Pressure mounting on Liberals to block HSBC-RBC merger

Pressure is mounting on the Liberal government to block a proposed merger between the Royal Bank of Canada and British bank HSBC, with some civil society and environmental groups insisting the merger is bad for everyone.

The Stop the RBC Takeover Campaign said in a media statement Thursday that if the merger is allowed to proceed, it will saddle "Canadians with higher rates and fewer financial choices, while further concentrating the power and market dominance of Canada's biggest bank."

The group's call to block the merger comes a few weeks after the House of Commons finance committee asked Ottawa to reject RBC's $13.5-billion acquisition of the British bank's Canadian arm, saying the deal would result in reduced competition in the financial sector.

"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's Nov. 1 report to the House of Commons said.

The committee's advice came weeks after the Competition Bureau said the transaction was "not likely to result in a substantial lessening or prevention of competition under the Competition Act," although it would "result in a loss of rivalry between Canada's largest and seventh largest banks."

The deal, which was announced in November 2022, is now being reviewed by the Office of the Superintendent of Financial Institutions (OFSI).

Conservative Leader Pierre Poilieve and NDP Leader Jagmeet Singh have called on Deputy Prime Minister and Finance Minister Chrystia Freeland to block the deal. They argue it would reduce competition and drive up the cost of mortgages.

"Let's be clear: this is an opportunity for RBC to make even more money while hardworking people playing by the rules and doing everything right still can't get ahead," Singh said when the deal was announced. "The Liberal government has the power to stop this merger and protect Canadians."

In a statement, RBC said HSBC's decision to "exit the Canadian marketplace" has led to uncertainty for the British bank's Canadian clients adding that RBC's proposed acquisition offers HSBC's Canadian customers "the best possibility for continuity and stability."

"This proposed acquisition will also keep more well-paying financial sector jobs in Canada and will repatriate overseas roles that currently support HSBC's Canadian operations," the statement said. 

'Eroding competition'

The Stop the RBC Takeover campaign members include the Canadian Anti-Monopoly Project, Environmental Defence, Greenpeace Canada, Shift: Action for Pension Health and Planet Health, For Our Kids, Climate Action Network Canada and others.

"This takeover will put further pressure on housing affordability and cost of living at a time when Canadians are already suffering," the group's statement said.

Keldon Bester, the executive director of the Canadian Anti-Monopoly Project, said a shortage of banking options is already contributing to higher mortgage payments and the merger would only make things worse.

"Canadians should not have to bear the cost of eroding competition in our banking sector as a result of our weak competition laws. Minister Freeland must block this transaction and protect competition," Bester said in a media statement. 

The campaign also says RBC isn't investing enough in clean energy while it maintains its investments in fossil fuels that contribute to climate change.

"If the federal government wants to keep its promises to Canadians about climate action, it has to regulate the financial sector in a way that aligns with Paris Agreement commitments," Julie Segal of Environmental Defence said in a media statement.

After she toured a housing development in Toronto, CBC News asked Freeland if she was considering blocking the deal or if she believes fewer banks could lead to higher mortgage rates for consumers.

"The proposed acquisition of HSBC by RBC is right now under… review [and] I am not going to make any further comment," she said.

HSBC has been operating in Canada since 1981 and currently has about 130 branches and 4,200 employees serving roughly 780,000 customers in Canada.

According to its most recent quarterly report, HSBC Canada had $120.5 billion in assets at the end of September, and posted a total operating income of $660 million in the first three quarters of this year. HSBC holds about two per cent of all the bank deposits and mortgages in Canada.