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Moodys Australian CU sector outlook rated negative
SYDNEY (5/1/08)--Pressures from the global financial crisis are affecting the credit outlook for Australia's credit unions, according to Moody's Investors Service. The tightened credit market has pushed the credit union sector for the country into a "negative" outlook, Moody's said Wednesday (Business Spectator April 30). The outlook rating examines a broad range of areas, including the impact of the subprime crisis on the sector's funding, consolidation trends and the sector's financial performance. Australia's credit unions are more reliant on warehouse facilities than mortgage-backed securities, and warehouse funding is still available to a limited degree for certain credit unions to continue making mortgage loans, said Moody's. The number of credit unions has dropped to 144 from 833 in 1973 and mergers in the sector are set to accelerate, the firm said, adding smaller credit unions may be holding back the movement's efficiency levels because they are struggling with rising operating costs. On the positive side, credit unions' asset quality remains strong in the short term, with low impaired asset levels and loss rates. Moody's noted that Australia's credit unions benefit from the common bond concept, which provides them with stable retail depositions--a significant advantage in the current conditions in wholesale funding markets.


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