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Alternative lenders to resume share buybacks even though big banks still can’t

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Those restrictions, announced back in March in response to the pandemic, are that federally regulated financial institutions cannot increase regular dividends, buy back common shares or hike executive pay. The restrictions haven’t changed, even as capital levels at big banks have risen, but they do not apply to Home Capital and Equitable Group, which are holding companies.

“They are not federally regulated financial institutions,” an OSFI spokesperson said in an email. “As such, our expectations regarding capital distributions do not apply to these entities.”

Moor noted that the money for Equitable’s buybacks is not coming out of the bank, but from the holding company that sits above it, as is the case with Home Capital. He also pointed to the lender’s common equity tier 1 ratio — a measure of its capital strength — which was at 14.3 per cent at the end of the third quarter, above its target range of 13 to 14 per cent.

Moreover, Equitable on Dec. 9 announced it intended to terminate a $400-million secured backstop liquidity facility provided by five of Canada’s biggest banks.

“This withdrawal signals ongoing confidence in the bank’s liquidity, as well as its strong position for continued growth,” the lender said.

Financial Post

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