BANKS IN CANADA DO NOT CONDUCT PROPER DUE DILIGENCE

The credit agency Moody's warned that Canadian banks face increasing risks due to the increased vulnerability of the loans they grant to their clients.

The rating agency said in a report released yesterday that the "credit quality" of the loans is threatened by the increase in interest rates, the increase in mortgages that are not insured and the longer terms to pay the loans for the purchase of automobiles

"As debt levels in relation to revenues continue to rise, the first bite to the quality of bank assets will fall on the portfolio of unsecured credit cards," Jason Mercer, an analyst at Moody's, said in a statement.

Mercer added that the credit cards do not have collateral and has a repayment priority lower than the payment of mortgages or car loans.

The Moody's warning coincides with a recent report by the Bank for International Settlements (BIS) that indicates that Canada is one of the countries most at risk of suffering a banking crisis. The unsecured mortgages, those for which the lender institution is responsible in case of default, have increased to 60%, 10 points more than five years ago. In addition, mortgage costs have gone up.