Royal Bank of Canada has been added to the list of 30 global systemically important banks (G-SIBs) by the Financial Stability Board of international regulators, the first Canadian bank on the list. It replaces Group BPCE, owner of Natixis, in the latest annual review by the FSB. RBC has made a push to expand internationally in recent years and has increased its capital markets revenues, which now make up a quarter of group revenues.
RBC said the designation reflected "the size and scale" of its global operations. It said it already met the additional capital requirement and did "not expect any impact to its capital position with this designation". It is among 17 banks listed on the bottom rung of the five G-SIB levels that 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 on the list of G-SIBs, although there were several changes to the "buckets" that banks are included in - changing the size of the capital surcharge they must hold.
ONE AT THE TOP
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. (see chart) The next tier of banks that must hold 1.5% of extra common equity has eight banks. They include BNP Paribas, which was moved down a level, and Barclays and Goldman Sachs.
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 under chief executive Tidjane Thiam to reduce its assets and also completed a second capital raise earlier this year, of SFr4.25bn (US$4.4bn). 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, due to the stiff capital requirements. Being on the G-SIB list also requires banks to meet other requirements, including more stringent resolution planning, as well as increased supervisory measures.