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ROYAL BANK OF CANADA  

   

ANNUAL  

INFORMATION  

FORM  

   

   

   

November 28, 2017  

   

   

   

CAUTION REGARDING FORWARD-LOOKING STATEMENTS  

From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. We may make forward-looking statements in this Annual Information Form and in the documents incorporated by reference herein, in other filings with Canadian regulators or the United States (U.S.) Securities and Exchange Commission (SEC), in reports to shareholders and in other communications. Forward-looking statements in this document and in the documents incorporated by reference herein include, but are not limited to, statements relating to our financial performance objectives, vision and strategic goals, the economic and market review and outlook for Canadian, U.S., European and global economies, the regulatory environment in which we operate, the outlook and priorities for each of our business segments, and the risk environment including our liquidity and funding risk as set out in the 2017 Management's Discussion and Analysis for the fiscal year ended October 31, 2017 (the 2017 Management's Discussion and Analysis).  The forward-looking information contained in this Annual Information Form and in the documents incorporated by reference is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision and strategic goals, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “believe”, “expect”, “foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”, “plan” and “project” and similar expressions of future or conditional verbs such as “will”, “may”, “should”, “could” or “would”.

By their very nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that our predictions, forecasts, projections, expectations or conclusions will not prove to be accurate, that our assumptions may not be correct and that our financial performance objectives, vision and strategic goals will not be achieved. We caution readers not to place undue reliance on these statements as a number of risk factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements. These factors – many of which are beyond our control and the effects of which can be difficult to predict – include: credit, market, liquidity and funding, insurance, operational, regulatory compliance, strategic, reputation, legal and regulatory environment, competitive and systemic risks and other risks discussed in the risks sections of our Annual Report for the fiscal year ended October 31, 2017 (2017 Annual Report) including global uncertainty and volatility, elevated Canadian housing prices and household indebtedness, information technology and cyber risk, regulatory change, technological innovation and new entrants, global environmental policy and climate change, changes in consumer behavior, the end of quantitative easing, the business and economic conditions in the geographic regions in which we operate, the effects of changes in government fiscal, monetary and other policies, tax risk and transparency, environmental and social risk.

We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Material economic assumptions underlying the forward-looking statements contained -in this Annual Information Form are set out in our 2017 Management's Discussion and Analysis under the heading Economic, market and regulatory review and outlook and for each business segment under the headings Strategic priorities and Outlook. Except as required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.

Additional information about these and other factors can be found in the risks sections of our 2017 Management's Discussion and Analysis.  

TABLE OF CONTENTS  

Management's Discussion and   Analysis   Incorporated by Reference  
CORPORATE   STRUCTURE………………………………………………………………………………………..   1
          Name, Address and   Incorporation……………………………………………………………………………   1
          Intercorporate   Relationships…………………………………………………………………………………….   1
GENERAL   DEVELOPMENT OF THE   BUSINESS…………………………………………………………. 1
          Three Year   History……………………………………………………………………………………………………   1 12-15
DESCRIPTION   OF THE   BUSINESS………………………………………………………………………………   3
          General   Summary………………………………………………………………………………………………………   3 12-15, 21-45
          Seasonality……………………………………………………………………………………………………………….   3 45-47
          Competition………………………………………………………………………………………………………………   3 21-45
          Government Supervision and Regulation –   Canada…………………………………………………. 3
          Government Supervision and Regulation – United   States……………………………………….. 5
          Risk   Factors……………………………………………………………………………………………………………..   8 51-91
          Environmental and Social Risk   Policies…………………………………………………………………….   9 90-91
DESCRIPTION   OF CAPITAL   STRUCTURE…………………………………………………………………   9
          General   Description………………………………………………………………………………………………….   9 91-101
          Prior   Sales…………………………………………………………………………………………………………………   11 91-101, 181*
          Constraints……………………………………………………………………………………………………………….   11
          Ratings……………………………………………………………………………………………………………………..   12 79-80
MARKET   FOR   SECURITIES………………………………………………………………………………………….   13
          Trading Price and   Volume…………………………………………………………………………………………   13
DIVIDENDS…………………………………………………………………………………………………………………….   17 91-101, 183-185*
DIRECTORS   AND EXECUTIVE   OFFICERS………………………………………………………………….   17
          Directors…………………………………………………………………………………………………………………..   17
          Committees of the   Board…………………………………………………………………………………………..   18
          Executive   Officers…………………………………………………………………………………………………….   19
          Ownership of   Securities……………………………………………………………………………………………   20
          Cease Trade Orders, Bankruptcies, Penalties or Sanctions……………………………………….   20
          Conflicts of   Interest………………………………………………………………………………………………….   21
LEGAL   PROCEEDINGS AND REGULATORY   ACTIONS……………………………………………. 21 193-194*
INTEREST   OF MANAGEMENT AND OTHERS IN MATERIAL      TRANSACTIONS………………………………………………………………………………………………………..   22
TRANSFER   AGENT AND   REGISTRAR………………………………………………………………………..   22
EXPERTS………………………………………………………………………………………………………………………..   22
AUDIT   COMMITTEE………………………………………………………………………………………………………   22
          Audit Committee   Mandate……………………………………………………………………………………….   22
          Composition of Audit   Committee……………………………………………………………………………..   22
          Relevant Education and Experience of Audit Committee   Members………………………….. 23
          Pre-Approval Policies and   Procedures……………………………………………………………………..   23
          Independent Registered Public Accounting Firm   Fees……………………………………………. 24
ADDITIONAL   INFORMATION……………………………………………………………………………………..   25
TRADEMARKS………………………………………………………………………………………………………………   25
APPENDIX   A – PRINCIPAL   SUBSIDIARIES……………………………………………………………….   26
APPENDIX   B – EXPLANATION OF RATINGS AND OUTLOOK……………………………….. 27
APPENDIX   C – AUDIT COMMITTEE   MANDATE………………………………………………………… 29
APPENDIX   D – PRE-APPROVAL POLICIES AND PROCEDURES……………………………. 34

*Notes 19, 21 and 26 to the 2017 Annual Consolidated Financial Statements for the fiscal year ended October 31, 2017 (the 2017 Annual Consolidated Financial Statements) for Royal Bank of Canada are incorporated by reference herein.

INFORMATION IS AT OCTOBER 31, 2017, UNLESS OTHERWISE NOTED.

CORPORATE STRUCTURE  

   

Name, Address and Incorporation[1]  

   

Royal Bank of Canada is a Schedule I bank under the Bank Act (Canada), which constitutes its charter.  The Bank was created as Merchants Bank in 1864 and was incorporated under the “Act to Incorporate the Merchants' Bank of Halifax” assented to June 22, 1869.  The Bank changed its name to The Royal Bank of Canada in 1901 and to Royal Bank of Canada in 1990.   

   

The Bank's corporate headquarters are located at Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada and its head office is located at 1 Place Ville-Marie, Montreal, Quebec, Canada.  

   

Intercorporate Relationships  

   

Information about intercorporate relationships with principal subsidiaries, including place of incorporation and percentage of securities owned by the Bank, is provided in Appendix A.   

   

GENERAL DEVELOPMENT OF THE BUSINESS  

   

Three Year History  

   

Through our business strategies and actions we pursue our vision, “To be among the world's most trusted and successful financial institutions.”  Our three strategic goals are:  

   

  • In Canada, to be the undisputed leader in financial services;  
  • In the U.S., to be the preferred partner to corporate, institutional and high net worth clients and their businesses; and
  • In select global financial centres, to be a leading financial services partner valued for our expertise.

   

The Canadian economy showed moderate growth during 2015 driven by some recovery in energy production in the second half of the year and higher exports.  Equity markets in Canada and the U.S., however, remained volatile throughout our fiscal year.    

   

In 2015, RBC delivered solid operating results across most of our business segments and strong credit quality.  In addition, on November 2, 2015, Royal Bank of Canada completed the acquisition of City National Corporation (City National), the holding company for City National Bank, which gives us an expansion platform for long-term growth in the U.S. and provides us with the opportunity to enhance and complement our existing U.S. businesses in line with our strategic goals.  

   

The Canadian economy continued to show moderate growth during 2016, supported by solid consumer spending and housing activity in the first half of the year while oil and gas production normalized and non-energy exports recovered in the second half of the year.  The U.S. economy also continued to show moderate growth.  Global equity markets recorded minimal gains in 2016 amid several periods of heightened volatility due to global growth concerns and political uncertainly related to the Brexit vote to have the United Kingdom leave the European Union and the U.S. election.  

   

   

RBC delivered solid results in 2016 driven by strong earnings in Wealth Management, which benefited from the inclusion of City National, solid results in Personal & Commercial Banking, and strong earnings in Investor & Treasury Services.  In addition to closing the acquisition of City National in fiscal 2016, RBC also completed the sale of RBC General Insurance Company, our home and auto insurance manufacturing  

   

_____________________________________  

1   When we say “we”, “us”, “our”, or “RBC”, we mean Royal Bank of Canada and its subsidiaries, as applicable.  References to “the Bank” mean Royal Bank of Canada without its subsidiaries.  

   

business, to Aviva Canada Inc., which included a 15 year strategic agreement between RBC Insurance and Aviva.  

   

The Canadian economy continued to show growth in 2017, supported by robust gains in consumer spending amid strong employment growth, low interest rates and wealth effects from rising home prices. The U.S. economy also continued to show moderate growth supported by consumer spending and business investment. The Eurozone has experienced positive growth as a result of a strengthening global economic outlook despite heightened volatility related to the Catalonian referendum, Brexit negotiations and the success of populist parties in recent elections.  

   

In 2017, RBC delivered solid operating results across most business segments driven by strong earnings in Personal & Commercial Banking, Capital Markets, Wealth Management and Investor & Treasury Services partially offset by lower earnings in Insurance.  

   

In accordance with transition planning, Rod Bolger assumed the role of Chief Financial Officer and Jennifer Tory assumed the role of Chief Administrative Officer, following the retirement of Janice Fukakusa.  Neil McLaughlin was appointed to the role of Group Head, Personal & Commercial Banking.  Helena Gottschling was appointed to the role of Chief Human Resources Officer and Michael Dobbins was appointed Head, Strategy and Corporate Development.  

   

We continue to monitor and prepare for regulatory developments in a manner that seeks to ensure compliance with new requirements while mitigating any adverse business or economic impacts.  Such impacts could result from new or amended regulations and the expectations of those who enforce them.  Significant developments include continuing changes to global and domestic standards for capital and liquidity, changes to federal mortgage rules, over-the-counter (OTC) derivatives reform and initiatives to enhance requirements for institutions deemed systemically important to the financial sector.  We also continue to monitor changes to resolution regimes addressing government bail-in and total loss-absorbing capacity.   

   

Our acquisitions and dispositions that have influenced the general development of our business over the past three years are summarized in the following table:  

   

   Business Segment         Acquisition/Disposition         Key Characteristics     
Insurance   RBC   General Insurance Company (2016)  
  • Disposition of our home and   auto insurance manufacturing business which included a 15 year strategic   distribution agreement allowing RBC Insurance to market and sell a full suite   of property and casualty insurance products to Canadians.  
Wealth   Management   City   National Corporation (2015)      
  • Acquisition enhances our U.S. presence and   strategically compliments our U.S. Wealth Management and Capital Markets   businesses creating a platform for long term growth.  
Royal   Bank of Canada (Suisse) SA (2015)  
  • Disposition supports our   long-term growth strategy to build a focused global wealth management   business servicing clients from our hubs in North America, the British Isles   and Asia.  
Personal   & Commercial Banking   RBC   Royal Bank (Suriname) N.V. (2015)          
  • Disposition of this business   was in support of the repositioning of our Caribbean business.  

Additional information about our three year history can also be found in the “Overview and outlook” section beginning on page 12 of our 2017 Management's Discussion and Analysis, which section is incorporated by reference herein.

DESCRIPTION OF THE BUSINESS  

   

General Summary  

   

Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance.  Our success comes from the 80,000+ employees who bring our vision, values and strategy to life so we can help our clients thrive and communities prosper.  As Canada's biggest bank, and one of the largest in the world based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our 16 million clients in Canada, the U.S. and 35 other countries.  

   

Our reporting segments are Personal & Commercial Banking, Wealth Management, Insurance, Investor & Treasury Services, Capital Markets and Corporate Support.  Additional information about our business and each segment (including segment results) can be found under “Overview and outlook” beginning on page 12 and under “Business segment results” beginning on page 21 of our 2017 Management's Discussion and Analysis, which sections are incorporated by reference herein.

Seasonality  

Information about seasonality is provided under “Quarterly financial information” beginning on page 46 of our 2017 Management's Discussion and Analysis, which section is incorporated by reference herein.  

   

Competition  

   

Our competition includes the other Canadian Schedule I banks, and, as we expand into new lines of business, our competition has grown to include other Canadian banks, trust companies, foreign banks, credit unions, caisses populaires, auto financing companies, investment management companies serving retail and corporate customers and public institutions, and companies and non-traditional competitors that offer products and services traditionally offered by financial institutions including through internet and mobile banking, investment counselling firms, brokerages, investment dealers, self-directed brokers, mutual fund companies, global private banks, wealth managers, asset managers, traditional offshore private banks, U.S. investment-led private client operations, custody service providers, insurance companies, reinsurance companies, investment banks, virtual banks and specialty financial service providers.  Key competitive factors include the range and features of financial products and services offered, pricing, distribution, and service quality.  Additional information about our competition can be found under “Business segment results” beginning on page 21 of our 2017 Management's Discussion and Analysis, which section is incorporated by reference herein.    

   

Government Regulation and Supervision – Canada  

   

The Bank is a “Schedule I” bank under the Bank Act (Canada) (Bank Act), and, as such, is a federally regulated financial institution.  Its Canadian trust, loan and insurance subsidiaries are also federally regulated financial institutions governed by (respectively) the Trust and Loan Companies Act (Canada) and the Insurance Companies Act (Canada).  The activities of the Bank's Canadian trust, loan and insurance subsidiaries are also regulated under provincial and territorial laws in respect of their activities in the provinces and territories.  In certain provinces, some of the Bank's capital markets activities are regulated under provincial securities laws (which are administered and enforced by securities regulatory authorities).  

   

The Office of the Superintendent of Financial Institutions (OSFI), an independent agency of the Government of Canada, reports to the Minister of Finance (the Minister) for the supervision of the Bank, as well as its Canadian federally regulated trust, loan and insurance subsidiaries.  OSFI is required, at least once a year, to examine the affairs and business of each institution for the purpose of determining whether statutory requirements are duly observed and the institution is in sound financial condition, and report to the Minister.  The Bank and its Canadian trust, loan and insurance subsidiaries are also required to make periodic filings and reports to OSFI.  

The Bank and its Canadian trust, loan and insurance subsidiaries are also subject to regulation under the Financial Consumer Agency of Canada Act (FCAC Act).  The Financial Consumer Agency of Canada (Agency), among other things, enforces consumer-related provisions of the federal statutes which govern these financial institutions.  The Commissioner of the Agency must report to the Minister on all matters connected with the administration of the FCAC Act and consumer provisions of other federal statutes, including the Bank Act, Trust and Loan Companies Act and Insurance Companies Act .  The Bank and its Canadian trust and loan subsidiaries are also subject to provincial and territorial laws of general application.  

   

The Bank and its subsidiaries, Royal Trust Corporation of Canada, The Royal Trust Company, Royal Bank Mortgage Corporation and RBC Investor Services Trust are member institutions of the Canada Deposit Insurance Corporation (CDIC).  CDIC insures certain deposits held at the member institutions.  

   

Under the Bank Act, the Bank is prohibited from engaging in or carrying on any business other than the business of banking, except as permitted.  The Bank can provide, amongst other services, any financial services, investment counselling services and portfolio management services, act as a financial agent and issue and operate payment, credit or charge card plans.   

   

The Bank has broad powers to invest in securities, but is limited in making “substantial investments” in or in controlling certain types of entities.  A “substantial investment” will arise through direct or indirect beneficial ownership of voting shares carrying more than 10 per cent of the voting rights attached to all outstanding voting shares of a corporation, shares representing more than 25 per cent of the shareholders' equity in a corporation, or interests representing more than 25 per cent of the ownership interests in any unincorporated entity.  The Bank can make controlling, and in certain circumstances, non-controlling substantial investments in certain entities in accordance with the investment provisions under the Bank Act .  Some substantial investments may be made only with the prior approval of the Minister or the Superintendent of Financial Institutions (the Superintendent).   

   

The Bank and its Canadian trust, loan and insurance subsidiaries are also required to maintain, in relation to operations, adequate capital and liquidity and OSFI may direct financial institutions to increase capital and/or to provide additional liquidity.  

   

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the Act) is applicable to all of our businesses in Canada.  The Act implements specific measures designed to detect and deter money laundering and the financing of terrorist activities.  Further, the Act sets out obligations related to deterring and detecting money laundering and terrorist financing from a global perspective, in order to minimize the possibility that RBC could become a party to these activities.  RBC has enterprise-wide anti-money laundering policies and procedures which assist in reducing the risk of facilitating money laundering and terrorist financing activities.  

   

Broker-Dealer/Investment Management Subsidiaries  

   

The activities of certain of the Bank's subsidiaries, such as RBC Dominion Securities Inc. (RBC DS), RBC Direct Investing Inc. (RBC DI), Royal Mutual Funds Inc. (RMFI), RBC Global Asset Management Inc., Phillips, Hager & North Investment Funds Ltd. (PH&N IF), and RBC Phillips, Hager & North Investment Counsel Inc., which act as securities dealers (including investment dealers, mutual fund dealers and exempt market dealers), advisors (investment counsel/portfolio manager) or investment fund managers are regulated in Canada under provincial and territorial securities laws (which are administered and enforced by securities regulatory authorities) and, in some cases, by the rules of the applicable self-regulatory organization (the Investment Industry Regulatory Organization of Canada for investment dealers and the Mutual Fund Dealers Association of Canada (MFDA) for mutual fund dealers).  Each of RBC DS and RBC DI are members of the Canadian Investor Protection Fund.  Customers' accounts are protected by the Canadian Investor Protection Fund within specified limits.  A brochure describing the nature and limits of coverage is available to customers upon request.  RMFI and PH&N IF are each members of the MFDA Investor Protection Fund,  

__________________________  

2 For the Bank's trust subsidiaries, only their retail deposit taking activities are subject to regulation under the FCAC Act.  

   

which protects against certain losses of customer property held by an insolvent MFDA member; similarly, a brochure describing the nature and limits of coverage is also available to customers upon request.  

   

Insurance  

   

The activities of the Bank's regulated Canadian insurance subsidiaries, RBC Life Insurance Company (RBC Life) and RBC Insurance Company of Canada (RICC), are federally governed by the Insurance Companies Act and by provincial legislation in each province and territory in which they carry on business.  In addition, the Bank is federally governed by the Bank Act for any insurance activities it is permitted to carry out.  The Bank may administer, promote and provide advice in relation to certain authorized types of insurance and may conduct any aspect of the business of insurance, other than the underwriting of insurance, outside of Canada and in respect of risks outside Canada.  However, in Canada, the Bank may not act as agent for any person in the placing of insurance.  The Bank can promote an insurance company, agent or broker or non-authorized types of insurance (e.g. life and home and automobile insurance) to certain prescribed groups where the promotion takes place outside of physical bank branches.  Additionally, and subject to applicable restrictions under the Bank Act, RBC Wealth Management Financial Services Inc., a wholly owned indirect subsidiary of the Bank, is licensed under applicable provincial and territorial laws to sell insurance products, including life and benefits insurance along with money products such as annuities and segregated funds, on both an individual and group basis, for both related and independent insurance companies in Canada.  

   

RBC Life is a member of Assuris which is a not-for-profit organization that protects Canadian life insurance policyholders against loss of benefits due to the financial failure of a member company.  RICC is a member of the Property and Casualty Insurance Compensation Corporation which is the corporation protecting Canadian property and casualty policyholders against loss of benefits due to the financial failure of a member company.  

   

RBC Insurance Agency Ltd. is a licensed insurance agency that distributes insurance products underwritten by non-RBC entities.  These products include home and auto insurance that is underwritten by an unaffiliated insurance company.   

   

Government Regulation and Supervision – United States  

   

Banking  

   

In the U.S., the Bank is characterized as a foreign banking organization (FBO).  Generally, the operations of an FBO and its U.S. subsidiaries and offices are subject to the same comprehensive regulatory regime that governs the operations of U.S. domestic banking organizations.  The Bank's U.S. businesses are subject to supervision and oversight by various U.S. authorities, including federal and state regulators, as well as self-regulatory organizations.   

   

In 2000, the Bank became a U.S. “financial holding company” (FHC), as authorized by the Board of Governors of the Federal Reserve System (Federal Reserve).  On November 2, 2015, RBC USA Holdco, Corporation (USA Holdco), RBC's top tier U.S. holding company, became a bank holding company (BHC) and an FHC.  Pursuant to the Gramm-Leach-Bliley Act , an FHC may engage in, or acquire companies engaged in, a broader range of financial and related activities than are permitted to banking organizations that do not maintain FHC status.  To qualify as an FHC, the Bank, as a FBO and BHC, and USA Holdco, as a BHC, must meet certain capital requirements and must be deemed to be “well managed” for U.S. bank regulatory purposes.  In addition, any U.S. depository institution subsidiaries of the FBO or BHC must also meet certain capital requirements and be deemed to be “well managed” and must have at least a “satisfactory” rating under the Community Reinvestment Act of 1977 .  

   

An FBO must meet several conditions in order to maintain “well managed” status for U.S. bank regulatory purposes:  (i) the FBO must have received a composite regulatory rating of “satisfactory” or better for its U.S. branch, agency and commercial lending company operations following its last regulatory examination, (ii) the FBO's home country supervisor must consent to it expanding its activities in the U.S. to include activities permissible for an FHC, (iii) the FBO's management must meet standards comparable to those required for a U.S. bank subsidiary of an FHC, and (iv) each U.S. depository institution subsidiary of the FBO and/or BHC must be deemed to be “well managed”, which requires both a “satisfactory” composite regulatory rating and a “satisfactory” rating on the “management” component of their last regulatory examination.  

   

Under the International Banking Act of 1978 (IBA) and the Bank Holding Company Act of 1956 (BHCA), all of the Bank's U.S. banking operations are subject to supervision and regulation by the Federal Reserve.  Under the IBA, the BHCA, and related regulations of the Federal Reserve, the Bank generally may not open a branch, agency or representative office in the U.S., nor acquire five per cent or more of the voting stock of any U.S. bank or bank holding company, without notice to or prior approval of the Federal Reserve.   

   

The Federal Reserve is the U.S. “umbrella regulator” responsible for regulatory oversight of the whole of the Bank's U.S. activities.  The Federal Reserve consults with and obtains information from other functional U.S. regulators that exercise supervisory authority over the Bank's various U.S. operations.  Reports of financial condition and other information relevant to the Bank's U.S. businesses are regularly filed with the Federal Reserve.  

   

On July 21, 2010, the Dodd-Frank Act was enacted.  The statute requires significant changes to U.S. financial regulations, with material cross-border implications.  Some provisions of the Dodd-Frank Act have taken effect automatically.  Other provisions require adoption of rules by one or more U.S. regulatory authorities to become operative and such rules are in various stages of completion.    

   

Under the Dodd-Frank Act, the Bank is registered as a “Swap Dealer” with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA).  

   

Regulation YY of the Federal Reserve issued under the Dodd-Frank Act (the Enhanced Prudential Standards) required the Bank to establish, by July 1, 2016, an intermediate holding company (IHC) organized under the laws of the United States.  The IHC is required to hold directly or indirectly the Bank's entire ownership interest in its U.S. insured depositary institution (IDI) subsidiaries and other U.S. subsidiaries (excluding so called section 2(h)(2) companies and Debt Previously Contracted branch subsidiaries).  The Bank designated USA Holdco as its IHC.  The Bank as an FBO and USA Holdco as an IHC are subject to Subpart O of the Enhanced Prudential Standards, which includes capital adequacy, capital planning and stress testing, risk management and governance, liquidity and liquidity stress testing, financial regulatory reporting and other requirements that are similar to or the same as those applicable to large U.S. domestic bank holding companies.  

   

The Bank maintains two branches in New York which are licensed and supervised as full federal branches with fiduciary licenses by the Office of the Comptroller of the Currency (OCC), the U.S. supervisor of national banks.  In general, the Bank's branches may exercise the same rights and privileges, and are subject to the same restrictions, as would apply to a U.S. national bank at the same location(s).  The Bank's branches may accept wholesale deposits but may not take U.S. domestic retail deposits outside of an available exemption.  Deposits in the Bank's branches are not insured by the Federal Deposit Insurance Corporation (FDIC).  The Bank also maintains a limited federal branch in Jersey City, New Jersey which may exercise the same rights and privileges as the Bank's New York federal branches except that it can only take deposits from non-U.S. sources. 

The OCC examines and supervises the Bank's U.S. branch office activities and annually examines and assesses their operations.  In addition, the Bank's U.S. branches are required to maintain certain liquid assets on deposit in their state(s) of residence, which deposits are pledged to the OCC.  Furthermore, the Bank is subject to supervisory guidance based on the examiners' assessment of risk management, operational controls, compliance and asset quality.

The Bank also maintains a state-licensed agency in Texas and state-licensed representative offices in Delaware, Texas and Washington (where it is called an alien bureau).  In general, the activities conducted at the Bank's agency include a broad range of banking powers, including lending and maintaining credit balances, but agencies are limited in their ability to accept deposits from citizens or residents of the U.S.  Further limitations may be placed on such agencies' activities based on state laws.  The activities conducted at the Bank's representative offices are limited to representational and administrative functions; such representative offices do not have authority to make credit decisions and may not solicit or contract for any deposit or deposit-like liability.  The Bank's representative offices are examined and assessed by both the Federal Reserve and state regulators and are required to adhere to any applicable state regulations.

Banking activities are also conducted at City National Bank (CNB) and RBC Bank (Georgia), National Association (RBC Bank), both of which are national banking associations chartered by the OCC.  CNB and RBC Bank are members of the Federal Reserve System.  The primary federal regulator of CNB and RBC Bank is the OCC.  As U.S. banks, CNB and RBC Bank are allowed to take retail deposits, and they offer retail and commercial banking services, including deposit and credit services, such as consumer lending products (including credit card and mortgage loans), and business and commercial loans.  CNB and RBC Bank are subject to capital requirements, dividend restrictions, limitations on investments and subsidiaries, limitations on transactions with affiliates (including the Bank and its branches), deposit reserve requirements and other requirements administered by the OCC and the Federal Reserve.  Deposits at CNB and RBC Bank are FDIC-insured to the extent pe

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