RBC added to global ‘too big to fail’ list

The Royal Bank of Canada (RBC) is the first Canadian lender to be added to the Financial Stability Board’s list of global systemically important banks, which are deemed too big to fail.

The FSB, which co-ordinates the work of national financial authorities and international standard-setting bodies, added RBC as it removed French bank Groupe BPCE, keeping the total number of institutions on the list at 30.

“This designation reflects the size and scale of RBC’s global operations,” RBC said in a statement Tuesday.

Banks that receive this global systematically important banks (G-SIBs) designation face increased regulatory expectations designed to reduce the likelihood of a failure, and the ripple effects on the global economy. That includes a higher capital buffer and higher supervisory expectations.

RBC, which is Canada’s largest bank by market capitalization, says it was ranked in the lowest GSIB capital surcharge bucket and that it already meets the requirement of a one per cent capital buffer.

The bank “does not expect any impact to its capital position with this designation,” RBC added.

The Office of the Superintendent of Financial Institutions said in a statement Tuesday that RBC is already subject to its framework for domestically systematically important banks (D-SIBs), and “therefore is well positioned to meet the G-SIB requirements starting in January 2019.”

Canada’s banking regulator in 2013 named the country’s six largest banks, including RBC, as DSIBs.

In turn, the banks were subject to additional requirements such as a capital surcharge, enhanced supervision, and increased disclosure, which OSFI says is generally consistent with the G-SIB requirements.