Concern over the lower profits of banks amid tougher global economic conditions could mean higher interest rates in Canada. Ratings agency Fitch says that auto loans and credit cards present the main risk of delinquencies, especially in the oil producing areas. Household debt may need to be cooled with rising interest rates.
Canadian banks have been subjected to lower regulatory conditions than US and European counterparts and are viewed by some analysts as riskier. Currently Fitch says that Canada’s lenders are able to withstand headwinds but that could change, especially if energy firms continue to be impacted by lower prices.