ALEXANDRIA, Va. (8/11/11)--The National Credit Union Administration (NCUA) has encouraged credit unions to assure their members that Standard & Poor's recent U.S. credit rating downgrade will have no impact on federal credit union deposit insurance, adding that the credit union system remains “strong and well capitalized.” In a development Wednesday night, NCUA learned that S&P's has also downgraded the NCUA Guaranteed Notes (NGNs) to AA+ status from AAA as a direct result of the S&P's downgrade of U.S. long-term sovereign debt. NCUA reassured that this would involve no new negative impact on Corporate Stabilization costs. The agency in a letter to credit unions (11-CU-11) added that member concerns related to the U.S. credit downgrades “may lead to unusually large deposit inflows or draws on existing lines of credit.” The NCUA recommended that credit unions contact the agency or state credit union regulators “if significant balance sheet growth leads to a temporary decline in regulatory capital levels.” Credit unions should also “consider all reasonable and prudent actions” to aid members who are enduring financial troubles, and should “maintain a dialogue with their examiners as they assess risk management challenges,” the NCUA added. As was also reported in Wednesday’s News Now, the agency advised credit unions that the downgrades of credit ratings of the U.S. government and a number of government programs this past week will have little effect on credit unions and the Corporate Stabilization program. According to the NCUA, the current risk-weights for Treasury securities will not change. This includes other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored enterprises. However, the NCUA noted, if a credit union or other entity bought NGNs and wants to sell them in the marketplace now rather than hold to maturity, the price or value may or may not be affected by S&P's action. While S&P did downgrade four NCUA unsecured debt guaranteed issues from two corporate credit unions the agency had guaranteed under the Temporary Corporate Credit Union Liquidity Guarantee Program from AAA to AA+, the downgrade does not affect the costs to NCUA of these debt obligations. There will be no increase in corporate credit union debt obligation costs for the NCUA or credit unions, the agency added.