German banks should brace for insolvencies, hold off dividends: Bundesbank’s Buch

German banks have sufficient capital buffers to weather the COVID-19 crisis but should prepare for a rise in insolvencies and refrain from paying out dividends for now, Bundesbank Vice President Claudia Buch said in a newspaper interview published on Sunday.

The German government has temporarily waived an obligation to file for insolvency to avoid a wave of corporate bankruptcies due to the health crisis, but numbers are widely expected to pick up early next year once the measure has expired.

“The banks have sufficient buffers. But banks and public authorities should prepare for more negative developments and for dealing with higher insolvencies,” Buch told the Frankfurter Allgemeine Sonntagszeitung.

“There is so much uncertainty that banks should do everything they can to avoid weakening their resilience now. Later, they can still pay dividends when the worst is over.”