Enterprise Risk Management at Royal Bank of Canada

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Case Details:

Case Code : ERMT-017
Case Length : 13 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Royal Bank of Canada
Industry : Banking
Countries : Canada

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note Contd...

RBC opened offices in the UK in 1979 and in West Germany, Puerto Rico, and the Bahamas in 1980. As Canada's banking rules relaxed, RBC bought Dominion Securities in 1987. The US Federal Reserve approved RBC's brokerage arm for participation in stock underwriting in 1991.

In 1992, RBC faced a $650 million loss after backing the Reichmann family's Olympia & York property development company, which failed under the weight of its UK projects. The next year RBC bought Royal Trustco, Canada's #2 trust company, and Voyageur Travel Insurance, its largest retail travel insurer.

A management shakeup in late 1994 ended with bank president John Cleghorn taking control of the company.

In 1995 RBC was listed on the New York Stock Exchange. The next year, it joined with Heller Financial (an affiliate of Japan's Fuji Bank) to finance trade between Canada and Mexico. It began offering PC home banking in 1996 and Internet banking in 1997. That year RBC became one of the world's largest securities-custody service providers with its acquisition of The Bank of Nova Scotia's institutional and pension custody operations.

RBC and Bank of Montreal agreed to merge in 1998, but Canadian regulators, fearing the concentration of banking power seen in the US, rejected the merger. In response, the bank slashed its workforce and implemented a sale-leaseback of its property portfolio (1999).

In the late 1990s, RBC grew its online presence by purchasing the Internet banking operations of Security First Network Bank; the online trading division of Bull & Bear Group (1999); and a 20% stake in AOL Canada (1999). It bought several trust and fiduciary services businesses from Ernst & Young.

In 2000, RBC bought US mortgager Prism Financial and the Canadian retail credit card business of BANK ONE. RBC also sold its commercial credit portfolio to U.S. Bancorp and bought the insurance subsidiaries of South Carolina-based Liberty Corporation to boost its US operations...

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