Canada bank regulator cautions on share buybacks

Fri Oct 24, 2008 3:59pm EDT
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TORONTO Oct 24 (Reuters) - Canada's financial institutions regulator told the country's banks and insurers this week that they should not repurchase any of their shares under approved buy-back programs without consulting the regulator first.

It is the first time in memory that the Office of the Superintendent of Financial Institutions has issued a specific advisory on share buybacks, known as normal course issuer bids, said a spokesman for the federal regulator.

"OSFI is of the view that the current environment calls for increased conservatism in capital management and that all financial institutions that have normal course issuer bids in place should not be repurchasing shares ... without first consulting OSFI," the regulator told banks and insurance companies on Wednesday.

This practice should continue until further notice, it said.

Shares of Canadian banks and insurance companies are under pressure from the credit crisis and broader economic outlook. The Toronto Stock Exchange's financials index of banks, insurance companies and asset managers is down 26 percent year-to-date, slightly better than the 34 percent drop in the benchmark S&P/TSX composite index.

Shares of financial institutions "are not generally being repurchased," OSFI said in its advisory.

Many banks and insurance companies have in place authorized repurchase programs, usually for a one-year term, as part of their ongoing capital management processes, it noted.

OSFI oversees banks, insurance companies and other deposit-taking institutions, and said it expects "prudent capital management practices" to be applied at all times. (Reporting by Lynne Olver; editing by Rob Wilson)