In the leadership shift at Royal Bank of Canada, there's a signal that the bank is looking at its trading businesses in capital markets very differently these days.
RBC's big news is the retirement of Gord Nixon as chief executive officer, and the appointment of Dave McKay. Mr. McKay, who comes mostly from a retail banking background, takes over next year.
However, there's a second large change, and that is in the leadership of the capital markets business. The change suggests that RBC is viewing trading now as a service to provide for clients, not as a means for the bank to make money trading its own book. After concerns that trading desk earnings had become too rocky at RBC, it's not a huge surprise.
The capital markets arm has had a two-CEO structure in recent years, with Mark Standish sitting in New York and Doug McGregor in Toronto. Mr. Standish came up on the fixed income trading side, Mr. McGregor through investment banking.
It was always too simplistic to view one as just the "trading" boss and one as the "investment banking" boss, and they worked together across all the business lines in capital markets. Nonetheless, there was some truth in drawing that line.
Now, Mr. Standish will be leaving the bank next year, and Mr. McGregor will be taking over as the single head of capital markets at RBC.
That suggests that trading will have a different role at RBC, something backed up by Mr. Nixon's statement in the press release naming Mr. McGregor to the spot. He lauded Mr. McGregor for having "led the expansion and re-balancing of this business where a much larger portion of earnings are now derived from corporate and investment banking, origination fees, and client-based activities in our trading businesses."
Translation – we want to make money trading for clients and from investment banking, and trading for trading's sake is not where we want to be. Couple that with the appointment of a CEO-in-waiting for the whole bank whose background is largely in retail, and RBC is taking on a more plain-vanilla look under its new leadership team.