KBRA Europe (KBRA) assigns its long-term issuer rating of AAA to the European Union (EU). KBRA also assigns its short-term issuer rating of K1+ to the supranational. The Outlook on the long-term rating is Stable.
KBRA's credit ratings for the EU reflect the creditworthiness of the EU's key member states and their commitment to ensuring the continued soundness of the EU's finances, based on the balanced budget principle and a legally enshrined debt service priority. These factors, combined with significant budgetary flexibility-including recourse to additional timely member support if and when needed, which functions like a joint and several guarantee-are key to the EU's credit profile. The EU's proven track record of excellent governance and an irreplaceable mandate for its member states, which has been reinforced by the bloc's responses to the pandemic and the Russia-Ukraine war, also support our credit ratings. In addition, the EU benefits from a very strong liquidity profile, driven by high, prudently managed liquid assets, excellent market access, and a diversified funding base. The EU's asset quality benefits from preferred creditor status and the institution has never incurred losses or restructured any loans in its portfolio. The expected rise in guarantees is not viewed as a meaningful credit risk, given the assets of guarantee funds and a relatively high provisioning rate for less established programmes. KBRA notes that the anticipated increase in outstanding borrowings will result in higher debt repayments. However, this is mitigated by higher budgetary headroom, member-state obligations to finance the agreed expenditure levels, and the aim to introduce new EU own resources to facilitate debt payments.
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Methodologies
- Sovereigns: Supranationals Global Rating Methodology
- ESG Global Rating Methodology
Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
There are certain issuers, entities or transactions rated by KBRA Europe or KBRA UK that may be or have relationships with Shareholders and/or Shareholder-Related Companies, as that term is defined in KBRA's Shareholder and Shareholder Related Companies for KBRA Europe and KBRA UK Policy and Procedure. Relevant disclosure information may be found here.
About KBRA Europe
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider. Kroll Bond Rating Agency Europe is located at 6-8 College Green, Dublin 2, Ireland.
Doc ID: 1003475
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Contacts:
Analytical
Joanna Drobnik, Managing Director (Lead Analyst)
+353 1 588 1250
asia.drobnik@kbra.com
Ken Egan, Director
+353 1 588 1275
ken.egan@kbra.com
Joan Feldbaum-Vidra, Senior Managing Director
+1 646-731-2362
joan.feldbaumvidra@kbra.com
Joe Scott, Senior Managing Director (Rating Committee Chair)
+1 646-731-2438
joe.scott@kbra.com
Business Development
Mauricio Noé, Co-Head of Europe
+44 20 8148 1010
mauricio.noe@kbra.com
