The European Central Bank has decided to let banks pay out part of their cumulated 2019-2020 profits to shareholders if they have enough capital, easing a blanket ban on dividends and buybacks set during the first wave of the coronavirus crisis.

The euro zone's top banking watchdog was still asking banks to be prudent so to preserve capital for a wave of unpaid loans that could reach €1.4 trillion.

But it is now making room for some small payouts from the healthiest banks, heeding calls from disgruntled bankers and investors as the economic outlook improves.

"The ECB expects dividends and share buy-backs to remain below 15% of the cumulated profit for 2019-20 and not higher than 20 basis points of the Common Equity Tier 1 (CET1) ratio, whichever is lower," an ECB statement said.

"Banks that intend to pay dividends or buy back shares need to be profitable and have robust capital trajectories."

The recommendation will remain valid until September 2021 and includes a request that banks use "extreme moderation" with bonuses and use capital to finance households and companies instead. 

The euro zone is still struggling under the second wave of the coronavirus pandemic with delinquencies expected to rise in the coming months as some government support schemes are phased out and companies and households run out of savings.

But the prospect of a vaccine means that the outlook further out seems rosier, leading the ECB to project the euro zone's economy rebounding by 3.9% next year and 4.2% in 2022.

"In revising its recommendation, the ECB acknowledges the reduced uncertainty in macroeconomic projections," the statement said.

"The revised recommendation aims to safeguard banks' capacity to absorb losses and lend to support the economy."

The Bank of England set its own dividend cap for UK banks at 25% of cumulative 2019/20 profits last week.