Canadian Banks are in quite good shapeAugust 20th, 2012
Moody’s Rating Agency has decreased rating for 6 of 7 biggest Canadian Banks. The Royal Bank has defended its rating but this was not possible for the following banks: Toronto Dominion Bank, Scotiabank, Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank as well as acting primarily in Quebec, Desjardins cooperatives.The decision was made because of the fact that these banks too easily lend mortgages, causing huge consumer debt. There are fears that people will not be able to repay their debts. House prices in Canada have increased significantly in recent years and Moody’s is concerned that there could be a speculative bubble burst, similar to that which took place a few years ago in the USA. The ratings of the banks have been reduced by one or two degrees at most – from A to AA or AAA. In such situation, investors demand a higher interest rate for the capital invested especially in bonds or other forms of investment.
Moody’s did not lowered the credit rating of Royal Bank this time. He did it earlier in June last year, when downgraded Royal Bank from AA1 to AA3. Royal Bank was then in good company of many U.S. banks like Bankof America, JPMorgan Chase, Citigroup and Goldman Sachs.