The Bank of England lifted restrictions on bank dividends and stock repurchases during the pandemic, believing that the industry has sufficient flexibility to absorb any further Covid-19 shocks.

In its latest financial stability report released on Tuesday, the Bank of England stated that “special protection measures for shareholder distribution are no longer required”.

The central bank cited recent stress test results and lower-than-expected loan loss levels. “The banking industry is still resilient… [and] Ability to continue to provide this support. “

The Bank of England’s decision follows the decisions of the U.S. Federal Reserve and the European Central Bank, which both eased shareholder dividend limits earlier this year.

In March last year, as the pandemic spread in Europe, the Bank of England No dividends To maintain loan capacity and absorb potential losses during the pandemic. The Bank of England began to relax the restrictions in December, but limited the dividend to 25% of quarterly profits, and only allowed the accumulation of 2021 dividends instead of payment.

The Financial Policy Committee added that although the rapid launch of the UK vaccination program has led to improved economic prospects, households and businesses will still need to obtain bank loans as the government’s coronavirus support measures are lifted.

The Bank of England said in a statement: “The FPC expects that banks will use all elements of their capital buffers when necessary to support economic recovery.”

“It is in the collective interest of the banks to continue to support viable and productive businesses instead of defending the capital ratio by cutting loans, as this may have an adverse effect on the economy.”

In order to encourage banks, the FPC stated that it will buffer the so-called countercyclical capital — designed to ensure that banks have additional capital to lend during the crisis — at 0% at least until December.

In addition, the report also pointed out that “the risk-taking of global financial markets has increased” and the price of high-yield assets has soared. It warned that if market participants reassess the prospects for growth or inflation, asset valuations could be “sharp corrections”, leading to higher interest rates.

Although housing price growth and market activity in the UK in the first half of this year were at their highest levels in a decade, the Bank of England said it was not too worried. The debt burden of households is still “significantly lower” than before the financial crisis, and the debt service rate is very low.