Kroll Bond Rating Agency (KBRA) releases The Case for Canadian Banks research report, which makes the following key points:
- In KBRAs opinion, the structure of Canadas mortgage market substantially reduces banking system risk.
- Canadian banks, which generally are prudent mortgage underwriters, dominate the mortgage market. In addition, a large portion of mortgages effectively carry a government guaranty.
- KBRA rates Canada AAA, implying de minimus risk that the sovereign would not honor its guaranty.
- KBRA views the Canadian banking system as having very solid financial strength owing to conservative policies, high-quality supervision, and the generally strong and stable macro profile of the Canadian economy.
- KBRA notes that Canada is undergoing a slowdown, which could lead to an uptick in unemployment and further fall in housing pricesfactors that do pose risks, especially in the context of high household debt and debt service levels.
- A continued economic slowdown combined with housing price pressure may cause impaired loans and provisions for credit losses to gradually normalize from extremely low levels. However, KBRA believes these risks are quite manageable in terms of the banking system and the sovereign debt profiles.
Related Publications: (available at www.kbra.com)
- The Case for Canadian Banks
- Canadian Banks: Resilience Endures 2018 Outlook
- Sovereigns: Canada Rating Report
- Sovereigns: Canada Rating ReportFinancial Institutions: The [Updated] Case for Community Banks
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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