On November 15, 2025, the National Bank of Canada plans to redeem its 4.300% Limited Recourse Capital Notes, Series 1.
This will get rid of $500 million in subordinated debt that counts toward regulatory capital.
The move is part of a steady tightening of the bank’s liability structure, which is happening because interest rates are staying high for a long time.
On September 19, 2025, National Bank announced the plan in a press release. The Office of the Superintendent of Financial Institutions has approved the redemption.
The notes will be bought back at par plus interest that has built up until the redemption date, but not including that date.
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Cash will be settled on the first business day after that date because November 15 is not a business day.
The announcement also says that the bank will buy back the 500,000 Non-Cumulative 5 Year Fixed Rate Reset First Preferred Shares, Series 44, that are held in the related limited recourse trust.
The bank’s statement is on its website and has all the official information about the deal, including when it will happen.
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The notes, which are also called LRCNs, are Canadian financial instruments that are meant to count as non-viability contingent capital.
They are set up as subordinated debt with a limited recourse feature that connects to a group of bank preferred shares.
When stressed, the structure moves loss absorption to the part that acts like equity. In normal markets, LRCNs help banks spread out their term funding and make the best use of their capital mix within OSFI rules.
The National Bank’s choice fits with what usually happens around first call dates, when issuers think about the costs of leaving a security outstanding versus getting new capital.
The coupon on the Series 1 notes is 4.300%. These structures first became popular during a time of very low interest rates, but now the math is more complicated.
If the bank uses new regulatory capital to replace the redeemed LRCNs, the all-in cost will be based on current credit spreads and benchmark yields, which are still higher than they were before 2022.
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If it decides to use a different mix of capital, the redemption could lower interest costs slightly, but it might need to make other changes to the balance sheet to keep regulatory buffers.
The redemption of the linked Series 44 preferred shares is a normal next step that ends the limited recourse trust along with the notes.
The most important thing to remember is that the bank is taking out both the debt and the related preferred shares at the same time, as long as the settlement is moved to the next business day.
The National Bank said that the action was part of its ongoing management of regulatory capital and that OSFI had approved it.
On July 31, 2025, the bank said it had $553 billion in assets and traded on the Toronto Stock Exchange under the symbol NA.
The redemption date is November 15, 2025, and the money will be sent on the first business day after that. This affects reinvestment decisions at the end of the year, when liquidity can be low and new issuance windows can be short.
If the bank comes back to the market with a new LRCN tranche or another capital instrument, the prices will give us a new look at how much demand there is for Canadian bank capital and how investors are pricing the risk of structures that aren’t going to work after two years of rate volatility.
The action doesn’t change the bank’s plans for Personal and Commercial Banking, Wealth Management, Financial Markets, U.S. Specialty Finance, or International.
It does, however, show that management is willing to use the optionality built into its capital stack.
The bank’s communication leaves the door open for future capital moves if the situation calls for it, which is in line with the sector’s careful approach to managing its balance sheets.
