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OSFI Updates Its COVID-19 Guidance on Dividend Increase Restriction

June 16, 2020

On June 11, 2020, the Office of the Superintendent of Financial Institutions (OSFI) updated its COVID-19 FAQs to address the dividend increase restriction applicable to federally regulated deposit-taking institutions and federally regulated insurers.

As part of the regulatory measures OSFI has taken to address issues stemming from COVID-19, OSFI announced on March 13, 2020 that it expected federally regulated financial institutions (FRFIs) to halt dividend increases and share buybacks (Dividend Restriction). The updated FAQs provide more detailed information on this restriction. Specifically, the FAQs address the following:


OSFI defines a dividend increase as an increase in the total dollar amount of dividends paid after March 13, 2020 compared with the last approved regularly scheduled dividend (be it quarterly or less frequent) that occurred prior to March 13, 2020. A regularly scheduled dividend is a cash payment by a FRFI – a bank, insurer or a trust or loan company – to its shareholders at specified times of the year that is part of a consistent dividend pattern. Non-cash dividends, such as stock dividends, are exempt where they have the effect of maintaining or improving the total dollar value of the FRFI’s common equity.

The FAQ responses do no address what is permitted or restricted for FRFI’s that do not declare regular dividends.


The Dividend Restriction applies to all FRFIs, except for FRFIs that are subsidiaries of other FRFIs. However, OSFI notes that it may raise concerns after considering the impact of a subsidiary FRFI’s dividend increase on its capital and liquidity ratios.


OSFI clarifies that despite any stock split or reverse stock split, the total dollar amount of the dividends paid must not be greater than the last approved regularly scheduled dividend prior to March 13, 2020.


A FRFI can continue to use its dividend payout ratio methodology, provided that the total dollar amount of dividend is limited to the total dollar amount of the last approved regularly scheduled dividend prior to March 13.


Where a FRFI has increased its common share capital, it can maintain the same dividend per share so long as the increase in the total dollar amount of dividends paid is less than, or equal to, the total dollar increase in common share capital.


OSFI clarified that the Dividend Restriction does not apply to dividends paid by federally regulated insurers to participating policyholders, since these dividends are paid pursuant to the FRFI’s policy on participating policyholder dividends and are part of the contractual payments to policyholders.

For further information, please contact:
Paul Belanger                            416-863-4284
Ora Morison                              416-863-2712
Vladimir Shatiryan                    416-863-4154

or any other member of our Financial Services Regulatory group.

Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.