The social development bank for Europe

Credit rating Aa1/AAA/AA+/AAA

The Council of Europe Development Bank is rated by Moody's, Standard & Poor’s, Fitch Ratings, and Scope Ratings*. It enjoys a high rating (Aa1/AAA/AA+/AAA) which mirrors its strong financial profile, the support of its shareholders and its stringent risk management policy. On 3 July 2020, Moody’s affirmed the CEB's long-term rating at Aa1 with stable outlook followed by Standard & Poor’s on 6 July 2020 that affirms its AAA rating with a stable outlook. On 29 July 2020, Fitch Ratings revised the outlook for the CEB from ‘positive’ to ‘stable’ while affirming its long-term Issuer Default Rating (IDR) at ‘AA+’.  On 2 October 2020, Scope Ratings assigned its first rating* for the CEB at AAA with a stable outlook. The rating of CEB's short-term debt assigned by the rating agencies reaches the highest grade of the rating scale at 'P-1/A-1+/F1+/S-1+*'.

Moody's: Aa1, stable outlook

“The credit profile of CEB is supported by its prudent risk-management framework. It has resulted in a favourable track record of asset quality in spite of a challenging operating environment over the past couple of years. CEB's credit profile also reflects its very high liquidity levels. Moreover, the bank has achieved enhanced visibility as an active and prominent partner responding to social pressures, including the refugee crisis and more recently the coronavirus pandemic, in Europe.”

“We [Moody’s] consider CEB’s liquidity and funding position to be very strong with a score of “aaa” for its liquidity resources and a score of “aa” for the quality of its funding, which results in an assigned score of “aa2”.”

“CEB retained good access to the capital markets, with an investor base diversified by institutions as well as by geography. CEB's access to funding was tested again with the coronavirus crisis, but the bank maintained strong market access, illustrated by successive issuances at favourable rates since the coronavirus crisis outbreak.”

“CEB's sound governance framework is illustrated by its prudent risk management policies, and high standard governance principles, as illustrated by our “+1” adjustment for quality of management.”

“CEB’s involvement in the coronavirus crisis response, and the associated increase in lending, further supports the importance of its mandate for its shareholders. Lending had already increased significantly following the migrant crisis, as its members shifted their focus on coping with a large backlog of social related investment needs. CEB is the only MDB to have a purely and long standing social expertise. The bank was also selected by the EU as one of its financial partners for implementing the InvestEU Programme, which, alongside the coronavirus response, will support the bank’s relevance for its shareholders.”

Credit opinion (3 July 2020)
Annual Issuer in-depth (27 July 2020)

Standard & Poor's: AAA, stable outlook

“The stable outlook reflects our [Standard & Poor’s] expectation that the Council of Europe Development Bank (CEB) will balance its positive lending dynamics over the next two years, including the heightened disbursement levels prompted by the coronavirus pandemic, with a sustained extremely strong financial profile. We expect the bank's policy relevance and funding importance will continue, with continued solid shareholder engagement into its activities. We [Standard & Poor’s] also assume CEB will continue to enjoy excellent preferred creditor treatment (PCT).”

“We [Standard & Poor’s] base our ratings on CEB's extremely strong enterprise risk and financial risk profiles. Management's actions over the past three years has strengthened the bank's financial risk profile, allowing it to mount a solid response to the wide-reaching pandemic.”

“With a broadening mandate and increasingly tangible role as a social investor in member countries' budgets, the bank has scaled up its operations.”

“In our [Standard & Poor’s] opinion, CEB benefits from strong governance and risk management standards. Shareholders remain supportive and acknowledge the bank's importance as a key contributor in its niche financing segment. Member countries are directly involved in defining CEB's policy.”

“We [Standard & Poor’s] expect CEB's extremely strong stand-alone financial risk profile, on the back of its resilient capital position and very strong funding and liquidity, will allow the bank to absorb the pressures resulting from its short-term ramp-up in lending.”

“CEB's solid financial standing has facilitated the bank's transition into a more dynamic disbursement profile. This transition has entailed a strengthened funding profile where a move to two-way CSAs on its derivatives portfolio has opened up additional markets, and further enlarge CEB's investor base thanks to increasing issuance volumes.”

“Under our [Standard & Poor’s] liquidity stress scenario, at all horizons up to one year, CEB would fully cover its balance-sheet liabilities without market access.”

Rating report (6 July 2020)

Fitch Ratings: AA+, stable outlook

“CEB's ratings are driven by its intrinsic credit features and reflect its solvency (assessed at 'aa-'), its liquidity (assessed at 'aaa') combined with its low-risk business environment, which provides an uplift of two notches to the lower of its solvency and liquidity assessments (aa-), resulting in an intrinsic rating of 'aa+'.”

“The bank has responded to the COVID-19 crisis by re-allocating and expediting planned loan commitments to address the health needs and social impact resulting from the pandemic.”

“CEB's 'very low' risk profile reflects the bank's 'very low' credit, equity, and market risks. The bank has not recorded any arrears on loan repayments since the onset of this crisis, which highlights the high credit quality of its borrowers.”

“We assess the bank's preferred creditor status (PCS) as 'strong', which translates into a two-notch uplift over the average rating of loans to 'A+', the highest across Fitch's multilateral development bank rating coverage.”

“CEB's 'aaa' liquidity assessment reflects the bank's excellent liquidity buffers and strong credit quality of its treasury portfolio.

“CEB's 'strong' access to capital markets has been further evidenced by large subscription rates on its COVID-19 social inclusion bonds.”

“Fitch has revised the assessment of the bank's public mandate importance to 'medium' risk from 'high'. The revision is driven by our view of CEB's increased importance for its member states as evidenced by the role it has played in the response.”

“CEB's 'aaa' liquidity assessment reflects the bank's excellent liquidity buffers and strong credit quality of its treasury portfolio.”

Fitch Ratings press release (29 July 2020)
Rating report (28 October 2020)

Scope Ratings: AAA*, stable outlook

“The AAA rating assigned to the Council of Europe Development Bank (CEB) reflects the supranational’s highly rated key shareholders, a strong liquidity position, very high asset quality and its increasing strategic importance particularly for EU member states.”

“The CEB’s counter-cyclical mandate to provide lending for projects with a social and/or environmental focus in its member states as well as its role in the context of the coronavirus pandemic, raises the strategic importance of the bank for its key shareholders, resulting in a very supportive political environment.”

“In addition, in line with most multilateral development banks, the CEB’s loan portfolio benefits from preferred creditor status (PCS) as evidenced during default episodes in the case of Greece and Former Yugoslavia. Scope expects that the CEB will continuously benefit from PCS given the high share of public sector exposures and expected reputational concerns among its highly rated borrowers.”

“It is Scope’s view that the CEB’s prudent liquidity policies result in a high and stable level of liquid assets, providing a substantial cushion in the context of increased lending volumes due to the bank’s Covid-19 response and allow the CEB to fulfil its mandate especially in times of heightened activity and uncertainty.”

“Another factor supporting the CEB’s AAA rating is its strong capital market access.”

“Scope also identifies the CEB’s well-diversified loan portfolio with a high average borrower quality and strong asset quality as a core credit strength.”

“The bank’s loan portfolio is well diversified across member states, which limits concentration risk.”

“Scope notes positively that the CEB has been profitable every year with average annual returns on equity of 3.38% since 2015 and with stable annual earnings of around EUR 105mn over the past three years.”

Press release Scope Ratings (2 October 2020)

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