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BMO receives regulatory approval for Bank of the West acquisition

BMO signage in Ottawa on Sept. 7, 2022. THE CANADIAN PRESS/Sean Kilpatrick BMO signage in Ottawa on Sept. 7, 2022. THE CANADIAN PRESS/Sean Kilpatrick
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TORONTO -

BMO Financial Group has secured the all-clear from U.S. regulators to close its US$16.3-billion takeover of California-based Bank of the West from BNP Paribas.

The deal, expected to close on Feb. 1, will mean a major expansion of its foothold in the U.S. market where many of Canada's biggest banks have been looking for growth.

BMO, which already has about US$165 billion in assets and 520 branches across nine states, will add some US$92 billion in assets and more than 500 branches across 20 states to make it the 13th largest commercial bank in the country, according to the Office of the Comptroller of the Currency (OCC).

The acquisition will also add nearly 1.8 million commercial, retail, wealth management and business banking customers and over 9,300 Bank of the West employees will join the company.

In approving the deal, both the OCC and the Federal Reserve Board cited actions taken by BMO to better serve customers as contributing factors to the decision, alongside financial stability and competition assessments.

BMO announced a US$40 billion community benefits agreement in November that commits it to lending to low and moderate income households, minorities, small businesses, and community development opportunities. The bank also committed not to close any branches, while it had previously eliminated or reduced several fees including on non-sufficient funds.

"We are excited to be bringing BMO and Bank of the West together to continue building a leading North American bank with a shared focus on progress for our customers, employees, communities and the planet," BMO chief executive Darryl White in a statement.

The close of the all-cash deal, first announced in December 2021, comes after Canada's banking regulator increased the amount of capital banks have to keep on hand as financial risks increase, leading BMO to announce a $3.15 billion common share offering in December.

TD Bank Group is still working to secure regulatory approval for its US$13.4-billion deal to take over Tennessee-based First Horizon Corp.

In approving the BMO deal, Federal Reserve Board vice-chair Lael Brainard raised concerns about the increase in bank concentration in the US$250-700 billion range, which the deal vaunts BMO to in the U.S.

Brainard said he was encouraged that the board is working with BMO to improve safeguards in the case of financial distress, and that the board is also undertaking a serious review of large bank capital requirements.

In announcing regulatory approvals, BMO also said that Nandita Bakhshi and Claudia Fan Munce, currently directors of Bank of the West, would join the board of directors of BMO's U.S. holding company.

This report by The Canadian Press was first published Jan. 18, 2023.

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