VANCOUVER, British Columbia (Reuters) - Canadian Imperial Bank of Commerce (CM.TO) did not anticipate the swift decline in the U.S. subprime mortgage market, leaving it with an uncomfortably large exposure, the bank’s chief executive said on Thursday.
“In our risk assessment, we underestimated the extent to which the subprime market might deteriorate and the degree to which that would impact securities that were structured to be very low risk,” CIBC Chief Executive Gerry McCaughey said.
“This, coupled with an over-dependence on the extremely high ratings of these securities, resulted in the build-up of exposures that are too large for CIBC’s risk appetite,” McCaughey said on a conference call.
His remarks come after CIBC, Canada’s fifth-biggest bank, revealed it had a C$9.3 billion ($9.2 billion) worth of hedged exposure to the subprime market, where defaults are rising after loans were made to customers with poor credit records.
Reporting by Nicole Mordant; Editing by Jeffrey Jones