Mea culpa: Higher capital requirements = Higher bank dividends

Sam Ferraro

Global Founders Funds Management

Mea culpa: Higher capital requirements = Higher bank dividends. In a recent blog post, I suggested that one of the reasons the government would be reluctant to lift capital requirements substantially was due to concerns that banks would cut back their dividends, which amounted to $20 billion in the past year alone. Well, I was wrong on the 'negative' link between bank capital and dividends (thanks to Charles Hyde from Macquarie University for pointing this out). Empirical evidence confirms that safer banks globally - those with greater loss absorbing capital - actually pay out higher dividends than their more leveraged counterparts. Despite having lower capital ratios than their global peers, Australia's major banks pay higher dividends, which I attribute in part to dividend imputation. (VIEW LINK)


Sam Ferraro
Senior Portfolio Manager
Global Founders Funds Management

Managing Director of Global Founders Funds Management, Sam has over 20 years experience in financial markets, with Merrill Lynch, JBWere and Goldman Sachs.

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