EBRD says Ukraine exposure ‘absolutely not’ a threat to credit rating

ISTANBUL (Reuters) – The European Bank for Reconstruction and Development’s exposure to war-ravaged Ukraine does not pose a threat to its prized triple-A credit rating despite previous warnings from the likes of Fitch, its vice president told Reuters on Friday.

WHAT DID EBRD SAY?

Matteo Patrone, the EBRD’s Vice President for Banking said the bank was “absolutely not” concerned that Ukraine exposure could threaten the bank’s rating.

He said that last year’s increase of the bank’s capital was “exactly to allow us to increase our exposure in Ukraine and continue supporting the real economy to the tune of 1.5 billion euros per year”.

The EBRD plans to scale that up to 2.5 billion and 3 billion euros per year going forward as well.

WHAT IS THE ISSUE?

Ratings agency Fitch warned last year that if Ukraine wasn’t able to pay back its international development loans, it would likely cost top multilateral lenders including the EBRD and the World Bank’s International European Bank for Reconstruction and Development their triple-A credit scores.

WHY IT MATTERS?

The loss of the top rating would make it more expensive for the EBRD itself to borrow money, undermining its whole business model.

The EBRD is one of the top lenders to Ukraine’s private sector, and its continued support to the country is key to helping it withstand, and recover from, Russian attacks.

THE NUMBERS

Multilateral lending to Ukraine has jumped since Russia’s 2022 invasion, exceeding a combined 25 billion euros at the end of 2022. Fitch’s warning last year put the EBRD’s net exposure to Ukraine at a hefty 12.8% ratio of its shareholder equity.

In December, however, the EBRD’s board approved a 4 billion euro capital increase, bringing its capital base up to to 34 billion euros.

(Reporting By Ezgi Erkoyun and Jonathan Spicer; Writing by Libby George; Editing by Gareth Jones)