(Reuters) - Moody's Investors Service has cut the ratings of six Canadian financial institutions, including the previously "Aaa" rated Toronto-Dominion Bank, due to concerns about rising consumer debt and high housing prices.
TD, the only publicly traded bank that still carried Moody's top rating, was downgraded along with Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Bank of Montreal, National Bank of Canada and Caisse Central Desjardins, Canada's largest association of credit unions, Moody's said on Monday.
The cuts, which were widely anticipated after Moody's put the lenders on credit watch in October, were all by one notch.
The only major Canadian bank not included in the cut was top player Royal Bank of Canada. That's because Moody's cut RBC's ratings by two notches last June as part of a review of 17 global banks.
Ratings downgrades typically lift the cost of borrowing for the affected financial institution.
Canada's banking system has been named the soundest in the world four years in a row, and indeed Moody's noted the banks remain among the highest rated in the agency's global rating universe.
But the outlook for the sector has become murky due to record consumer debt levels combined with increased downside risks to the Canadian economy, Moody's said.
"High levels of consumer indebtedness and elevated housing prices leave Canadian banks more vulnerable than in the past to downside risks the Canadian economy faces," the agency said in a statement.
The agency also pointed to high capital markets exposure at Bank of Montreal and National Bank, which increases those banks' exposure to a market downturn.
Moody's now rates TD's long-term debt at Aa1, Scotiabank and Caisse central Desjardins are at Aa2, and the others are at Aa3.
Shares of the banks seemed unaffected late in the session on Monday.
(Reporting by Cameron French, additional reporting by David Gaffen in New York; Editing by Richard Chang)
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