Canadian Bank Mergers: A break with tradition

After decades of steady growth for six big banks, the Canadian banking sector is fast consolidating. The old certainties have been undermined by the announcements of mergers between Royal Bank of Canada and Bank of Montreal in January and Canadian Imperial Bank of Commerce and Toronto Dominion Bank in April. The rush to merge follows a global trend fuelled by the need to cope with increased competition, and was stimulated by the BankAmerica/NationsBank merger in the US. But unlike their US counterparts, RBC/BMO and CIBC/TD have to run the gauntlet of rigorous banking regulation, entrenched political conventions and hostile popular opinion.

The marriage of RBC and BMO, respectively the first- and third-ranking Canadian banks, would create the biggest bank in Canada and the ninth-biggest bank in the world with combined assets of around $337 billion. This was the first bank merger attempted in Canada since the 1961...