Fitch assigns Eurasian Development Bank RUB5bn Bond Issue 'BBB'
The bond's rating is in line with EDB's Long-term Issuer Default Rating (IDR) of 'BBB', which is based on the credit standing of its main member countries, the Russian Federation (RF; 'BBB'/Positive/'F3') and the Republic of Kazakhstan (RK; 'BBB-'/Positive/'F3'), which founded the bank in 2006. In December 2010, EDB's Outlook was revised to Positive from Negative. This reflects the proven capacity of the bank, despite its short track record, to develop its operations while maintaining excellent asset quality, strong capitalisation and a high level of liquidity. The Outlook revision was also driven by the change in Outlook on the RF and RK, which are EDB's main shareholders.
The RF owns 66% of the bank's capital and the RK 33%. The rest is owned by Armenia, Tajikistan and, since June 2010, Belarus. Although the bank is open to membership from other Eurasian Economic Community (EurAsEC) countries, Fitch expects its two founding member states to maintain a majority stake in EDB's capital, with the RF not falling below 50% and one share.
EDB benefits from privileges and immunities conferred by its shareholders. In particular, preferred creditor status gives it priority of repayment in the event of sovereign default and protects it against restrictions on FX transfers. EDB is not subject to banking regulation but has to abide by some internal prudential ratios. Debt is limited to 200% of equity and short-term assets must cover at least 100% of short-term debt. Despite rapid lending growth since its creation, capitalisation remains comfortable and provides headroom for operational developments.
EDB is a multilateral development bank (MDB) created in 2006 to foster the regional integration of the EurAsEC, which includes the RF, the RK, Belarus, the Kyrgyz Republic, Uzbekistan and Tajikistan. Headquartered in Almaty (in the RK), the bank had 212 staff at end-June 2010, the Fitch Ratings agency's press service reports.