Mellon Financial Corp. has become the latest U.S. banking company to establish a branch presence north of the border.
The Pittsburgh company announced Wednesday the opening of a Toronto branch of its Mellon Bank, after getting approvals from Canadas Office of the Superintendent of Financial Institutions and its Minister of Finance. Mellon said it would move the assets of its Mellon Bank Canada subsidiary to the new full-service branch.
Mellon Bank Canada will be reorganized into a holding company for other Mellon businesses in the country.
Last year Chase Manhattan Corp. and J.P. Morgan & Co. became the first foreign banking companies to take advantage of a new law allowing foreign banking companies to branch in Canada. National City Corp. and U.S. Bancorp opened their first commercial lending branches in Toronto in November.
Foreign banking companies, which were not permitted to have branches in Canada until the legislation was passed in June 1999, now can have branches but are only allowed to engage in wholesale corporate banking. They may not take retail deposits or deposits of less than 150,000 Canadian dollars.
Under the old law, foreign companies were required to form separately capitalized subsidiaries, which made opening branches there a costly venture.
Nineteen foreign banking companies have applied for branch licenses in Canada since the law changed. Applications from Credit Suisse First Boston, Dresdner Bank AG, Bank One Corp., State Street Corp., and 10 other companies are still under review.
Wendy Bocti, the principal officer of Mellons Canadian branch, said the reorganization of Mellon Bank Canada will better serve Mellons Canadian customers, and expand the scope of lending.
Though the Canadian government is encouraging foreign companies to establish branches to enhance competition and Canadian small-business and middle-market business options, observers say foreign banking activity is ruffling few feathers in that country. Analysts for Royal Bank of Canada said it would be difficult for foreign companies to take market share from Canadian banks.
The five mega-Canadian banking companies welcome the competition, said Kim Norris, the director of foreign bank branch supervision at the Office of the Superintendent of Financial Institutions.