Residential mortgage losses for Canada’s big banks could rise to 20 basis points according to updated stress tests from ratings firm Moody’s. That’s a large rise given that a year ago it predicted losses of 3 basis points. Continued weakness in the energy sector are driving concern of defaults on debts by energy firms and individuals in the worst hit areas. Although the stress test predictions look at the worst-case scenario Moody’s believes that conditions will need action from the lenders: “we believe they might be required to take capital conservation measures, cut dividends, or raise additional equity.” The big banks begin reporting their quarterly results this week.
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