Canadian financial regulator has lifted the curbs it had imposed on the country’s financial institutions such as banks and insurers in March 2020.
The move, which is expected to boost the sector’s valuation, will allow banks and insurers to resume dividend increases, share buyback programmes, and increase executive compensation.
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As per Reuters’ report, the Office of the Superintendent of Financial Institutions (OSFI) stated that the curbs proved effective during the pandemic but are no longer required.
In the quarter that ended on 31 July, the country’s six biggest banks, Royal Bank of Canada, Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, and National Bank of Canada had over $39.4bn in capital, which is more than the current minimum requirement, the report said.
The lenders are expected to make changes to their capital distributions when they announce their fourth-quarter financial results, said Goodreid Investment Counsel portfolio manager Brian Madden.
“This (move) creates an impetus for valuation multiples to expand,” Madden added.
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By GlobalDataDuring the past 20 months when restrictions were in place, the Canadian bank’s index climbed 82%. For the same period, the US banks benchmark rose 107%.
Canada’s decision comes after the US, Europe and Australia have already lifted their moratorium.
Commenting on the delay, Superintendent of Financial Institutions Peter Routledge said that the OSFI felt “a little caution, a little bit more prudence for a few more months wouldn’t hurt the system.”
