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By Nichola Saminather
TORONTO, Nov. 4 (Reuters) – Canadian banks and insurers can resume dividend increases, share buybacks and increase executive compensation, the country’s financial regulator said Thursday, lifting the moratorium on he imposed on them since March 2020.
The Office of the Superintendent of Financial Institutions (OSFI) said in a statement that these measures have been effective over the past year and a half, but are no longer needed or appropriate and are being rolled back.
The Canadian bank index rose 83% during the 20-month moratorium. The benchmark index of US banks jumped 107% over the same period.
Canadian financial firms have accumulated massive levels of excess capital since the restriction was implemented, and investors have grown increasingly impatient as regulators in other parts of the world, including the United States, l Europe and Australia have lifted their restrictions.
Canada’s six largest lenders – the Royal Bank of Canada, the Toronto-Dominion Bank, the Bank of Nova Scotia, the Bank of Montreal, the Canadian Imperial Bank of Commerce and the National Bank of Canada – had capital of nearly 49 billion Canadian dollars ($ 39.4 billion) minimum required during the quarter ended July 31.
This was after OSFI raised the minimum capital buffer to guard against risk to an all-time high as of October 31, a step seen as a reversal of pandemic-era measures to support the resilience of financial institutions. and considered a precursor to the lifting of the restrictions on the distribution of capital.
Shares of Royal Bank, Bank of Montreal and National Bank rose about 0.4% following the announcement.
National Bank and BMO could increase their dividends to the maximum to reach the midpoint of their target ranges of 38% and 33% respectively, according to the analysis, based on fiscal year 2022.
($ 1 = $ 1.2425 Canadian) (Reporting by Nichola Saminather; Editing by Andrea Ricci)