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“We expect these trends to continue, and to spike in the event of economic stress,” the report said.

Beattie said credit card losses are generally higher for banks than losses from other personal loans, and a severe recession could push those losses higher than in the aftermath of the 2008 financial crisis. Another vulnerability for the banks in such a recession would be lines of credit that aren’t covered by insurance like many mortgages are.

Moody’s has already signaled it believes the current oil price slump, if sustained, will put greater stress on consumer loan portfolios than on corporate loan books — particularly in Western Canada. Beattie said at least some impact from low oil prices is likely to be seen when Canada’s big banks report fourth-quarter and year-end financial results in December.

During the upcoming review period for Scotia, Moody’s intends to weigh the likelihood the bank’s increased risk tolerance will persist along with the bank’s “strategic imperative” to increase profitability by shifting the asset mix towards higher yielding categories of consumer credit.

Further analysis will be conducted on the operating environment and Scotia’s performance outside Canada.

“Given the direction of the review, upward pressure on the rating is unlikely,” Moody’s said. However, some firms faced with such reviews don’t end up with a ratings change at all.

The review is the second action taken by Moody’s based on the view that Scotiabank’s risk profile is changing. In June of last year, the outlook on the bank was downgraded to “negative,” with Moody’s citing a trio of events including the acquisition of a 20 per cent holding in Canadian Tire Financial. Moody’s said the stake would increase exposure to unsecured consumer credit “at a time of peak Canadian consumer leverage.”

At that time, Moody’s also cited Scotia’s decision to sell a 37 per cent stake in mutual fund firm CI Financial, which had provided a stable source of earnings, in favour of more “international exposure.”