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Canadian Banks Encouraged To Boost Reserves Jan 99
Standard & Poors, Jan 1999
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
Abstract
Regulators are quietly encouraging Canadian banks to boost their loan loss reserves while the good times persist. They point to the more robust levels of reserves south of the border in the U.S. system, where total reserves equal 1.88% of loans, the highest among developed countries of the world. Without indicating any specific goals, and certainly not indicating that comparability with the United States was desirable, they have made it more attractive to boost general reserves by permitting 0.75% of loans to be included in Tier 2 capital. There is much discussion of linking the level of general reserves to risk-weighted assets as well. The debate on the correct level of general reserves centers around the methodology of allotting reserves...
Companies mentioned in this report are: Canada,Royal Bank of Canada,Toronto-Dominion Bank (The),Bank of Montreal,Bank of Nova Scotia (The),Canadian Imperial Bank of Commerce,National Bank of Canada,United States of America (Unsolicited Ratings)
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