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British banks uninvestable after scrapping dividends, says RBS chairman

Howard Davies also said regulators will need to rework the capital framework for lenders by the Autumn and that payments could not be on hold indefinitely

Royal Bank of Scotland - British banks uninvestable after scrapping dividends, says RBS chairman

The chairman of Royal Bank of Scotland Group PLC (LON:RBS), Howard Davies, has said the UK’s banks are “not investible” after they were forced to scrap their dividends by the Bank of England to preserve cash during the coronavirus crisis.

The central bank has said that the firms must now get permission to pay dividends, however, this is unlikely to be granted at least until the end of 2020.

READ: Lloyds Banking and other big banks suspend dividends after Bank of England request

In a webinar on Friday, Davies said regulators will need to rework the capital framework for lenders by the Autumn and that the banks could not keep payments to investors on hold indefinitely.

The chairman added that the ability to invest in the banks was curtailed as potential shareholders “can’t plug in any numbers for cash out”, making it harder to calculate value.

Meanwhile, Anne Boden, the chief executive of challenger bank Starling, has said financial institutions may need support from the UK government to handle an expected jump in unpaid state-backed business loans which have been deployed to keep the economy afloat during the pandemic.

There could also be more trouble for the finance sector ahead as the prospect of a no-deal Brexit once again resurfaces with the trade deal deadline on December 31 inching closer.

Shares in RBS were down 2% at 122.6p in late-morning trading, while Lloyds Banking Group PLC (LON:LLOY) dropped 2.3% to 31.1p, HSBC Holdings PLC (LON:HSBA) fell 1.4% and Standard Chartered PLC (LON:STAN) slipped 2.5% to 431.3p.

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