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Royal Bank of Canada first Canadian bank to cut prime rate
[TORONTO] The Royal Bank of Canada, Canada's biggest lender, said on Tuesday it would cut its prime lending rate by 15 basis points, becoming the first of Canada's big banks to trim borrowing costs nearly a week after the central bank stunned markets with a rate cut.
The move by RBC takes its prime rate to 2.85 per cent from 3.0 per cent and is effective Wednesday, RBC said.
It is the first of Canada's big six banks to cut its prime lending rate in the wake of the Bank of Canada's surprise decision Jan 21 to cut overnight borrowing costs by a quarter of a percentage point to counter the effects of cheaper oil on economic growth and inflation.
Canada's biggest banks, which include RBC, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada, have come under fire for not immediately cutting their lending rates after the central bank's rate cut.
By not passing on the full rate cut to borrowers, the banks can protect their net interest margin, which boosts profits.
Typically, once one bank cuts its prime rate the others follow in order to remain competitive with borrowers.