A couple of significant regulatory announcements in the Canadian banking sector came as no surprise, but the ultimate market reaction to these reforms could yet affect the banks’ credit profiles, says Standard & Poor’s Ratings Services (S&P).
In a new report, S&P says that recently announced regulatory changes for the Canadian bank sector — the government’s pledge to introduce a “bail-in” policy framework for failing banks; and the decision to designate the Big Six banks as systemically important, leading to higher capital charges and closer supervision — were both in line with its expectations for the sector.
“These developments reinforce our perception that Canadian regulators are emphasizing prudential standards, active bank supervision, and the avoidance of a future taxpayer funded bailout of a failing financial institution,” said Standard & Poor’s credit analyst Tom Connell. “As a result, these two announcements have not resulted in changes to our ratings on Canadian banks.”
“However, the proposed policy measures and the related market reactions could eventually lead to changes in the credit profiles of Canadian banks,” Connell added.