Inside the plaza’s
“We were a strong supporter of the Free Trade Agreement between the
Perhaps closer to the heart for Taylor, 60, NAFTA is likely to fuel additional overseas growth for Royal, already a powerhouse in the trade finance and global foreign-exchange markets, and the dominant institution in
Shorter-term, Royal has been seeking to crack the
Since announcing its intentions, however, Royal has dallied on the sidelines.
I guess we could find a way, too,”
Excessive caution? To be sure, Royal has misstepped more than once. Along with the rest of the banking pack, it has been burned by such fads as energy and LDC loans, and most recently, by a precipitous plunge in real estate values. RBC’s exposure to
By the end of the third quarter, Royal Bank had classified C$766 million of its exposure to
As head of the largest bank in
In August, however, Prime Minister Brian Mulroney and the 10 provincial premiers reached a compromise. The accord would grant special recognition to
Like most Canadian business leaders,
“It is difficult to know where to begin listing the costs a divided
Against this backdrop of critical economic and political issues, Chief Executive editorsJ.P. Donlon and Joseph L. McCarthy met with
Provided the North American Free Trade Agreement gains legislative approval in the
We’ve supported the Canada-U.S. Free Trade Agreement, and we’ve supported the idea that
It’s too early to comment on the particular opportunities the formation of such a market would present to us. But in general, it seems,
Royal Bank has a representative office in
Banking follows trade?
Absolutely. One of the things we’ve learned through experience in the international arena is that you don’t open a bank and let business come to you. You open a bank in line with demand.
We went at the German market early, anticipating a consolidated
All successful international banks have a dominant position in their home markets. Of course, we hank some large companies that do business largely in their own market. But our bread and butter is providing trade financing to the top 1,000 global multinational companies.
Do you think the Canadian legislature will pass the agreement?
It will be a strenuous debate. Labor unions and parties on the Left have been very negative to NAFTA. In the end, I’m hopeful Canadians will see that the advantages outweigh the disadvantages.
Will NAFTA change your approach to the
The original FTA has given us an equal position with American banks. So we have a leg up on other foreign banks in the
Are you concerned about competition coming into your home base?
No. With a 25 percent share of the market here, we have a pretty good shot at holding our own.
A CAPITAL IDEA
What might induce the chief executive of, say, a
The strength of our balance sheet. Using American standards, we’ve more than a 10 percent overall capital-to-assets ratio, compared with the 8 percent required under the
As a result, you get a much higher rating, which means you can raise funds more cheaply than many of your competitors. Are you planning any significant changes in your approach to the Canadian market?
On June 1,
For several years, you’ve professed a desire to push south into the
For one thing, we have been waiting for legislative and regulatory changes in the
Meanwhile, I gather there are other reasons for the lack of activity, beyond insufficient progress in overhauling the banking system stateside.
Well, another reason is that people want too much money. We’re not prepared to pay three times book value. An acquisition of that sort involves so much goodwill that it’s practically debting the bank. We’re not about to do that.
With so many negatives, why expand to the
at all? U.S.
What types of acquisitions would you consider?
We might consider a large regional bank that is growing fast and might be able to benefit from the substantial capital injection we could provide.
Let’s talk about technology. You’ve received quite a boost from the dowdy, old PC.
We have wired all our branches in
One example: The system automatically flags certain files with a red star. This might tell a representative to try to sell a customer a particular product-for example, a mortgage loan. Bank tellers who formerly counted up cash are now able to cross-sell products and services. That increases our productivity. From their side of the counter, Royal Bank’s customers receive better service.
Another technology-based service through which you’ve gained a competitive advantage is ATMs.
We gain a cost advantage by completing some 65 percent of our routine transactions with ATMs. The cost per electronic transaction through our own ATMs is about 35 cents, while it’s five times that for teller transactions.
That 65 percent figure is considerably higher than that at many
It has to do with getting your branch people in the marketing mode. Also, our commitment to employee training has been key. That includes both training to sell products and services and training to use our new technology.
What’s your technology budget, and what proportion of your total budget does that comprise?
Our technology spending is in the neighborhood of $900 million. That’s roughly 20 percent of our budget.
Others have spent at least as much on technology with much less of a return. What’s your secret?
We benefited by getting involved early, particularly with ATMs. Thus we’ve been able to remain ahead of the learning curve.
I’m not a constitutional expert. But as the head of the largest financial institution in
A view has been put forward that nothing much would change if
Sounds like what’s being proposed by some officials in the former
Regarding the U.S. presidential election, do you have any fears that if Bill Clinton, a Democrat, gets to the White House, protectionist sentiment will escalate?
Neither this hank nor Allan Taylor has a partisan opinion about
I do, however, have a concern about some of the protectionism building up in the
Let’s get some of these irritants out of the way and go forward in a spirit of cooperation. Whether it’s Mr. Bush or Mr. Clinton in the White House next year, I hope he will he good for the relationship.