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The Royal Bank of Canada's transaction of HSBC, pending regulatory approval, is expected to complete in 2023.CARLOS OSORIO/Reuters

Royal Bank of Canada RY-T has won the bidding war for HSBC Bank Canada, but the battle for regulatory approval is just beginning.

The $13.5-billion cash deal must survive a trio of regulatory reviews from the Competition Bureau of Canada, the Office of the Superintendent of Financial Institutions (OSFI) and the federal Minister of Finance before the transaction can be completed, which RBC hopes will happen by the end of 2023. All three will be taking a hard look at the proposed deal, legal experts say, as Canada’s other big banks will want to pursue potential acquisitions of their own should they notice any signs of a thaw in the otherwise rigid rules around bank takeovers.

Already, the country’s biggest bank is facing political opposition. In a statement calling for the Liberal minority government to block the deal, NDP Leader Jagmeet Singh said it “is only going to decrease the options for families in Canada and put more money into the pockets of big-bank executives.”

There is also skepticism on Bay Street about the deal’s potential to sail through the review process unscathed. Barclays analyst John Aiken said the deal represents an “excellent transaction” for RBC in a note to clients on Tuesday, though he added “the only fly in the ointment is that, as the largest player, there could be some regulatory concerns with the Competition Bureau.”

How RBC pulled off its highly-coveted $13.5-billion deal for HSBC Canada with some unintended help from Ottawa

“While we believe that the deal will ultimately be approved, there is a risk that it may not ultimately be consummated in its current form,” Mr. Aiken said.

Under Commissioner Matthew Boswell, the Competition Bureau has taken an especially hard stance on transactions it views as negatively affecting consumer choice. Most recently, the bureau filed a legal challenge in an attempt to block Rogers Communications Inc.’s $26-billion takeover of Shaw Communications Inc.

Asked about those potential concerns on a Tuesday morning conference call with analysts, RBC chief executive officer Dave McKay said the bank was “not aware of any reason why Competition [Bureau] clearance will not be received.” HSBC Canada is “still a relatively small bank by market share of 2 per cent or less,” he said.

The Competition Bureau will review the proposed transaction, a spokesperson confirmed by e-mail, though declined to comment further as it is required by law to conduct its merger reviews confidentially.

According to one competition law expert close to the deal, whom The Globe is not identifying as they are not authorized to comment publicly, the deal review will be “unlike some of the more adversarial transactions of late [because] this one is going to be very co-operative and collaborative.” The Competition Bureau usually has concerns with four-to-three mergers, the source said, meaning deals that reduce the number of rivals in a given sector from four to three, and that is not the case here.

Ultimately, even if the bureau supports the deal, federal Finance Minister Chrystia Freeland could halt it. In a statement issued shortly after the RBC announcement, the Finance Department said the deal is subject to Ms. Freeland’s approval and that she “has the authority to impose any terms and conditions and to require any undertaking that she considers appropriate.”

Conversely, if the Competition Bureau moves to block the deal, the Finance Minister can overrule that decision and allow the transaction to go ahead. In a separate call with reporters on Tuesday afternoon, RBC’s Mr. McKay was asked if he was willing to divest some of HSBC Canada’s assets in order to win approval – as Rogers has offered to do in its attempt to acquire Shaw, and as Barclay’s Mr. Aiken has suggested may be required of RBC.

His response was a curt “no.”

Then there is the issue of whether approving RBC’s purchase of HSBC Canada would set a precedent, potentially spawning a larger wave of consolidation among Canadian banks. While precedent would likely not apply to regulatory reviews of proposed mergers, the case-by-case nature of such reviews is thought to make it difficult for such a contagion effect to occur.

With a report from James Bradshaw