Credit Ratings

Credit Ratings Short Term
Standard & Poor's short-term ratings and what they mean.
A1
For short-term assets, the issuer's capacity to meet its financial commitment on the obligation is strong.
A2
For short-term assets, the issuer is more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A3
A short-term obligation exhibits adequate protection parameters. However adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B
A short-term obligation is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation however, it faces major ongoing uncertainties which could lead to an inadequate capacity to meet its financial commitments on the obligation.

Credit Ratings Long Term
Standard & Poor's long-term ratings and what they mean. Ratings from AAA to BBB are termed Investment grade assets.
AAA
The obligations/obligator's capacity to meet its financial commitment on the obligation is extremely strong.
AA
The obligations/obligator's capacity to meet its financial commitment on the obligation is very strong.
A
The obligation/obligator is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories.
The obligator's capacity to meet its financial commitment on the obligation is strong.
BBB
An obligation/obligor exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to the obligor to meet its financial commitment on the obligation.

Building Societies and Credit Unions
Most Building Societies and Credit Unions are not assigned ratings by S&P. They are approved to take deposits by the Australian Prudential Regulatory Authority (APRA),and as such must comply with the guidelines placed on them. APRA also oversees Australian banks compliance to the prudential guidelines it has imposed to ensure depositors protection.

These institutions are generally in the business of lending money to "mums and dads" secured against residential property. Most of the mortgages are insured and have responsible LVR's. This makes building societies and Credit Unions viable alternatives to the normal Bank options. Building Societies and Credit Unions usually offer better deposit rates than the banks because of their non-rated status.