Canada’s banking regulator says it has cleared 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, says the reasons for the ban that was implemented in the early days of the pandemic no longer stand.
In the early days of the pandemic, the banking regulator forbade Canada’s big banks from raising their dividends or hiking executive compensation, in case that cash was needed for the pandemic uncertainty to come.
“OSFI expects that banks will use the additional lending capacity to support Canadian businesses and households,” the regulator said in March of 2020 when the pandemic was first unfolding.
But the big banks have largely emerged from the pandemic unscathed, with their loan books performing fine.
And government support programs have also helped stimulate the economy, and the banks are now sitting on cash far in excess of the minimum requirements.
The U.S. bank regulator made similar moves to rein in cash payouts at U.S. banks, before removing those limitations this summer.
Routledge says that boards of directors at the companies should be able to make decisions on the payouts, and that OFSI expects them to act responsibly.
More to come