The Federal Reserve is investigating allegations that Royal Bank of Canada teamed up improperly with City National Corp. to make a loan to a client while the proposed combination of the two banks is still pending.
The probe could delay the planned $5.4-billion takeover of the big Los Angeles bank by RBC, one of Canada’s largest financial firms.
A letter from the Fed, obtained by the National Post of Toronto, asks the banks to respond to questions raised in written comments by Matthew R. Lee, an East Coast public interest lawyer.
The central bank must rule on the banks' application to merge, deciding whether the merger is safe and lawful and benefits all segments of the community.