Tuesday, May 18, 2010

Fitch Affirms Ratings for Corporate CUs

Fitch Ratings on May 13 affirmed the long- and short-term Issuer Default Ratings (IDRs) at 'A+' and 'F1+', respectively, of the eight corporate credit unions that it rates based on the National Credit Union Administration's (NCUA) continued support for these corporate credit unions. Additionally, their Outlook remains Stable.

However without the external support, it is Fitch's opinion that these institutions would likely have been in default. Corporate credit unions continue to benefit from the various support mechanisms put in place to maintain liquidity in the corporate credit union system and most of the corporate credit unions currently require regulatory forbearance from the NCUA given their weak capital positions.

The eight corporate credit unions that Fitch rates are: Central Corporate Credit Union, Constitution Corporate Federal Credit Union, Eastern Corporate Federal Credit Union, First Corporate Credit Union, Mid-Atlantic Corporate Federal Credit Union, Members United Corporate Federal Credit Union, Southeast Corporate Federal Credit Union, and Southwest Corporate Federal Credit Union.


  1. "without the external support, it is Fitch's opinion that these institutions would likely have been in default." Default on what? Fitch doesn't say. You don't say. So what exactly are they talking about. From what I can tell, none of them have debt instruments issued in the market and they have abundant liquidity. Again, what would have been in default without the government support?

  2. Yet better than big GSEs, more transparent than Flubs, backed by a solvent DIF -- and a sector that takes care of its own.

    Troubled, of course, for holding MBS comprised of buckets of bank-made legendary loans. Hurt more by bank toxins than bank trade groups, For the corporate CUs, perhaps the only shame was touching the contamination of others.

  3. Dear Anonymous:

    Prior to the financial crisis, larger corporate credit unions regularly went to the market to issue commercial paper, which was rated. If it was not for the support by NCUA, they would have defaulted on this paper. You are correct that currently they don't have any debt instruments and ample liquidity. But this is the case because NCUA has guaranteed all CU deposits at corporates.

  4. ” NCUA has guaranteed all CU deposits at corporates.” Which means that because of the credit unions’ joint and several liability construction backing their separate federal insurance fund, it is the credit unions themselves that are covering both the cost of the temporary guarantee as well as the eventual cost of all losses. Compare to the bank side and the fleecing of taxpayers; economy driven into recession.



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