Mr. Chairman, in order to build the buffers that will cushion banks against the likely deterioration in bank’s solvency position, the central bank encourages all banks to observe the prudential capital adequacy buffer ratio of 13 percent in making their dividend pay-out decisions.
Banks whose CARs are below 13 percent must ensure that in addition to making the appropriate statutory provisions and full provision for non-performing loans, they restrict their dividend payments to no more than 50 percent of distributable profits in the year. This is to allow them build the necessary buffers to contain any unanticipated shocks to the banks’ capital.