these rules.