NEW YORK — One reason Fitch Ratings put three corporate credit unions on ratings watch negative last month is because monoline insurers that cover mortgage-backed securities, like Ambac Financial Group and MBIA, are struggling.
"With the monoline insurers under stress, the credit enhancement corporates gathered from this support has been lessened, so there is an increased potential they could see some losses in those securities," said Ken Ritz, senior director of Fitch Ratings' banking group.
However, Ritz said an increased potential for investment losses doesn't mean the corporates are no longer a safe place for natural person credit union funds. Mortgage-backed securities aside, corporates have very strong management strategies, good liquidity and potentially a low risk profile, he said.
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"I want to be clear, it's not like we're saying it could impair capital to the extent that we're questioning the corporate's survival," Ritz said. "We still think they deserve those AA- ratings. We still view them as very solid companies."
Fitch placed three corporates on rating watch negative recently: Members United Corporate FCU on May 31, and Southwestern Corporate FCU and Constitution Corporate FCU on June 13. All three institutions still maintain AA- long term issuer default ratings (IDR). Fitch downgraded U.S. Central FCU's IDR from AAA to AA+ on March 18.
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