Moody’s has downgraded its ratings for six Canadian banks due to their exposure to risk from high house prices and household debt.

The ratings firm has cut the deposit and long-term debt ratings for TD Bank, BMO, RBC, Scotiabank, CIBC and National Bank.
Each has been moved down one level over fears that the quality of the loans they hold may be weakened.

Moody’s says that consumers and the banks may be “more vulnerable to downside risks facing the Canadian economy than in the past.”

Although it acknowledges the capital and liquidity buffers that Canada’s big banks have, Moody’s notes that their resilience has not been tested at the current high levels of indebtedness.

TD is now rated Aa2 while the others are A1.

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