The Competition Bureau has cleared RBC’s proposed $13.5-billion takeover of HSBC Bank Canada despite concerns about concentration in Canada’s financial sector.
The bureau said Friday that its review found the deal won’t likely significantly lessen competition, even though it means Canada’s largest bank is poised to take over the seventh largest by assets.
But it did note that the deal, which still requires approval from the Finance Minister and the banking regulator, means the loss of a competitor in a concentrated market.
“The bureau’s review found that the merger would result in a loss of rivalry between RBC and HSBC Canada,” the bureau said in its report.
“The bureau also found that relevant financial services markets are concentrated, that there are by high barriers to entry and expansion in many of the relevant markets, and that conditions in certain of the relevant markets may facilitate coordinated behaviour among competitors.”
Critics had pushed the Competition Bureau to try and block the deal, arguing that HSBC Canada added important market pressure especially in areas like mortgage rates and sustainable finance.
The bureau did note that the loss of rivalry between RBC and HSBC Canada will be more pronounced for some customer groups such as mortgage shoppers.
“The bureau found evidence of instances where HSBC Canada had materially affected RBC offers for a number of the products examined, including mortgages, high interest savings accounts, GICs and business loans and accounts.”
It found, however, that HSBC Canada’s competitive impact was limited compared with other financial institutions, and that Canada’s other major banks are effective competitors.
Some had also pushed for the deal to be blocked because HSBC has been a leader in sustainable policies, such as a commitment last year to stop funding new oil and gas fields, while RBC has been criticized for its shortcomings on climate action.
The Competition Bureau, looking largely at sustainable finance products, found that RBC would still face incentives to respond in the area given increasing demand and significant competitive pressures.
The bureau’s review considered a broad range of sources, including more than 1,500 submissions from Canadians.
The approval will be used in the Finance Minister’s decision-making process on whether to give the final greenlight for the deal to proceed.
RBC first announced its proposed takeover of HSBC Canada in November 2022. HSBC Canada has said it expects the deal to close in the first quarter of 2024.