If you look at the ACL ratios we have around commercial real estate now versus the pandemic, they’re about 2x where we were pre-pandemic, if you will. And so pre-pandemic you some sense for what we were thinking about loss rates in a more normal environment. The aggregate portfolio, now we kind of would expect more of a 2x run rate there. And certainly, the U.S. is probably more acute within that. I think with our ratio is U.S. is about 2.5x higher than what we would see play out in Canada. That’s the mix of the nature of our client base. We have more of an institutional mix in the U.S. than in Canada. But again, we’ve got, I think, very good client base. We’ve got good underwriting standards. Certainly in the commercial space as a whole as well as CRE, we tend to get a lot of guarantees from our clients in Canada, that’s about 95% plus of our portfolio is guaranteed.
So our clients are very invested in kind of working these situations out and working with us. So we do expect to see headwinds in commercial real estate for sure. But overall, we do expect the overall commercial portfolio will trend back to more normal levels as we progress through the year.
Paul Holden: Right. In the interest of time, I’ll leave it there.
Operator: The next question is from Lemar Persaud from Cormark Securities. Please go ahead.
Lemar Persaud: This maybe for Dave, but the other group has might want to chime in as well. I think you referred to increased regulation in the U.S. from the follow that failed at U.S. regional banks. I’m wondering if you can maybe offer your thoughts on how much of a magnitude is increased potential capital regulations, liquidity changes and tightening of lending capacity or impact to oil U.S. operations. Are you guys actively making changes with respect to how you operate in the U.S. and then it sounds like it’s a net positive for City National, but then what about the capital markets business?
Dave McKay: Maybe I’ll start and I don’t know if Graeme you want to jump in on that side. So yes, as we look at some of the root causes to the challenges the banks under question based in the narrative back and forth between the industry and leaders on the regulatory side, we do expect to see some type of — whether the liquidity or capital rules or combined rules around positive concentration, overall liquidity levels the nature of duration in your asset for all the things that we account for. How you account for that in your balance sheet and charges to your equity base and AOCL. All those things that we do in Canada, we do expect to see — and we should all expect to see and there’s been a strong public narrative on it, some of those changes, and therefore, that will have some industry impact on margins.
And on profitability and a requirement for, we would think at a minimum, increased liquidity. That, to some degree, may also impact CNB. In addition, there’s a recovery charge from the FDIC to the industry on the recovery costs of Signature Bank and obviously, SVB to start, and we haven’t heard what that is for First Republic, yet and it’s a fairly material recovery cost that you’ll see. We expect CNB would be part of that over recovery charge a very small part. So from that perspective, longer term, how does that impact the way we think, certainly want to make sure you watch your concentrations in your depositor side doesn’t really mean as much insured, uninsured, but overall, where do you have significant commercial or ultra-high net worth concentrations.
