September 30, 2011 / 9:39 PM / in 6 years

Bank of Canada says 3 banks systemically important

TORONTO (Reuters) - The Bank of Canada considers Canada’s three biggest banks “systemically important” on a national basis, it said on Friday in a report that could add to concerns about more stringent capital rules facing the sector.

<p>Bank of Canada Governor Mark Carney walks from his office to a news conference upon the release of the Monetary Policy Report in Ottawa July 20, 2011. REUTERS/Chris Wattie</p>

Global regulators are considering imposing tighter capital rules for banks considered to be systemically important or “too big to fail”, meaning their collapse would imperil the wider financial system.

No Canadian bank is believed to be on the radar screen of the global regulators, but many believe that Canada’s bank regulator, the Office of the Superintendent of Financial Institutions, could impose tighter rules on domestic banks deemed key to the domestic sector.

According to the central bank -- which does not have a hand in implementing the regulations -- Royal Bank of Canada (RY.TO), Toronto-Dominion Bank (TD.TO), and Bank of Nova Scotia (BNS.TO) fit the bill.

“We find the empirical evidence that the systemic importance of the top three banks, RBC, TD, and BNS, is greater than other banks,” the bank said in a working paper authored by Toni Gravelle and Fuchun Li.

Adding additional capital constraints would limit the lending capacity of the affected banks.

Reporting by Cameron French; editing by Rob Wilson

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