• On Sept. 13, 2019, we raised our long-term issuer credit rating on the German State of North Rhine-Westphalia (NRW) to 'AA' from 'AA-'.
  • We equalize our ratings on NRW.BANK and Erste Abwicklungsanstalt (EAA) with the ratings on NRW because, in our opinion, they enjoy an almost certain likelihood of extraordinary government support.
  • We are therefore raising our ratings on the two government-related entities NRW.BANK and Erste Abwicklungsanstalt to 'AA' from 'AA-'.
  • The stable outlooks reflect that on NRW.

FRANKFURT (S&P Global Ratings) Sept. 16, 2019--S&P Global Ratings today said it raised its long-term rating on German-based NRW.BANK and Erste Abwicklungsanstalt (EAA) to 'AA' from 'AA-' and affirmed its 'A-1+' short-term issuer credit ratings on the two entities. The outlook on both entities is stable.

The upgrade follows a similar rating action on the State of North Rhine-Westphalia (NRW; see "German State of North Rhine-Westphalia Upgraded To 'AA' From 'AA-' On Reduced Contingent Liabilities Burden," published Sept. 13, 2019, on RatingsDirect). That upgrade reflects our view of reduced risks from the legacy of a failed state bank. We believe that NRW should cover the remaining guarantees without significant debt-financing, which helps the state continue its budgetary consolidation.

We consider NRW.BANK and EAA government-related entities (GREs) benefiting from an almost certain likelihood of receiving timely and sufficient government support in times of stress. We base this opinion on NRW.BANK's and EAA's critical role for and integral link with NRW. We therefore equalize our ratings on NRW.BANK and EAA with the ratings on their owner and guarantor, NRW.

We believe that the state will maintain its guarantees and NRW.BANK will continue as a GRE for the foreseeable future, because the bank will likely remain an integral part of the state's economic development objectives. This assessment is consistent with the March 2002 agreement (Verstaendigung II) between Germany and the European Commission on state support for German development banks.

Despite its minority ownership of EAA, we see NRW as liable for EAA's losses. We expect that NRW would provide timely and sufficient extraordinary support to EAA in an event of financial distress. EAA's business model is based entirely on state guarantees and NRW's interest in an orderly workout of its contingent liabilities from the former WestLB.

The stable outlooks on NRW.BANK and EAA reflect our outlook on NRW.

An upgrade to NRW would trigger similar rating actions on NRW.BANK and EAA. We could raise the ratings on NRW if its debt fell significantly to levels more comparable with those of international peers, while it maintained its excellent economic and liquidity situation.

We could consider a negative rating action if we observed a weakening of the entities' role for, or link with, the state. This could lead us to reassess their status as GREs. However, we consider this scenario unlikely over the next 24 months. We could also consider a downgrade to the entities if we were to downgrade NRW.

Related Criteria

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.

Primary Credit Analyst:Felix Winnekens, Frankfurt (49) 69-33-999-245;
felix.winnekens@spglobal.com
Secondary Contacts:Felix Winnekens, Frankfurt (49) 69-33-999-245;
felix.winnekens@spglobal.com
Thomas F Fischinger, Frankfurt (49) 69-33-999-243;
thomas.fischinger@spglobal.com

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