Behind S&P's warning on Canadian banks lies a troubling message, one we've heard before but bears repeating.
"The current mix of international and domestic macroeconomic conditions could bring about a rising level of unemployment and further constrain income growth for Canadian workers," Standard & Poor's Ratings Services warned late Friday.
"These developments may potentially impair consumers' debt servicing capacity and amplify Canada's vulnerability to a housing market correction at some point in the future."
As The Globe and Mail's Tara Perkins reported, S&P revised its outlook on seven financial institutions to "negative" from "stable," including Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, National Bank of Canada, Laurentian Bank of Canada, Central 1 Credit Union and Home Capital Group Inc.
"A prolonged run-up in housing prices and consumer indebtedness in Canada is in our view contributing to growing imbalances and Canada's vulnerability to the generally weak global economy, applying negative pressure on economic risk for banks," S&P said.