March 24, 2020 / 2:23 PM / 14 days ago

UPDATE 2-Germany, like France and Sweden, urges banks to hold off dividends and bonuses

* Bafin also advises against buybacks

* Regulators fear misuse of crisis funds

* Follows similar calls in Sweden and France (Updates with background, context, reaction)

FRANKFURT, March 24 (Reuters) - Germany’s financial watchdog on Tuesday urged banks to refrain from share buybacks and think twice before paying dividends and bonuses, the latest warning from regulators in Europe worried that banks could misuse funds meant to bolster the economy against the coronavirus.

Regulators have recently enacted measures to make it easier for banks to lend and to absorb losses as economic crisis looms, but they want to prevent the money, which ultimately comes from taxpayers, ending up in the pockets of shareholders or bankers.

Few banks have pulled their dividends voluntarily. Santander of Spain, hard hit by the outbreak, on Monday became the first major euro zone lender to announce that it would scrap an interim payment in November and review its 2020 full-year dividend.

The European Central Bank, which has said it will buy more than 1 trillion euros in bonds and provide cheap financing to banks to fund companies, also expects banks to make “prudent decisions” on payouts.

“The relief banks get from the measures adopted needs to be used to finance the economy and absorb possible losses, not to increase remuneration or the distribution of dividends,” the ECB said on its website.

The advice from Germany’s Bafin watchdog follows similar calls earlier on Tuesday from officials in Sweden and France.

“We advise financial institutions to handle existing capital resources very carefully,” Bafin President Felix Hufeld said in a statement.

Germany’s Commerzbank has been planning to pay a dividend of 15 cents per share. A spokeswoman said the lender would look closely at Bafin’s advice and “will decide in a responsible way”.

Last week, a group of former senior regulators said in a statement to G20 finance ministers and central bankers that commercial lenders should immediately halt share buybacks, dividends and most staff bonuses to bolster their capital and their capacity to lend to the real economy.

Reporting by Tom Sims, Hans Seidenstuecker and Frank Siebelt; Editing by Kevin Liffey

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