The Federal Reserve Board has approved an application by The Bank of Nova Scotia (NYSE:BNS), based in Toronto, Canada, to acquire up to 14.99 percent of the voting shares of KeyCorp (NYSE:KEY), as well as indirectly acquire KeyBank National Association, both located in Cleveland, Ohio. This decision, effective December 12, 2024, follows the absence of any public objections after a comment period concluded following a notice in the Federal Register on September 12, 2024.
BNS, a financial holding company, will increase its ownership in KeyCorp from the current 4.93 percent to up to 14.99 percent. This acquisition does not constitute a controlling interest, as defined by the Bank Holding Company Act, avoiding triggers for regulatory presumptions of control. The Bank of Nova Scotia is the third-largest insured depository organization in Canada, with consolidated assets of approximately $1.0 trillion. KeyCorp, on the other hand, holds consolidated assets of approximately $189.8 billion, making it the 26th largest in the United States, with KeyBank operating across multiple states.
The Federal Reserve’s review considered the potential competitive effects of the proposal and concluded that it would not have a significantly adverse effect on competition or on the concentration of resources in any relevant banking market. Moreover, the Department of Justice has advised that the proposal is not expected to negatively impact competition. BNS’s capital levels exceed the minimum required under the Basel Capital Accord, and the organization is deemed to have adequate resources to absorb the costs of the proposal.
The Board also evaluated the financial and managerial resources of both BNS and KeyCorp, their compliance records, and the effectiveness of their anti-money laundering measures. The Office of the Superintendent of Financial Institutions (OSFI) in Canada, BNS’s home country supervisor, has confirmed that BNS is subject to comprehensive supervision on a consolidated basis.
In terms of community impact, the Board considered the Community Reinvestment Act (CRA) performance of KeyBank, which received an “Outstanding” rating in its most recent evaluation by the Office of the Comptroller of the Currency (OCC) on April 3, 2023. KeyBank’s record of meeting the credit needs of its communities, including low- and moderate-income neighborhoods, supported the approval.
The Federal Reserve Board also assessed the financial stability implications of the transaction and concluded that the acquisition of a noncontrolling interest in KeyCorp would not result in greater or more concentrated risks to the stability of the U.S. banking or financial system. The acquisition is expected to strengthen KeyCorp’s capital position, enabling it to better serve customers without significant adverse effects such as undue concentration of resources or risks to the U.S. banking system’s stability.
The approval is conditional upon BNS’s compliance with all conditions and commitments made during the application process, and it is contingent on BNS receiving all required regulatory approvals. The transaction may be consummated no earlier than the 15th calendar day following the effective date of the order and no later than three months after that date, subject to extension for good cause if necessary.
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