Hours after imposing steep tariffs on Canada, President Trump raised an issue that even the American lenders whose cause he’s championing find perplexing: the access, or lack thereof, of U.S. banks to the Canadian market.
On Tuesday, Mr. Trump wrote in a post on Truth Social, “Canada doesn’t allow American Banks to do business in Canada, but their banks flood the American Market.” He added sarcastically, “Oh, that seems fair to me, doesn’t it?”
While this issue doesn’t often come up in conversations with prominent American bank executives, it appears to be increasingly on the president’s mind.
Mr. Trump mentioned the Canada banking issue early last month as part of a broader criticism against what he views as the unequal economic balance between the United States and its northern neighbor. Writing on Truth Social, Mr. Trump said Canada “doesn’t even allow U.S. Banks to open or do business.”
Here is the actual state of play for U.S. banks in Canada:
Can U.S. banks operate in Canada?
Canada’s banking sector is dominated by the “Big Six,” the half-dozen institutions including the Royal Bank of Canada and TD Bank. They are permitted to take deposits, extend mortgages and advise corporate clients — all the core activities for banks. And Canadian customers disproportionately still prefer to do their banking in person, as opposed to online, meaning it would require a major physical presence for any entrant to attempt to enter the market.
Additionally, U.S. banks are restricted in what they can do in Canada.
Foreign banks, including American ones, must either work with a Canadian middleman, establish a Canadian subsidiary or receive special government permission to do business. Unless they agree to follow Canada’s stringent banking rules that include holding a hefty sum of cash-like assets in reserve at all times, they cannot operate retail branches that take deposits under around $100,000.
Given how dominant Canada’s homegrown banks are, any international bank that tries to compete faces “an additional regulatory burden for what would begin as a small prize,” said James R. Thompson, associate professor of finance at the University of Waterloo.
The upshot is that U.S. banks have minimal operations in Canada. The largest American lender, JPMorgan Chase, says it has roughly 600 employees in Canada, out of more than 300,000 worldwide. Many international banks limit themselves to areas that don’t involve lending, such as offering investment advice to wealthy Canadians or local companies.
So Mr. Trump is incorrect in asserting that American banks cannot do any business in Canada, but it is true that they are hamstrung in their activities.
Why is Canada so restrictive?
While there are more than 4,000 banks in the United States, Canada has just a few dozen, and more than three-quarters of deposits are held by the Big Six.
For decades, Canadian political leaders have crowed about that restrictive financial regulatory model. They argue that fending off foreign entrants in the country’s mortgage market helped the country largely avoid the 2008 collapse south of its border.
In light of Mr. Trump’s criticism, Maggie Cheung, a spokeswoman for the Canadian Bankers Association, was quick to point out on Tuesday that foreign banks were an integral part of the banking landscape. She said 16 U.S. banks were operating to some degree in Canada, with a cumulative of nearly $79 billion in assets — a statistic that the nation’s prime minister, Justin Trudeau, also cited on Tuesday.
“American banks are alive and well and prospering in Canada,” Mr. Trudeau said.
But in relative terms, their successes are small. U.S. bank assets represent 1 to 2 percent of the $6.5 trillion held by banks operating in Canada writ large.
“The major impediment faced by U.S. banks,” said Laurence Booth, professor of finance at the University of Toronto, “is simply they can’t compete with the Canadian banks as they don’t have the scale, while they can’t take any of them over as there are restrictions on foreign ownership.”
Do Canadian banks ‘flood’ the U.S.?
International banks — including Canadian ones — are largely free to establish U.S. arms. The United States is a more attractive target for international banks than Canada, both because it is a hub for world finance and because its market permits more exotic, higher-profit lending activities like 30-year mortgages. (The most common mortgage in Canada carries a five-year term.)
The largest Canadian bank in America, TD Bank, operates more than 1,000 U.S. branches through a Delaware subsidiary. That size puts it in line with well-known regional lenders like Citizens and Fifth Third.
The Canadian Bankers Association said the six largest Canadian lenders held less than 3.5 percent of U.S. bank assets.
Is this even an issue for Wall Street?
Big U.S. banks had plenty of hopes that Mr. Trump would decrease regulations, encourage merger activity and slash taxes. Expanding their presence in Canada was not on the list.
A U.S. banking industry trade group, the Bank Policy Institute, said Tuesday that it had released no statements on the matter, and no bank chief executive has taken up the rallying cry.
More pressing for the global banking industry are Mr. Trump’s tariffs, which have helped push the industry’s stocks down 8 percent over the past month, according to the KBW Nasdaq Bank Index.
