Urged Eurozone lenders to “remain prudent”, the European Central Bank (ECB) on Friday announced to end pandemic-era restrictions on banks’ payouts to shareholders after September 2021. It has recommended that all banks should limit dividends. But it warned that eurozone lenders “should remain prudent when deciding on dividends and share buy-backs”.

In March 2020 after the outbreak of coronavirus pandemic, the ECB had imposed a cap on banks’ rewards to shareholders to ensure lenders had enough liquidity to weather the fallout.

Also Read| Germany lists Spain, the Netherlands as COVID high-risk countries

The curbs were then extended twice, until September 2021. The Frankfurt institution said with the eurozone recovery now firmly under way because of mass vaccinations and post-lockdown reopenings, it would return to the “pre-pandemic way of assessing” banks’ plans for dividends and share buy-backs. But it urged banks to keep a cushion to cope with further fallout from the pandemic, including potential bankruptcies.

Banks should “not underestimate the risk that additional losses may later have an impact on their capital trajectory as support measures expire”, the ECB said.

Also Read| Moderna’s COVID vaccine approved for children aged 12-17 by EU

Meanwhile, ECB President Christine Lagarde, on Thursday, warned of growing economic uncertainty after fast-spreading Delta variant of the virus has been found in various EU countries.

The ECB has taken unprecedented action to help the 19-nation currency club through the pandemic, launching a 1.85 trillion-euro emergency bond-buying scheme to stimulate growth and keep borrowing costs low.

It has also offered ultra-cheap loans to banks and eased rules on capital buffers to keep credit flowing to households and businesses.

But the Frankfurt institution made clear it wanted lenders to make their own extraordinary efforts as well. The US Federal Reserve and the Bank of England have also recently lifted their Covid-era restrictions on dividends after banks proved they had successfully weathered the changing economic circumstances.

Experts say eurozone banks are sitting on billions of euros they intend to pay out to shareholders.