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The corner of Bay Street and Adelaide streets in the heart of Toronto’s financial district.Gloria Nieto/The Globe and Mail

Canada's largest banks are stuffed with capital, giving them the freedom to go buying should they so choose.

Across the five biggest banks, the common equity Tier 1 ratio – the all-important measure – now averages 9.4 per cent. At that level, the banks are well above the globally-mandated 7-per-cent minimum, and even surpass Canada's 8-per-cent requirement.

Because they are so well-capitalized, the banks have the room to strike deals without any worries about the Office of the Superintendent of Financial Institutions (OSFI) breathing down their necks. This freedom is relatively new for them. It was only recently that OSFI finalized its common-equity rules, and until then, the banks always felt as though they were walking on eggshells.

Asked about the potential for acquisitions on Tuesday, Bank of Nova Scotia chief executive officer Brian Porter acknowledged that he is open to the idea. "If we see anything that's [in line with our] strategy, we'll take a good hard look at it," he said, later adding that "the phone continues to ring, and there will be opportunities within our footprint."

Whether or not Scotiabank inks a deal will likely depend on the asking price, because the bank has always been wary about overpaying for acquisitions.

Executives at Royal Bank of Canada voiced a similar note when reporting earnings last week. CEO Gordon Nixon made it very clear that the bank has looked at a "tremendous number of opportunities in the wealth management space in the last year or so," demonstrating just how open the bank is to doing a deal. It's just that RBC can't wrap its head around current valuations.

"While there are assets available, it's very difficult to make them work," Mr. Nixon said.

Bank of Montreal, meanwhile, is already off and running, announcing a few weeks ago that it will buy London-based F&C Asset Management for $1.3-billion.

Although the banks are flush with capital, acquisitions aren't a sure bet – and price isn't the only factor. The banks can also use their excess capital in other ways, including buying back shares or increasing their distributions.

However, most of them are looking to expand. "Their mandate to grow earnings per share is driven more by boosting net income than shrinking the share count," Scotiabank analyst Sumit Malhotra recently told The Globe and Mail.

That said, National Bank of Canada will likely be a notable exception over the next year. Last week chief executive officer Louis Vachon said the bank is focused on beefing up its capital buffer, because it currently lags behind its five big rivals. At the end of last quarter, National Bank's common-equity ratio stood at 8.3 per cent and the management team wants to hit the 9-per-cent mark.