Canadian TD Bank canceled the planned purchase of the American financial institution First Horizon.
The canadian bank stated that the implementation of the transaction did not take place due to issues related to the approval of this process. The financial institution holds regulators responsible for the lack of implementation of the initiative. The failed deal was previously estimated at $13.2 billion.
After it became known that the purchase of First Horizon would not take place, the share price of this financial institution decreased by 33.2%. Since the beginning of this year, the bank’s shares have fallen by 58.9%.
For the first time, a Canadian lender announced its intention to implement a deal to purchase an American financial institution in February last year. American regulators have repeatedly stopped the implementation of the process. The reason for these actions is the fear that the scale of the Canadian bank’s influence on the situation in the US market will become too significant. In case of successful implementation of the transaction, TD could become the sixth largest American lender.
The news about the cancellation of the planned acquisition of a financial institution appeared during the next aggravation of the situation in the American banking industry. PacWest and Western Alliance shares fell sharply on Thursday, May 4, and the KBW regional banking index fell by 35%.
Because TD withdrew its offer, Nelson Peltz, a well-known activist investor and co-founder of Trian Fund Management, said that the limit of the deposit insurance system in the United States should be increased. He also said that account holders should pay insurance to protect balances of more than 250 thousand dollars.
Peltz believes that the measures proposed by him will stop the outflow of deposits from small regional and municipal banks.
This week, the FDIC released a report on potentially possible reforms aimed at changing the American deposit insurance system. This report contains a recommendation not to introduce a new limit, but at the same time recognizes the fact that raising the insurance ceiling from $ 250,000 to $2.5 million is highly likely to cover the funds needed by small and medium-sized businesses to cover the costs associated with salary payments.
As we have reported earlier, TD Bank Completes Cowen Acquisition.