Banks may get the go-ahead to boost shareholder returns

Canada’s banks may get the green light to return more money to shareholders later this week.

The federal banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), will hold an online event on Nov. 4, during which it will make an announcement on capital distributions for federally-regulated financial firms.

OSFI said that Peter Routledge, superintendent of financial institutions, will provide an update on the regulators’ priorities and policy agenda — specifically including its plans for capital distributions — starting at 2 pm ET, followed by a press conference.

The banks have been under capital return constraints since the onset of the pandemic.

Back in March 2020, OSFI undertook a number of actions designed to ensure the resilience of the financial system and availability of credit to the economy, such as reducing capital buffers.

At that time, the regulator stressed that it was allowing banks to unleash their capital reserves to support lending; not to boost shareholder returns (through mechanisms such as higher dividends and share buybacks).

As the stress on the financial system has abated, OSFI has gradually curbed some of the regulatory measures taken in response to the turmoil caused by the pandemic. That includes restoring the capital buffer requirements, a step that took effect on Oct. 31.

With capital buffers now back to their pre-pandemic levels, the regulator may be ready to relax the curbs on shareholder distributions, too.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.