Federal Reserve Approves Bank of Nova Scotia's Acquisition of KeyCorp

The Federal Reserve Board has approved an application by The Bank of Nova Scotia (NYSE:BNS) to acquire up to 14.99% of the voting shares of KeyCorp (NYSE:KEY) and to indirectly acquire KeyBank National Association, both located in Cleveland, Ohio. This decision, effective December 12, 2024, follows a period of public comment that concluded without any objections following a notice in the Federal Register on September 12, 2024.

BNS will increase its ownership in KeyCorp from 4.93% to 14.99%. This acquisition does not represent a controlling interest, as defined by the Bank Holding Company Act, thus avoiding regulatory presumptions of control. BNS is the third-largest insured depository organization in Canada, with consolidated assets of approximately $1.0 trillion, while KeyCorp has consolidated assets of around $189.8 billion, ranking it as the 26th largest in the United States, with KeyBank operating across multiple states.

The Federal Reserve’s review assessed the competitive effects of the acquisition and concluded that it would not significantly harm competition or resource concentration in any relevant banking market. The Department of Justice has also stated that the proposal is not anticipated to negatively impact competition. BNS's capital levels exceed the minimum requirements under the Basel Capital Accord and have sufficient resources to cover the costs associated with the acquisition.

The Board reviewed the financial and managerial resources of both organizations, their compliance records, and the effectiveness of their anti-money laundering measures. The Office of the Superintendent of Financial Institutions (OSFI) in Canada confirmed that BNS is comprehensively supervised.

Regarding community impact, the Board examined KeyBank's Community Reinvestment Act (CRA) performance, which earned 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 fulfilling the credit needs of communities, particularly low- and moderate-income areas, supported the approval decision.

The Federal Reserve also assessed the implications for financial stability and concluded that the non-controlling interest acquisition would not pose greater risks to the stability of the U.S. banking system. The acquisition is expected to bolster KeyCorp's capital position, enabling better service to customers without significantly adverse effects on the concentration of resources or risks to banking stability.

The approval is conditional upon BNS's adherence to all commitments made during the application process and is contingent on receiving all necessary regulatory approvals. The transaction may be completed no sooner than 15 days following the effective date of the order and must be finalized within three months thereafter, extendable for good cause if needed.

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