Credit ratings: Where is your money? What is the risk and safe haven for your dollars

How  safe is your money. The NZ banks continue to be well rated, but if your money is in the 2nd level finance organisations, remember their safety ratings are considerably less, the risk is higher.

Our banks are amongst the safest in the world when we look at the credit ratings provided by Standard & Poor’s.  The four largest domestic banks, ANZ National, ASB Bank, Bank of New Zealand and Westpac are in the 28 banks out of over 2000 that are rated by Standard & Poor’s, which have a AA rating or better.

Rabobank which has a relatively large predominantly rural banking operation in New Zealand has an A rating.  Only four banks in the USA are rated AA or better out of more than 7100 banks operating in the United States.

The Reserve Bank has a flier on the topic

https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Factsheets%20and%20Guides/factsheet-know-your-credit-ratings.pdf?revision=d4162aa1-7837-41be-ba7e-2a427014e9b1

Liz Koh did an article  on this topic July 2019, note the  interest rate example quoted applies to that time, not long ago, but  now so different

https://www.stuff.co.nz/business/114123887/heres-a-reason-to-stick-with-the-big-banks

If your money is with Credit Unions or Building Societies the risk is higher in the context of the overall financial system they’re tiddlers. According to Reserve Bank figures, banks had total assets of $630.653 billion at the end of April. As of the end of March, non-bank deposit takers (NBDTs), including finance companies but not the ANZ owned UDC, had total assets of just $2.62 billion, of which $1.07 billion was held by building societies and $1.21 billion credit unions.

Examples are

  1. UDC BBB+,
  2. Police and Families Credit Union BBB-

Readers should note Westpac remains the principal  bank supplier to  Government, and  note the  name Bank of New Zealand  . In the event of a crisis, are the Government going to let these entities founder?

 

Posted by Alec Waugh

 

 

 

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