Regulator gives Canadian banks OK to raise dividends, boost executive pay again

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 (OSFI), says the reasons for the ban that was implemented early in the pandemic no longer stand.

In the early days of the pandemic, the OSFI forbade Canada's big banks from raising their dividends or hiking executive compensation, in case that cash was needed elsewhere.

"OSFI expects that banks will use the additional lending capacity to support Canadian businesses and households,"the regulatorsaid in March 2020.

But the big banks have largely emerged from the pandemic unscathed, with their loan books performing fine.

Government support programs have also helped stimulate the economy, and the banks are now sitting on cash far in excess of the minimum requirements.

In a research note shortly after the OSFI announcement, CIBC analysts estimated the bankshave sufficient excess capital to buy back up to sixper centof outstanding shares on average.

And they expect dividend raises to happen fast possibly as banksreport fourth quarter results, starting at the end of November.

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.