Canada freezes bank capital buffer at 3% until mid-2028

RegulationCorporate Action
โดย Money & Banking·CA·Read original
Summary · why it matters

Canada's financial regulator, OSFI, announced it will keep the Domestic Stability Buffer requirement at 3% throughout the tenure of the current superintendent. Peter Routledge, Canada's superintendent of financial institutions, confirmed during a conference hosted by Bank of Nova Scotia that the 3% level will remain unchanged until June 2028, when his term ends. This follows OSFI's reduction of the buffer by 0.50 percentage points, or 50 basis points, to 3% last June, the first change in three years. Currently, Canada's largest banks must maintain a Common Equity Tier 1 ratio of at least 11% of risk-weighted assets, and the country's six largest banks hold capital comfortably above that minimum. Routledge said OSFI has not imposed restrictions on how banks may use excess capital, unlike during the COVID-19 pandemic, when the regulator limited dividend payments and share buybacks. Several executives of major banks attending the conference said their approach to deploying capital going forward will prioritize organic growth first, followed by share buybacks, rather than large acquisitions. Scott Thomson, chief executive officer of Scotiabank, said organic growth comes first and buybacks second, while Raymond Chun, chief executive officer of Toronto-Dominion Bank, said the bank has strong potential to run a high level of share buyback programs. Royal Bank of Canada and Bank of Montreal also said they plan to continue returning excess capital to shareholders through share buybacks.

Impact on stocks 4

Financials▲ · 4 stocks
Bank of Nova Scotia
BNS
▲ PositiveCapitalrelevance

Conference host and OSFI's buffer freeze with no capital-use restrictions supports Scotiabank's stated priority of organic growth then buybacks.

Toronto Dominion Bank
TD
▲ PositiveCapitalrelevance

TD CEO says the bank has strong potential to run high share buyback programs as OSFI leaves excess capital unrestricted.

Bank of Montreal
BMO
▲ PositiveCapitalrelevance

OSFI keeps buffer at 3% with no restrictions on excess capital, and BMO says it will keep returning excess capital via buybacks.

Royal Bank of Canada
RY
▲ PositiveCapitalrelevance

RBC plans to continue returning excess capital to shareholders through share buybacks under the unchanged 3% buffer.

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