Canada’s biggest banks set aside 3.9 per cent more for bonuses, a relatively small increase in a year when record revenue from trading and dealmaking helped firms weather the COVID-19 pandemic.
The country’s six largest lenders set aside $16.2 billion (US$12.6 billion) for performance-based compensation in the 2020 fiscal year. The increase improved upon the previous year’s 2.5 per cent gain — the smallest in nine years — though it fell short of the 6.3 per cent average for the past decade.
“This year is going to be very challenging when it comes to bonuses,” said Bill Vlaad, president of Vlaad & Co., a Toronto-based recruitment firm that monitors compensation trends. “The rest of Canada has had a really challenging year, so the banks can’t then go out and pay investment bankers crazy bonuses. They just can’t do that optically.”
Toronto-Dominion Bank and Royal Bank of Canada, the two largest lenders, had the biggest increases to their bonus pools, while Bank of Nova Scotia — which sold businesses and operations through the year — was the only company to shrink its reserves for performance-based pay.
Banks saw a 22 per cent surge in annual revenue from their capital-markets operations, to about $31.1 billion collectively for the year ended Oct. 31. Underwriting and advisory fees rose 23 per cent to a new peak of $5.66 billion, and trading revenue soared 41 per cent to a record $16.5 billion.
Overall, the Big Six banks had $41.2 billion in annual net income, down 12 per cent from the previous year’s record.
Canada’s bonus reserves may hint what’s ahead for U.S. and European banks. Wall Street traders are poised for handsome bonuses in their best year in a decade, though their investment-banking peers may be less fortunate. Traders at JPMorgan Chase & Co. may see a 20 per cent bonus boost.
In Europe, Deutsche Bank AG signaled in October that it’s planning bonus increases for top-performing investment bankers. UBS Group AG plans to raise fixed salaries for some employees by as much as 20 per cent, allowing the company to lower its bonus pool.
The Canadian banks pay bonuses based on performance, with most of the variable compensation going to capital-markets employees such as investment bankers, research analysts and those in sales and trading. Variable compensation reflects the amount reserved, not paid out, and doesn’t include base salaries. Bonuses are typically distributed in December.
“There aren’t a lot of bonuses to go out when you divide it by the number of people that are still on at the firms,” Vlaad said. “The banks have an unnatural, invisible hand that is coming in and has restricted them from having any material layoffs, so they haven’t been able to be as efficient as they’d like to be because of their promises to the Canadian public.”
The six banks’ workforce totals about 378,400, down 3 per cent from last year, with Scotiabank shrinking the most after selling operations in the Caribbean and winding down other businesses. Bank of Montreal’s and Canadian Imperial Bank of Commerce’s ranks also shrunk after the two companies announced cost-reduction measures before the pandemic. Job cuts across the industry could have been higher if not for COVID-19, with chief executive officers vowing that employees wouldn’t lose their jobs due to the pandemic.
Here’s a bonus breakdown by bank:
Toronto-Dominion
Canada’s largest lender by assets set aside $2.89 billion for incentive compensation, with its 6.2 per cent increase the highest since 2017. The pool reflects employees’ ability to keep the bank serving customers and running efficiently throughout the pandemic, Chief Financial Officer Riaz Ahmed said in an interview.“Bonuses are linked to performance, and overall some of our businesses have done very well,” he said. “We’ve also made sure we’ve continued to look after all of our people through the pandemic.”
Royal Bank
Royal Bank, which has the biggest capital-markets division among Canadian lenders, set aside $6.04 billion for variable compensation, a 5.9 per cent increase and the highest total for the Big Six.
“We take a very balanced approach to compensation with consideration of the external environment in the long-term interest of both our employees and our shareholders,” CFO Rod Bolger said in an interview. Market-driven businesses such as wealth management and capital markets will see rates “according to what the market pays, and both of those businesses had strong performance this year.”
Still, overall earnings at Canada’s second-largest lender were down, “so a lot of our employees will see lower variable compensation this year,” Bolger said.
Scotiabank
Scotiabank’s performance-based compensation pool fell 1.3 per cent to $1.74 billion, its first decline since 2015, even as Canada’s third-largest lender posted record revenue from its capital-markets operations as trading reached an all-time high.
“It’s not all about ‘eat what you kill’ because we want them to be good corporate citizens,” CFO Raj Viswanathan said in an interview. “We want to compensate them appropriately when they have a good year,” but employees won’t necessarily receive a specific percentage of the business they generate.
Scotiabank’s compensation calculations take into account the company’s performance relative to its projections, and that’s weighing on compensation this year because of how the pandemic hurt business, he said.
“The overall variable compensation of the bank is down because the bank’s performance has been lower” in the second and third quarters, Viswanathan said.
BMO
Bank of Montreal raised its set-asides for variable compensation 0.8 per cent to $2.63 billion, its smallest increase in at least eight years.
“We’re committed to the principles of paying for performance and providing market-competitive compensation for our employees,” CFO Tom Flynn said in an emailed statement. “This year, we are comfortable with how well we have adhered to those principles, for both bonuses and total compensation.”
CIBC
The fifth-largest Canadian lender allocated 4 per cent more for performance-based pay, reserving $1.95 billion, a reversal from the previous year’s 4.7 per cent contraction.
“We believe in paying competitively and paying for performance, and that philosophy is applied,” CFO Hratch Panossian said in an interview. “This year, the level of compensation we’ve landed on we believe reflects the performance of the bank both from a financial perspective as well as doing the right thing for our clients and supporting clients through a very tough environment.”
National Bank
National Bank of Canada set aside 4 per cent more for bonuses, with the Montreal-based lender allocating $990 million for variable compensation, rebounding from a 1.3 per cent contraction in fiscal 2019.
“We’re trying to balance a good year with the fact also that our loan losses did go up during the year and that has to be reflected,” CEO Louis Vachon said in an interview. “In the context of a pandemic, I think our approach to compensation does need to remain relatively sober. So that’s how we’re balancing things out.”
The new regulations will take effect in Bowen Island, Tofino, Pemberton and 14 other communities on Nov. 1
Published Apr 18, 2024 • Last updated 2 hours ago • 5 minute read
With less than two weeks before B.C.’s short-term rental restrictions take effect, visitors staying at an Airbnb, Vrbo or other short-term rental homes are told to check with their hosts to make sure they are not staying in illegal accommodations.
Guests should ask hosts if they are compliant with the new rules, said B.C.’s housing minister, even as he reassured guests they won’t be on the hook.
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“The responsibility to comply with the rules fall with the hosts and the short-term rental platforms,” said Ravi Kahlon at a news conference with Premier David Eby in Langley on Thursday. “We encourage people to continue to explore beautiful British Columbia, and stay in legal short-term rental accommodations.”The new regulations set to take effect on May 1 would restrict short-term rentals to principal residences and either a secondary suite or a laneway home/garden suite on the property.
They apply to more than 60 B.C. communities with populations of more than 10,000 people, as well as 17 smaller communities, including Bowen Island, Tofino, Osoyoos, Pemberton, and Gabriola Island, which have decided to opt in. For these communities, the rules will take effect on Nov. 1.
The new legislation carries penalties of $500 to $5,000 a day per infraction for hosts and reach as high as $10,000 a day for platforms.
Eby said the province’s principal residence requirement is meant to crack down on speculators while allowing homeowners to rent out spaces in their principal residences if they choose to do so.
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He acknowledged the restrictions could put some property owners’ investment and retirement plans into disarray, but made no apologies, saying people with money to invest should put their money elsewhere.
“Do not compete with individuals and families who are looking for place to live with your investment dollars,” Eby said, adding the government will “tilt the deck every single time toward that family.”
The government has set up a provincial enforcement unit, currently staffed by four people, to conduct investigations into alleged non-compliant units.
The enforcement will be largely done digitally and includes the use of a short-term rental data portal that’ll help local governments monitor and enforce regulations.
Municipalities with their own short-term rental restrictions can upload non-compliant properties to the portal, said Kahlon. Platforms will have five days to verify whether the units are on their sites. Local governments without short-term rental licensing can report properties they believe are not compliant.
The platforms will be required to remove non-compliant listings at the request of local or the provincial governments and provide the province with a monthly update of short-term listings on their sites, said Kahlon.
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Companies such as Expedia and Booking.com are working to get ready for the new rules, and he’s hopeful other platforms will follow suit by May 1.
Airbnb said it has been in discussions with the provincial government for months and plans to comply with the new rules, but predicts they will harm the province’s tourism sector by taking extra income away from residents and limiting accommodation options for people, while doing little to improve the housing crunch for residents.
“They’re doing this because they say there’s going to be an impact on housing, that this will free up more housing for people,” said Nathan Rotman, Airbnb’s policy lead in Canada. “That is just not true.”
Despite several years of Airbnb restrictions in Vancouver, for example, rents have gone up while vacancies stayed low, he said.
Kahlon said the pending rules are already having a positive impact on housing availability with short-term rentals being converted to long-term use or being put up for sale.
In March, more than 19,000 entire homes in B.C. were listed as short-term rentals for most of the year, said the province. Even if half of those units are returned to the long-term market, that’ll make a “substantial difference” in communities, said Kahlon.
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Eby said there has been a “massive upswing” in hotel construction in key tourist areas as an unintended result of the new policies.
Bowen Island, a small community of 4,200 whose council voted in March to opt into the province’s short-term rental regulations, has seen increased pressure from tourists and housing demand in recent years.
The decision was council’s way “to balance what is appropriate use in residentially-zoned neighbourhoods while still allowing property owners to still do what they want with their properties,” said Mayor Andrew Leonard.
The principal residence requirement still allows for Airbnb and other short-term rentals on the island, he pointed out. “The vast majority of short-term rental operations are unaffected. This just keeps it in the homes of homeowners instead of speculators.”
Some communities, including Parksville’s Resort Drive area, were granted an exemption last month under the province’s exemption for strata hotel or motels. The area was purpose-built as tourism accommodation more than two decades ago.
The new legislation is being challenged in B.C. Supreme Court by Victoria-based groups and the Westcoast Association for Property Rights, who are calling for a review of the new rules and compensation for financial losses.
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According to Airbnb, Airbnb bookings and related spending generated around $2.5 billion in B.C. in 2023 and created 25,000 jobs.
The company says that for every $100 spent on an Airbnb booking, guests also spent about $229 on other travel spending.
More than three quarters of hosts polled by the company say they use their Airbnb earnings to cover rising costs of living, especially housing.
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Short-term rental platforms that violate B.C.’s pending regulations can face administrative penalties of up to $10,000 per day, officials announced Thursday.
Investigations into non-compliant companies and individual hosts will be conducted by a provincial enforcement unit, which will launch once the new rules take effect on May 1.
The Ministry of Housing said daily penalties will range from $500 to $5,000 for hosts, depending on the infraction, and reach as high as $10,000 for corporations.
Speaking at a news conference in Langley, Premier David Eby reiterated that the purpose of the province’s regulations is to open up thousands of potential long-term housing units that are currently being offered year-round on apps such as Airbnb and VRBO.
“The commitment that we have as government is to ensure that the housing stock that we have – the homes that are actually built – are available for people who are looking for a place to live,” Eby said.
The premier acknowledged his family, like many others in the province, has benefited from the availability of short-term rentals, and stressed that those types of accommodations will not be banned outright next month.
But the government previously calculated there were 19,000 whole homes being used exclusively as short-term rentals last year.
“I can tell you there are 19,000 families and individual that are looking for a place to live … right now that are in competition with people who are looking to operate homes like hotels,” Eby said.
Under the new rules, hosts can still rent out their primary residence, as well as one “additional unit, secondary suite or laneway home” on the same property, according to the ministry.
Those rules apply in every B.C. community with more than 10,000 residents, and to any others that opt in – as several already have, including Tofino, Pemberton, Osoyoos and Bowen Island. The rules will take effect in those smaller communities in November.
And once the regulations take effect, Housing Minister Ravi Kahlon stressed that guests themselves “will not face any fines.”
“We encourage people to continue to explore beautiful British Columbia, and stay in legal short-term rental accommodations,” Kahlon said.
Officials have recommended anyone planning to stay in a short-term rental on or after May 1 reach out to the host to confirm that the unit will be in compliance.
It’s unclear which violations will potentially cost platforms $10,000 per day. The government has said companies will be required to share user data to help municipalities and the province conduct their own enforcement, as the regulations also give local bylaw officers the ability to impose fines of up to $3,000 per day on hosts.
Platforms will be expected to remove listings from non-compliant users under some circumstances as well.
The announcement from officials came hours after Airbnb shared an “economic analysis” estimating that the platform generated more than $2.5 billion in economic benefits across the province last year.
According to the company, for every $100 a guest spent on an Airbnb rental, they spent about $229 on other local goods and services.
“B.C.’s new short-term rental law is going to significantly impact the province’s tourism sector, just as peak tourism season arrives – taking extra income away from residents, limiting accommodation options for guests, and potentially putting at risk billions in tourism spending and economic impact,” Nathan Rotman, Canadian policy lead at Airbnb, said in a statement.
But officials have claimed the pending rules are already having a positive effect on housing availability – addressing a major crisis in the province – as former hosts choose to either become landlords or put their properties up for sale.
Kahlon said some companies, such as Expedia and Booking.com, have been “actively working to get ready for the coming changes,” and that he’s hopeful other platforms will follow suit by May 1.
New short-term rental rules that will deliver more homes for people are set to come into effect on May 1, 2024, as the Province releases additional information to guide hosts, platforms and visitors through the changes.
“The effect of short-term rental apps like Airbnb, VRBO and others has been the loss of thousands of long-term rental homes in the midst of a housing crisis, driving up the cost of housing for British Columbians,” said Premier David Eby. “That’s why our government has created balanced new rules to crack down on speculators who are effectively operating mini hotels, while also ensuring homeowners can still rent out spaces in their principal residence. As we’ve already seen, these new rules are turning short-term rentals back into homes for people who live and work in our communities.”
The new rules are aimed at reining in the growing short-term rental market that is taking homes off the market. Analysis from short-term rental data analytics company AirDNA, from March 2024, shows that more than 19,000 entire homes in B.C. are being listed as short-term rentals for the majority of a calendar year. Data from a McGill University professor about short-term rentals in B.C. also shows in June 2023 that the top 10% of hosts earn nearly half of all revenue.
“We are in a housing crisis that requires strong action to deliver more housing for the people who live and work in our communities,” said Ravi Kahlon, Minister of Housing. “The changes passed last fall to tackle the growing short-term rental challenges are already bringing more long-term homes back onto the market. As the rules for hosts and platforms come into effect, we are taking another strong step to deliver more long-term homes for people in communities throughout B.C.”
The new rules that will take effect May 1, 2024, are:
In addition to the short-term rental rules going into effect, 17 communities initially exempt from the legislation have requested to opt in to the Principal Residence Requirement. For those communities, the new short-term rental rules will take effect on Nov. 1, 2024. A full list is included in Backgrounder 2.
A first-of-its-kind in Canada, the short-term rental data portal has been created to support local governments with monitoring and enforcement of short-term rental regulations and will allow local governments to have the platform companies remove listings that do not comply.
The Provincial Short-Term Rental Compliance Enforcement Unit, which will be phased in beginning May 1, will also be able to conduct investigations into alleged non-compliance, which may result in administrative monetary penalties and compliance orders. Administrative penalties for hosts breaking the rules can range from $500 to $5,000 a day per infraction, and up to $10,000 per day for corporations, depending on the infraction. Visitors and guests will not face any fines. The unit will also facilitate data sharing and requests to platforms to remove listings.
Visitors with stays booked after May 1, 2024, at short-term rentals are encouraged to check with their host directly to confirm the host is complying with their local government regulations and with B.C.’s new short-term rental rules.
Full requirements for hosts and platforms to comply with the new rules have also been released and are available in Backgrounder 1 and here: https://www2.gov.bc.ca/gov/content/housing-tenancy/short-term-rentals
Turning more short-term rentals into long-term homes is part of the Province’s Homes for People action plan. Announced in spring 2023, it sets out further actions to deliver the homes people need faster, while creating more vibrant communities throughout B.C.
Quotes:
Walt Judas, CEO, Tourism Industry Association of British Columbia (TIABC) –
“TIABC applauds the government for listening to the tourism sector and introducing regulations that will address housing shortages in visitor-dependent communities and give municipalities the tools they need to manage short-term rentals. From our perspective, the Province has found the right balance to provide more permanent homes for workers in tourism and other sectors, while also ensuring a range of accommodation options for visitors.”
Ken Sim, mayor of Vancouver –
“These short-term rental rules are vital in tackling the housing crisis not just in Vancouver, but across British Columbia. We’re eager to implement these new tools and collaborate with platforms to ensure short-term rentals in Vancouver align with these regulations. These measures lay the groundwork for a more sustainable and equitable housing landscape where Vancouver residents can thrive.”
Learn More:
To learn more about the rules that take effect May 1, 2024, visit: www.gov.bc.ca/ShortTermRentals
To learn more about government’s Homes for People action plan, visit: https://news.gov.bc.ca/releases/2023HOUS0019-000436
To learn about the steps the Province is taking to tackle the housing crisis and deliver affordable homes for British Columbians, visit: https://strongerbc.gov.bc.ca/housing
Two backgrounders follow.
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