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      Scope takes no action on the Council of Europe Development Bank
      FRIDAY, 25/02/2022 - Scope Ratings GmbH
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      Scope takes no action on the Council of Europe Development Bank

      Monitoring review announcement

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or at minimum each six months in the cases of sovereign, sub-sovereign and supranational organisation issuers. 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’s 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 ratings assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review of the Council of Europe Development Bank (AAA/Stable; S-1+/Stable) on 21 February 2022. 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 ratings history can be found on www.scoperatings.com.

      Key rating factors

      For the updated Annex accompanying this review, click here.

      The Council of Europe Development Bank’s (CEB) AAA rating reflects the supranational’s ‘excellent’ intrinsic strength and ‘high’ shareholder support. The CEB’s institutional profile benefits from an increasing strategic role for its shareholder governments and excellent governance. Its social mandate, along with shareholders’ strong responses and financing demand during the 2015 refugee crisis and the Covid-19 health crisis, supports its unique role among peers.

      The CEB’s financial profile benefits from excellent asset quality with no non-performing loans (NPLs) and high average borrower quality due to its focus on the public sector, predominantly in Europe. It also benefits from preferred creditor status (PCS) for its sovereign exposures and strong geographical diversification. The CEB’s liquidity profile is exceptionally strong, and its funding profile benefits from strong market access. Stable net profits continue to strengthen its capital base. Indeed, the CEB’s unaudited 2021 financial results confirm a solid financial performance, with a net profit of EUR 94.8m (core earnings of EUR 85.7m excluding valuation effects), zero NPLs, and a normalisation of its lending operations after the Covid-19 crisis, with the volume of approved projects returning to development plan targets. The key rating challenge is the CEB’s high leverage.

      Finally, the CEB benefits from highly rated key shareholders. The largest European economies – Germany (AAA/Stable), France (AA/Stable), Italy (BBB+/Stable), Spain (A-/Stable), the Netherlands (AAA/Stable), Belgium (AA-/Stable) and Greece (BB+/Stable) – are joined by Turkey (B/Negative) to form the CEB’s key shareholders, whose weighted average rating is A. This drives Scope’s high assessment of shareholder support. However, at 14%, coverage of outstanding mandated assets by high-quality callable capital is relatively moderate compared to peers.

      The Stable Outlook reflects Scope’s assessment of the CEB’s financial buffers against external and balance sheet-driven shocks. The rating could be downgraded if: i) the CEB records sustained losses leading to a marked deterioration of the capital base; ii) its liquidity buffers are significantly reduced; and/or iii) key shareholders are downgraded.

      The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Supranational Entities, 7 September 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: Alvise Lennkh, Executive Director.

      © 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.

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