Six of Canada's largest banks had credit ratings downgraded by Moody's Investors Service on concern that over-indebted consumers and high housing prices have left lenders vulnerable to potential losses on assets.

Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and Royal Bank of Canada had their long-term debt and deposit ratings lowered one level, Moody's said Wednesday in a statement. It also cut its counterparty risk assessment for the firms, excluding Toronto-Dominion.

"Expanding levels of private-sector debt could weaken asset quality in the future," David Beattie, a Moody's senior vice president, said in the statement. "Continued growth in Canadian consumer debt and elevated housing prices leaves consumers, and Canadian banks, more vulnerable to downside risks facing the Canadian economy than in the past."

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A run on deposits at alternative mortgage lender Home Capital Group Inc. has sparked concern over a broader slowdown in the nation's real estate market, at a time when Canadians are taking on higher levels of household debt. The firm's struggles have taken a toll on Canada's biggest financial institutions, which have seen stocks slide on concern about contagion.

Untested Strength In its statement, Moody's pointed to ballooning private-sector debt that amounted to 185 per cent of Canada's gross domestic product at the end of last year. House prices have climbed despite efforts by policy makers, it said. And business credit has grown as well.

"We do note that the Canadian banks maintain strong buffers in terms of capital and liquidity," Moody's said. "However, the resilience of household balance sheets, and consequently bank portfolios, to a serious economic downturn has not been tested at these levels of private sector indebtedness."

Spokesmen for the six banks declined to comment or didn't immediately respond to messages seeking comment outside of normal business hours.

Moody's also cited high housing prices and consumer debt when it cut five of the banks in January of 2013. That decision cost Toronto-Dominion its Aaa grade.

The ratings company said Wednesday that it still has a negative outlook on all six. The move left Toronto-Dominion Bank with a long-term debt rating of Aa2. Moody's lowered the other five to A1.