Basel III capital requirements may have prompted mortgage lender PNC Financial Services Group to agree to finance its acquisition of RBC Bank through the issuance of $1 billion in preferred stock and $1 billion in common stock. At least, that’s the theory floated by FBR Capital Markets. Analysts wrote in a report Tuesday that PNC Financial Services Group (PNC), the parent company of PNC Mortgage, is “well positioned to pay cash for the deal.” But because the company chose another avenue, the analysts behind the report believe PNC is worried about complying with Basel III capital requirements, which were designed with the intent of ensuring systemically significant banks have enough capital to cover future risks. In December, the Basel Committee on Banking Supervision created a framework for new capital standards, raising the minimum level of capital banks are required to hold. FBR Capital analysts wrote that “although PNC did not disclose its pro forma Basel III Tier 1 common ratio, we believe that the company is being conservative by leaving the door open for a stock issuance in case Basel III requirements prove to be more onerous. Ultimately, we do not expect PNC to issue common stock considering it should earn close to $3 billion by the time the transaction closes. PNC commented that it expects to manage its capital position to 8% to 8.5% Tier 1 common equity ratio, inline with our estimates for a 1.5% SIFI buffer on top of the 7% required capital.” PNC Financial Services Group agreed to buy RBC Bank, the U.S. banking subsidiary of Royal Bank of Canada (RY), for $3.45 billion this week. PNC Mortgage is the 20th largest mortgage originator in the United States, originating $10.5 billion in home loans last year. Once the transaction closes in March, the acquisition of RBC Bank will add $25 billion in assets, 424 bank branches, $19 billion in deposits and $16 billion in loan balances to the PNC network. RBC’s current allowance for loan losses is in the $755 million-range, according to PNC. JPMorgan (JPM) executives recently warned Congress about the capital burdens that will be placed on banks when Basel III standards come to life in the marketplace. Write to: Kerri Panchuk.