Banks in Canada will have to address growing challenges next year amid increased asset quality risks and uncertain prospects of government support, but will withstand the stresses, Moody’s Investors Service said in a press release on Tuesday.
“Moody’s said it expects that Canadian banks’ solid capital, stable earnings and relatively low current level of problem loans will help them mitigate any increase in credit costs and withstand unexpected stress in 2016,” the release stated.
Moody’s noted that the Canadian banks’ profitability is expected to remain stable despite low oil prices and low interest rates. However, the release added increased financial strain on Canada’s households could impact current levels of asset quality at the banks.
Earlier in December, the Canadian dollar was severely affected as oil prices dropped below $40 per barrel. In addition, Canada’s unemployment rate rose in November.