“The resistance really is more around tradition and ego and prestige than it is anything else,” Nixon said in an interview with Bloomberg Television’s Erik Schatzker.
Royal Bank, Canada’s largest lender by assets, made the shift 11 years ago. Citigroup Inc. (C) and Bank of America Corp. (BAC) are among the only major U.S. banks that have separated the roles, while firms including JPMorgan Chase & Co. and Goldman Sachs Group Inc. (GS) have kept them combined.
“It’s healthy for the system and I think it takes a lot of the pressure off the CEO, which would be good,” Nixon, 55, said. “But unfortunately, some U.S. CEOs don’t quite see it that way.”
Nixon was named CEO in 2001 after John Cleghorn resigned, and the Toronto-based lender appointed Guy Saint-Pierre as the non-executive chairman. All of Canada’s major banks followed Royal Bank’s move separating the roles.
Canada’s banks are among the strongest in the world, according to a ranking in the June issue of Bloomberg Markets magazine. Canadian lenders, which dominate the list’s top 10 spots, cited strong capital levels, a conservative-lending culture and strict regulatory oversight for their showing.
Canada’s mortgage market was one of the greatest sources of strength for the country relative to the U.S. and elsewhere, Nixon said.
“Most mortgages are on the balance sheets of banks, therefore they’re quite well underwritten, the lending terms are conservative, amortization periods are relatively modest compared to other markets,” Nixon said. “As a result, one of the strongest asset classes has been one of the weakest asset classes elsewhere.”
Royal Bank is also reducing its exposure to Europe, including capital markets, even as it looks to gain business in wealth management, investment banking and trust services on the Continent, Nixon said.
“We’re taking down our overall balance sheet exposures where we feel it’s prudent to do so, but we also think there’s an opportunity to do business with our European customers,” Nixon said. “We would be taking down exposures in things like our trading books and areas where you can be impacted by periods of low liquidity.”