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.

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