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Credit assessment

The Bundesbank's credit assessment system

19.06.2018

The Bundesbank has a dedicated credit assessment system to assess the credit quality of debtors of non-marketable assets. Credit assessment goes back a long way at the Bundesbank. Counterparties can use the Bank's credit assessment to determine an enterprise's or debtor's eligibility in the context of their monetary policy operations.

The Bundesbank uses its credit assessment system to estimate debtors' default risk. Each rating class on the credit assessment scale stands for an expected one-year probability of default. On the one hand, this credit assessment establishes whether credit claims on these enterprises can be pledged by credit institutions as collateral for monetary policy operations with the Bundesbank. On the other, it determines the size of the markdown applied to approved credit claims.

Even irrespective of their refinancing history, interested enterprises can request a credit assessment and receive the results in a compact format, namely a fact sheet and  a financial statement analysis with sector-specific comparative ratios and a multi-year comparison.

The Bundesbank's credit assessment process consists of two stages. The first stage is based on the annual financial statements of the enterprises concerned. Processing these annual financial statement data based on a statistical model provides a comprehensive insight into the economic and financial situation of the enterprise under analysis. In the second stage, these findings are inputted into an expert analysis, which takes into account Eurosystem requirements, to determine the final credit assessment.

The Bundesbank's credit assessments represent an objective and competent evaluation by an independent institution that has no commercial interests of its own. Being granted with the "eligibility status" is considered a hallmark of quality that can be used to build confidence in business dealings with customers, suppliers and lenders or to strengthen an enterprise's position in credit negotiations. In customs law, a positive assessment by the Bundesbank serves as proof of solvency. The Bundesbank provides credit assessments free of charge as part of its monetary policy mandate.

A summary of the Bundesbank's in-house credit assessment system can be found in the leaflet The Deutsche Bundesbank's credit assessment system. A separate leaflet How the Deutsche Bundesbank assesses the credit standing of groups which report under International Financial Reporting Standards (IFRS) describes the procedure for assessing groups which prepare their financial statements under IFRS.

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