London, 23 October 2012 -- In its annual credit report on the Eurasian Development Bank (EDB), Moody's Investors Service says that the long-term foreign currency rating of A3 and short-term rating of P-2 is supported by the standalone financial strength of EDB, whose capital is fully paid in, which is a rarity for multilateral development banks (MDBs). The ratings also reflect Moody's view that, in case of need, EDB would likely receive financial support from its current shareholders, which include the Russian Federation (Baa1) and the Republic of Kazakhstan (Baa2).
The rating agency's report is an annual update to the markets and does not constitute a rating action.
In analysing the risk profile of MDBs, Moody's assigns particular significance to the assessment of capital adequacy, liquidity and asset quality of the institution's loan portfolio. Together, these elements form the basis of Moody's assessment of an institution's intrinsic financial robustness. In terms of capital adequacy, the fact that EDB's capital is fully paid in is a key source of strength. Furthermore, EDB's Basel II capital adequacy ratio stood at 49% at the end of August 2012, which provides the institution significant shock absorption capacity.
EDB's stringent risk assessment, underwriting standards and preferred creditor status have helped the bank maintain very low levels of non-performing loans (NPL) since it commenced operations. In fact, the bank's loan portfolio had no NPLs outstanding at the end of 2011. Finally, the institution's credit risk profile also benefits from a high level of liquid assets relative to its total liabilities.
EDB's lending and investment operations will remain concentrated in investment-grade sovereigns such as Russia and Kazakhstan over the medium term, which should help support the quality of the bank's portfolio. However, the bank also plan to expand its activities in its lower-rated member countries, presenting a new challenge for risk management and asset allocation procedures. Nevertheless, Moody's expects that the robustness of these practices will remain supportive of EDB's credit-risk profile.
EDB began operations in June 2006, with a mandate to enhance the economic integration and development of member states of the Eurasian Economic Community (EurAsEC). Upon successful completion of its first medium-term strategy in 2010, EDB's mandate broadened to include supporting member countries affected by the global economic and financial crisis. EDB now acts as resource manager of the Anti-Crisis Fund (ACF) set up by EurAsEC countries to help stabilise affected regional economies.
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Oritseweyimi Omamuli Vice President - Senior Analyst Sovereign Risk Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Bart Oosterveld MD - Sovereign Risk Sovereign Risk Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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