S&P affirms Eurasian Development Bank’s rating at 'BBB/A-2'
Azerbaijan, Baku, Jan. 17 / Trend E. Kosolapova/
Standard & Poor's Ratings services affirmed its 'BBB/A-2' foreign currency issuer credit ratings on the Eurasian Development Bank (EDB). At the same time, the Kazakhstan national scale rating was affirmed at 'kzAA+' and the Russia national scale rating was affirmed at 'ruAAA'. The outlook is stable.
"The ratings on the EDB reflect our assessment of the bank's financial profile as "very strong" and its business profile as "weak". These assessments determine our 'bbb' stand-alone credit profile (SACP). Given that EDB's shareholding structure does not include callable capital, EDB's SACP is the same as its long-term issuer credit rating of 'BBB'," S&P said.
The assessment of the EDB's business profile as "weak" is based on S&P view of the bank's concentrated decision-making and policy mandate as a subregional development bank with a relatively narrow geographical diversification of activities, its length of time in operations, and its institutional arrangements.
Eurasian Development Bank is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth and the expansion of mutual trade and other economic ties in its member states. EDB's charter capital exceeds $1.5 billion. The member states of the Bank are Armenia, Belarus, Kazakhstan, the Kyrgyzstan, Russia and Tajikistan.
Voting rights in are proportional to capital contributions, therefore Russia and Kazakhstan continue to dominate the EDB.
"In our opinion, there are significant institutional and governance impediments in Russia and Kazakhstan, which we believe have a negative impact on EDB's business profile because both members are able to significantly influence the bank's decision-making," S&P said.
"Very strong" assessment of EDB's financial profile reflects S&P view of its high capitalization and liquidity levels compared with many other financial institutions.
"Our funding and liquidity ratios indicate that EDB is structurally able to cover its scheduled debt repayments and loan disbursements over the next year without recourse to new issuance. Despite its relatively small size, EDB has successfully issued several types of securities at different bond and money markets even during times of market turbulence. Given that the bank expects a moderate increase in its balance sheet, we believe it will be able to continue providing loans and servicing its debt even if market access worsens," S&P said.
The stable outlook reflects S&P expectation that EDB's policy goal, as well as its capital and liquidity positions, will remain intact over the medium term.
According to S&P, the ratings on EDB are not directly linked to those of its controlling shareholders. However, if the operating environment in the EurAsEC becomes more difficult, the ratings on EDB could be lowered. Similarly, if EDB's financial profile worsened, either because of increased leverage, or because of funding pressure, EDB's creditworthiness could come under pressure.
Conversely, the ratings could be raised if the political institutional framework in the main decision-making member countries strengthen or if the bank's capitalization were to improve substantially.