Canadian banks are likely to experience further recession-driven losses, but should have sufficient capital to absorb them, according to report released Wednesday by Standard & Poor’s.

While the banks are likely to experience additional losses as the recession continues, “stress tests reveal that these banks have sufficient capital to withstand losses” in what S&P believes to be the most likely scenario for the economy.

“The results of our base-case stress test — which is also our expected case — ndicate that the sector exceeds our minimum capital thresholds,” said Standard & Poor’s credit analyst Lidia Parfeniuk.

Moreover, it adds that most Canadian banks could withstand even higher-than-expected losses. “In fact, as a group, Canadian financial institutions perform better under our stress tests than do those we rate in the U.S. under similar tests,” says Standard & Poor’s Ratings Services.

Its stress tests include Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, and Toronto Dominion Bank Financial Group, National Bank of Canada, Laurentian Bank, the Desjardins Group, the BC Credit Union System and HSBC Canada.

IE