November 21, 2017 / 12:12 PM / a year ago

Royal Bank of Canada joins G-SIB ranks

LONDON, Nov 21 (IFR) - Royal Bank of Canada has been added to the list of 30 global systemically important banks by the Financial Stability Board of international regulators. It replaces Group BPCE, owner of Natixis, on the list in the latest annual review.

RBC has made a push to expand internationally in recent years and grown its capital markets revenues too. These now make up a quarter of group revenues.

RBC is among 17 institutions listed on the bottom rung of the five G-SIB levels, who must all hold an extra 1% of common equity as a percentage of their risk-weighted assets, beyond that required under Basel capital rules.

There were no other changes to the banks included on the list of G-SIBs, although there were several changes to the “buckets” that banks were included in.

JP Morgan is now the only bank required to hold an extra 2.5% of common equity, after its US peer Citigroup moved down a tier.

Citigroup joined Bank of America, Deutsche Bank and HSBC in a group that must hold an extra 2% of capital.

The next tier of banks that must hold 1.5% of extra common equity includes eight banks. They include BNP Paribas, which was moved down a level. Barclays and Goldman Sachs are also in the 1.5% bucket. Two Chinese lenders, Bank of China and China Construction Bank, have been moved up from the bottom group into that bucket too.

Credit Suisse has been moved down a rung into the group required to hold 1% additional capital. The Swiss bank has made a concerted push to reduce its assets under chief executive Tidjane Thiam and has also completed a second capital raise, of SFr4.25bn (US$4.4bn), earlier this year.

Banks must hold the additional capital from 2019.

The FSB has never put any bank in the top tier, which would require a bank to hold an additional capital buffer of 3.5%.

Banks are not keen to be in the higher brackets, as it means they must hold more capital. Being on the G-SIB list also requires banks to meet other requirements, including more stringent resolution planning, as well as higher supervisory measures.

RBC said the designation reflected “the size and scale” of its global operation. It said it already met the additional capital requirement and did “not expect any impact to its capital position with this designation”. (Reporting by Christopher Spink)

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