SOURCE: The Bedford Report

The Bedford Report

June 24, 2011 08:16 ET

New Capital Rules May Slow Growth in Canadian Banks

The Bedford Report Provides Equity Research on Toronto Dominion & Royal Bank of Canada

NEW YORK, NY--(Marketwire - Jun 24, 2011) - Earlier this month regulators announced that the world's largest banks could face a capital buffer of as much as three percentage points in an effort to keep taxpayers off the hook the next time a lender gets into difficulty. Large financial institutions worldwide are planning a campaign to persuade regulators that imposing higher capital requirements on big banks could hurt the economic recovery and not achieve its goal of reducing risk. The Bedford Report examines the outlook for companies in Canada's Banking Sector and provides stock research on Toronto-Dominion Bank (NYSE: TD) (TSX: TD) and Royal Bank of Canada (NYSE: RY) (TSX: RY). Access to the full company reports can be found at:

Regulators at the Basel Committee on Banking Supervision are said to be pushing for capital surcharges of as much as three percent of assets for the world's biggest banks. That would be in addition to the minimum seven percent level set last year as an industry minimum. Analysts say that most, and possibly all, of Canada's big five banks could face capital buffers.

Canadian banks are opposed to the idea because holding more capital would make them less competitive. Canada's Finance Minister, Jim Flaherty, recently told reporters that he is prepared to accept the new rules, depending on the details.

The Bedford Report releases investment research on the Canadian Banking Industry so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at and get exclusive access to our numerous analyst reports and industry newsletters.

Canada's financial system has been highly touted as the world's safest, best-capitalized and best regulated since the 2008 financial crisis. This was highly disputed in a report issued earlier this year by Canaccord Genuity analyst Mario Mendonca, which argues that the common equity Tier 1 ratios for the Canadian banks are, on average, 160 basis points lower than the US banks that disclosed their pro forma common equity Tier 1 ratios at the end of 2010.

In Canada, the five largest financial institutions have all stated that their Tier 1 capital ratios will be at 7 percent by the end of 2012, when the phase-in period of Basel III begins. Mendonca agrees the Canadian Banks will have little or no difficulty reaching the required minimum capital ratios according to the Basel III schedule.

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