Canadian Banks’ Expansion into America Has Not Gone Well. Here’s Why

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Anyone living on the eastern seaboard of the U.S. would be hard-pressed not to notice the ubiquitous TD Bank branches, with their aqua-green signs and matching decor. 

All told, TD Bank has 1,100 bank branches in the U.S. and is currently the 10th largest bank in the country, with US$366 billion in assets. TD even muscled its way to becoming the third-largest retail bank in New York.

A subsidiary of the Toronto-Dominion Bank, TD’s incursion into the U.S. began more than 20 years ago when it decided to spend US$20 billion on buying up regional American banks.

But was it actually a good investment and a good idea?

In a recent article in Mergers & Acquisitions magazine, analysts with Toronto-based Veritas Investment Research, an independent equity research firm, said that U.S. banking is a very low-return, high-risk business relative to Canadian banking. (Learn: Gold Jumped 22% this year, Record Highs)

“Over the long term, banks that generate the highest risk-adjusted return on equity (ROE) tend to outperform. In other words, banks that focus on Canadian banking supplemented with wealth and capital markets (i.e. tortoises) outperform banks that chase international banking growth (i.e. hares),” Veritas said in a recent report.

Today, TD is facing a crippling crisis in the U.S. Three years ago, the U.S. Department of Justice laid charges against a Chinese drug trafficking ring that had laundered US$653 million in profits through various financial institutions, primarily through TD branches in New York. The criminals even bribed some TD employees and managed to wash the money over five years due to the bank’s poor anti-money laundering controls. (Learn: Lower rates not great for Canadian banks)

This October, TD learned of the steep price it would have to pay for this scandal. The bank would have to plead guilty to criminal charges, pay out US$3 billion in fines, accept an asset cap barring the bank from growing above a certain level in the U.S., and allow independent monitors to watch TD to ensure it complies with certain regulatory pacts. 

Last year, TD also paid a US$225 million termination fee after it walked away from buying a regional bank in Tennessee. Not shockingly, its third-quarter earnings this summer saw a loss of C$181 million and a loss from its U.S. retail business of C$2.28 billion.

In a note to clients, John Aiken, an investment bank analyst from Jeffries, said this money laundering fiasco may result in a lost decade” for TD. “Growth in the U.S. will likely be constrained and the timeline for a fix is extended by several years.”

For more than 30 years, Canada’s six big banks saw investing in the U.S. and other parts of the world as a way to expand their footprints. TD and Scotiabank made the biggest investments abroad, with TD and Bank of Montreal (BMO) often buying up regional banks in the U.S. 

Yet research conducted by Veritas shows that Canadian banks that sought fortunes outside of Canada have seen a relatively low return on this investment—and many headaches. In contrast, Canadian banks that focused more on business at home saw better returns. 

Veritas has produced three data-heavy reports making his case. The research concluded that the banks with the best risk-adjusted returns over the past decade focused on Canada as a market rather than those that pursued foreign markets.

Why? One reason is that Canada has one of the most stable banking systems in the world, having never had a banking crisis since 1840 and only two bank failures since 1923. Canada also has a handful of large diversified banks with less competition, all heavily regulated. “Canadian banking generates a higher ROE than international banking due to less capital intensity, lower competitive pressures, and higher profitability,” Veritas said in one report. 

In contrast, the U.S. has experienced 12 major banking crises since 1840, driven by a fragmented, competitive, and localized banking system. The most recent was the credit crisis of 2007–2008, which led to the collapse of storied investment houses like Bear Stearns and Lehman Brothers.  

The far more competitive environment in the U.S. makes earning high returns more difficult. Profit margins aren’t as strong in the U.S. as in Canada, and fees are lower in the U.S. with more competition, Veritas said. 

Indeed, Canadian banks like TD, which focused on building retail networks in the States, ran smack into this reality. On the other hand, Veritas found that Canadian banks that instead focused on wealth management in the U.S. and elsewhere did far better.  

Canadian banks also invariably take wayward risks when they venture south of the border, leading to costly scandals. In the 1990s, the Canadian Imperial Bank of Commerce (CIBC) became one of Enron’s bankers and ended up helping the energy company hide debt. CIBC had to pay US$80 million in fines and US$2.4 billion to settle a class action lawsuit (although it did not admit any wrongdoing in the Enron case). 

In 2005, the bank also had to pay out US$125 million to settle an SEC investigation into its role in an improper mutual fund market timing and late trading scam (again, not admitting they had been at fault). And in 2007, the bank found itself exposed to US$9.8 billion worth of problematic U.S. subprime mortgage debt it had agreed to backstop.

The Royal Bank of Canada (RBC) has faced similar issues. In 2008, three of its employees went to prison for their role in the Enron scandal. Earlier this year, the U.S. Office of the Comptroller of the Currency (OCC) imposed a US$65 million fine on City National Bank, an American subsidiary of RBC, for “systemic deficiencies in the bank’s risk management and internal controls.” City also had to pay more than US$31 million for refusing to extend mortgages in predominantly Black and Latino communities in Los Angeles.

Canadian banks have also sucked up significant losses from its acquisitions. In the late 1990s and early 2000s, RBC bought a North Carolina bank called Centura Banks Inc. and tried valiantly to turn it into a meaningful foothold in the southeastern states, only to retreat after absorbing losses for 10 straight quarters in the aftermath of the credit crisis.  (Learn: “Strong cultural fit” – Scotiabank to invest in U.S.-based KeyCorp as it refocuses direction)

More recently, in 2023, BMO acquired San Francisco’s Bank of the West for US$16.3 billion. In the first quarter after its acquisition, Bank of the West added US$538 million in provisions for credit losses to BMO’s balance sheet—more than double the provisions on the parent company’s existing portfolio.

In the meantime, TD Bank faces a long recovery from its money laundering scandal. 

“While enforcement actions by the U.S. Office of the Comptroller of the Currency (OCC) provide clarity on monetary and non-monetary penalties, TD Bank may still be subject to additional Civil Money Penalties, asset reductions, and enforcement actions if the bank fails to successfully remediate its anti-money laundering (AML) compliance program. Enforcement actions by the OCC are not the end of TD’s AML issues but instead mark the beginning of a multiyear remediation process,” Veritas said in its most recent report on TD. 

This article originally appeared on veritascorp.com and was syndicated by MediaFeed.org.

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From Choosing Banks to Avoiding Fees: Everything You Need to Know Before Opening a New Bank Account

From Choosing Banks to Avoiding Fees: Everything You Need to Know Before Opening a New Bank Account

You can streamline opening a bank account by collecting the necessary identification documents, preparing financially to fund the account, and choosing the best account and bank for your financial objectives.

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  • Step 1: Decide on the type of account.

  • Step 2: Choose a bank or credit union.

  • Step 3: Gather the necessary documents.

  • Step 4: Fill out the application (online or in-person).

  • Step 5: Make the initial deposit.

  • Step 6: Set up online banking and mobile app.

  • Step 7: Explore and activate preferred account features (e.g., debit card, direct deposit).

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To open a bank account, you’ll need to provide the bank with some essential information and documents. This helps the bank prevent fraud and ensure your security. Here’s what you should have ready:

  • Photo Identification: Bring a government-issued ID, such as a driver’s license or passport. The bank will use the picture on your ID to verify your identity. Some banks may require a second form of identification, like a social security card or birth certificate, which doesn’t need to have a photo.

  • Social Security Number or Tax Identification Number: If you’re a US citizen or resident, you must provide your social security number or tax identification number. This allows the bank to verify your identity and report any interest income to the Internal Revenue Service. Bringing your social security card can also satisfy the second identification requirement. If you’re not a US citizen, some banks may allow you to open an account using your alien identification card instead.

  • Proof of Residence: Banks require proof of residence to confirm that you live where you claim. To verify your address, provide an official document, such as a utility bill, a letter from a government agency, or mortgage documents.

  • Initial Deposit: Many bank accounts require a minimum initial deposit, typically between $25 and $100, which varies depending on the account type and perks. This deposit ensures that you can cover any administrative costs associated with the account. Most banks accept cash, ACH transfers, or debit cards for this initial deposit.

Check our top online banking picks

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Choosing your bank account type depends on your financial goals and timelines. 

When it comes to banking, picking the right account for your needs is key. Here’s a quick look at the most commonly offered bank account types and what each one is best for:

  • Checking Accounts: Perfect for your daily money moves. Use a checking account to deposit your paycheck, pay bills, and swipe your debit card without hassle. It’s your go-to for everyday transactions.

  • Savings Accounts: If you’re looking to stash some cash for the future, a savings account is your best bet. It’s great for building up an emergency fund or saving for big goals, like a vacation or a new car, and you’ll earn a bit of interest along the way.

  • Money Market Accounts: Want to earn more interest than a savings account? A money market account could be the answer. It’s ideal for those who can maintain a higher balance and occasionally need to write checks directly from the account.

  • Certificates of Deposit (CDs): For the savers who can set aside money for a while, CDs offer higher interest rates in exchange for your commitment to not touch the funds for a set period. They’re perfect for long-term goals like saving for a down payment on a house.

Each of these accounts serves a different financial need, so consider what you’re looking for and choose the one that fits best.

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There are three main types of banks: traditional brick-and-mortar banks, credit unions, and online banks, each catering to different preferences.

Traditional Banks 


Traditional banks, often called “brick and mortar” institutions due to their physical locations, offer various services catering to individuals and businesses. These services include checking and savings accounts, money market accounts, loans, credit cards, and more. Traditional banks may be the most suitable choice for customers who value in-person banking and appreciate having access to a broad range of products. 

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Credit unions offer services similar to traditional banks, but with a key difference: you’re not just a customer; you’re a member-owner. This structure allows credit unions to pass profits back to you through reduced fees, higher savings rates, and lower loan rates. 

Some of the largest credit unions in the US include the Navy Federal Credit Union, which serves military members and their families, the State Employees’ Credit Union (SECU) in North Carolina, and Pentagon Federal Credit Union (PenFed). While membership was traditionally restricted, many credit unions now have more inclusive eligibility requirements, allowing you to join based on where you live, work, or through associations you belong to.

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Online banks offer products and services similar to traditional banks but operate entirely via the internet without physical branches. By eliminating brick-and-mortar locations, they reduce overhead costs and often pass these savings to you through competitive rates and fewer fees.

You’ll likely appreciate the lower account fees, but be mindful of other potential charges like wire transfers and foreign transaction fees. Many online banks offer overdraft protection, but terms vary, so review these carefully. For ATM access, online banks often provide nationwide networks for deposits and withdrawals. Some partner with traditional banks to expand availability, giving you more options for managing your cash.

If you anticipate frequent ATM use, carefully review the bank’s fee policy. Some online banks reimburse ATM fees up to a certain limit, while others may charge for out-of-network transactions. 

Online banking can be an excellent choice if you’re comfortable managing your finances through websites and mobile apps. However, it may not suit you if you prefer face-to-face interactions for complex financial matters.

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  • Fees: To minimize the cost of managing your money, look for banks with low or no monthly maintenance fees, overdraft fees, or ATM fees.

  • Interest rates: Compare interest rates on savings accounts, certificates of deposit (CDs), and loans to ensure you’re getting the best return on your deposits and the most affordable rates on borrowing.

  • Customer service: Evaluate the bank’s reputation for customer service, including the availability of support through various channels (e.g., in-person, phone, email, or chat) and the responsiveness of their staff.

  • Convenience: Consider the bank’s branch and ATM locations, online and mobile banking options, and hours of operation to ensure easy access to your money and services.

  • Reputation and stability: Assess the bank’s financial stability by reviewing its financial statements, credit ratings, and media reports. Opt for a bank with strong capital, consistent profitability, and a solid reputation to ensure your money is safe.

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Once you’ve opened your new bank account, the bank may immediately provide you with a debit card or checks or send them to your home. Before using any cards issued, you’ll need to activate them by visiting a designated website or calling the number provided. 

To make the most of your new account, access your bank’s online banking platform or mobile app. These tools allow you to view your account balance, manage your account information, and pay bills from anywhere with an internet connection. 

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  1. Familiarize yourself with fees: Take the time to understand the various fees your bank charges, such as monthly maintenance fees, overdraft fees, account minimum fees, and ATM fees. While these fees are typically disclosed in the new account forms you sign, many banks also list them online for easy reference.

  2. Look for workarounds: Once you’re familiar with the fees, seek out ways to avoid them. Some banks waive or reduce fees when you sign up for direct deposit, opt for e-statements, connect additional bank accounts, or maintain a minimum balance.

  3. Use your bank’s ATMs: Stick to using your bank’s ATMs or those in their partner network to avoid paying extra fees for out-of-network ATM withdrawals.

  4. Set up alerts: Take advantage of your bank’s text or email alert system, which can notify you when your account balance falls below a certain threshold. This helps you stay informed about your account balance and avoid overdraft fees.

  5. Opt out of overdraft protection: While it can be useful in some situations, it often comes with high fees. Consider opting out of this service and closely monitoring your account balance to prevent overdrafts altogether.

  6. Negotiate fees: If you incur a fee, don’t hesitate to ask your bank if they can waive it, especially if it’s your first offense or you’ve been a loyal customer. Some banks may be willing to work with you to reduce or eliminate the fee.

  7. Shop around: If your current bank’s fees are too high, explore other options. Look for banks with lower fees or accounts tailored to your needs, such as the best student bank accounts

     or senior accounts. These often offer reduced fees, waived minimum balance requirements, and other perks to help you easily manage your finances. 

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If you’re thinking about how to switch banks, it’s crucial to update your direct deposit information with your employer. Provide them with your new bank’s routing and account numbers to ensure your paychecks are credited to the correct account. Pay special attention to transitioning your semi-annual or annual bills so that you don’t miss any payments when the bill comes due. 

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You can choose to keep any previously held bank accounts open to maintain a relationship with more than one bank. This can be beneficial in securing competitive rates on future products. However, be sure to consider any associated bank fees before making this decision.

If you close your old account, wait until all pending transactions have cleared to avoid complications. Depending on your bank, you may need to visit a branch in person or be able to close the account online. Once the account is officially closed, destroy all associated debit cards and unused checks to protect your financial security

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Opening a bank account is a straightforward process that involves gathering documentation and researching your options. After deciding on the type of bank and account that best fits your needs, provide the necessary identifying information and minimum initial deposit, if required, to open the account. Whether you maintain multiple accounts across different banks or consolidate your accounts at a single institution, you can optimize your banking experience by familiarizing yourself with online platforms, mobile apps, and associated fees. 

This article originally appeared on Bestmoney.com and was syndicated by MediaFeed.org

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