OSFI lets banks off capital leash

As expected, the Office of the Superintendent of Financial Institutions (OSFI) announced today that banks and other federally regulated financial firms can resume capital distributions.

The superintendent of financial institutions, Peter Routledge, declared that it is now appropriate for the Canada’s banking regulator to lift a curb on executive compensation hikes and on distributions such as dividend hikes and share buybacks.

The regulator adopted restrictions on the banks’ capital activities alongside an array of regulatory measures designed to ensure that the banks could weather the financial distress brought on by the pandemic and continue supporting the real economy through the provision of credit.

In recent months, OSFI has gradually pared back the various regulatory accommodations adopted in the face of the pandemic, including raising the required capital buffers to above their pre-pandemic levels.

Routledge pointed to several reasons for lifting the restriction on capital distributions, including that the original rationale for adopting the restrictions is no longer valid.

He also stressed that decisions on capital distributions properly lie with the senior management and board of directors of the banks, and that OSFI is confident they will act responsibly in making those decisions.

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.