European Central Bank said it may give lenders more time to replenish their capital, as they work through credit that goes sour because of the pandemic.

In the coming months we will closely watch developments and stand ready to postpone the timeline to rebuild buffers if doing so would help banks to quickly process the expected increase in non-performing loans, said Andrea Enria, chair of the ECBs supervisory board.

The supervisor said last year that it wont push banks to start to rebuilding capital until losses subside, and at any rate not before the end of 2022.

The ECB and other authorities have given banks unprecedented regulatory relief to ensure they can keep lending to companies hurt by lockdowns and other fallout from the health crisis. In a trade-off, the ECB froze dividend payments last year and capped them for much of 2021.

The ECB still plans to lift that cap at the end of September in the absence of unexpected, materially adverse developments in the coming months, Enria said at a conference hosted by Morgan Stanley.

Banks have communicated plans to return about 10 billion euros ($12 billion) to shareholders under the cap, which is a third of what they had planned in September, Enria said. Only a few banks have distribution plans that are somewhat greater than our guardrails, he said. We are now engaged in supervisory dialog with these firms.

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