This chapter examines the dividend policy of European banks. The empirical evidence presented here suggests that financial institutions in the Eurozone react to stress in international financial markets by reducing or omitting dividend payouts to strengthen their capital position. Additionally, a negative reaction of dividend payouts of European banks to an increase of the yield differential between German and Spanish bonds seems to exist. However, this response of dividends to sovereign credit risk in the Eurozone is not statistically significant. The financial crisis starting in 2007 does not seem to materially change the relationships among the variables examined here.