* Banks speak out against LSE's plan to take over TMX
* Concern centers on Toronto's future as financial center
* Their opposition puts more pressure on gov't to veto (Adds details from hearings)
By Pav Jordan and Claire Sibonney
TORONTO, March 9 (Reuters) - Some of Canada's big banks are
speaking out against London Stock Exchange's
At an Ontario hearing on Wednesday, bank executives echoed criticism that the deal will hurt Toronto's status as a global financial center, and ultimately harm the prospects of Canadian companies looking to raise capital on public markets.
"While this has been billed as a merger of equals ... it is
not," said Bob Dorrance, head of the investment bank unit of
Toronto-Dominion Bank
Opposition from the banks, which dominate capital markets activity, will add to the pressure on Ottawa to veto the deal.
The Conservative government last year blocked BHP
Billiton's
In Ontario, home base for the TMX's Toronto Stock Exchange, Finance Minister Dwight Duncan has spoken out against the deal, raising pressure on Canada's securities regulator to block it. The transaction faces a multitiered approval process at provincial and federal levels.
The federal government's review will begin as soon as the government receives an application for approval.
For timeline on LSE-TMX deal: [ID:nN28155639]
For factbox on approval process: [ID:nN15252795]
For factbox on LSE and TMX history: [ID:nN08113490]
Six big lenders dominate the banking sector and federal laws protect the banks from foreign takeovers. That gives them a hefty stake in assuring Toronto grows as a financial hub.
The big banks make billions of dollars in profits from domestic retail operations, wealth management and investment banking and they are shareholders in Alpha Group, an alternative trading system that has stolen TMX market share since its launch in 2007.
The banks' criticism is not unanimous, however.
Royal Bank of Canada
While TD and National Bank of Canada
"We're talking about a very, very critical part of the financial services structure and people have to be very thoughtful about how that type of transaction is entered into," Phil Smith, deputy head of investment banking at Scotia Capital, told Reuters outside the hearings.
The banks' arguments were spelled out in a letter obtained by Canadian media.
A copy of the letter shown on the National Post newspaper's website gave endorsements from TD, CIBC and National Bank. An earlier media report had said Scotiabank had also signed.
Shares of both TMX and LSE have weakened as opposition to the transaction has grown.
As of Wednesday, the deal valued TMX at C$41.46 a share, about 6.1 percent above the current stock price of C$39.07.
COMPLEX PROCESS
LSE shareholders would hold 55 percent of the combined entity -- a transatlantic exchange with market capitalization of about $7 billion. The new exchange operator would have the world's largest number of mining, energy and other resource companies in its stable of listings.
The exchange operators say the deal would give companies better access to capital and offer Canadian markets a competitive advantage as the global industry consolidates.
"We think that our proposed merger will deliver significant opportunities for growth for the Canadian capital markets," TMX spokeswoman Carolyn Quick said on Wednesday in an email. (Additional reporting by S. John Tilak and David Ljunggren, Writing by Cameron French; editing by Janet Guttsman and Jeffrey Jones)