By Erica Alini - Monday, January 28, 2013 - 0 Comments
Credit rating agency Moody’s just downgraded by a notch the long-term ratings of BMO, ScotiaBank, Caisse centrale Desjardins, CIBC, National Bank and TD. RBC was spared.
The decision follows an identical move by Standard and Poor’s in December.
Here’s what Moody’s had to say about the rationale for the downgrade (the full press release is here):
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:
By 30 September 2012, Canadian household debt to personal disposable income reached a record 165%, up from 137% as of 30 June 2007, as debt grew faster than personal incomes. Growth in consumer debt has been driven by rising house prices, which have increased by approximately 20% since November 2007.
Downside risks to the Canadian economy have increased:
Moody’s central scenario for Canada’s gross domestic product (GDP) is for it to grow between 2% and 3% in 2013, but downside risks have increased. The open, commodity-oriented economy is exposed to external macro-economic risks, which if they arise would have significant ramifications for the Canadian economy, and consequently its banks.
NBC, BMO and BNS have sizeable exposure to volatile capital markets businesses:
Moody’s believes that trading and investment banking activities expose financial firms to the risk of outsized losses and risk management and controls challenges, and leave them highly dependent on the confidence of investors, customers and counterparties.
Canadian banks’ have noteworthy reliance on wholesale funding:
The Canadian bank’s noteworthy reliance on confidence-sensitive wholesale funding, which is obscured by limited public disclosure, increases their vulnerability to financial markets turmoil.
Moody’s has removed systemic support from the ratings of all Canadian banks’ subordinated debt instruments that had benefited from support “uplift”:
The rating agency believes the global trend towards imposing losses on junior creditors in the context of future bank resolutions reduces the predictability of such support being provided to the sub-debt holders of the large Canadian banks given the Canadian regulators’ broad legislated resolution powers. The removal of support for subordinated debt is consistent with recent actions we’ve taken elsewhere, including in many European countries, reflecting the increased likelihood that sub-debt holders would be subject to burden sharing in the event support was required.
By The Associated Press - Tuesday, November 20, 2012 at 8:31 AM - 0 Comments
PARIS – France’s government has shrugged off the latest downgrade of its credit rating,…
PARIS – France’s government has shrugged off the latest downgrade of its credit rating, saying Tuesday that it just needs time for reforms to the sluggish economy to take root.
In a setback for President Francois Hollande’s Socialist government, Moody’s Investors Service stripped Europe’s No. 2 economy of it of its prized AAA credit rating late Monday on concerns that its rigid labour market and exposure to Europe’s financial crisis were threatening its prospects for economic growth.
This is the second ratings downgrade to have hit France this year: Standard & Poor’s agency lowered its score in January. The third leading agency, Fitch, still ranks France at AAA-rating but has had it on review for a downgrade since late last year.
But Finance Minister Pierre Moscovici insisted that France’s credibility remains strong and that the government’s plan to reduce unemployment and restore growth would bear fruit.
France has come under scrutiny as its €2 trillion ($2.5 trillion) economy has stagnated, with many leading French companies laying off workers. Meanwhile Hollande has struggled to reassure economists that his attempts to revive the French economy will be successful. Continue…
By Scaachi Koul - Friday, August 17, 2012 at 10:30 AM - 0 Comments
In a report released on Thursday, Moody’s Investors Service not only confirmed Canada’s triple-A…
In a report released on Thursday, Moody’s Investors Service not only confirmed Canada’s triple-A rating but said the country held up to the effects of the global recession “better than most other top-rated sovereigns.”
Canada didn’t experience a financial crisis like the ones that affected the U.S. and some European countries, Moody’s also noted.
The rating agency dismissed risk about the red-hot housing market, one of the longstanding concerns about the Canadian economy along with household debt, calling it “manageable in terms of its potential effect on federal finances.”
By the editor - Thursday, August 18, 2011 at 10:20 AM - 0 Comments
The real issue is not how to keep credit rating agencies compliant with official thinking, but how to return the American economy to the robust and dynamic powerhouse it has been throughout its history
Prohibitions against shooting the messenger have been forgotten in the midst of the current financial crisis.
Last week Standard & Poor’s credit rating agency expressed publicly what everyone has been thinking for some time: that the United States does not have a credible plan to address its mounting deficit and debt. Net federal government debt as a percentage of GDP is predicted to rise from 74 per cent to 85 per cent by 2021. (Canada is at 34 per cent.) As a result, S&P stripped the U.S. of its AAA credit rating.
Reaction from the White House was furious. Treasury Secretary Tim Geithner said, “S&P has shown really terrible judgment and they’ve handled themselves poorly, and they have shown a stunning lack of knowledge about basic U.S. fiscal math.” Yet any complaint that the rating agency is being too tough on Washington is the height of hypocrisy.
By Erica Alini - Tuesday, August 9, 2011 at 5:50 PM - 7 Comments
Washington doesn’t have to look far for examples of how to climb back from a downgrade
By cutting the U.S. credit rating on Friday, Standard and Poor’s may well have pushed the world economy closer to a dreaded second dip into recession. Of course, downgrading the world’s largest economy is bound to have serious consequences, but Washington’s humiliation is not a first. Many of today’s AAA-rated countries have less-than-perfect credit histories. In fact, seven of the 15 nations on the AAA list of both S&P’s and Moody’s either lost their top score for a period, or had to work their way up there from lower ranks.
So how does a country climb back to a AAA rating? In one of three ways, it seems–and not all of them involve austerity: Continue…
By John Parisella - Monday, August 8, 2011 at 5:59 PM - 34 Comments
Last Friday, the Standard & Poor’s rating agency made history by ratcheting the U.S….
Last Friday, the Standard & Poor’s rating agency made history by ratcheting the U.S. credit rating down a notch from AAA to AA+. (The two other major rating agencies, Moody’s and Fitch, kept the U.S. at AAA.) The Obama administration argued S&P overestimated the U.S. debt by over $2 trillion. And though S&P recognized the error, it argued the debt ceiling deal was inadequate to maintain an impeccable credit rating.
Politicians from both the Democratic and Republican parties have blamed one another for the decision by S&P. GOP presidential candidate Michele Bachmann attributed the downgrade to President Obama, while Obama advisor David Axelrod blamed the Tea Party for toying with a default to force spending cuts. Continue…