TEXT: S&P Places European Investment Bank 'AAA' Rating On Watch Neg
(The following was released by the rating agency)
-- On Dec. 5, 2011, Standard & Poor's placed the ratings on 15 of the 17 European Economic and Monetary Union (EMU or eurozone) member states on CreditWatch with negative implications. As a result, the ratings on 16 European Union members are now on CreditWatch with negative implications.
-- We are therefore placing the 'AAA' long-term issuer credit rating on the European Investment Bank (EIB) on CreditWatch negative. At the same time, we are affirming the 'A-1+' short-term rating.
-- The CreditWatch placement on the EIB reflects our concerns about the potential effect on the EIB of what we view as deepening political, financial, and monetary problems within the eurozone.
-- We expect to conclude our review as soon as possible after the European summit on Dec. 9, 2011. Depending on the outcome of our review of the ratings on eurozone member states, we could lower the long-term rating on the EIB by one notch, if any.
LONDON (Standard & Poor's) Dec. 8, 2011--Standard & Poor's Ratings Services today placed its 'AAA' long-term issuer credit rating on the European Investment Bank (EIB) on CreditWatch negative. At the same time we affirmed our 'A-1+' short-term issuer credit rating on the EIB.
On Sept. 28, 2011, Standard & Poor's said the EIB's rating could come under downward pressure if its 'AAA' callable capital decreased significantly as a result of declines in the creditworthiness of key shareholders (see related research below).
The CreditWatch placement is prompted by similar CreditWatch placements that we made on 15 eurozone sovereigns on Dec. 5, 2011, which included CreditWatch placements on the long-term sovereign ratings on key 'AAA' rated EIB shareholders such as Germany and France. Both own 16.2% of the bank's subscribed capital, followed by The Netherlands with a 4.5% share.
EIB's capital ratios, as measured according to our methodology for rating supranational entities, fall below those of almost all other 'AAA' rated multilateral lending institutions.
EIB had adjusted shareholders' equity (own funds) of nearly EUR40 billion at year-end 2010. As a consequence, its ratio of adjusted shareholders' equity plus provisions for losses (narrow risk-bearing capacity; NRBC) to loans, equity investments, and off-balance sheet items (which is EIB's purpose-related exposure; PRE) was 10.9%. EIB had almost EUR137 billion in callable capital from its 'AAA' rated member countries. Accordingly, its ratio of NRBC plus callable capital from its 'AAA' rated member countries (broad risk-bearing capacity; BRBC) to PRE was more than 48% at year-end 2010.
At end-2010 the nearly EUR137 billion in callable capital from 'AAA' rated EIB shareholders represented about 62% of total callable capital (EUR221 billion). Should the ratings on the EIB's 'AAA' rated eurozone sovereign shareholders be lowered, the ratio of its 'AAA' rated callable capital as a percentage of the total would fall to just under 22%. This would result in a fall in the EIB's BRBC to PRE, to 24%. As a result we are placing the EIB's long-term rating on CreditWatch negative.
We currently anticipate that we could lower the rating on EIB by one notch. Supporting factors for the rating include what we view as the high quality of EIB's loans and other assets, underpinned by conservative risk-management policies.
We expect to resolve EIB's CreditWatch placement within 90 days once we complete the review of EIB's eurozone shareholders currently rated 'AAA'.
In our CreditWatch releases of Dec. 5, 2011, on some of the EIB's individual 'AAA' rated guarantor members, we indicated that our ratings on Austria, Finland, Germany, Luxembourg, and The Netherlands are currently unlikely to fall by more than one notch, and the ratings on France by no more than two notches, if at all. Depending on the outcome of our review of the ratings on EIB's eurozone member states, if we view the reduction in 'AAA' callable capital as not being sufficiently offset by EIB's asset quality we could lower the long-term rating on the EIB by one notch, if any.
RELATED CRITERIA AND RESEARCH
-- European Investment Bank, Sept. 28, 2011
-- Standard & Poor's Puts Ratings On Eurozone Sovereigns On CreditWatch With Negative Implications, Dec. 5, 2011
-- Credit FAQ: Factors Behind Our Placement Of Eurozone Governments On CreditWatch, Dec. 5, 2011
-- Criteria For Multilateral Lending Institutions, Oct. 19, 2007
-- Timeliness of Payments: Grace Periods, Guarantees, And Use Of 'D' And 'SD' Ratings, Dec. 23, 2010
-- Principles of Credit Ratings, Feb. 16, 2011
-- Rating Sovereign-Guaranteed Debt, April 6, 2009
-- Sovereign Government Rating Methodology And Assumptions, June 30, 2011
Ratings Affirmed; CreditWatch/Outlook Action
European Investment Bank
Issuer Credit Rating
Foreign Currency AAA/Watch Neg/A-1+ AAA/Stable/A-1+
Senior Unsecured AAA/Watch Neg AAA
European Investment Bank
Commercial Paper A-1+