Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

RBC Sells First Bond by Canadian Bank to Satisfy Basel III Rules

July 11 (Bloomberg) -- Royal Bank of Canada said it sold C$1 billion ($930 million) of junior-ranking bonds that comply with Basel III regulatory capital requirements.

RBC’s bond issue marks the first by a Canadian bank that is considered non-viability contingent capital by regulators, according to Patrick MacDonald, co-head of debt capital markets at the bank’s securities unit in Toronto. The notes are designed to convert to equity if a bank gets into financial distress, according to Standard & Poor’s.

So-called NVCC debt will be used to replace existing subordinated securities, which are being phased out to comply with international banking standards designed to prevent a rerun of the 2008 financial crisis. Canada’s market for securities that can be converted into capital in a crisis will eventually reach C$20 billion, Moody’s Investors Service said in January.

Moody’s rated the notes Baa1, four levels lower than the bank’s senior rating of Aa3. Standard & Poor’s rates the debt A-, two levels below the bank’s rating of A+.

A trigger event will convert the bonds into equity without the holder’s consent, S&P said. For example, it defined such as events as Canada’s bank regulator publicly announcing it has advised a bank that the lender has ceased to be viable and conversion of the notes would restore its viability; or the bank’s viability will be restored or maintained; or the federal or provincial government announces that the bank has accepted a capital injection, or equivalent support, from a government or agency to keep the bank afloat.

To contact the reporter on this story: Cecile Gutscher in Toronto at cgutscher@bloomberg.net

To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Paul Cox

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.