DBRS has revised the ratings trend of CIBC to negative, citing concerns about its risk management capabilities.

The rating agency confirmed the bank’s ratings and removed it from under review, saying, “the negative trend reflects DBRS’s concerns about the effectiveness of the bank’s risk management processes, especially in the context of managing risk to generate consistent and sustainable performance.”

It notes that weaknesses in risk management at the bank surfaced in the fourth quarter of 2007 and first quarter of 2008 following charges and losses associated with the deterioration of the U.S. sub-prime mortgage market. “Prior to this deterioration, DBRS believed the bank had made strides in its managing its risk profile, including strengthening its risk management practices, which includes concentration risk and reputation-related risk, and de-risking its business mix,” it said.

DBRS added that it believes successful execution by the new senior management team to address risk management issues will be instrumental in removing the negative trend over the next year, as it is currently too early to determine the effectiveness of these actions.

“Longer term, CIBC’s ability to generate greater stability of earnings, improved business practices and better reputation-related risk management is expected to contribute positively to CIBC’s ratings in the medium term,” it said, adding that the bank had already been lowering risk in its business mix by deploying capital towards its retail businesses and selling or winding down more risky capital markets businesses.

DBRS’s concerns about the negative impact on capital ratios from the deterioration in the U.S. sub-prime market and the long-term viability of some of CIBC’s other hedge counterparties have been addressed through the issuance of $2.9 billion of common equity in January.

The rating agency also confirmed the ratings of the Toronto-Dominion Bank, with stable trends. “The ratings are supported by TD’s leadership position in Canadian personal banking, low business risk profile and strong credit risk profile,” it said.