A deal for the Royal Bank of Canada to absorb HSBC Bank Canada for $13.5 billion is good news for pension plans, said Dave McKay, chief executive officer of RBC.

“This is good for shareholders ⁠— which are largely pension funds ⁠— and that’s average Canadian pension funds,” said McKay during a conference call.

The proposed takeover would see RBC absorb HSBC Canada’s 800,000 clients, 4,200 employees, 130 branches and $130 billion in assets. It would also grow its share in Canada’s banking sector from about 20 per cent to 22 per cent. To move forward, however, RBC must secure approval from the Office of the Superintendent of Financial Institutions, the Competition Bureau and the Ministry of Finance.

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On Tuesday, the Ministry of Finance issued a statement saying its review of the deal may take into account the rights and interests of consumers and business customers, the impact of the transaction on the level of competition and its effects on the stability of the financial sector.

During the conference call, McKay pushed back on the idea that the acquisition could have a negative impact on the stability of Canada’s banking system. “It doesn’t change any of the market structure. We operate in a hugely competitive banking sector.”

According to Robert Clark, an economics professor at Queen’s University, McKay may be understating the acquisition’s potential impact. Clark noted that, during the 1990s, bank mergers limited consumer choice in some local markets, though he also said the introduction of online banking may make this less of an issue in the current environment. “While it’s a minor player, the loss of HSBC Canada could have some effect on consumer choice. . . . They’re kind of a competitive force in the market and so they could be exerting pressure on the rates that people get with other lenders.”

It’s unclear whether McKay’s reference to “average Canadian pension funds” refers to direct investments or indirect ones made through mutual funds. According to an email from RBC, it doesn’t have information available on the amount of its stock held, either directly or indirectly, by pension funds.

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