In late November, City National Bank's Rod Werner made a bunch of phone calls to his colleagues at venture capital firms with an unfortunate message.
City National was getting out of the venture debt market, meaning no more lending to early stage start-ups. The firm was instead focusing more on bigger companies and private equity.
According to multiple sources, who declined to be named because the conversations were private, Werner, managing director of City National's technology and venture capital banking group, said the bank's parent company, Royal Bank of Canada, was feeling some regulatory heat.
RBC acquired Los Angeles-based City National last year for $5 billion, and in the deal assumed a growing portfolio of high-risk debt tied to young technology companies.
In an official statement to CNBC.com, City National offered a softer message, and a spokesperson declined to comment on anything regarding regulators.
"We will continue to bank early stage companies — and technology companies across the board — but we are narrowing our focus on the types of loans we make and expanding efforts to lend to more established companies," City National said. "Working with RBC Capital Markets, we believe we can be a vibrant contributor to the growth of a wide range of technology companies and entrepreneurs."
RBC's U.S. banking regulator is the Office of the Comptroller of the Currency, which also oversees City National.