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      FRIDAY, 02/06/2023 - Scope Ratings GmbH
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      Scope downgrades the Republic of Poland's credit ratings to A; Outlook revised to Stable

      A longer-standing trend of weakening standards of governance and weakening of the underlying inflation outlook drive the downgrade. Sound macroeconomic fundamentals, a moderate public debt level, and a well-capitalised banking system support the ratings.

      For the updated report accompanying this review, click here.

      Rating action

      Scope Ratings GmbH (Scope) has today downgraded the Republic of Poland (Poland)’s long-term issuer and senior unsecured local- and foreign-currency ratings to A from A+, and revised the Outlooks to Stable from Negative. Scope has downgraded Poland’s short-term issuer ratings to S-1, from S-1+, and revised the Outlooks to Stable from Negative, in local- and foreign-currency.

      Summary and Outlook

      The downgrade of Poland’s long-term sovereign ratings to A reflects the pursuant two credit-rating drivers:

      1. A weakening of governance institutions and disagreements around the rule of law between the Polish government and the European Union (EU), which has furthermore elevated uncertainties around EU funding; and
         
      2. A weakening of the outlook for underlying inflation, alongside associated adverse effects of higher rates on the fiscal balance.

      The one-notch credit-rating downgrade reflects updated Scope assessments of Poland under ‘environmental, social and environmental (ESG) risk’, ‘domestic economic risk’ and ‘public finance risk’ categories of its sovereign rating methodology.

      Geopolitical risk following Russia’s escalation of war in Ukraine is a further credit challenge. Elections later this year engender uncertainties with respect to policy making and Poland’s institutional direction moving ahead.

      However, Poland’s A sovereign ratings reflect multiple credit strengths, such as sound macroeconomic fundamentals and comparatively robust rates of economic growth over the recent years as well as comparatively strong longer-run economic growth potential. Credit strengths reflect furthermore moderate levels of public debt and financing requirements, a sizeable cash cushion and deep domestic capital markets. Poland’s ratings are anchored by a profitable, liquid and well-capitalised domestic banking system.

      The Stable Outlook reflects Scope’s view that risks to the ratings are presently balanced over the coming 12 to 18 months.

      The ratings and/or Outlooks could be further downgraded in the event of, individually or collectively: i) governance risks and associated tensions with the European Union escalating absent significant resolution following elections this year; ii) weaker budget discipline resulting in the deterioration of the outlook for debt sustainability; and/or iii) a global or regional shock bringing output attrition and/or Poland’s external-sector risk profile materially weakening.

      Conversely, the ratings and/or Outlooks could be upgraded if, individually or collectively: i) governance challenges are reduced, allowing furthermore for a durable easing of tensions with European institutions; ii) fiscal performance improves, supporting a significantly declining trajectory for the government debt ratio; iii) the economy’s external balance sheet were to further strengthen; and/or iv) social and environmental risks are significantly redressed, enhancing long-run sustainable economic growth.

      Rating rationale

      The first driver of the credit rating downgrade to A reflects longer-standing weakening of Polish governance institutions, furthermore elevating uncertainties around EU funding.

      On 27 October 2021, the Court of Justice of the European Union (CJEU), on request of the European Commission (EC), levied a EUR 1mn daily penalty on Poland for a period until interim measures of a 14 July 2021 ruling are complied with1 – specifically, with respect to the appeal for the suspension of provisions under which the Disciplinary Chamber of Poland’s Supreme Court decides on requests for the lifting of judicial immunity.

      After political deadlock in negotiations, the EC presented conditional approval of the Resilience and Recovery Program (RRP) of EUR 35.4bn (4.7% of average 2021-26 GDP), reflecting EUR 23.9bn in grant financing, on 2 June 2022, conditional on the upholding of reforms of the judicial system. The release of a first tranche of the funding was to be linked to conditions as defined by the EC, structured on milestones. Under such conditions, the Polish government is requested to abolish the disciplinary chamber and reform its disciplinary procedure against Polish judges, which the CJEU ruled in July 2022 contravened EU law2.

      In February 2023, the Polish parliament voted on a bill aiming to address some of the conditions defined by the EC for unlocking funds allocated under the RRP, such as amendments of disciplinary procedures against judges in question. The legislation’s promulgation has, however, been suspended after Polish president Andrzej Duda’s postponement of the bill’s approval and, instead, referral to the Constitutional Tribunal for an adjudication. The Tribunal has thus far been unable to gather the necessary quorum to proceed to a vote on the bill, due to an internal dispute around the status of its president.

      Furthermore, in December 2021, the European Commission opened infringement proceedings in association with a separate breach of the primacy of EU law3, after a decision of the Constitutional Tribunal to deny binding effects of interim measures prescribed by the CJEU and determine specific articles of EU treaty as being incompatible with Polish law. On 15 February 2023, the EC decided to refer Poland to the CJEU for violations of EU law by the Tribunal after Poland failed to address the EC’s concerns.4

      As a result of this protracted institutional deadlock, the EC has not released funding linked to the country’s Recovery and Resilience Facility. At the same time, daily financial penalties associated with the CJEU decision of 27 October 2021 continue to accrue. In April 2023, the European Commission rejected a request from the Polish government to halt said fines, arguing remedial measures adopted to date were inadequate to meet conditions as defined by the CJEU. Nevertheless, the CJEU issued an order later the same month curtailing penalties to EUR 500,000 daily, from EUR 1m, acknowledging some progress made.5 As Poland has refused to pay penalties being levied, funds have been deducted from EU funding committed to Poland under the European Union’s multi-annual budget. By the end of May 2023, Scope estimates such penalties had accumulated to around EUR 650m (a symbolic 0.1% of GDP), accounting for levies under an earlier dispute regarding a lignite extraction mine with the Czech Republic.

      Furthermore, stakes surrounding rule-of-law contentions have evolved since the second half of last year, following communication from the EC during October 2022 that release of European Cohesion Funds for Poland under the 2021-27 EU budget, amounting to a significant EUR 76.5bn (9.9% of average 2021-27 annual GDP) – by a distance the largest nominal multi-annual financial framework (MFF) sum earmarked for any EU member state – had been placed on hold due to failure to satisfy ‘enabling conditions’ of the primacy of the rule of law under the EU Charter of Fundamental Rights6.

      Presently, it appears unlikely that new EU funding will flow to Poland ahead of the general elections later this year, outside of the final 2014-20 MFF disbursements. Delays and uncertainties regarding the timing and availability of European financing reduce the real value of allocated funds and affect the ultimate absorption capacity of the funding, where Poland holds an otherwise sturdy historical track record – as an example absorbing during the 2014-20 EU budgetary phase 91% of allocations7.

      More recent policy developments constitute further signals of rule-of-law challenges. On 29 May 2023, President Duda signed to law a legislation advanced by the governing party establishing a parliamentary committee for examination of Russia’s influence in domestic politics. The legislation has raised concern that the committee may be used to exclude opposition politicians absent due process8.

      The longevity of disputes with the EU around judicial independence, the rule of law, media freedoms and human rights suggests there is no easy resolution of an underlying disparity of opinion around national sovereignty. Although Poland has played a strong role under the context of the EU’s foreign-policy position since escalation of the Russia-Ukraine war – barring disagreements recently around a Polish ban of grain imports from Ukraine, the institutional discord with the EU undermines the investment outlook premised significantly on EU funding, tempering longer-run economic growth. In addition, budget costs from monetary penalties and effects on fiscal performance from attenuated economic growth accrue over time, especially if government replaces delayed EU funding with higher-cost national financing to advance assigned projects. Finally, rule-of-law contentions create a degree of uncertainty as regards other financing accessible to Poland but contingent on its relationship with the EU – such as with respect to EU balance of payments assistance under adverse economic scenarios.

      The second driver behind the downgrade of Poland’s ratings is a weakening of the outlook for underlying inflation. Persistently elevated inflation affects goals of price stability and undermine monetary flexibility. Associated higher rates furthermore pose implications for interest payments and the budget balance.

      Price pressures have stayed elevated, despite some moderation in the rates of headline consumer-price-index (CPI) inflation in recent months, to 13% YoY by May 2023, from February 2023 peaks of 18.4% – on a back of moderating global energy and food prices and comparatively more favourable base effects. But core inflation (excluding food and energy prices) rests at levels near multi-decade highs: 12.2% YoY as of April, pointing to persistent underlying domestic price dynamics – even though core inflation is likely to likewise gradually moderate. Tight labour-market conditions, given near record-low unemployment (of 2.7% of the active labour force as of April), are fuelling nominal wage growth (of 12.1% YoY in April). After a first hike in January, the minimum wage is set to rise again by July, bringing the cumulative rise to about 19% by the end of the summer9.

      An expansionary fiscal policy supports aggregate demand, such as via assistance for businesses and households and still-elevated public investment, but contributes to price pressure. A policy of mortgage repayment holidays for households hinders the degree to which higher rates affect household demand, cutting near-term disinflationary effects of past central-bank hikes. The National Bank of Poland (NBP) hiked policy rates to 6.75% by September last year, but has left rates unchanged since despite entrenchment of inflationary risks. This has seen evolution of a meaningful negative real policy rate (-5.5% as of May). Several Monetary Policy Council members indicated, moreover, potential for a rate cut ahead of elections later this year, conditional on a durable decline in inflation. After averaging 14.4% in 2022, headline inflation is seen averaging a still elevated 13.5% in 2023, before receding to 8.1% by 2024, nevertheless staying significantly above the NBP upper tolerance band of 3.5%.

      The present higher rates environment also contributes to a gradual weakening of government fiscal space, such as a forecast rise in net interest payments to 5% of revenue by 2028, from 2.6% at 2021 lows. After having risen sharply since H2 2021, the yield on 10-year zloty bonds has stabilised in recent months, averaging about 6.1% since the beginning of this year, amid heightened inflation expectations. A comparatively weaker structure of Polish government debt as compared to that of peer sovereign states makes Poland comparatively more exposed during phases of significant tightening in funding conditions and/or weakening of zloty. The moderate average maturity of treasuries (5.3 years) favours a faster pass-through of higher market rates to interest expenses, as an outstanding share of foreign-exchange denominated liabilities (23.3% of aggregate treasury debt) presents furthermore exposures to currency risk.

      The general government deficit widened to 3.7% of GDP in 2022, up from 1.8% of GDP in 2021, from the impact of measures aimed at alleviating the impact of the energy crisis on the private sector and at managing arrivals of refugees from Ukraine. It is expected to decline modestly to 3.6% of GDP this year, before 2.8% of GDP in 2024 and average around 3.3% of GDP a year during 2025-28 (compared with 1.5% on average during 2015-19). The net budgetary costs of measures aimed at alleviating the effects of high energy prices on the private sector are estimated at 1.7% of GDP for this year, roughly equal to that from the previous year (1.9% of GDP), according to estimates of the European Commission10. Medium-run budget risk relates to indexation of public-sector wages and pension payments on inflation, as well as to commitments to boost public spending on health care – seen rising from 4.7% of GDP in 2020 to 6% by 202411. The 2022 reform of the personal income tax, introduced as part of the ‘Polish Deal’, will durably cut government revenue. The Russia-Ukraine war has furthermore brought reassessments of defence requirements, with military expenditure set to rise from an estimated 2.2% of GDP in 2022 to 3% this year11, and statements from government officials indicate this could gain further in the coming years, possibly to achieve an objective of 5% of GDP12.

      Challenges for the rating furthermore consider elections later this year presenting uncertainties with respect to policy making and Poland’s institutional direction moving ahead. Geopolitical risks have risen for the eastern Europe region including for Poland after escalation of Russia’s war in Ukraine.

      The external sector has seen mixed developments. The current account widened to a 3% of GDP deficit last year, reflecting higher energy and commodity import prices and disruptions of exports to Russia, Belarus and Ukraine (representing around 3.7% of Polish exports prior to escalation of the war)11. But the current-account balance improved to a PLN 24.4bn (EUR 5.4bn) surplus in Q1 2023. Moving ahead, the IMF expects the current account to gradually recover – concluding a forecast horizon to 2028 around -2% of GDP.

      Foreign-exchange reserves rose to about USD 155bn by April, recovering significantly from 2020 lows of USD 104bn and representing by April a 95% coverage of short-term external debt (defined on a remaining-maturity basis), a level above IMF adequacy guidelines but still moderate by comparison against that of central and eastern European peer states, such as Hungary (rated BBB/Stable Outlook, 99%), the Czech Republic (AA-/Stable, 115%), and Bulgaria (BBB+/Stable, 270%). Comparatively stable foreign direct investment (FDI) liabilities constituted a meaningful 51% of gross external liabilities as of end-2022. Inward FDI flows amounted to 4% of GDP in the year to March 2023, higher than a 3.1% average during 2015-19. The net international investment position furthermore rose to -34% of GDP, from lows of -69% as of 2014.

      Poland’s A credit ratings reflect multiple credit strengths.

      Firstly, the ratings are underpinned by a large and diversified economy, and resilient macroeconomic fundamentals. Following a comparatively moderate downturn during 2020 (-2% output growth), the economy has observed robust recovery, with quarterly output reaching 11pps above end-2019 levels by Q1 2023, well above that of most peer economies. The medium-run potential rate of growth is estimated around a robust 3%, underpinned by prospects of continued foreign direct investment and convergence in labour productivity towards EU averages. Potential growth is above that of sovereign peers’ economies, even acknowledging working-age population decline estimated by the UN around 0.9% a year during 2023-28.

      The Polish economy displayed strong output growth last year (of 5.1%), driven by robust household consumption and build-up in inventories. Nevertheless, economic growth decelerated markedly as the year progressed, with growth turning negative in the final quarter (-2.3% QoQ) due to a decline in private demand. Quarterly growth recovered to a strong 3.8% QoQ in Q1 this year, although this improvement was driven by improvements in net trade, reflecting subdued domestic demand, easing supply-chain tensions, and declining global commodity prices. Private demand is seen staying tepid medium run, amid persistently elevated inflation, soft consumer and business confidence and tighter funding conditions. Conversely, an accommodative fiscal stance and prospects of continued improvements in the external balance ought to support output. Real growth is seen decelerating to 2% in 2023, before edging up to 2.8% in 2024 and converging on a medium-run potential of about 3% yearly subsequently.

      Furthermore, Poland’s general government debt ratio stood at a moderate 49.1% of GDP as of end-2022, having declined by 4.5pps from the previous year and representing a level only moderately higher than the 45.7% ratio at end-2019. This improvement was driven by strong nominal economic growth, mitigating the impact of rising budget deficits. Under a baseline economic scenario, Scope sees the general government debt-to-GDP ratio resuming a modest upside trend over the medium term, to around 51% by 2028. This view is underpinned by expectations of persistent primary fiscal deficits (averaging around 1.3% of GDP over 2024-28) and rising interest payments.

      Finally, Poland’s credit ratings are anchored by a stable banking system, with resilient asset quality through the pandemic crisis allowing for the gradual removal of crisis relief measures. Despite the Covid-19 pandemic, the quality of the credit portfolio has stayed resilient over recent years and the non-performing loan ratio edged under pre-2020 levels, reaching 4.2% of aggregate loans by Q4 2022. Despite some declines from 2020 highs, capitalisation and liquidity metrics generally have stayed strong, and above pre-pandemic crisis averages, as reflected in tier-1 capital adequacy and liquidity coverage ratios of 16.6% and 179.5% respectively as of end-2022. A system-wide return-on-equity ratio of 9.0% the same quarter is sound, which ought to be further anchored medium run by rises in net interest margins, despite near-term pressures resulting from a government-imposed mortgage payment moratorium and slowing credit demand.

      Housing-price growth has decelerated markedly over the recent months and stood at 4.9% YoY in Q1 2023 (from 17.4% YoY peaks of Q1 2022). Indebtedness of Polish households has stayed moderate, at 46% of gross disposable income (against 94.2% for the euro area). In February 2022, the European Systemic Risk Board indicated it perceived limited evidence of overvaluation in the housing market and assessed the present policy stance as being appropriate and sufficient for addressing risks13. While Polish borrowers are exposed to rate rises due to their significant use of variable-rate loans (representing around 90% of outstanding mortgages), this vulnerability is curtailed by low overall household debt levels, a favourable starting point as far as debt-servicing ratios having been reduced in the recent past, as well as implementation by government of the mortgage payment holiday, set to endure until at least the end of this year, and an expanded borrower support fund.

      Legal risk from foreign-currency loans is still a source of vulnerability, given 13% of loans to households as of April 2023 (down from 42% in 2009) and 15% of private-sector deposits (up from 9%) denominated in foreign currency. Uncertainty remains around EUR 10.8bn of Swiss franc-denominated mortgages pending court outcomes14, although legal costs are likely to be spread over time. In February 2023, the Advocate General to the CJEU issued a non-binding opinion in support of borrowers’ claims against banks, raising a likelihood that the CJEU’s final ruling could lead some banks to pay out sizeable settlements15. The Polish Financial Supervision Authority had previously estimated that an adverse ruling for banks may result in immediate costs of about PLN 100bn (EUR 22bn) for exposed lenders16, although provisions of PLN 37bn have already been created. The matter of Swiss franc loans partially contributed to difficulties resulting in the resolution of Getin Noble Bank in September 2022, the nation’s tenth largest lender having assets of PLN 44bn, requiring a contribution from the Polish resolution authority of PLN 6.9bn.

      Core Variable Scorecard (CVS) and Qualitative Scorecard (QS)

      Scope’s Core Variable Scorecard (CVS), which is based on the relative rankings of key sovereign credit fundamentals, provides a first indicative credit rating of ‘bbb+’ for Poland. Poland receives no adjustment to this indicative rating under the reserve currency adjustment under the sovereign methodology. As a result, final ‘bbb+’ indicative ratings can be adjusted, under a next step, by the Qualitative Scorecard (QS) by up to three notches depending on the size of relative qualitative credit strengths or weaknesses versus an indicative peer group of sovereign states.

      For Poland, ‘growth potential of the economy’, ‘macro-economic stability & sustainability’, ‘debt sustainability’, ‘current-account resilience’, ‘external debt structure’, ‘banking-sector performance’, and ‘financial imbalances’ have been identified as relative credit strengths under the QS compared with the peer group. Conversely, ‘resilience to short-term external shocks’ and ‘institutional and political factors’ are identified as relative credit weaknesses in the QS.

      On aggregate, the QS generates a two-notch net upside adjustment and indicates “A” long-term ratings for Poland.

      A rating committee has discussed and confirmed these results.

      Factoring of environment, social and governance (ESG)

      Scope explicitly factors in ESG sustainability issues in its ratings process via the sovereign methodology’s stand-alone ESG sovereign risk pillar, with a significant 25% weighting under the quantitative model (CVS).

      With respect to environmental factors, Poland receives medium scores on a CVS index of the economy’s carbon emissions per unit of GDP (capturing the scale of an economy’s likely transition costs to greener economic structures over coming decades) under an international comparison, albeit weaker scores than most ratings peers’ economies. Likewise, Poland receives medium scores as far as the ecological footprint of its economy’s consumption compared with available biocapacity. Furthermore, the country receives low scores on its level of greenhouse gas emissions relative to the size of its population. However, CVS environmental scores for natural disaster risk, as captured by the World Risk Index, are strong, reflecting comparatively lesser exposure of Poland to natural hazards. Poland adopted an energy policy strategy in 2021 pledging to significantly cut coal-fired power by the 2040s, with the main contribution to coal-based emissions stemming from its power sector. Poland participates under the European Emissions Trading System, creating incentives to cut emissions. The energy transition strategy targets 30% reductions of emissions by 2030 relative to 1990 levels. This transition will demand substantive investments, however, mostly in power generation, over more than a decade. A ‘neutral’ assessment has been assigned on ‘environmental factors’ for Poland under the complementary qualitative (QS) assessment against the country’s group of sovereign peers.

      Credit factors associated with social criteria are likewise captured by the agency’s quantitative model and qualitative overlay. Under the quantitative model, Poland performs strongly on income inequality, as measured by a comparatively lesser income share for the 20% of the population with the highest incomes against that received by the 20% of its population with the lowest incomes. However, CVS marks on labour-force participation are weaker than those of peer economies. Poland receives a weak score under the CVS for its old-age dependency ratio, although nevertheless average scores as compared against the generally weaker performance for this factor for many advanced-economy rating peers of Poland. Social factors are furthermore reflected in comparatively lesser GDP per capita as compared with that of countries within the country’s strong indicative peer group. The working-age population has been declining around 1% annually over the last decade, creating a growing skilled-labour shortage. But large-scale inflows of migrant workers – especially from Ukraine – have helped restrain wage pressures and eased demographic bottlenecks. While a net present value of expected pension spending changes is benign at -5.5% of GDP from 2022-50 under IMF projections, the net present value of health-care spending changes is more material at 33.8% of GDP over the same period. Polish students did well on the 2018 OECD Programme for International Student Assessment (PISA) study of the scholastic performance of 15-year-old students across mathematics, science and reading, ranking 11th of 77 countries; however, skills of the Polish workforce ranked a below-average 92nd of 141 countries on the World Economic Forum’s 2019 Global Competitiveness Report. On the complementary QS, Scope assigns an evaluation of Poland’s ‘social factors’ as ‘neutral’ compared with that of its sovereign peers.

      Under governance-related factors captured in the CVS, Poland receives average marks on the World Bank Worldwide Governance Indicators (WGI), with scoring having dropped since 2014 (the year prior to Law and Justice (PiS) entering government) across each of the six WGI categories, with declines being most pronounced on categories of voice & accountability, political stability and the rule of law. The weakening of governance institutions represents an important driver of this credit rating downgrade. While an exit from the European Union remains highly unlikely, given the high degree of citizen support for Europe (nine of 10 Poles are in favour of Poland’s membership of the EU), there is no easy path to resolution of present disagreements with the European Union – especially in advance of this year’s elections. At the same time, PiS has positively presented Poland as a constructive member of the Union, and prudently de-coupled disagreements over the rule of law from goals of developing closer economic ties with EU partners and a normal working relationship on other crucial issues – such as the war in Ukraine. The ruling coalition has been in a parliamentary minority since August 2021, as policy disagreements resulted in the exit of a junior partner. Elections later this year present uncertainties with respect to policy making moving ahead and Poland’s institutional direction as neither of the two main political blocs may secure a parliamentary majority. Geopolitical risks have risen for the eastern Europe region including for Poland following escalation of the Russia-Ukraine war. Under the QS, Scope assesses ‘institutional and political factors’ of Poland as ‘weak’ compared with Poland’s indicative country peer group.

      Rating Committee
      The main points discussed by the rating committee were: i) governance and EU funding; ii) economic and fiscal fundamentals; iii) inflation and monetary policy; iv) external sector; v) banking sector; and vi) peers considerations.

      Rating driver references
      1. Court of Justice of the European Union, Press Release No 192/21 
      2. Court of Justice of the European Union, In Case C‑791/19 
      3. European Commission, Rule of Law: Commission launches infringement procedure against Poland for violations of EU law by its Constitutional Tribunal
      4. European Commission, The European Commission decides to refer POLAND to the Court of Justice of the European Union for violations of EU law by its Constitutional Tribunal 
      5. Court of Justice of the European Union, Press Release No 65/23 
      6. Financial Times, 16 October 2022 – Rule of law stand-off threatens new EU funding to Poland
      7. European Commission, 2023 European Semester: Country Report – Poland 
      8. Reuters, 30 May 2023 – EU, US concerned new Polish law on Russian influence to affect election 
      9. Polish Ministry of Family and Social Policy – The minimum salary in 2023 is higher than previously proposed 
      10. European Commission – Spring 2023 Economic forecast for Poland
      11. OECD, February 2023 – Economic Survey of Poland 
      12. Euractiv, 18 July 2022 – Poland to spend 5% of GDP on defence 
      13. European Systemic Risk Board, February 2022 – Vulnerabilities in the residential real estate sectors of the EEA countries 
      14. Court of Justice of the European Union, Press Release No 36/23 
      15. KNF - Position of the Chairman of the Financial Supervisory Commission prepared for the hearing before the Court of Justice of the European Union in case C-520/21


      Methodology
      The methodology used for these Credit Ratings and/or Outlooks, (Sovereign Rating Methodology, 27 September 2022), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

      Solicitation, key sources and quality of information
      The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
      With Rated Entity or Related Third Party participation    YES
      With access to internal documents                                  YES
      With access to management                                            YES
      The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity.
      Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
      Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

      Regulatory disclosures
      These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
      Lead analyst: Dennis Shen, Senior Director
      Person responsible for approval of the Credit Ratings: Dr. Giacomo Barisone, Managing Director
      The Credit Ratings/Outlooks were first released by Scope Ratings in January 2023. The Credit Ratings/Outlooks were last updated on 14 January 2022.

      Potential conflicts
      See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.  

      Conditions of use / exclusion of liability
      © 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.

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