News & Resources

If you've been keeping an eye on finance headlines this week, you've probably noticed that bank downgrades seem to be a trending topic. It started with debt rating agency Moody’s cutting ING Bank of Canada’s senior deposit rating. The downgrade happened last week after the agency also slashed the rating of its Dutch parent company ING Bank N.V. to a C-. ING is one of the world's largest financial services companies with an excellent reputation - so the move comes as a surprise.

The reason? “Relative to peers, ING Bank of Canada has elevated interest rate risk because of its reliance on interest revenues and the product options embedded in the core Canadian residential mortgage product," Moody's said.

Reaction To the Move

It’s a move that should not be a concern for ING customers, says founder of Canadian finance resource InvestingForMe.com¸ George Christison. “For Canadians with savings deposited in an ING Bank of Canada account, the rating downgrade should also be a non-event; their confidence is not placed in ING Bank of Canada, but rather the Government of Canada, through CDIC insurance program.”

ING’s narrow business model is a concern to Moody’s. The online bank, famous for its no-fee checking and high interest accounts, may not have a wide enough scope to compete with the other banks. Christison points out the Dutch bank has a good track record. “ING Bank of Canada has proven its model works in Canada,” he states, noting  most foreign banks only last 3 to 5 years in Canada because of the monopoly the big 5 banks have in this country.

What’s Really Going On

There are two things happening here. One, the worldwide economy continues to sputter and banks remain in focus, as access to credit is still the main issue. ING is not the only victim to the rating agency. Moody’s downgraded the ratings of several other banks this week including RBC in Canada. Fortunately for RBC the only thing affected was its ego, as the stock seemed to hold up well after the announcement. Click here for our coverage on the RBC downgrade.

The other factor is the deepening European debt crisis. Countries such as Spain and Cyprus are now asking for bailouts to save their sinking economies, and this is putting added pressure on the banking system worldwide.

What This Means For Canadians

If you bank with ING you should see no difference in the service you’re getting or the interest being paid to you. However, Christison says those invested in ING should pay close attention. “From an investment point of view, the company only has one bond issued and outstanding, and no publicly traded shares. So for holders of the bond, the downgrade might be worrisome.”

Straight up - If you have a mortgage with ING you have nothing to worry about. The real concern is how this downgrade will affect ING bank’s reputation. The Dutch bank downgrade could shake the confidence of other smaller banks that don’t have the same track record as ING.

Rubina Ahmed-Haq

Rubina Ahmed-Haq is a financial journalist and personal finance expert with more than 15 years of experience. Her career spans three continents with appearances on TV, radio, print and online. She is the Finance Editor for HOMES Publishing. You can also read her columns in CondoLife and Active Life. Rubina runs the website www.AlwaysSaveMoney.ca. She has also contributed on personal finance matters at The Toronto Star, The Globe and Mail, National Post, CTV Newschannel, Mississauga Life Magazine, Masalamomma.ca, OurKidsMedia, CAA Magazine, South Asian Focus TV, ANOKHI Magazine, Bridal Fantasy Magazine, Canadian Running Magazine, FRESH JUICE magazine and NEWSTALK 1010.

Latest life insurance articles

10 Myths About Life Insurance Busted – Some May Surprise You
You may be young with no kids and no mortgage. Life insurance is for someone older, who has dependents right? Wrong. Let’s debunk life insurance myths and learn why everyone needs some form of coverage.
Will a Life Insurance Policy Cover Death Due to COVID-19?
Demand for life insurance may be on the rise during the pandemic as more Canadians consider buying a policy or reviewing ones they already have. If you’re thinking of applying for a policy, here are a few things to keep in mind.
How Does Vaping and e-Cigarettes Affect Life Insurance?
Many insurers may classify vaping in the same way they do smoking. If you smoke or vape, you can still qualify for a life insurance premium, but in all likelihood, you will pay a higher rate than someone who does not.