Canadian banks aiming to expand in the United Statesthrough acquisitions face new attention to past conflicts and increased scrutiny from regulators and politicians. I am.
Both TD Bank and BMO are working to close big deals there, with TD $ 13.4 billion against First California, which focuses on the southeastern United States. Trading, BMO is California-based Bank of West.
Read more: Banks of Canada face rare political heat amid rising inflation
The general southward growth of Canada's banking industry is due to US President Joe Bidenlast year's economic competition, including the "revitalization" of merger monitoring in the banking industry. After issuing a widespread enforcement order calling for an intensification of.
BMO and TD Bank are each facing a public meeting on the proposed transaction. This is not required by regulatory agencies, but the US Office of the Comptroller of the Currency, announced in May, applies to these transactions. We also extended the public comment period for both transactions.
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The hearing will follow a speech by OCC speech director Michael Sue, "to analyze the bank merger. It's time to rethink the framework used for Yes, it raises the attention of those who are trying to make a deal and feeds critical politicians. Of the industry.
Earlier this month, U.S. Senator Elizabeth Warren sent a letter to OCC, a major bank regulator, asking "stop the merger until TD Bank is liable for its abuse." rice field.
Read more: Banks of Canada face rare political heat amid rising inflation
This letter comes from the last report, a month by the Research Media Outlet Capital Forum, which claims to have conducted a government investigation in 2017, at TD "Problem accounts across retailers from main to Florida. "Practice" was discovered. Without their permission.
Warren's alleged practice, which she called "rambling fraud and abuse," was an account scandal at Wells Fargo, where banks created millions of fraudulent accounts without customer consent. He said they were similar. The high-profile case led to an indictment against the former CEO and a $ 3 billion settlement with the federal office in 2020.
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TD pushed back strongly against the claims of the research part.
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"The claims in the Capitol Forum article are completely unfounded. They tell the wrong story. It's a shame I chose, "spokeswoman Elizabeth Goldenstein said in an email.
"Our business is built on ethics, integrity and trust, and our rewarding practices that emphasize customer satisfaction are carefully and actively managed."
She wants banks to secure approval He said he is still working on it. First Horizon transaction.
Still, state bank analyst Gabriel Dechain said in a note to customers that a letter from Warren and three members of the House could prevent the acquisition of TD. As a result, it attracted enough attention to question the deal.
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He asks regulators to "scrutinize ongoing fraud" in the TD. Including, he said the letter may get the widespread attention it seeks. Greater risk for banks.
"Whether the 1/8 First Horizon 3/8 acquisition is approved can be a secondary issue. Bank sales practices in the United States are wells fargo's ( It's not a good time whenever it's compared to Senator Warren's letter). ”
He said the bank was in 2020 due to" illegal overdraft registration ". After being fined US $ 122 million by the Wells Fargo, the TD said it was already facing disciplinary action against similar sales practices in the United States.
The TD, along with many US banks, has significantly reduced or eliminated overdraft fees under pressure from US regulatory agencies as part of broader banking reforms.
Tighter regulatory pressures also affected Dechaine, which downgrades both TDs and BMOs in March. He said he expected both of the United States. Transactions close later than banks expect based on "uncertainty in regulatory approval".
Other banks are already causing delays due to a more intense process. Last month, Tokyo-based Mitsubishi UFJ Financial Group announced that the planned sale date of US $ 8 billion to its subsidiary US Bancorp was postponed due to a longer-than-expected regulatory approval process.
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The BMO proceedings haven't received the attention TD faces, but in the US media There are comments on the US $ 1.9 billion proceedings that banks are facing in Minnesota. Anything related to the Ponzi scheme can complicate the procedure.
St. Louis-based bank analyst James Shanahan said there is certainly a different regulatory environment at this point.
"There's more scrutiny, and that's for sure," said a senior analyst at Edward Jones.
Read more: Inflation is rampant, meaning that the Bank of Canada must raise interest rates by more than 3%. Means. The presidential orders and the Democratic Party dominating the House of Representatives and the Senate show that M&A's activities are widespread, but perhaps even more scrutinized, especially in the area of financial services.
However, he is particularly concerned about the Democratic Party, as the TD-BMO transaction does not appear to raise major antitrust issues or cause serious unemployment. He said it was not a type of transaction.
Mr. Shanahan said it would be very reasonable to close the deal by the end of the year, as expected, but it could certainly be postponed.
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