Standard & Poor’s Ratings Services today affirmed its ratings, including the ‘A+’ long-term counterparty credit rating, on Credit Union Central of British Columbia (B.C. Central). The outlook is stable.

The affirmation follows B.C. Central’s announcement to merge with Credit Union Central of Ontario (CUCO) in October of this year and the broad endorsement of the deal by their members.

Combining the two institutions is an important step toward creating one national organization and in finally addressing the inefficient and fragmented nature of the credit union centrals in Canada, which have been significantly outgrown in several cases by some of their member credit unions.

S&P says the proposed merger is long overdue and dewill improve B.C. Central’s and CUCO’s diversification and enable the new entity — to be called Central 1 Credit Union (Central 1) — to more efficiently conduct capital markets business in support of its credit unions.

The consolidation process among the credit unions means that their needs and products are significantly changing, requiring the central to evolve with them. A larger central is likely to have better resources, systems, and economies of scale to access the capital markets and, thus, will be of better value to its member credit unions, S&P adds.

Although the merger is considered incrementally positive, the combined institution will remain at the ‘A+’ rating level. S&P believes that the risk profile of Central 1 won’t change materially. Integration risks are relatively low and shouldn’t represent a major disruption to the institution’s operating businesses. The structure of the respective member credit unions is similar in that their operations are centered on retail banking with a high share of residential mortgage loans. Both systems have been increasing their share of the typically higher risk commercial mortgage lending, which we believe has historically not been the credit unions’ core expertise. Exposures in this area are still relatively low but Standard & Poor’s will monitor the commercial mortgage lending contribution in relation to the overall risk profile of the system and its central.