{"id":9501,"date":"2010-01-22T14:52:42","date_gmt":"2010-01-22T18:52:42","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=9501"},"modified":"2010-01-22T14:52:42","modified_gmt":"2010-01-22T18:52:42","slug":"moodys-downgrades-bmo-prefs-4-notches-to-baa1","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=9501","title":{"rendered":"Moody's Downgrades BMO Prefs 4 Notches to Baa1"},"content":{"rendered":"

Moody’s Investors Service has announced<\/a> it has:<\/p>\n

downgraded the long-term ratings of the Bank of Montreal (BMO) and its subsidiaries. BMO’s deposit rating dropped to Aa2 from Aa1 and its bank financial strength rating (BFSR) fell to B- from B.
…<\/b>
Moody’s Senior Vice President, Peter Routledge, said “the downgrade of BMO reflects our view that the bank’s wholesale investment bank exposes the bank to greater earnings volatility than previously incorporated in its ratings and the fact that BMO allocates substantial capital to this business…”
…<\/b>
The 2007-08 credit crisis exposed vulnerabilities in the wholesale investment banking business model and intensified Moody’s view of the riskiness of this business. Such vulnerabilities include risk management weaknesses, high leverage, confidence-sensitivity, excessive concentrations, and opacity of risk.
…<\/b>
Moody’s downgraded BMO’s preferred stock securities (which include non-cumulative preferred shares and other hybrid capital instruments) four notches to Baa1 from Aa3. The first notch reflects the downgrade of BMO’s unsupported\/stand-alone BFSR. The next three notches are a consequence of implementing Moody’s revised methodology for rating bank hybrid securities which reflects the changing role of hybrids as loss absorbing capital instruments. Published in June 2009, Moody’s special comment titled “Canadian Bank Subordinated Capital Ratings” summarized the potential ratings impact of implementing this revised methodology.<\/p><\/blockquote>\n

There have been rumours of something like this, as I posted on Moody’s May Massacre Hybrid Ratings<\/a>.<\/p>\n

The loss absorption potential for preferreds is a matter of great pith and moment; the current system is ad hoc, but there are strong indications that the process will be formalized with Contingent Capital rules<\/a>.<\/p>\n

BMO has the following preferred share issues currently outstanding: BMO.PR.H, BMO.PR.J, BMO.PR.K, BMO.PR.L, BMO.PR.M, BMO.PR.N, BMO.PR.O and BMO.PR.P.<\/p>\n","protected":false},"excerpt":{"rendered":"

Moody’s Investors Service has announced it has: downgraded the long-term ratings of the Bank of Montreal (BMO) and its subsidiaries. BMO’s deposit rating dropped to Aa2 from Aa1 and its bank financial strength rating (BFSR) …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-9501","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/9501","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9501"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/9501\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9501"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9501"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9501"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}