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Fitch said the debt-to-income ratio in Canada is higher than pre-recession levels in the U.S., but Canadian banks aren’t vulnerable to a similar sub-prime mortgage crisis because of fundamental differences in the markets and the way the industry is regulated.[np-related]

“We’re not talking about a U.S.-style situation at this juncture and there are market structure elements that are different between the two countries that you have to keep in mind as you go between the analysis,” Mr. Toka said.

He pointed to the fact that mortgages were often sold on in the U.S., whereas in Canada banks tend to hold the origination themselves. Also, independent mortgage brokers — often blamed in the mortgage crisis for loose lending — are used much less in Canada.

Fitch analyzed the risk by testing the affect of cumulative bank losses in scenarios where the losses were between one and 10%.

When comparing the banks’ domestic mortgage value relative to total loans, CIBC and RBC were exposed to the most potential risk, while TD Canada Trust and Bank of Montreal were the least. The agency also noted that TD uses more insurance relative to the others while RBC had the least.

“BMO has a different approach to the market than others. For two years now, we have been actively promoting fixed rate products with a maximum amortization of 25 years. With our offering, Canadians can pay less in total interest, become mortgage free faster, and protect themselves against the risk of rising rates,” said Paul Deegan, vice-president government and public relations at BMO Financial Group