Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). 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 3 December 2021.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The AAA/Stable 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 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 represents Scope’s view that risks to the ratings over the next 12 to 18 months are balanced. The ratings could be downgraded if: i) the German sovereign rating was downgraded; and/or ii) changes to the institutional framework were to result in notably weaker support.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Rating Methodology: Sub-Sovereigns, 12 May 2021) 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 Julian Zimmermann, Analyst

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