Toronto Dominion Bank says it intends to repurchase up to $10-billion worth of common shares by next July after Canada’s banking regulator lowered the amount of money the Big Six need to keep aside for financial shocks.

The new share buyback program will be subject to approval from the Office of the Superintendent of Financial Institutions (OSFI) , Canada’s top banking regulator, but it won’t exceed 61 million common shares and will represent about 3.74 per cent of the bank’s issued and outstanding common shares.

OSFI in June reduced the domestic stability buffer , allowing banks to have a common equity tier 1 (CET1) ratio, which measures how much capital banks have with respect to their risk-weighted assets, of 11 per cent, instead of 11.5 previously.

The decision frees up billions of dollars in capital for the banks, but some analysts say an uncertain economy, weak loan demand and unattractive acquisition targets are making it challenging for banks to deploy that excess cash effectively.

Canada’s biggest banks have been well in excess of that figure, with CET1 ratios of more than 13 per cent in recent years.

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TD’s CET1 ratio as of July 31 was about 14.3 per cent. Chief executive Raymond Chun in August said the lender could return more than $13 billion to shareholders in fiscal 2027 in its bid to reach its CET1 ratio target of 13 per cent, though its primary goal would be to use any extra capital for organic growth.

“If we don’t have a need for or have excess capital, we would consistently return capital back to our shareholders, and I see that playing through in 2027,” he said on a call with analysts at the time.

TD’s stock has risen 31.5 per cent this year as of Tuesday’s close.

The bank completed the repurchase of $7-billion worth of common shares on Sept. 25.

• Email: nkarim@postmedia.com