BoE suspends dividend as capital falls below target

The Bank of England will not be paying a dividend to the government this year, as its loss-absorbing capital dipped below the minimum level agreed with the UK Treasury.

The BoE did make a pre-tax profit of £72 million ($100 million) in the 2020–21 financial year, according to its annual report and accounts, published on June 17. However, it said its capital had dropped below the £3.5 billion set out in its framework agreement with the Treasury, meaning profits will be retained this year to rebuild the capital buffer.

The fall was largely driven by a rise in intangible assets, the BoE said, particularly due to its project to renew its real-time gross settlement system. Loss-absorbing capital is calculated as the bank’s total capital minus any components that cannot absorb losses, including intangible assets, illiquid investments and property revaluation reserves.

Intangibles rose by £45 million to £130 million over the year, and loss-absorbing capital fell from £3.504 billion to £3.475 billion.

Several central banks worldwide have declined to pay dividends this year, which, in some cases, has been a source of tension with cash-strapped governments.