RBC faces pressure on capital as Canada regulator gets tougher
BNN Bloomberg
Royal Bank of Canada is under new pressure to bolster its capital levels after the country’s financial regulator raised the minimum buffer for the largest banks.
Canada’s six biggest domestic banks must have a common equity tier 1 capital ratio of at least 11.5 per cent by November, the Office of the Superintendent of Financial Institutions said Tuesday. Its decision to boost the requirement from 11 per cent forces banks to build a larger rainy-day fund to absorb losses heading into a possible recession.
In practice, OSFI’s rule means banks will want to operate with a CET1 ratio of 12 per cent or more. RBC’s is expected to fall to about 12 per cent from 13.7 per cent when it completes its $13.5 billion (US$10.2 billion) deal for HSBC Holdings Plc’s Canadian unit, now expected in early 2024.
“It was something that came a bit earlier than expected,” Keefe, Bruyette & Woods analyst Mike Rizvanovic said of the regulator’s higher capital requirement.
