Moody's cut RBC's long-term deposit rating by two notches to Aa3, saying it faces a high probability of needing government support because of the exposure of its global investment banking operations to a possible financial crisis.
A downgrade usually means that it becomes more costly for banks to raise money by selling debt. Investors demand higher interest for riskier debt, which is what the downgrades represent.
The Royal Bank said the downgrade will not affect its clients and will have a minimal impact on its business.
"RBC remains one of the strongest and highest rated banks in the world. That category crosses a number of classifications in terms of credit ratings, in terms of capital base and in terms of balance sheet," the bank said in a statement.
"While Moody's has changed their overall view of the capital markets industry, RBC Capital Markets has been consistently profitable, thanks to a strategic and measured approach to growth and prudent risk management," RBC said in a statement.
The announcement came after the close of markets.
It also cut Swiss banking giant Credit Suisse Group by three levels and Morgan Stanley and UBS by two.
Others cut by one level included Bank of America, Citigroup, and JPMorgan Chase.
Original Article
Source: huffington post
Author: cbc
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