(The following statement was released by the rating agency)
LONDON, September 08 (Fitch) Fitch Ratings has affirmed the
Council of Europe
Development Bank's (CEB) Long-Term Issuer Default Ratings (IDR)
at 'AA+' with a
Stable Outlook and Short-Term IDR at 'F1+'. A full list of
rating actions can be
found at the end of this rating action commentary.
KEY RATING DRIVERS
The affirmation and Stable Outlook reflect the following key
The 'AA+' IDRs are fully driven by the intrinsic credit quality
of CEB, notably
its high level of solvency (assessed at aa-), its excellent
at aaa) and a low-risk business environment it operates in,
which provides an
uplift of two notches to the solvency assessment of 'aa-',
resulting in an
intrinsic rating of 'aa+'.
The bank's strong solvency assessment is driven by the CEB's
very low risk
profile, notably the excellent performance of its loan book (no
impairment). This ability to manage a fully-performing loan book
possible by CEB's strategy to solely focus the bank's lending
programmes on its
European member countries (80.5% of loans were to
Total assets are likely to remain broadly stable. We expect
loans to increase
significantly to provide support to projects targeting the
of migrants and refugees. However, this will not immediately
capitalisation owing to CEB's strategy of replacing liquid
assets with loans,
and projected increases in equity through internal capital
generation, albeit at
a slower pace than in previous years. Nevertheless, the expected
lending is viewed as a key risk to the ratings, as it is not
additional capital injection from shareholders, and the
reduction in treasury
assets may affect liquidity over time.
The very low risk profile of CEB also reflects the bank's strong
management, strong average rating of loans (BBB+) and low
concentration, as assessed under Fitch's new supranationals
with 31.6% of CEB's loan book concentrated in its five largest
Fitch's solvency assessment also reflects the moderate
capitalisation of CEB.
This is driven by CEB's equity-to-adjusted assets ratio of 11.1%
which is weak compared with other Fitch-rated multilateral
(MDBs). Fitch expects this figure to remain stable at
approximately 11% over the
CEB enjoys one of the strongest liquidity profile among
Fitch-rated MDBs. Liquid
assets covered 288% of short-term liabilities at end-2015. The
quality of the
liquidity portfolio is strong, with 58.8% of treasury assets
rated 'AA-' or
above, and the bank has excellent access to financial markets.
CEB operates in a low-risk business environment. Its business
profile is medium
risk according to Fitch's criteria; this reflects the modest
size of CEB's
banking portfolio and the large share of non-sovereign loan book
of banking exposure), as well as the bank's excellent governance
strategy of the bank is driven by its public mission mandate and
objectives have been adjusted following the migrants crisis,
translate into accelerated lending.
A particular challenge that the CEB has faced this year is the
refugee crisis in Europe. The Migrant and Refugee Fund (MRF) was
October 2015 by CEB to provide immediate finance to member
countries most in
need of support. The MRF has been funded by contributions from
states, the European Investment Bank and CEB itself. As of
end-June 2016, the
CEB has approved EUR16.6m in grants towards 11 MRF projects.
The operating environment presents low risks, in Fitch's view.
is driven by the focus of CEB's financing operations on European
are, overall, high-income, politically stable countries. This is
by the bank's headquarters being located in Paris.
CEB does not benefit from an uplift above its intrinsic rating
due to a lack of
extraordinary support from shareholders. Although the average
rating of key
shareholders stood at 'AA-' at end-2015, callable capital does
not provide full
coverage of net debt. In addition, in Fitch's view, propensity
of member states
to bring extraordinary support is weak compared with peers, as
the absence of paid-in capital injection from shareholders in
the last two
The Stable Outlook reflects Fitch's expectation that CEB's
credit profile will
remain commensurate with the bank's 'AA+' IDR.
However, future developments that could, individually or
collectively, result in
negative rating action include:
- Deterioration in the bank's capitalisation metrics.
- A substantial deterioration in CEB's average rating of loans
in the bank's underwriting standards.
- Rapid growth in lending affecting capitalisation metrics,
which would have a
negative impact on the ratings.
Conversely, future developments that could, individually or
in positive rating action include:
- A capital injection from shareholders strengthening the
solvency of the bank,
which would have a positive effect on the Long-Term rating.
The ratings and Outlooks are sensitive to a number of
- CEB's conservative risk management framework is maintained.
- Slight deterioration in credit quality of CEB's portfolio over
The full list of rating actions is as follows:
Long-Term IDRs affirmed at 'AA+'; Stable Outlook
Short-Term IDR affirmed at 'F1+'
Senior unsecured debt affirmed at 'AA+'/'F1+'
Commercial paper affirmed at 'F1+'
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Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
Additional information is available on www.fitchratings.com
Sources of information - The sources of information used to
assess these ratings
were Council of Europe Development Bank's financial statements,
information provided by the Council of Europe Development Bank.
Supranationals Rating Criteria (pub. 27 Jul 2016)
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