Finance Department plans public consultations on RBC deal to acquire HSBC Canada

The federal Finance Department has launched a public consultation on Royal Bank of Canada’s RY-T $13.5-billion proposed deal to take over HSBC Bank Canada in a rare move to collect information on how it could affect the country’s financial sector.

Canada’s largest bank struck the biggest domestic bank deal on record in late November – a purchase that would bolster RBC’s dominance over its rivals by tens of billions of dollars in loans and deposits.

In an online notice published Tuesday, the Department of Finance said that it is seeking feedback on whether the deal is in the best interest of the financial sector.

HSBC Canada’s position as the seventh-biggest bank in the country – as well as its focus on commercial and mortgage lending – has prompted questions about competition and concentration in the banking sector, which is dominated by the Big Six banks. While RBC requires approval from key federal regulators, including the Competition Bureau and the Office of the Superintendent of Financial Institutions, the federal Finance Minister ultimately has the final say in greenlighting the takeover.

HSBC expects later close of Canadian division sale to RBC

A bank merger of this size in Canada has not surfaced in more than two decades since the federal government squashed two major combinations in the sector.

The Finance Department said it will consider comments on how the deal could affect customers, as well as the stability, efficiency and integrity of the sector.

In response to questions during a call with reporters when the deal was announced, RBC chief executive officer Dave McKay said he would not be willing to divest some of HSBC Canada’s assets to win approval.

The consultation is the second opportunity for stakeholders to express their thoughts on the acquisition. In early May, the Competition Bureau requested information from market participants to assess whether the deal is “likely to result in a substantial lessening or prevention of competition for services provided by the companies, including personal and business financial services across Canada.”

The following day, HSBC said in its first-quarter earnings results that it expects the deal to close later than anticipated to “ensure a smooth transition.” The acquisition is set to close in the first quarter of 2024, rather than later this year.

The Competition Bureau said that it would investigate potential impact to residential mortgages, business lending, investment products and other financial services. The consultation ended on June 1.