Canadian banks would be at disadvantage if U.S., Europe don't follow through on agreed capital requirements
Canadian regulators should rethink capital requirements imposed on the country’s largest financial institutions if banks in the United States and Europe are not forced to follow through with the strict final stages of the international risk management regime put in place following the 2008 financial crisis , the head of Canada’s largest bank says.chairman Jerome Powell signalled an about-face on a plan to raise large bank capital requirements when he spoke before the U.S.
McKay said it’s not a certainty that the global financial regulatory landscape will be lopsided, but it’s something Canadian banks are closely watching. Over the past year, however, City National, now part of RBC’s wealth management division, has been challenged by high interest rates and credit conditions in the United States in the fallout from Silicon Valley Bank’s implosion in March 2023. Funding costs rose amid deposit outflows and the parent company had to step in last fall to shore up liquidity with a capital injection and the purchase of debt securities.
“We signalled to the market that notwithstanding the challenges we faced in the latter part of the year — just two quarters largely due to a number of market issues around deposits and a little bit of credit loss given a high interest rate environment in the U.S. — that we expect to see City National be a good tailwind for RBC.”RBC’s $13.5-billion purchase of HSBC Bank Canada
Meanwhile, if City National bounces back as he expects, the U.S. wealth management franchise could be expanded at some point through bolt-on acquisitions. But that will depend, in part, on the regulatory landscape.
Royal Bank Of Canada 2008 Financial Crisis Financial Institutions Banks In The United States City National Level Playing Field Canadian Banks Capital Requirements United States Federal Reserve Risk Management Wealth Management
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