Maybe the first bank chief to comment about proposed new rules on foreign banks operating in the...

Maybe the first bank chief to comment about proposed new rules on foreign banks operating in the U.S., Royal Bank of Canada (RY) CEO Gordon Nixon says they will have "no impact whatsoever." Stonecap's Brad Smith disagrees, saying all Canadian banks will have to reconsider their business lines as the rules would likely raise the amount of capital necessary to operate.

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  • Warderf
    , contributor
    Comments (45) | Send Message
    It will impact each bank in proportion to their banking operation in the US. In the end it will be the consumer that bears the cost. Anyone whose taken economics in high school should know this. In the short term the person on the street especially the unemployed are the ones that suffer. More capital = less lending, which means lower economic growth in the short term.
    I've never understood why business/government keeps changing processes depending on the last "crisis". Come up with a plan that lowers the risks of various "crises" and use that overall plan. Understand the implications of all these crises and put into place processes that best handle them. What happened last time in all probability will not happen the next time. But it is the Federal Reserve's view or maybe it's congresses' mandate on the Federal Reserve that their job is to fix the problem afterwards, not prevent it.
    We will have to see the final costs associated as the full version of Frank-Dodd is implemented.
    I like the fact that the Bank of Canada has recently taken steps to curb the mortgage lending. I'm for prevention. But to each their own. I prefer growth at trend. Slow it if it's growing too fast and speed it up if it's growing too slow. A lot harder done than said.
    As for the Royal Bank their US exposure is small compared to their Canadian and European exposures.
    Given what happened to Canadian banks in the last crisis, beyond the implementation of Basel III I don't think that they will be impacted much from changes in the US. As for Basel III a number of the changes is where you get the treatment of the capital you raise. I'm pretty sure the Canadian banks have met their Basel capital requirements already and if they haven't they will shortly.
    Royal and TD made acquisitions recently and they didn't have to raise capital to fund it, so the capital that tells me they are very comfortable with their capital levels and their interpretation of the capital requirements.
    29 Nov 2012, 03:24 PM Reply Like
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