RBC’s outgoing CFO reflects on a tumultuous era for banking

Share

There's been non-stop change since Janice Fukakusa was named Royal Bank of Canada's chief financial officer in 2004. First came the industry obsession with Sarbanes-Oxley, the American law enacted after accounting scandals at the likes of Enron. Next was the panic of the financial crisis. Then came the rush to embrace new international accounting rules, which led to regulators cracking down on risky banking activities. Fukakusa endured it all and helped Canada's biggest bank skate through the Great Recession. One of Bay Street's highest-ranking women, she retires in January.

Is it shocking to see how much banking has evolved since you became CFO?

There has been a massive change. Today it's all about documentation and transparency. It's gone from a trust-led environment to a regulation-led one. It used to be that regulators said, "We trust that what you're doing is right." Now it's more about following regulations right down to a T.

Did it ever feel like you were treading water trying to keep up with all the rules?

Sarbanes-Oxley consumed our whole finance team, and we also commandeered internal audit to help. When you do that, you actually lose sight of the underlying business. We've learned the key to implementing rule changes is to get a core team engaged—which involves finding the people who love to do this and who go deep. Also, everyone makes mistakes. You read about errors at other banks, then you test your own models. It's really hard for anyone to get ahead of any of this stuff.

There's an assumption that accounting is boring, especially now that you're tasked with filling out more forms. Is that accurate?

I ask myself: Is finance fun any more? Are you adding to the business, or are you pushing paper? But some people love doing this stuff—analyzing balance sheets and capital metrics. They love the degree of complexity, they love the debate with regulators.

Globally, regulators have attacked banks for being too big and complex. Is the crackdown an overreach?

Some of their requirements, including all of the stress-testing, actually let you hone your business model and define your risk appetite. You can see cause and effect—you can make a conscious decision to invest in the infrastructure needed to cope, or take the complexity out.

More executives are railing against the quarterly earnings cycle. Does it suck up too much energy?

There are way too many quarterly disclosure requirements. I think we're on the precipice of something that could shift over the next five years. All of this model-tweaking at the margin every quarter, it takes too long to do. It's important to share what our long-term shareholders want to see in terms of performance, but the dialogue we have with sell-side analysts, for instance, is totally different from our conversations with long-term shareholders.

Many investors—particularly U.S. hedge funds—are growing more short-sighted. How do you handle them?

It's very frustrating. If I'm going to a conference and am holding one-on-one meetings, I have the investor relations team sort through the participants. We try to get more of a mix of long-term shareholders. I refuse to have a group meeting consumed by questions about what will move our stock price in the next hour or day.

People at RBC joke about being scared to show up late for your meetings. Some were at 6:30 or 7 a.m. Why?

I'm a morning person—I now come in somewhere close to 5 a.m. But I am sensitive to calling early meetings for people with kids. If I do a staff roundtable, I schedule it for 8:30 or 9. But our chief risk officer gets in very close to when I do. Sometimes we meet at Tim Hortons when it opens at 6 a.m. One of my objectives after January is to wake up at 6 a.m. and not feel like I've slept in. I really want to have that feeling.

This interview has been condensed and edited