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Moody’s drops six Canadian banks
Moody's Investors Service said it downgraded the baseline credit assessments, long-term ratings and counterparty risk assessments of six Canadian banks and their affiliates, reflecting the expectation of a more challenging operating environment for banks in Canada for the remainder of 2017 and beyond, that could lead to a deterioration in the banks' asset quality, and increase their sensitivity to external shocks.
The banks affected are: Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and Royal Bank of Canada.
The baseline credit assessments, long-term debt and deposit ratings and counterparty risk assessments of the banks and their affiliates were downgraded by one notch, except Toronto-Dominion Bank's counterparty risk assessment, which was affirmed, Moody’s said. The short-term Prime-1 ratings of the Canadian banks were affirmed. All relevant ratings for these banks continue to have negative outlooks, reflecting the expected introduction of an operational resolution regime in Canada.
"Today's downgrade of the Canadian banks reflects our ongoing concerns that expanding levels of private-sector debt could weaken asset quality in the future. Continued growth in Canadian consumer debt and elevated housing prices leaves consumers, and Canadian banks, more vulnerable to downside risks facing the Canadian economy than in the past," Moody's senior vice president David Beattie said in a news release.
In the same action, Moody's affirmed the baseline credit assessments, long-term ratings and counterparty risk assessments of CIBC Mellon Trust, the Federation des caisses Desjardins du Quebec and Caisse centrale Desjardins.
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