Home / Canada’s banks could be forced to raise equity, cut dividends if oil prices keep sinking, Moody’s warns
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Canada’s banks could be forced to raise equity, cut dividends if oil prices keep sinking, Moody’s warns

Some Canadian banks could be forced to preserve capital by raising equity or even cutting dividends if oil prices continue to slump, Moody’s warns in a new report.

Some Canadian banks could be forced to preserve capital by raising equity or even cutting dividends if oil prices continue to slump, Moody’s warns in a new report.

In a “severe stress” scenario modelled by the ratings agency, and included in the report to be widely circulated Monday, losses in consumer lending portfolios would exceed historic peaks and capital markets activity at the country’s biggest banks would be significantly crimped.

“Under the moderate stress scenario we modeled, the profitability of Canadian banks will decline but their capital would not be impaired,” David Beattie, a senior vice-president at Moody’s, wrote in the report.

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