Royal Bank, TD Have Characteristics of ‘Important’ Banks, Moody’s Says

Royal Bank of Canada (RY) and Toronto- Dominion Bank, the two largest Canadian lenders, have traits that may make them “systemically important” because of their large capital markets businesses, according to Moody’s Investors Service.

Moody’s included Royal Bank, the largest Canadian lender, and Toronto-Dominion, the No. 2 bank, on a list of 28 “global systemically important banks” based on three criteria, according to a report today. Royal Bank ranks 22nd and Toronto- Dominion ranks 27th on the list, which includes banks with “significant” capital markets investments.

“We selected these 28 banks on the basis of their capital market activities,” said Carlos Suarez Duarte, assistant vice president and analyst for Moody’s, said in a telephone interview. ““We are not suggesting these are the banks that are included in the Basel Committee list.”

The Basel Committee on Banking Supervision disclosed July 19 how authorities will apply levies for the world’s most systemically important banks, guiding investors in calculating extra funds that the lenders must raise.

Canada’s banks, ranked the soundest in the world by the World Economic Forum, aren’t on a list of 28 lenders that could face capital surcharges if too-big-to-fail rules were applied today, Canada’s Office of the Superintendent of Financial Institutions said July 19.

“TD Bank Group does not expect to be a global SIFI and it’s clear that today’s Moody’s report does not suggest anything to the contrary,” Toronto-Dominion Bank (TD) spokesman Mohammed Nakhooda said today in a statement. “It is also important to note that more than 80 percent of our earnings mix comes from our retail business.”

Deutsche Bank AG (DBK), Goldman Sachs Group Inc. (GS) and BNP Paribas (BNP) SA top the Moody’s list.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net; David Scheer at dscheer@bloomberg.net