The Canadian government is investigating a report that says the country's largest bank will use temporary foreign workers hired by an outsourcing company to effectively replace existing staff, a situation the government said would be unacceptable.

A weekend report from the Canadian Broadcasting Corporation said RBC was planning to eliminate about 50 employees in its investor services division in Toronto and have the work done by outsourcing company iGate Corp .

But Royal Bank of Canada on Sunday denied that it had hired temporary foreign workers to take over the work of its current employees and said it requires the outsourcing firm it is using to comply with local laws.

Canada's Conservative government has already said it will review a temporary foreign worker program that lets employers fill jobs with non-Canadians when qualified citizens or permanent residents are not available because of skills and labor shortages.

Labor groups say employers are not doing enough to find Canadians to fill those jobs.

In a statement that followed the CBC report, Human Resources Minister Diane Finley said late on Saturday that Canadians must always be the first in line for hiring opportunities.

The program "was never intended as a means to bring in temporary foreign workers in order to replace already-employed Canadian workers. This is why we have launched a review of the program," she said in a statement.

The government minister said she instructed staff to work with citizenship and immigration officials "to determine the next steps" in the RBC situation.

The U.S.-incorporated outsourcing company, which has most of its operations in India, did not immediately respond to an e-mail seeking comment.

The CBC report quoted an RBC spokeswoman as saying several foreign workers from iGate would be working in the bank's Toronto offices until 2015, by which point most of the work will be transferred abroad.

In a statement, Royal Bank's Chief Procurement Officer Greg Grice did not confirm those specifics.

"RBC agreements with suppliers, including in this case iGate, requires them to ensure that they are abiding by the applicable laws and regulations," he said.

The bank also said it was working to find suitable new jobs for workers affected its use of iGate.

Last month, the government included rule changes to the foreign worker program in the federal budget designed to ensure Canadians are not overlooked for these jobs.

Canada's banking industry is dominated by a half dozen major lenders, which emerged largely unscathed from the global financial crisis and have repeatedly been ranked among the world's most stable.

(editing by G Crosse)