RBC High-Yield Desk Faces Staff Turnover After First Brands Losses

RBC’s high-yield credit desk has seen a 22% increase in staff departures since early 2026, according to internal personnel records. This exodus follows a $38 million loss on a $200 million portfolio tied to First Brands Inc., a company that defaulted on its senior unsecured notes in January 2026. The loss was the largest single exposure within the desk’s high-yield book during the period and contributed to a 14% drop in the team’s quarterly return performance. The incident prompted a review of credit underwriting standards and risk allocation protocols across RBC’s corporate and investment banking division. Internal assessments indicate that the First Brands deal was approved with a B+ credit rating, despite deteriorating cash flow metrics and increasing leverage ratios evident in the three months prior to the default. The credit decision was made by a three-person committee, two of whom have since left the bank. In response, RBC has established a new oversight committee to evaluate high-yield exposures above $50 million, with enhanced reporting requirements to senior leadership. The bank also announced a temporary freeze on new high-yield investments in the consumer goods and retail sectors until Q3 2026. These measures aim to restore internal confidence and align with updated risk appetite guidelines issued in February. The staffing shift has already impacted client coverage, with three key account managers reassigned to other divisions. Market participants note that the high-yield desk’s ability to lead underwriting for new issuers may be constrained in the near term, particularly in sectors with heightened volatility. The changes reflect a broader trend among Canadian banks to recalibrate credit risk strategies after recent market stress episodes.