Banks urged to cut dividends

A more proactive supervisory policy forcing banks to cut dividend payouts in times of stress may help shield the economy from future credit shocks, Boston Federal Reserve Bank President Eric Rosengren said yesterday.

Rosengren, speaking at an event on the sidelines of International Monetary Fund (IMF) meetings, said banks were slow to cut payouts in the early stages of the 2007-2009 financial crisis as their management did not want to signal weakness, and regulators were slow to respond.