Federal regulators acted swiftly to limit the impact of Standard & Poor's rating downgrade on U.S. debt, announcing in a joint statement that the move will not impact the treatment of U.S. securities in risk based capital calculations.
The ratings firm downgraded the score for U.S. debt instruments from AAA to AA+.
“For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies and government-sponsored entities will not change,” the regulators from the NCUA, Federal Reserve, FDIC and OCC announced Monday.
“The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board’s Regulation W, will also be unaffected,” the announcement said.
Bill Brooks, former CU CEO and now a credit union consultant with CU Prosper, said that he didn't expect the downgrade to have much of an impact on credit unions.
Partly this was because moving from AAA to AA+ was “technical” Brooks said, adding “it's not like we went to B” and partly this was because demand for U.S. securities remains strong in the suffering global economy.
“U.S. securities even with the downgrade are far better than anything else out there as a safe haven,” Brooks noted.