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

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic 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 rating’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 rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Council of Europe Development Bank (long-term foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term foreign-currency issuer ratings: S-1+/Stable) on 23 September 2024.

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 rating annex accompanying this review, please see here.

The Council of Europe Development Bank (CEB)’s AAA rating reflects the supranational’s ‘excellent’ institutional and financial profiles, and ‘very high’ shareholder support. The CEB’s institutional profile benefits from a growing strategic role for its shareholder governments and excellent governance. Its social mandate has been strengthened in the context of the Covid-19 pandemic, the Ukraine crisis, and earthquakes in Türkiye, underscoring the bank’s unique role among European supranational institutions. This is reflected in the large increase of paid in and callable capital approved in December 2022, alongside the bank’s new Strategic Framework for 2023-27, which enables direct lending to Ukraine.

As of December 2023, the CEB’s financial profile benefits from excellent asset quality with no non-performing loans and high average borrower quality due to its focus on the public sector, predominantly in Europe. It also benefits from preferred creditor status for its sovereign exposures and geographical diversification towards Central and Eastern Europe. Climate related exposure is carefully managed with all activities aligned with the Paris Agreement since January 2024. The CEB’s liquidity profile is exceptionally strong. The bank’s funding profile benefits from strong market access, especially for social inclusion bond issuances, accounting for about one third of its funding programme. Despite provisioning for credit risk exceeding the 10-year average, net profitability increased significantly in 2023 based on higher interest income, enabling the bank to strengthen its capital base.

The implementation of the Strategic Framework for 2023-27 is supported by the substantial capital increase of EUR 4.25bn approved in December 2022, of which up to EUR 1.2bn is to be paid in, demonstrating the importance and growing relevance of the CEB for its membership. The capital increase is effective since 29 February 2024 with a subscription period extended from 30 June until 31 December 2024 to reach the highest possible level of participation among shareholders. The key rating challenge is the high leverage, although the capital increase will improve room to manoeuvre and increase the CEB’s lending capacity over the coming years.

The CEB benefits from highly rated leading shareholders. The governments of Europe’s largest economies – Germany (AAA/Stable), France (AA/Negative), Italy (BBB+/Stable), Spain (A/Stable), the Netherlands (AAA/Stable), Belgium (AA-/Negative) and Greece (BBB-/Positive) – make up the CEB’s principal shareholders along with Türkiye (B/Positive), for a weighted average credit rating of A. Highly rated key shareholders and a record of timely shareholder support determine Scope’s assessment of ‘very high’ shareholder support for the bank.

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 recorded sustained losses, leading to a marked deterioration in the capital base; and/or ii) its liquidity buffers were significantly reduced.

The methodology applicable for the reviewed ratings and rating Outlooks (Supranational Rating Methodology, 21 June 2024) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Thomas Gillet, Director

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