Bank Mergers.

[Big Blue Machine]

We need to let the banks merge so together they can take on the other banks in the world. The biggest Canadian bank (RBC) is something like only 26th in the world.

Look at this

http://www.cbc.ca/news/interactives/who-top10-banks/

[madmax]

We need to let the banks merge so together they can take on the other banks in the world. The biggest Canadian bank (RBC) is something like only 26th in the world.

Look at this

http://www.cbc.ca/news/interactives/who-top10-banks/

Other banks are open to competition. Canadian Banks are not and would be swallowed up.

I really don't see the need for larger Canadian Banks. There profits are good, they are well protected and have a captive market.

[gc1765]

We need to let the banks merge so together they can take on the other banks in the world.

How will this benefit Canadians?

[Topaz]

As I watch this govt I wonder if Harper is a "world order" kind of guy or if he supports the NAP and if so, will the US and Canada will become one and therefore alot of things will become private companies and that's not ALL good for Canadians. Harper has already got rid of the Wheat Board, the US doesn't have one. I think Canadians better be alert to this government and any other government when selling out Canada. I see the NDP, want to bring in universal drug care and I'm for it and don't mind the taxes going to where it does the most good for Canadians. I'm not sure the banks mergering would be good, we could see the C$$ disappear for the US $$.

[uOttawaMan]

Why?

They post excellent profits and dividends as it is.

[geoffrey]

How will this benefit Canadians?

Well, the condition of mergers in my opinion should be the opening of Canada to foreign competition in financial services.

[gc1765]

Well, the condition of mergers in my opinion should be the opening of Canada to foreign competition in financial services.

Foreign competition is a good thing...but don't we have that already?

[geoffrey]

Foreign competition is a good thing...but don't we have that already?

Can you think of an example?

No we don't.

[gc1765]

Can you think of an example?

No we don't.

HSBC?

[GostHacked]

RBC has been posting record profits recently. I do not see how merging with another foreign bank can brew competition and I do not see how it will benifit Canadians. Mergers are generally a bad thing for employees and customers, but a great thing for the banks bottom line. And when merging with a foreign company, you will have people in another country partaking in the control of the financial institution. Hopefully all the kinks are hammered out, for dealing with banks in two different countries causes problems. Canadian standards for banks are not the same as the foreign country's bank. Merging would have to get a standard across the board for both locations/companies.

I have seen a lot of consolidation with banks and other large corporations in general. AT&T is now the largest telecommunications company in the US. This is a round up of all the small Ma Bells that were created when large monopolistic companies were broken up in the 80s to create some competition in the market place, in order to stimulate it)

Foreign competition means that the money may no longer stay here in Canada.

[geoffrey]

HSBC?

They don't offer personal chequing. Nor does any foreign bank.

I stand corrected. Perhaps being a Canadian bank (despite the foreign ownership) gets them through. This is the only example I can find... interesting. I'm going to take a look into this.

Edited May 14, 2007 by geoffrey

[gc1765]

I stand corrected. Perhaps being a Canadian bank (despite the foreign ownership) gets them through. This is the only example I can find... interesting. I'm going to take a look into this.

Yes, it's strange that there aren't many examples. I just figure if HSBC can do it, what is stopping everyone else?

[Riverwind]

I stand corrected. Perhaps being a Canadian bank (despite the foreign ownership) gets them through. This is the only example I can find... interesting. I'm going to take a look into this.

Here is the history of the HSBC bank in Canada:

http://en.wikipedia.org/wiki/HSBC_Bank_Canada.

Here is a list of foreign banks with operations in Canada:

AMEX Bank of Canada (The U.S. parent is American Express "AMEX".)

Bank of America National Association

Bank of China (Canada) (The Chinese parent is Bank of China of the People's Republic of China.)

National Bank (Pakistan)

Habib Bank (Pakistan)

BCP Bank

Bank of East Asia (Canada)

Bank of Cyprus

BNP Paribas[1]

Citibank Canada (The US parent is Citigroup.)

CTC Bank of Canada

Deutsche Bank

ICICI Bank Canada

ING Bank of Canada

MBNA Canada The American parent is Bank of America.

HSBC Bank Canada

Sears Canada Bank

State Bank of India

Totta

http://en.wikipedia.org/wiki/List_of_banks_in_Canada

Most of these banks do not engage in retail operations. I suspect it is because it takes a huge amount of money and time to build a retail banking business from Canada from scratch. HSBC built their business by acquiring existing banks with the retail infrastructure.

That is why I think allowing mergers and foreign acquistions will do nothing for banking competition. The existing retail branches would simply be re-labelled and the profits would go to investors outside the country.

[geoffrey]

Yes, it's strange that there aren't many examples. I just figure if HSBC can do it, what is stopping everyone else?

Schedule II banks (foreign owned banks like HSBC) are allowed to accept deposits and all that, but they don't have access to security interests... so they can't have a legal interest in property in security of a debt from what I can understand (busting out the old finance text). At least not by themselves, I assume they could use a Canadian bank's power to do so... I'm not really sure, this is pretty far from my area of experience.

I was under the impression that the chequing account restriction was part of schedule II as well, but apparently that's not the case. I think that the reason you don't see foreigners opening up here is more based on their limited ability to loan funds.

[Riverwind]

I was under the impression that the chequing account restriction was part of schedule II as well, but apparently that's not the case. I think that the reason you don't see foreigners opening up here is more based on their limited ability to loan funds.

HSBC and ING offer competitive mortgages. MBNA and AMEX have big credit card businesses. I don't see how they could offer such services if they were simply acting as brokers for Canadian banks.

This is what the government website says:

Foreign banks operating in Canada account for almost 7 per cent of the assets held by the Canadian banking industry. Until recently, foreign bank activity in Canada took place through separately capitalized subsidiaries, operating on essentially the same basis as Canadian banks.

The recent growth in the number of foreign bank branches stems directly from legislation passed in June 1999 which allows foreign banks to establish operations in Canada without having to set up Canadian incorporated subsidiaries. As of June 2001, 11 applicants had already received ministerial approval to establish branches and a number of other applications were being reviewed. Under this legislation, foreign banks can establish either full-service branches or lending branches. Full-service branches are permitted to take deposits greater than $150,000, while lending branches are not permitted to take any deposits and are restricted to borrowing only from other financial institutions. Legislative provisions in the new policy framework will ensure that the foreign bank entry regime remains consistent with the new domestic policy framework in areas such as permitted investments and business powers, and will provide similar increased flexibility for foreign banks wishing to operate in Canada.

http://www.fin.gc.ca/toce/2001/bank_e.html

I am guessing that HSBC and ING are 'separately capitalized subsidiaries' which allows them to operate as Canadian Banks. I suspect that the requirement for seperate capitalization protects Canadian depositors from any financial problems that the parent bank might have. If I am correct then I think that such rules are good for the economy and that we should not consider loosening them.