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Updated December 22nd, 2023 at 13:12 IST

Canada govt approves RBC's acquisition of HSBC's Canada unit, with conditions

Among the stipulations, RBC is required to establish a new global banking hub in Vancouver, facilitating over 1,000 jobs.

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HSBC to expand personal banking in India
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Canada government granted approval for Royal Bank of Canada's (RBC) acquisition of HSBC Holdings' local operations, totalling a substantial C$13.5 billion ($10.2 billion). The approval, coming over a year after RBC initially announced the deal, was accompanied by specific conditions mandated by Finance Minister Chrystia Freeland.

Among the stipulations, RBC is required to establish a new global banking hub in Vancouver, facilitating over 1,000 jobs and creating approximately 440 net new positions in British Columbia. The conditions also entail waiving fees related to the transfer of mortgages from HSBC to RBC, safeguarding HSBC's Canadian workforce, and increasing RBC's client operations centre workforce in Winnipeg by 10 per cent.

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Furthermore, RBC must allocate $7 billion in financing for affordable housing construction across Canada and commit to maintaining banking services at a minimum of 33 HSBC branches. CEO Dave McKay expressed optimism about the acquisition, emphasizing its potential to strengthen RBC's domestic business and elevate its global standing.

The deal received approval from the federal banking regulator, the Office of the Superintendent of Financial Institutions, and the Competition Bureau, which, while acknowledging minimal impact on competition, noted the reduction in rivalry between Canada's largest and seventh-largest banks.

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However, not everyone is pleased with the approval. Canada's Conservative party leader, Pierre Poilievre, who had advocated against the deal, criticized the government for not supporting competition in banking and mortgage lending, suggesting that all Canadians would now bear the consequences.

The acquisition, RBC's largest to date, was part of a broader trend of Canadian banks pursuing growth through acquisitions. Other notable moves included BMO's acquisition of U.S. lender Bank of the West and TD Bank's offer to purchase U.S. regional lender First Horizon.

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For HSBC, the decision to exit the Canadian market aligns with its strategic focus on reducing its global footprint and concentrating efforts on the Chinese market. HSBC's Canadian operations, with over 130 branches and 780,000 customers, represent a modest 2 per cent market share.

This landmark deal marks the largest attempted acquisition in Canada's banking sector since the early 1990s, when RBC's endeavour to acquire rival Bank of Montreal was thwarted by regulatory intervention.

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(With Reuters inputs)
 

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Published December 22nd, 2023 at 08:12 IST

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