KfW is Germany’s national promotional bank, majority owned by the Federal Republic of Germany and benefiting from an explicit and direct statutory guarantee, as well as an institutional liability, from the Federal Republic. Scope therefore fully aligns the credit risk of the institution with that of the sovereign.

Moreover, Scope notes that notwithstanding the presence of the sovereign guarantee, KfW operates in a prudent manner and complies with capital and risk management requirements. This applies to promotional activities, which benefit from the statutory guarantee, as well as to the commercial business that the KfW group carries out through legally independent subsidiaries. KfW is planning the spin-off of its venture capital equity financing activities in a newly created entity towards YE 2018.

Starting from Q2 2018, the institution has reorganised its promotional activities based on the intrinsic nature of its lending products: more standardised on-lending solutions have been aggregated in the new business area SME Bank and Private Clients, while customised solutions are now provided in the business area Customised Finance and Public Clients.

Promotional business volumes in H1 2018 stood at EUR 36.1bn: commitments in Export and Project Finance increased, offset by a decrease in Customised Finance and Developing and Emerging Countries promotion.

The ratings also reflect KfW’s specific funding model: KfW is almost entirely wholesale funded.
However, the institution’s proxy sovereign status affords the group very good and sustainable access to capital markets for funding, attracting a wide investor base.

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

Download the updated report here.