In one fell swoop the credit rating agency Moody’s brought down the credit rating of six Canadian banks.
RBC was the only big bank to escape this downgrade cycle.
So why is Moody’s picking on us?
“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,” David Beattie, vice-president at Moody’s said in a note.
Canadian consumer debt has risen to a record-high 165 per cent of disposable income in the third quarter of 2012, up from 137 per cent in mid-2007. Bank of Canada governor Mark Carney has repeatedly warned about these levels, but they remain stubbornly high.
Sure, Mark Carney has warned about this, but he’s gone now… doesn’t that mean the problem is gone too?
As always Mr. Flaherty is there to reassure us Canadas banks are the ‘soundest in the world’.
In other news… it’s not a bubble, it’s a balloon.
Image source: wreckonomics at Vancouver Peak.