The Canadian banking regulator said it has paved the way for banks and insurers to raise dividends and resume share buybacks.
Peter Routledge, head of the Office of the Superintendent of Financial Institutions (OSFI), says the reasons for the ban that was implemented at the start of the pandemic no longer hold water.
At the start of the pandemic, OSFI banned major Canadian banks from increasing their dividends or increasing executive compensation, in case that cash was needed elsewhere.
“OSFI expects banks to use the additional lending capacity to support Canadian businesses and households,” the regulator said. said in March 2020.
But the big banks have largely emerged unscathed from the pandemic, with their loan portfolios performing well.
Government support programs have also helped stimulate the economy, and banks now have liquidity well beyond minimum requirements.
In a research note shortly after OSFI’s announcement, CIBC analysts estimated that banks have enough excess capital to repurchase up to 6% of outstanding shares on average.
And they expect dividend increases to happen quickly, perhaps when banks release their fourth quarter results, starting in late November.
The US banking regulator took similar steps to curb cash payments to US banks, before removing those restrictions this summer.
Routledge says corporate boards should be able to make decisions about payments, and OFSI expects them to act responsibly.
“Evil alcohol lover. Twitter junkie. Future teen idol. Reader. Food aficionado. Introvert. Coffee evangelist. Typical bacon enthusiast.”