A new report from Moody’s Investors Service says the credit outlook for credit unions is negative.
“The negative outlook applies across the sector as funding pressures increase from strong retail deposit competition, whilst credit quality weakens in line with the current economic environment,” Moody’s assistant vice president Marina Ip said yesterday.
According to Moody’s, smaller credit unions may not survive the challenging environment without looking to consolidation.
Abacus, the industry body for mutuals, however disagreed with Moody's assessment.
“The credit union sector’s well-earned reputation for prudent management and responsible lending means it is well positioned to weather challenging economic conditions,” Abacus CEO Louise Petschler said.
Ms Petschler emphasised Moody’s observations that credit unions’ loan books were low-risk, largely comprised of residential mortgages with significant mortgage insurance cover and generally no exposure to ‘toxic’ investments of large bad loans.
Moody’s assessment of credit unions follows its review of building societies last week, for which it also labelled the credit outlook negative.
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