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Big banks worry loan books are ‘too good to last’

Canada’s biggest banks are so surprised by the shrinking number of bad loans that they are digging deep into their books to make sure they aren’t blindsided by a sudden shock.

When Royal Bank of Canada and Toronto-Dominion Bank released their second quarter earnings last week, both lenders reported plummeting provisions for credit losses, a form of safety cushion set up to absorb any losses from non-performing loans. RBC’s credit provisions now total $244-million, down 16 per cent from the previous quarter, while TD’s amount to $392-million, down 14 per cent from the first quarter.