Moody’s Lower Long-Term Credit Ratings of Six Canadian Banks

This article was last updated on April 16, 2022

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The Moody’s Investors Service has lowered the long-term credit ratings of six major Canadian banks, which includes Toronto-Dominion, Bank of Nova Scotia, Bank of Montreal, CIBC,  National Bank and Desjardins. Each of the respective banks lost one point in rating of the agency, reasoning it to the rising levels of consumer debt along with elevated home prices posing to be serious threats for the Canadian economy. All of these banks were considered for a review by the Moody’s in October.

The vice-president of Moody’s, David Beattie, made an official statement after the ratings were published, explaining that “high levels of consumer indebtedness and elevated housing prices leave Canadian banks more vulnerable than in the past to downside risks the Canadian economy faces.” It was highlighted that consumer debt of all Canadians has mounted up to record-level, i.e. 165 per cent of disposable income in the third quarter of 2012, which is an increment from 137 per cent in mid-2007. It is being recalled that governor of Bank of Canada, Mark Carney, warned about such high levels at numerous occasions.

The review resulted in TD to have had its pristine top-level Aaa rating downgraded to Aa1, while Bank of Nova Scotia and Desjardins fell from Aa1 to Aa2. On the other hand, rating of BMO, CIBC, and National Bank of Canada was reduced from Aa2 to Aa3. Hence the overall relative outlook of all six banks remained unchanged. The only bank among Canada’s Big Six banks to remain unaffected by the downgrade was Royal Bank of Canada.