By Pete Schroeder and Nivedita Balu

WASHINGTON/TORONTO (Reuters) - The U.S. Federal Reserve said on Thursday it had approved an application by Scotiabank to buy up to 14.99% of the voting shares in U.S. regional lender KeyCorp, as the Canadian bank looks to boost its exposure to developed markets.

Scotiabank announced the $2.8 billion deal in August, which would also allow it to appoint two directors to the Ohio bank's board.

Spokespeople for the two banks did not immediately respond to requests for comment.

Scotiabank CEO Scott Thomson's move to acquire a stake in the regional lender comes as the bank refocuses on the North American trade corridor as part of its new strategy, while it looks at possibly exiting some unprofitable markets in South America.

Thomson, who took charge at the Canadian bank last year, has said moving capital from developing markets to developed markets is a huge part of the strategy and the KeyCorp investment was "a low risk, low cost optionality in North America" with strong returns.

Canadian banks have also sought growth opportunities in the past through acquisitions in the United States that have come with high price tags.

(Reporting by Pete Schroeder in Washington and Nivedita Balu; Editing by Jamie Freed)