Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereign, sub-sovereign and supranational issuers. Monitoring reviews are unrelated to the calendar that outlines public finance rating actions.

Scope performs monitoring reviews to determine whether outstanding ratings remains proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Land of Berlin (AAA/Stable; S-1+/Stable) on 27 August 2020. This monitoring note does not constitute a rating action nor indicates the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The AAA rating reflects the Land of Berlin’s commitment to fiscal consolidation, favourable debt profile, excellent capital market access, prudent liquidity management, and solid economic base. In addition, the rating is underpinned by the well-established and highly integrated institutional framework under which Berlin operates, characterised by a very strong revenue equalisation system together with the federal solidarity principle and the primary shock-absorbing role the federal government has assumed in the context of the Covid-19 crisis. These aspects also enable the Land to counterbalance the Covid-19 economic shock. Credit challenges relate to high direct debt, low revenue flexibility given limited leeway to adjust revenues, unfunded pension liabilities weighing on long-term expenditure flexibility, as well as sizeable, yet manageable, contingent liabilities. The Stable Outlook reflects our assessment that the risks Berlin faces remain well balanced.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology Sub-Sovereigns, 18 May 2020) is available on https://www.scoperatings.com/#!methodology/list.

This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.

Lead analyst: Jakob Suwalski, Director.

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