Under Conditions, Freeland Greenlights RBC's $13.5 Billion Acquisition of HSBC Canada

22 Dec, 2023

Under Conditions, Freeland Greenlights RBC's $13.5 Billion Acquisition of HSBC Canada

Finance Minister Chrystia Freeland has given her nod to RBC's acquisition of HSBC Canada worth $13.5 billion, despite opposition calls to halt it over competition concerns.

Freeland's approval was the final hurdle following the Competition Bureau's clearance in September. However, her endorsement includes conditions for RBC. These conditions stipulate that none of HSBC Canada's 4,000 employees should face dismissal within six months from the closing date, extending to two years for front-line staff. Additionally, banking services must continue at a minimum of 33 HSBC branches for four years.

The federal government initiated a consultation on bolstering competition within the financial sector. This consultation seeks insights into whether large bank mergers should be formally prohibited and if the government should restrict the scale of bank growth through acquisitions.

The deal's opponents argue that it would further concentrate an already heavily centralized banking sector. With the acquisition, Canada's six largest banks are projected to control approximately 95% of banking assets, up from the existing 93%.

Conservative Leader Pierre Poilievre emphasized concerns over excessive banking sector concentration, citing HSBC Canada's role as a mortgage rate disrupter and the potential impact on consumers. Freeland defended her decision, highlighting potential job losses, investor confidence, and service disruption for 780,000 Canadians if the deal had been blocked.

RBC's CEO, Dave McKay, hailed the approval as beneficial for Canadians, stressing extensive competition in the banking landscape despite the merger. He emphasized the bank's commitment to address affordability by allocating $7 billion for affordable housing construction across Canada.

As part of the conditions, RBC plans to establish a global banking hub in Vancouver, generating over 1,000 jobs and creating 440 net-new jobs in B.C. Additionally, they aim to increase the client operations workforce in Winnipeg by 10%, adding 100 new jobs.

McKay refrained from committing to maintaining HSBC Canada jobs beyond the stipulated timeline, highlighting the need for time to understand employees better and chart the way forward. He emphasized the bank's intention to focus on building relationships and managing future pathways after a thorough understanding of the employees post-approval.