Banks told to limit dividends

The Australian Prudential Regulation Authority (APRA) has told Australia's largest banks to limit their dividend payouts to investors to allow the banks to comply with new rules requiring them to maintain higher capital thresholds, according to The Australian Financial Review.

Bank shares have posted solid gains amid rising investor expectations of high dividend yields and bonus capital returns.

However, the banks have been warned by APRA that they “should maintain adequate capital buffers”, according to the AFR, both in a letter and follow-up phone calls.

“The letter was a bit weaselly, let's say cautiously phrased, but the phone follow-up made it clear we shouldn't consider paying out more capital in dividends as the prudential charge was going to be more onerous than we thought,” one senior bank executive told the newspaper.