European Investment Bank’s (EIB) Long-Term Issuer Default Rating (IDR) receives an ‘AAA’ classification with a Stable Outlook from Fitch Ratings.
EIB’s new rating comes after its solvency assessment improved from ‘aa-’ to ‘aa’ because of its ‘strong capitalization’ and ‘very low risk’ profile following Fitch’s previous review.
Also, the Bank’s liquidity assessment from ‘aa’ to ‘aa+’ is due to its access to the European Central Bank’s (ECB) refinancing window.
“The revision of EIB’s liquidity assessment to ‘aa+’ from ‘aa’ is primarily based on a stronger uplift to our liquidity assessment, reflecting the benefit of EIB’s access to the European Central Bank’s (ECB) refinancing window, which is an extremely rare feature among supranational institutions.”
Fitch Ratings
Additionally, EIB’s rating highlights its Standalone Credit Profile (SCP) of ‘aaa’, which is centred around its ‘aa’ solvency and ‘aa+’ liquidity assessments, Fitch disclosed.
Furthermore, the EIB’s new classification comes with “an uplift of three notches over the lower of solvency and liquidity to reflect the bank’s low risk business environment”.
Furthermore, EIB’s rating revision to the threshold of ‘aaa’, Fitch revealed, can be attributed to the Bank’s resilience to the impact of the Covid-19 pandemic.
“The revision reflects the resilience of the bank’s capitalisation and risk profile to the consequences of the Covid-19 pandemic and Fitch’s expectation that the crisis will have only a limited impact on key solvency metrics over the medium term.”
Fitch Ratings
Meanwhile, the Bank’s equity to asset ratio of 12.9% (year end 2020) and the Fitch risk-weighted assets (FRA) ratio of 39.9% for 2020 was balanced off by EIB’s agile capitalization assessment.
However, Fitch expects that going forward, the two asset ratios will remain relatively stable within the medium term. Also, it is expected that the growth in the Bank’s assets will be matched ‘boot-to-boot’ by the growth in equity.
Furthermore, Fitch predicts a marginal decline in its FRA ratio resulting in a “modest weakening of asset quality in the loan portfolio by end-2023”.
Also, according to Fitch’s projections, the Bank’s “Asset quality will continue to be supported by credit protection schemes, including guarantees and first-loss-piece (FLP) mechanisms”.
In the meantime, Fitch expects the Bank’s average loan and guarantee ratings to remain relatively stable within the medium term, as its 2019 ratings of ‘A-’ persisted till year end 2020.
EIB’s business environment is regarded by Fitch as ‘low risk’. Also, the Bank’s formidable policy response to the impact of the Covid-19 pandemic is evidence of its role as ‘counter-cyclical’ lender and reveals its institutional relevance within the EU and other regions globally.
EIB Ghana’s economic recovery
Mr. Werner Hoyer, EIB’s President, disclosed that, the EIB has over the last forty-five (45) years channelled more than EUR 650 million to support Ghana’s agriculture, employment, and energy sectors among other.
Paramount among these supports is the recent provision of some EUR 170 million in support of Ghana’s establishment of ‘Development Bank of Ghana’ (DBG).
The DBG is purposed to provide affordable wholesale funding to the private sector to help the economy recover from the adverse shocks from the pandemic.
“The EIB’s backing for the new National Development Bank will support Ghana’s vision of empowering our private sector to embrace new business opportunities, create skilled jobs and successfully overcome COVID-19 challenges.”
His Excellency Nana Addo Dankwa Akufo-Addo
The President of the Republic of Ghana, His Excellency Nana Akufo-Addo has on several occasions highlighted the long-standing relationship Ghana has with the EIB, as well as the continuous economic support the country receives from the EIB.
“The European Investment Bank is a key partner for Ghana and Africa. As discussed with President Hoyer, Ghana and the European Investment Bank share the same goals, and our close partnership will accelerate economic growth in Ghana in the future.”
His Excellency Nana Addo Dankwa Akufo-Addo
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