Home Ratings and Research Currently valid ACRA Europe assigns solicited credit rating of BBB to IBEC, outlook Stable
ACRA Europe assigns solicited credit rating of BBB to IBEC, outlook Stable
Friday, 29 May 2020

The International Bank for Economic Cooperation (hereinafter, IBEC, or the Bank) has been assigned a BBB long-term foreign currency rating.

The outlook on the long-term foreign currency credit rating is Stable. The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

The credit rating for IBEC is primarily based on the assessment of the shareholder structure and support at BBB, which stems from the weighted average assessment of the creditworthiness of its main shareholders (at A-) adjusted two notches downward due to the Bank’s low systemic importance for its main shareholders. ACRA Europe has not adjusted the assessment of the shareholder structure and support based on the Bank’s standalone creditworthiness assessment at “bbb”, which reflects a “strong“ assessment of the Bank’s capital position, “weak“ assessment of the risk profile, and a “satisfactory“ assessment of the liquidity and funding position.

Sovereign model results

Shareholder structure and support


Weighted average assessment of the shareholders’ creditworthiness


Systemic importance adjustment


Final shareholder structure and support assessment


Standalone creditworthiness assessment


Management quality, strategy quality and operational transparency


Capital adequacy


Risk profile


Funding and liquidity


Final standalone creditworthiness assessment


Standalone creditworthiness assessment adjustment to the shareholder structure and support assessment


Final credit rating


Credit rating rationale

Positive rating assessment factors

  • Investment-grade assessment of shareholder support.
  • Strong capital adequacy.

Negative rating assessment factors

  • Low systemic importance for the main shareholders.
  • Relatively low diversification of exposure.
  • High dependence on short-term bank funding.

Potential rating upgrade factors

  • Increase in the creditworthiness of key member states.
  • Increase of the Bank’s systemic importance for its main shareholders.
  • Decrease in credit risk concentration.
  • Further progress in decreasing the Bank’s dependence on short-term bank funding.

Potential rating downgrade factors

  • Decrease in the creditworthiness of key member states.
  • Deterioration of asset quality.


IBEC underwent a significant strategy overhaul in 2018.

IBEC was established in 1963 with its headquarters in Moscow (now the capital of the Russian Federation), with the aim of promoting economic co-operation between member states. In 2018, the Bank underwent a dynamic overhaul of its strategy. Currently, its main focus lies in financing and facilitating trade operations of the Bank’s member states, including operations with third countries. In addition, the Bank performs a settlement function and provides customer accounts in both global and local currencies.

As of 2019, the Bank’s shareholders were the Russian Federation (51.69% of the paid-in share capital), the Czech Republic (13.34%), the Republic of Poland (12.01%), the Republic of Bulgaria (7.56%), Romania (7.12%), the Slovak Republic (6.67%), Mongolia (1.33%), and the Socialist Republic of Vietnam (0.38%). Although IBEC’s shareholders are all former Eastern Bloc countries, they are quite heterogeneous. Five shareholders are EU members with manufacturing-oriented economies, Russia and Mongolia have to a significant extent commodity-based economies, while Vietnam’s economy is based on low value added labor-intensive manufacturing.

The Bank’s systemic importance for its main shareholders is constrained predominately by the limited scope of its financing and the availability of commercial funding for most of its borrowers.

ACRA Europe assesses the systemic importance of IBEC as low. This assessment is based on the following considerations:

  • The significance of the projects financed in the shareholders’ economies is low. Total exposure of the Bank to its shareholders’ GDP varied between 0% and 0.30% of GDP in 2019 (between 0% and 0.13% for loans).
  • Commercial financing for the main borrowers from the shareholders’ countries is generally available. IBEC loans represent only either a low, or in some cases, moderate portion of their financing.
  • From a geopolitical perspective, IBEC’s significance is limited. The Czech Republic, Poland, Bulgaria, Romania, and Slovakia are integrated into Western structures (the EU and NATO), while Mongolia and Vietnam have strong economic ties to China. Therefore, the reputation risk of Russia as a main shareholder in case of inability or unwillingness to support the Bank is limited in ACRA Europe’s view.
  • Among the international financial institutions with Russia as their main shareholder, IBEC is the second smallest, both in terms of assets and capital, which reflects its limited importance.

That said, ACRA Europe’s assessment of the shareholders’ support stands at BBB, two notches below the weighted average of the Agency’s assessment of the creditworthiness (both outstanding and internal) of the shareholders. This assessment is also constrained by the absence of a contractual obligation for the shareholders to provide additional capital if necessary.


The new management has initiated a strong expansion in the Bank’s activities.

ACRA Europe assesses the quality of the Bank’s management, strategy, and operational transparency as “satisfactory.” This assessment is based on the 2018 overhaul of the Bank’s outdated strategy (following the appointment of Denis Ivanov as CEO and the reinforcement of HR with skilled management with international experience in business, banking, or finance), followed by a strong expansion in operations. Loans to customers rose by almost 125% in 2019. The new management has also started to increase the diversification of the Bank’s funding sources. In 2019, IBEC sold 10-year bonds worth RUB 7 bln on the domestic market and thereby significantly decreased its reliance on short-term funding.


IBEC’s strong capital ratios are expected to decline as business activities are expanded further.

ACRA Europe assesses the Bank’s capital adequacy as “strong.” The Bank operates with a paid-in capital of EUR 200 mln, with callable capital standing at EUR 200 mln. However, there is no contractual obligation for the shareholders to fulfill a potential call. Tier 1 capital adequacy stood at 50.4% in 2019. While the Bank’s capital adequacy is expected to decrease with the further expansion of business activities (similar to 2019, when the Tier 1 ratio fell by almost 30 percentage points), the capital adequacy is currently well above ACRA Europe’s 25% threshold for the “strong” category.

The Bank’s profitability is rather low compared to global peers. In 2019, return on equity stood at 2.2% (1.7% in 2017-2019). However, this is, to a significant degree, attributable to the Bank’s low leverage (the asset to equity ratio stood at 208% in 2019), which is expected to increase as operations are expanded, therefore increasing profitability potential.


IBEC wrote off its legacy NPLs in full in 2018.

ACRA Europe assesses the Bank’s risk profile as “weak.” This assessment is based on high credit risk concentration and the “satisfactory” assessment of risk management quality.

The assessment of the credit risk diversification is “weak.” The concentration of the credit risk is relatively high both in terms of borrowers/issuers/counterparties and countries. In 2019, the top ten exposures in proportion to the paid-in capital stood in the 100–150% range, while the share of exposures to counterparties located in the Bank’s largest jurisdiction (Russia) stood at 32%. Moreover, loan exposure is skewed towards the banking (reflecting the Bank’s trade financing focus) and energy sectors, with both having almost one-third of the share of the total credit portfolio.

In the ACRA Europe’s opinion, the Bank’s credit risk is somewhat mitigated by the ownership structure of the exposure (more than half of the loans were originated to majority state-owned entities) and the solid collateralization of the loans to customers portfolio (approximately 75%). As of 2019, the Bank had no impaired assets following its decision write off all NPLs in full in 2018 and no new NPLs were recognized in 2018 or 2019.

ACRA Europe views the risk management quality as “satisfactory.” This assessment is supported by improved risk management procedures in accordance with the best international practices. However, it is unclear whether these improvements will lead to sustained improvement in asset quality given the Bank’s poor underwriting standards in the past, which resulted in very high NPL ratios prior to the 2018 write-off.


IBEC’s reliance on short-term funding is significantly higher compared to its peers.

ACRA Europe’s assessment of IBEC’s funding and liquidity is “satisfactory.” The Bank’s liquidity position is assessed as “satisfactory.“ This reflects the solid share (over 10%) of highly-liquid assets in the Bank’s total assets and the moderate coverage of short-term liabilities by liquid assets, which was firmly in the 1–1.5 range in 2019 (both according to ACRA Europe’s definition).

ACRA Europe assesses the structure of IBEC’s funding as “weak“ due to dependence on bank loans in 2019, which were 38% of the total liabilities predominately of short-term nature. The Bank’s reliance on the short-term bank funding (over 30% of total liabilities) is significantly higher compared to global and regional peers.

ACRA Europe notes significant improvement in the Bank’s dependence on short-term bank funding with the help of a RUB 7 bln bond issuance and a strong increase in customer deposits. Nevertheless, the share of bank funding still remains well above ACRA Europe’s threshold of 25% for a higher assessment. The diversification of the Bank’s funding base has also improved significantly (the Herfindahl-Hirschman Index stood at 32%, down from 60% in 2018). Nearly half of the Bank’s funding sources in 2019 were represented by total capital (48%). The rest was proportionally divided between loans and deposits from banks (20%), debt securities (16%), and funds raised from third parties (16%).

Appendix 1. List of material data sources

IBEC questionnaire

IBEC Financial Statements

IBEC Annual Reports


Rating history

This is the first distribution of the rating.

Regulatory disclosure

The credit ratings have been assigned to the IBEC under the Methodology for Credit Rating Assignment to Multilateral Financial Institutions and Other Supranational Development Institutions , applicable from September 19, 2018. An explanation of the importance of each rating category and a default definition is included on the ACRA Europe website. Information on the rate of historical failure is available at cerep.esma.europa.eu. The default rate means a percentage of ratings that were changed to default from the overall number of ratings, for each rating category and given period. The disclosure of the rating and outlook was preceded by the approval of the Rating Committee. Since July 30, 2012, ACRA Europe has been a registered credit rating agency according to Regulation (EC) No 1060/2009 of the European Parliament and of the Council of September 16, 2009, on credit rating agencies.

The credit ratings and their outlook are expected to be revised within 12 months following the publication date.

The credit rating was issued as solicited. The rated entity participated in the credit rating assignment. ACRA Europe had access to the rated entity’s internal documents but no access to the company’s management. ACRA Europe, in the context of routine care, verified all sources entering the rating process and considers the scope and quality of the information entering the analytical process to be sufficient to assign a credit rating. The rated entity was notified on May 26, 2020, and after the notification there were no changes or amendments in the rating.

ACRA Europe provided no additional services to the rated entity. No conflicts of interest were discovered in the course of the credit rating assignment.

Download pdf