PrefBlog

In a report available only to clients, Moody’s has stated:

Our outlook for the Canadian banking system has been changed to negative from stable to reflect the evolving support environment in Canada. The outlook expresses our expectation of how bank creditworthiness will evolve in this system over the next 12-18 months.

Our outlook for the Canadian banking system has been changed to negative from stable. This change reflects our view that the Canadian government’s plan to introduce a bail-in regime for senior debt combined with the accelerating global trend towards explicit inclusion of burden-sharing with senior debt holders as a means of reducing the public cost of bank resolutions could reduce the predictability of support being provided to the senior debt holders and uninsured depositors of the large Canadian banks.

Most rated Canadian banks’ long-term ratings benefit from at least two notches of uplift due to systemic support, which reflects our currently very high expectation that the government would provide support if required. On June 11, 2014 we affirmed the long-term ratings of the seven largest Canadian banks but changed the outlook to negative from stable on the supported senior debt and uninsured deposit ratings of these banks, to reflect the fact that the balance of risk has shifted to the downside for unsecured bank creditors given the Canadian government’s plans to implement a “bail-in” regime for domestic systemically important banks and the evolving global support environment.

The above-noted actions do not reflect any change in our assessment of the standalone credit profiles of the Canadian banks, all but one of which maintain their stable outlooks (see page 3).

This entry was posted on Wednesday, July 9th, 2014 at 2:10 am and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.