KfW, as Germany’s national promotional bank, benefits from an explicit and direct statutory guarantee, as well as an institutional liability from the Federal Republic; these guarantees fully align the credit risk of the institution with that of the sovereign.

Scope notes that despite the benefit of the sovereign guarantee, KfW operates in a prudent manner and complies with capital and risk management requirements. As of Q3 2017, KfW reported a strong Common Equity Tier 1 capital ratio of 20.3%; the minimum requirement set by the German financial supervisory authority, BaFin, stood at 14.7%.

The agency considers KfW’s risk of default to be very remote. KfW’s proxy sovereign status affords the group very good and sustainable access to capital markets for funding. The group attracts a wide investor base, comprised mostly of central banks, banks, asset managers and pension funds.

Scope believes that a growing focus on sustainability and general ESG (environmental, social and governance) criteria may further support KFW’s strong capital market position. KfW’s overarching sustainability approach spans its lending business, operations, and general governance. KfW has been confirmed as one of the top performers with regard to ESG factors.

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