The cauldron of financial turmoil bubbling over in Europe is now seeing its hot water trickle into Canada. Late Friday, rating agency Moody’s Investors Service announced the downgrade of ING Bank of Canada’s senior deposit ratings to Baa1 from A2.
This comes on the heels of the rating agency’s downgrade of ING’s parent, ING Bank NV, to C- for financial strength.
The Dutch bank was one of several financial institutions in the Netherlands and Belgium that had its rating trimmed (by two grades) by Moody’s on Friday because of factors such as the recession, the debt crisis and other such vulnerabilities plaguing the regions’ financial markets right now.
When it comes to ING Bank of Canada in particular, Moody’s noted in a release that its expectation that ING Bank NV could and would support its Canadian subsidiary hadn’t changed, it did have concerns about market competition and the specificity of the firm’s business model in Canada.
In particular, Moody’s questioned some of the banks exposure to risk because it leans so heavily on “interest revenues and the product options embedded in the core Canadian residential mortgage product,” said the release.
It’s not that ING doesn’t manage the risk efficiently, Moody’s point out, it’s just that given the state of Europe and market uncertainties, that planning may not be able to protect against all material losses.
It’s been a tough week for parent company ING Bank NV, which announced several days ago that it would be settling charges alleging it “violated U.S. sanctions” by bringing Cuban and Iranian client money through the American financial system and then deleting transaction records.
Still, shares of ING on both the European and American exchanges were trading up on Friday. Some industry watchers attribute this to the downgrade being a little less harsh than expected.
Editor's Note: We have corrected an earlier online version of this article that got the ratings wrong in the first paragraph.