UK banks can start paying shareholders dividends again, according to the Bank of England.
The Prudential Regulation Authority, a regulator and part of the central bank, said banks are strong enough to do so.
Banks bowed to pressure in March and ceased dividend payments.
Banks including HSBC, Lloyds, NatWest, Santander and Barclays were due to pay billions of pounds to pension funds and private shareholders.
Stopping the payments allowed them to keep the capital and absorb bigger shocks from potential loan losses.
But many loans to businesses made by banks have been backed by the government, reducing risk for the banks.
“The Prudential Regulation Authority judges that an extension of the exceptional and precautionary action taken in March is not necessary and that there is scope for banks to recommence some distributions should their boards choose to do so,” the regulator said in a statement.
“The PRA will expect to be satisfied that any distributions would not create excess vulnerabilities to stress for a given bank or impede its ability or willingness to support households and businesses,” it warned.
On the topic of bonuses for top earners at the banks, it said it “expects firms to exercise a high degree of caution and prudence in determining the size of any cash bonuses granted to senior staff given the uncertain outlook and the need for banks to deploy capital to support the wider economy.”
Critics have questioned why banks would not wait to see the full impact of the current recession before distributing its reserves.