TORONTO – Most of Canada’s biggest banks have been downgraded by Moody’s Investor Services, one of the world’s major credit rating agencies.
Moody’s says it took the step because of concerns over the banks’ exposure to heavily indebted consumers and elevated housing prices.
As mortgage lenders, Canada’s banks have benefited over the past few years from lending to home buyers.
The six financial institutions — five banks and a Quebec-based credit union — are being downgraded by one notch to either double-A one, two or three.
Double-A is still a relatively high, investment-grade ranking in the Moody’s system.
The ratings affect Toronto-Dominion Bank (TSX:TD), Scotiabank (TSX:BNS), Bank of Montreal (TSX:BMO), Canadian Imperial Bank of Commerce, (TSX:CM), National Bank (TSX:NA) and the Desjardins caisse populaire.
A downgrade by a credit rating agency usually means investors will demand a higher interest rate when a company goes to raise cash by issuing bonds or other debt.
Last October, Moody’s warned it was placing the long-term ratings of those six banks under review for a possible downgrade.
Royal Bank was not included on the list.
Moody’s had already cut Royal Bank’s long-term deposit rating to Aa3 from Aa1 in June as part of a move to cut the credit ratings of 15 of the world’s largest banks, including Bankof America, JPMorgan Chase, Citigroup and Goldman Sachs.