* Not doing buybacks due to capital uncertainty
* Thinks Tier 1 capital minimums should be higher
(Adds comments, details)
TORONTO, Sept 22 (Reuters) - The financial sector will keep capital levels high because no one knows how regulators will change requirements, so buybacks will be difficult, the head of Canadian Western Bank CWB.TO said on Tuesday.
Chief Executive Larry Pollack said lenders are waiting to see what might change in terms of minimum Tier 1 regulatory capital levels, which currently stand at 7 percent, before deciding on how they will deploy excess capital.
"Until the regulatory system globally actually decides what capital ratio we should have, I don't think the Canadian regulators will be too happy about people buying their own shares back," Pollack told an institutional investor conference hosted by CIBC in Toronto.
Canadian banks have big capital cushions compared to global rivals and analysts have begun to speculate about whether they will use the money for acquisitions or return the capital to investors in the way of share buybacks or dividend increases.
The minimum Tier 1 requirement in Canada is 7 percent, but the biggest eight Canadian banks have capital levels from 9 percent to almost 13 percent, well above global competitors.
Canada's big banks shored up their balance sheets earlier in the year by issuing preferred and common shares.
Pollack, who reiterated that CWB will only do acquisitions that fit the regional bank's strategy and are immediately accretive to earnings, said the recession is not over yet. So maintaining high capital levels is a good medium-term strategy.
"But we could always buy warrants back, or buy common shares on the market and reduce that dilution if the regulators put a pin in as to what your capital ratios should be," Pollack said.
He said minimum capital ratios should probably be higher than the current 7 percent and would perhaps end up closer to 8.5 percent or 9 percent.
"Even if they are at those levels, no one is going to be at those levels, they're going to be north of 10 on Tier 1," Pollack noted. (Reporting by Andrea Hopkins; editing by Janet Guttsman)