Credit rating agency Standard and Poor's has given the Police and Families Credit Union (PFCU) a 'BB+' long term credit rating, and a 'B' short term rating, making it the first credit union in New Zealand to have an S&P rating under the Reserve Bank's new regime for regulating non-bank deposit takers. Both ratings have a stable outlook. A Standard and Poor's rating below 'BBB-' is widely referred to as "junk" status. Under the RBNZ's new regime it will be mandatory for all deposit takers to obtain a credit rating by March 2010. "PFCU is the first credit union in New Zealand to be rated by Standard & Poor's. We view the credit union's sustainable business model, very good asset quality, and overall sound financial profile as strengths that underpin the ratings," Standard & Poor's credit analyst Gavin Gunning said. "Further, we consider PFCU's competitive position to be sound as it is not in direct competition with banks, unlike many community-based and regional credit unions," Gunning said. 

"Moderating the strengths are PFCU's very small capital base, key person risk due to its small staff strength, and basic operational risk management. In our opinion, PFCU's very small capitalization provides only modest protection against a major operational risk event, even if such an event is of a low probability or difficult to predict," he said. "The stable outlook reflects our expectation that PFCU's business and financial profile will remain sound during the current economic downturn in New Zealand and the impending period of regulatory change affecting the New Zealand credit union sector. We expect PFCU's good asset quality would continue to be supported by more favorable employment trends affecting New Zealand Police compared to the general community." "Negative ratings momentum is mostly likely to eventuate should a major operational risk or other negative event impact PFCU's financial profile, given its very small capital base. Deterioration in its business profile and customer franchise, or a material weakening in its asset quality, liquidity or other financial parameters could also contribute to negative ratings momentum. Positive ratings momentum is not expected in the short-to-medium term." Established 35 years ago, PFCU provides personal lending and deposit services to members of the New Zealand Police and their families.