stats
globeinteractive.com: Making the Business of Life Easier

   Finance globeinvestor   Careers globecareers.workopolis Subscribe to The Globe
The Globe and Mail /globeandmail.com
Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space


Search

space
  This site         Tips

  
space
  The Web Google
space
   space



space

  Where to Find It


Breaking News
  Home Page

  Report on Business

  Sports

  Technology

space
Subscribe to The Globe

Shop at our Globe Store


Print Edition
  Front Page

  Report on Business

  National

  International

  Sports

  Arts & Entertainment

  Editorials

  Columnists

   Headline Index

 Other Sections
  Appointments

  Births & Deaths

  Books

  Classifieds

  Comment

  Education

  Environment

  Facts & Arguments

  Focus

  Health

  Obituaries

  Real Estate

  Review

  Science

  Style

  Technology

  Travel

  Wheels

 Leisure
  Cartoon

  Crosswords

  Food & Dining

  Golf

  Horoscopes

  Movies

  Online Personals

  TV Listings/News

 Specials & Series
  All Reports...

space

Services
   Where to Find It
 A quick guide to what's available on the site

 Newspaper
  Advertise

  Corrections

  Customer Service

  Help & Contact Us

  Reprints

  Subscriptions

 Web Site
  Advertise

  E-Mail Newsletters

  Free Headlines

  Globe Store New

  Help & Contact Us

  Make Us Home

  Mobile New

  Press Room

  Privacy Policy

  Terms & Conditions


GiveLife.ca

    

PRINT EDITION
RBC joins global 'too big to fail' list
space
Bank becomes the first Canadian institution to be added to list of 30 major lenders that must hold extra capital for safety
space
By JAMES BRADSHAW
  
  

Email this article Print this article
Wednesday, November 22, 2017 – Page B1

Royal Bank of Canada has officially joined the ranks of global banks deemed too big to fail.

The Financial Stability Board (FSB), an international body based in Basel, Switzerland, and headed by Bank of England Governor Mark Carney, has added RBC to the list of 30 global systemically important banks, which must set aside larger capital buffers and face more onerous oversight.

RBC is the lone Canadian bank on the list, joining 16 other institutions, including Morgan Stanley, Banco Santander SA and UBS AG, in the lowest and least onerous of five tiers used to sort what are known as G-SIB banks. At that level, banks must hold an extra 1-per-cent capital buffer. RBC would be phased in by January, 2019, but said it already meets the higher capital standard.

For years, RBC skirted the threshold to qualify as a G-SIB as it increased revenue and expanded its footprint outside Canada with the purchase of Los Angeles-based City National Bank in 2015. In Canada, RBC has been one of six major banks labelled as systemically important from a domestic lens - a D-SIB - since 2013.

In a statement, RBC said its inclusion on the list "reflects the size and scale" of its global operations and that the bank "already meets the requirement of a 1 [per cent] capital buffer so does not expect any impact to its capital position with this designation."

The G-SIB tag comes with other duties, such as detailed planning for resolvability and higher supervisory expectations. It can also push compliance costs higher.

In Canada, the federal government requires banks to draft resolution plans - known as "living wills" in the United States - that test various scenarios to show how a bank could be wound up in an orderly fashion in the unlikely event it fails.

Canada's blueprint draws on key principles set out by the FSB and aims to maintain customers' access to critical banking services, all the while protecting taxpayers from having to shoulder losses.

Now, RBC's plan also has to measure up to regular assessments by the FSB.

"This designation will not change RBC's strategy; nor will it impact clients or have a significant impact on shareholders," an RBC spokesperson said.

Banks are deemed systemically important when their failure would risk triggering a financial crisis. As a result, these financial institutions have been colloquially dubbed "too big to fail" - a label some banks are keen to avoid.

RBC is Canada's largest bank by market capitalization but trails Toronto-Dominion Bank by a narrow margin when measured by assets.

"This is hardly a surprise, and it is not a stretch to suggest this bank has always been systemically important to the global financial system (at least a little)," said Rob Sedran, an analyst at CIBC World Markets Inc., in a research note. After gauging reactions from RBC's management and Canada's banking regulator, he concluded: "The lasting impact on the shares of this announcement should be limited."

The Office of the Superintendent of Financial Institutions (OSFI) noted in a separate statement that Canada's D-SIB banks are already subject to a capital surcharge, enhanced supervision, recovery and resolution planning and increased disclosure - obligations that generally align with the FSB's framework.

"Consequently, RBC is well-positioned to meet the G-SIB requirements starting in January, 2019," the federal regulator said.

"OSFI seems fine with [RBC's] capital position (and that's what matters)," said Gabriel Dechaine, an analyst with National Bank Financial Inc., in a research note.

In recent months, OSFI has been working to implement a "bail-in" regime that would allow authorities to shore up a failing bank by converting certain debt securities to avoid the need for a bailout funded by taxpayers.

The designation of RBC as a G-SIB bumped France's Group BPCE, owner of corporate and investment bank Natixis, from the list of 30. The remaining 29 on the list remained the same, although some were shuffled to different tiers. Notably, Citigroup Inc. moved down to the third tier, leaving U.S. giant JPMorgan Chase & Co. as the lone bank in the stricter fourth tier, which requires an added buffer of 2.5 per cent.

There are no banks in the fifth, most stringent tier.

Royal Bank of Canada (RY)

Close: $100.92, down 9¢


Huh? How did I get here?
Return to Main Drew_Fagan Page
Subscribe to
The Globe and Mail
 

Email this article Print this article

space  Advertisement
space

Need CPR for your RSP? Check your portfolio’s pulse and lower yours by improving the overall health of your investments. Click here.

Advertisement

7-Day Site Search
    

Breaking News



Today's Weather


Inside

Rick Salutin
Merrily marching
off to war
Roy MacGregor
Duct tape might hold
when panic strikes


Editorial
Where Manley is going with his first budget




space

Columnists



For a columnist's most recent stories, click on their name below.

 National


Roy MacGregor arrow
This Country
space
Jeffrey Simpson arrow
The Nation
space
Margaret Wente arrow
Counterpoint
space
Hugh Winsor  arrow
The Power Game
space
 Business


Rob Carrick arrow
Personal Finance
space
Drew Fagan arrow
The Big Picture
space
Mathew Ingram arrow
space
Brent Jang arrow
Business West
space
Brian Milner arrow
Taking Stock
space
Eric Reguly arrow
To The Point
space
Andrew Willis arrow
Streetwise
space
 Sports


Stephen Brunt arrow
The Game
space
Eric Duhatschek arrow
space
Allan Maki arrow
space
William Houston arrow
Truth & Rumours
space
Lorne Rubenstein arrow
Golf
space
 The Arts


John Doyle arrow
Television
space
John MacLachlan Gray arrow
Gray's Anatomy
space
David Macfarlane arrow
Cheap Seats
space
Johanna Schneller arrow
Moviegoer
space
 Comment


Murray Campbell arrow
Ontario Politics
space
Lysiane Gagnon arrow
Inside Quebec
space
Marcus Gee arrow
The World
space
William Johnson arrow
Pit Bill
space
Paul Knox arrow
Worldbeat
space
Heather Mallick arrow
As If
space
Leah McLaren arrow
Generation Why
space
Rex Murphy arrow
Japes of Wrath
space
Rick Salutin arrow
On The Other Hand
space
Paul Sullivan arrow
The West
space
William Thorsell arrow
space





Home | Business | National | Int'l | Sports | Columnists | The Arts | Tech | Travel | TV | Wheels
space

© 2003 Bell Globemedia Interactive Inc. All Rights Reserved.
Help & Contact Us | Back to the top of this page