The House of Commons finance committee has asked Ottawa to reject Royal Bank of Canada’s $13.5 billion acquisition of HSBC’s domestic unit, citing the lack of competition in Canada’s financial sector.
The committee’s report late Wednesday comes weeks after the Competition Bureau approved the transaction, clearing the way for one of the biggest deals in the country’s financial sector. However, the deal has gathered opposition.
The deal, which was announced in November 2022, is now in the hands of the Office of the Superintendent of Financial Institutions (OSFI) and Canada’s finance ministry. It is expected to close in the first quarter of 2024.
“Removing competition in the financial sector could raise banking fees for Canadians who already pay more for financial services due to an already uncompetitive financial sector,” the committee said in the report.
“There already are very few financial institutions in the Canadian banking sector representing a lack of competition.”
Conservative Leader Pierre Poilievre has also called for the federal government to reject the deal, saying that blocking the deal is a clear step the government could take to address affordability concerns.
“We strongly believe that RBC’s proposed acquisition offers HSBC’s Canadian clients the best possibility for continuity and stability while providing them with innovative made-in-Canada international banking solutions and advanced digital capabilities,” an RBC spokesperson said.
The finance department in its response said Finance Minister Chrystia Freeland’s decision will be informed by a regulatory review processes, including those administered by the OSFI and the Competition Bureau.
The last time a deal of this size was attempted in Canada was in the early 1990s, when RBC wanted to acquire rival Bank of Montreal. That acquisition was blocked by regulators.
The highly regulated Canadian banking sector is active in the mergers and acquisition space as banks seeking growth opportunities also look to expand into the United States.
(Reporting by Nivedita Balu in Toronto; Editing by Mark Porter and Diane Craft)