Fact check: Trump repeats false claim that Canada prohibits US banks

By Daniel Dale, CNN

Washington (CNN) — As his 25% tariffs on imported Canadian products took effect on Tuesday, President Donald Trump repeated one of his many false claims about Canada – wrongly saying, again, that Canada prohibits US banks from operating there.

“Canada doesn’t allow American Banks to do business in Canada, but their banks flood the American Market. Oh, that seems fair to me, doesn’t it?” Trump wrote in a social media post on Tuesday morning.

CNN and others debunked Trump’s claim a month ago.

“There’s nothing prohibiting American banks from operating here, including having retail branches,” Cristie Ford, a professor at the University of British Columbia’s law school, said in an email in February.

Canada tightly regulates the banking industry, and it requires various government approvals before a foreign-owned bank can open in the country. But US banks have been operating in Canada for well over a century; the Canadian Bankers Association, an industry group, said in a February statement that “there are 16 U.S.-based bank subsidiaries and branches with around C$113 billion in assets currently operating in Canada” and that “U.S. banks now make up approximately half of all foreign bank assets in Canada.”

Tyler Meredith, former head of economic and fiscal policy for Prime Minister Justin Trudeau, noted on social media in February that Bank of America, Wells Fargo, Citigroup, US Bank, JPMorgan, and Northern Trust are among the US banks with current Canadian operations. You can see the others here and here.

Meredith said in an interview that “we take a very careful look at people who want to come into our banking sector, because we consider financial services to be a core asset to Canada and to the Canadian economy” and try hard to avoid the “cascading consequences” the world has seen with bank failures in the US – “but there are existing American institutions, Chinese institutions, Japanese institutions, and European institutions” that have permission to operate in Canada.

US banks can apply to launch a subsidiary in Canada, which is known as a “Schedule II” entity, or a “branch” in Canada (not to be confused with a retail branch), which is known as a “Schedule III” entity.

When a non-Canadian bank establishes a Canadian subsidiary, “that subsidiary will be subject to the same regulatory regime and capital requirements as a domestically owned and operated bank,” said Bryce Tingle, a professor at the University of Calgary’s law school, in a February email. “It will have exactly the same powers and market access as a Canadian bank.”

Jeremy Kronick, director of the Centre on Financial and Monetary Policy at the C.D. Howe Institute think tank in Toronto, explained in a February email that there are downsides to the subsidiary option from the perspective of foreign banks: A subsidiary is “a separate legal entity from their parent, thus requiring their own local capital and liquidity structures.
From the foreign bank’s perspective, this is obviously inefficient.”

Most US banks operating in Canada have chosen the “branch” option that does not subject them to the requirements of a subsidiary. However, there is a different restriction on branches: They are not allowed to accept deposits lower than $150,000 CAD.

That, of course, means they can’t conduct retail operations for average Canadian citizens – but they can engage in various profitable activities, for companies and wealthy individuals, that are less visible to the general public. The Canadian Bankers Association said the US banks in Canada “specialize in a range of financial services, including corporate and commercial lending, treasury services, credit card products, investment banking and mortgage financing.”

Kronick said: “Bottom line: there are trade-offs to each option, but foreign banks certainly can operate in Canada. A case could probably be made that the restrictions on both options prevent full competition with Canadian banks, but not that ‘Canada doesn’t even allow US Banks to open or do business there’ as Trump stated.”

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