A major credit rating agency has raised its outlook on Canada's major banks on Tuesday, just over 14 months after it lowered the ratings.
Moody's Investors Service said it boosted its outlook on Royal Bank (TSX: RY), Toronto-Dominion Bank (TSX: TD), National Bank (TSX: NA), Canadian Imperial Bank of Commerce (TSX: CM), Bank of Montreal (TSX: BMO) and Bank of Nova Scotia (TSX: BNS) from negative to stable.
The change in outlook reflects the fact that the credit rating agency has lowered its expectation of the need for government support to banks' deposits and senior debt with the implementation of new "bail-in" rules pending in September.
The rules are intended to prevent taxpayer money from being used in the unlikely event of the failure of one the country's "domestic systemically important banks."
Under those new bail-in rules would see some types of the debt of a struggling financial institution converted into shares so that the bank could be quickly recapitalized and remain viable.
Back in May 2017, Moody's cut the banks' ratings to negative, saying that continued growth in Canadian consumer debt and elevated housing prices left consumers and Canadian banks more vulnerable to downside risks facing the Canadian economy than in the past.
However, since that rating reduction, interest rates have gone up and the federal government has instituted new rules meant to tighten mortgage lending.
