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Scope Ratings says these institutions’ intrinsically strong credit profiles and robust shareholder support underpin their creditworthiness. This is evident in the selective capital increases and other measures underway to enhance their balance sheets.

However, these institutions face an uncertain geopolitical outlook, not least due to the election of Donald Trump as the next US president, with the potential for significant shifts in foreign, trade and energy policy that his administration will undertake.

“A second Trump administration will likely re-introduce volatility to international relations, potentially enhancing the role of institutions if a unified European response can be mobilised to address the most important policy challenges,” says Alvise Lennkh-Yunus, Head of Sovereign and Public Sector at Scope Ratings.

Supranationals to further optimise capital management in 2025

“Developments in Ukraine and the consequences for the defence and energy sectors will be pivotal as shifts in US foreign, trade and energy policies could impact supranationals’ strategies and disbursements,” Lennkh-Yunus says.

“While such uncertainties may lead to shifts in global trade and capital flows and alter Europe’s strategic and security outlook, we expect supranationals will further optimise capital management with the continued roll-out of select recommendations from the G20 review on capital adequacy,” he says.

Climate finance and environmental risk management and associated reporting practices will remain priorities.

Supranationals will expand their activities in a balanced and broadly risk-neutral manner, leveraging capital retention and prudent adjustments to capital management.

Asset quality is expected to remain stable, underpinned by the preferred creditor status for sovereign lending and prudent underwriting standards and credit enhancements for private sector activities.

“Our rated supranationals’ exposure to long-term climate credit risks is well managed, with legacy exposures to fossil-fuel based projects making up only small and shrinking portions of lending,” says Julian Zimmermann, analyst at Scope.

“Shareholder support will remain strong, highlighted by expected instalments in capital increases for the European Bank for Reconstruction and Development (EBRD) and the Council of Europe Development Bank (CEB). This is in support of the institutions’ expanding activities in Ukraine (SD), along with other strategic priorities.

The gradual weakening in the credit quality of major shareholders, such as France, which Scope downgraded to AA-/Stable, did not affect final ratings of any supranational rated by Scope, highlighting their intrinsic strengths.

In 2024, Scope affirmed the ratings on the European Union (EU, AAA/Stable), European Investment Bank (EIB, AAA/Stable), European Stability Mechanism (ESM, AAA/Stable), the CEB (AAA/Stable), the European Financial Stability Facility (EFSF, AA+/Stable) and the EBRD (AAA/Stable). Scope also assigned a first-time AAA/Stable rating to the Nordic Investment Bank (NIB).