The Fed’s expected 25bp rate cut on Wednesday appears premature given the latest increase in headline inflation to 2.9%, an economy still expanding at around 2%, the uncertain effects of higher tariffs and only modest signs of labour market softening.

Scope has updated its sub-sovereign methodology by integrating ESG factors into the core analytical framework and enhancing the institutional and individual credit profile assessments. No rating changes are expected as a result of this update.

Cyprus’s public debt is set to fall below 60% of GDP this year driven by robust growth and prudent fiscal policy while bad debts on bank balance sheets continue to decline, offsetting risks from a challenging geopolitical and external environment.

Housing, the main collateral for covered bonds, contributes more than a third of Europe’s GHG emissions. Yet while climate change can significantly amplify credit risk in covered bonds, mitigation can add more credit risk than actual climate impacts.

French banks are well positioned to navigate short-term market volatility, but a prolonged political crisis could weigh on the sector via lower growth in lending and higher funding costs, partially reversing recent improvements in profitability.

Unresolved divisions in France’s parliament risk exacerbating political instability and associated credit challenges given large budget deficits and rising public debt.

UK banks’ credit fundamentals are strong. While we do expect some asset-quality weakening, profitability will remain high in 2025, capital is robust, liquidity is stable and deposits are growing. Meanwhile, sector consolidation will continue.

We continue to expect a mild deterioration in asset quality as pressure in some corporate sectors intensifies amid heightened geopolitical risk and a potential slowdown in global trade.

Buoyant markets, a resilient US economy, rising customs revenues, appeasement by trading partners and conducive politics point to further escalation in US trade tensions, already set to cut global output by an estimated 0.7pps in the medium term.

The UK Supreme Court judgment partially reversing the Court of Appeal ruling on car finance provides widespread relief to the banks affected as it will materially reduce compensation payouts. The FCA redress scheme will further moderate credit pressures.