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Moody’s downgrades 6 Canadian banks

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Moody’s Investors Service has downgraded the long-term credit ratings of six Canadian banks, including Toronto-Dominion, Bank of Nova Scotia, Bank of Montreal and CIBC. National Bank and Desjardins were also downgraded.

The ratings agency lowered each of its ratings one notch, citing high levels of consumer debt and high home prices as threats to the Canadian economy. Moody’s had put all six banks under review in October.

“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,” David Beattie, vice-president at Moody’s said in a note.

Canadian consumer debt has risen to a record-high 165 per cent of disposable income in the third quarter of 2012, up from 137 per cent in mid-2007. Bank of Canada governor Mark Carney has repeatedly warned about these levels, but they remain stubbornly high.

Finance Minister Jim Flaherty was quick to reiterate his confidence in Canada’s banking system.

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