Canada’s banking regulator says it is in no hurry to ease restrictions on dividends or share buybacks.
Jeremy Rudin, head of the Office of the Superintendent of Financial Institutions (OSFI), said in a speech that he won’t loosen restrictions on how financial institutions use their capital until the risks of another economic setback have completely dissipated.
Earlier this year, Rudin banned Canada’s banks from increasing dividends, buying back shares and increasing executive compensation to ensure that the lenders have sufficient capital to weather the downturn brought about by the Covid-19 pandemic.
"From our perspective, keeping the restrictions on a bit too long is not as serious a mistake as taking them off too soon," Rudin said. "We’ll begin to relax those restrictions when we get to the point where we think that there are few if any plausible paths that lead to a second pandemic-induced setback for the economy."
Rudin said the regulator will know when the time is right by how much uncertainty remains over the economic outlook. He added there is no set date or any particular indicator that would trigger a decision to ease restrictions on Canadian banks.
The restrictions were part of a suite of measures rolled out by OSFI in mid-March of this year as part of a broader government and central bank effort to keep financial markets functioning amid pandemic lockdowns. The regulator also helped the banking sector by temporarily lowering capital buffers, releasing about $300 billion in capital for new lending.
