Moody’s Investors Service says that the rating outlook for Canadian asset-backed commercial paper is stable, underpinned by the solid banking system and relatively strong economic recovery.

“Performance of consumer assets, which make up the majority of the assets funded in conduits, has been stable and there is more than sufficient credit enhancement to cover any potential losses,” says Moody’s vice president, Lisa Singman. “Also, bank sponsors are committed to their programs and continue to react in order to maintain their current rating levels.”

Another factor supporting the ratings has been the Canadian economy’s relatively better showing during the global economic crisis, says the rating agency, adding that the banking system in Canada is also strong. While Moody’s does have negative outlooks on some of the banks that sponsor ABCP in Canada, it adds that no near-term rating action is likely to affect any of the short-term ratings on the ABCP.

Moody’s does not expect banks to create any new ABCP programs in 2010. It also says that some conduits may shrink, possibly leading to some consolidation to reduce costs.

IE