By MIKE BAKER

RALEIGH, N.C. (AP) ¿ A Royal Bank of Canada executive who oversees the company's international operations, including its U.S. banking operations based in North Carolina, said Wednesday the U.S. financial industry needs more consolidation.

But he warned that acquisitions have been complicated by the government's ongoing effort to keep banks afloat.

Jim Westlake, who guides the company's work outside of Canada, said the Troubled Asset Relief Program, which has provided billions of dollars to domestic banks, has been a "made-in-U.S. solution." He said it would be prudent for the government to allow well-capitalized foreign banks to participate more in the market.

"Acquisitions right now are tough to even contemplate because it's hard to say what a market deal looks like in the current environment," Westlake said during a visit to Raleigh, where the bank's U.S. banking operations are headquartered.

"How would you even do an acquisition of a bank that is currently in TARP? What happens? Unless you're dealing with government-assisted deals or FDIC sales, we feel that in this year, the normal market flow has been pretty disrupted."

Despite some bruises, RBC and its U.S. subsidiary RBC Bank ¿ based in Raleigh with a presence in six Southern states ¿ have fared comparatively well through the economic downturn. President Barack Obama praised the Canadian banking system last month, saying the conservative approach there has provided the nation with a vibrant banking sector without the "wild risks" of Wall Street.

RBC has built its presence in the Southeast through three acquisitions in the past few years, but executives noted that they aren't all that interested in making any acquisitions right now. Scott Custer, chief executive of RBC Bank, said healthy companies like his don't want to bog down their balance sheets with the questionable finances of struggling companies.

As a foreign bank, RBC is not qualified to receive TARP funding.

Westlake said he expects more consolidation in the banking industry before it can fully revive. He expects there to be more large national banks, noting that Canada's financial system is driven by a handful of major banks.

It would be a "big surprise" for RBC to participate in an acquisition this year, Westlake said, even though the company plans on some expansion. He said the company wants to take advantage of its financial strength to build its brand areas where it has already grown ¿ North Carolina, Alabama, Atlanta, select communities in Florida and the coastal areas of Virginia and South Carolina.

"We are definitely in a year in which we are focusing very hard on managing our own books, maintaining a very conservative approach to cost and spend," Westlake said. "We will be very selectively looking at growth opportunities, but it's a time to really focus on making sure that we deal with our own loan book, particularly real estate lending."

Shares of Royal Bank of Canada were up 34 cents, or 1.3 percent, to $25.95 on Wednesday afternoon.

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