Royal Bank of Canada announced yesterday evening that it plans to establish a litigation reserve of US$500 million to cover potential legal costs associated with a number of lawsuits over the collapse of Enron Corp.

The bank said the charge will be recorded in the fourth quarter.

RBC is a defendant in a number of pending Enron related actions, including a securities class action brought on behalf of Enron securities holders in a federal court in Texas.

“After careful consideration and consultation, we have concluded it is appropriate and prudent to establish a litigation reserve for Enron-related matters at this time,” said Gordon Nixon, president and CEO, in a release.

“In light of our financial strength, this litigation reserve will not affect our ability to pursue our on-going business strategies,” Nixon added.

Dominion Bond Rating Service said “With an after-tax impact of about C$300 million, DBRS believes the charge is not expected to have a significant impact on Royal’s capital ratios or growth objectives and does not significantly limit the Bank’s strategic flexibility”.