PAPERS A ROYAL PAIN
RBC probing Panama link
The Royal Bank of Canada’s appearance in the Panama Papers was the top concern during shareholder question period at the institution’s annual meeting in Montreal.
“All of the evidence is not good for the bank’s image,” said Willie Gagnon, spokesman for the MÉDAC shareholder advocacy group at the meeting Wednesday. “In the documents we don’t find the name of any other Canadian bank.”
Despite the headline risk, these concerns haven’t resonated with most analysts or investors.
The leak of millions of records from Panama law firm Mossack Fonseca earlier this week suggested public figures channelled billions of dollars through 214,000 offshore companies using some of the world’s biggest banks. RBC is associated with 378 shell companies in the documents, which also included mentions of European banks HSBC and Credit Suisse.
“I’m equally concerned our name’s been dragged into this with no allegations whatsoever of wrongdoing,” said CEO David McKay to reporters following the meeting. “We have very strong procedures and policies in place to identify wrongdoing and to not do business where we suspect there’s any evidence of that.”
McKay said RBC has put a team in place to look at the bank’s internal records that date back 40 years in order to determine whether there is any connection to the Mossack Fonseca law firm.
“I heard about it the same time the rest of the world did: in the newspapers,” he said.
McKay also confirmed that RBC is not the unnamed Canadian bank the federal anti-money laundering agency has levied a $1.1-million penalty against for failing to report a suspicious transaction and various money transfers.
When asked whether RBC could be involved in helping individuals or companies avoid paying taxes, McKay compared legal offshore tax planning to Canada’s tax-free savings account program.
“There are very legitimate tax planning products endorsed by governments around the world that encourage certain types of behaviour, so you can’t classify (them) as illegitimate,” he said.
“You have to separate tax evasion, which is illegal, from tax planning within the rules, construct and principles of the government.”
RBC’s stock was down just 0.24 per cent Wednesday, closing at $73.93 in Toronto, and Cormark Securities analyst Meny Grauman says RBC’s stock is not likely to be hurt by the document leak without the development of some significant accusations.
“It would be something that would be very hard to quantify at this stage,” Grauman told the Financial Post.
“There are always these kinds of risks floating around Canadian banks, but at this stage the market hasn’t reacted. … Institutional investors are definitely not focused on it.”
Sal Mirandola, a tax litigator at the Borden Ladner Gervais law firm says he believes it’s too early to draw conclusions about what the documents could mean to RBC, or any banks named in the leak, until there are reviews from the institutions themselves or Canadian tax authorities.
“I think the general attitude, based on my own experience, is that Canadian financial institutions do an excellent job of monitoring themselves,” Mirandola said. “I would be very surprised if there’s any wrongdoing that ends up being found here.”
Outgoing Hydro-Québec CEO Thierry Vandal was voted to the board of directors by shareholders at the meeting. This follows the resignation of Joao Pedro Reinhard, who was arrested in March on charges of importing and possessing cocaine.
“The board has a very stringent vetting program in place when it comes to recruiting new directors,” said Katie Taylor, chair of the RBC board. “We do detailed background checks on all our new recruit directors, and that includes everything you can imagine, from business, personal and otherwise.”