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Eiko Sievert
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Alvise Lennkh-Yunus
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Scope affirms KfW at AAA with Stable Outlook
Rating action
Scope Ratings GmbH (Scope) has today affirmed KfW’s AAA long-term issuer and senior unsecured debt ratings in local currency, with Stable Outlooks. Scope also assigned AAA long-term issuer and senior unsecured debt ratings in foreign currency, with Stable Outlooks. Scope also affirmed S-1+ short-term issuer ratings in local currency and assigned S-1+ short-term issuer ratings in foreign currency with Stable Outlooks.
Scope has also affirmed the following programme ratings:
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KfW Note Programme rated AAA/Stable
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KfW Australian and New Zealand Medium-term Note Programme rated AAA/Stable
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KfW EUR 90bn Multi-Currency Commercial Paper Programme rated S-1+/Stable
- KfW USD 30bn US Commercial Paper Programme rated S-1+/Stable
The AAA/Stable ratings for KfW reflect several key factors:
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Equalisation factor: KfW’s ratings are equalised with those of the Federal Republic of Germany (AAA/Stable and S-1+/Stable). This reflects the explicit, unconditional, unlimited, statutory, direct and irrevocable guarantee of the Federal Republic of Germany for all existing and future obligations of KfW in respect of money borrowed, bonds and notes issued, and derivative transactions entered into by KfW, as well as obligations of third parties that are expressly guaranteed by KfW. The bank’s public legal status as a public law institution (Anstalt des öffentlichen Rechts) legally exempts it from insolvency procedures, in line with most other German state development banks. In addition, the bank benefits from an institutional liability support mechanism in the form of a maintenance obligation by the Federal Republic under the principle of Anstaltslast.
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Strong integration with the public sponsor: Scope acknowledges the mature and very supportive legal framework of the bank, stipulated in the Law Concerning KfW (KfW law), which makes changes to KfW’s business model or guarantee structure unlikely. In addition, KfW’s high strategic importance to the German federal government is underpinned by its critical role in implementing Germany’s economic policy, including coordinating and providing crisis support to municipalities and businesses.
- Robust standalone fundamentals: The bank’s excellent fundamentals include its high capitalisation and asset quality, strong liquidity and funding profile, and excellent capital market access. KfW’s market presence is underpinned by its role as the largest German development bank and one of Europe’s largest and most frequent SSA issuers over past decades.
Download the updated Rating Report here.
Key rating drivers
Equalisation factor
KfW’s AAA rating reflects the extensive guarantee framework for its liabilities provided by the Federal Republic of Germany, which is the key factor for equalising KfW’s ratings with the ratings of Germany. The explicit, unconditional, unlimited, statutory, direct and irrevocable guarantee can only be amended, revoked or restricted through an act of parliament (Germany’s Bundestag). Scope deems any such development unlikely.
KfW also benefits from a maintenance obligation (Anstaltslast)* provided by the Federal Republic of Germany. This two-fold** guarantee mechanism significantly enhances the likelihood of government support for KfW if ever needed. In line with German state development banks, KfW is exempt from insolvency procedures due to its public law charter.
KfW is not considered a credit institution or financial services institution under the German Banking Act or relevant EU directives and regulations. While it is exempt from liquidity rules, disclosure requirements, and recovery and resolution regulations, the bank is subject to bank regulatory provisions, including capital adequacy requirements and a specialised regime for minimum requirements for risk management. Supervision falls to the German Federal Financial Supervisory Authority (BaFin) in collaboration with the Bundesbank. KfW is also subject to legal supervision by the Federal Ministry of Finance in consultation with the Federal Ministry for Economic Affairs and Energy.
High strategic importance to Federal Republic of Germany
The rating is further underpinned by KfW’s high strategic importance to the Federal Republic of Germany. As one of the world’s leading promotional banks and the largest in Germany, with total assets of EUR 542bn as of 31 March 2025, KfW is instrumental to Germany’s implementation of policy objectives at national and regional level.
The bank’s activities have a ‘high’ strategic importance for its public sponsors. It fulfils a central role in promoting sustainable economic, environmental, and social development in Germany and internationally. Domestic activities particularly focus on providing SME financing to support innovation, digitalisation and growth, improving energy efficiency and
climate protection in Germany’s housing stock and transportation infrastructure, promoting affordable housing and urban development, and supporting education and social infrastructure. KfW’s strategic relevance and adaptability have been highlighted in recent years. During the Covid-19 pandemic, the bank played a key role in supporting companies by offering loan financing and liquidity support on behalf of the central government. In response to the Covid-19 pandemic and the energy and cost-of-living shock in 2022, the bank acted as a financing intermediary for the Economic Stabilisation Fund (WSF). WSF funding of EUR 17.4bn was used to fund the special coronavirus programme, and EUR 4bn to support liquidity of energy sector companies and Germany’s energy infrastructure.
KfW’s domestic promotional activities are organised into three business areas: i) SME bank and private clients, which integrates standardised financing products for SMEs, business founders, start-ups, self-employed professionals and private individuals; ii) customised finance and public clients, which caters to regional development banks and financing services for municipalities and social infrastructure; and iii) KfW Capital, which aggregates KfW’s venture capital investments and aims to sustainably improve the supply of venture and growth capital for innovative technology companies in Germany and Europe. Through its subsidiaries including KfW IPEX-Bank, Deutsche Investitions- und Entwicklungsgesellschaft (DEG), KfW Capital, and the business unit KfW Entwicklungsbank, the KfW Group also provides export and project finance as well as international promotional finance. Risks to KfW’s position as the Federal Republic’s development bank and its provision of competition-neutral activities, which are underpinned by a stable and supportive legal framework on national and European levels, are remote.
High capitalisation and sound asset quality, excellent funding and liquidity profiles.
KfW’s Common Equity Tier 1 ratio of 28.6% as of 31 March 2025 is sound and has steadily increased over the past decade from around 20%. KfW benefits from continuous internal capital generation and operates under a statutory mandate that prohibits profit distribution as per Article 10 (3) KfW Law. Consequently, annual profits are retained to support capitalisation levels or reinvested to further its development and promotional activities.
KfW’s asset quality is high, underpinned by the bank’s double-recourse loan protection for its policy mandated lending business. Domestic promotional business is mainly conducted through the banking sector via on-lending. Typically, KfW has a direct claim against the intermediary bank to whom it provided the initial loan (the ‘house-bank principle’) as well as the ultimate borrower. Overall credit quality of the portfolio remains stable in 2024 with 81% of net exposure classified as investment grade, while its NPL ratio according to SNL data declined to 2.72% at year-end 2024, down from 3.05% in 2023.
The guarantee structure allows the bank to tap capital markets at favourable rates. As one of the world’s largest EUR SSA issuers, KfW demonstrates a favourable liquidity and funding profile, with excellent capital market access for its EUR 65-70bn funding programme. This is further supported by preferential treatment of the bank’s bonds under Solvency II, along with their recognition as Level 1 high-quality liquid assets for liquidity coverage ratio requirements and zero risk-weighting under Basel rules.
Credit challenges: limited loan portfolio diversification and modest though stable profitability, both driven by KfW’s public policy mandate.
KfW’s loan portfolio is characterised by regional and sectoral concentration. More than half of its total exposures are in the Federal Republic of Germany and almost two-thirds of total exposures are to the financial industry. The regional concentration makes the bank’s asset quality susceptible to developments in the country. At the same time, prudent underwriting standards lead to very robust asset quality, which Scope expects to remain robust despite the protracted economic stagnation in Germany.
Finally, KfW’s profitability is modest, but stable, reflecting its non-profit maximising character and public policy mandate according to the KfW Law. Operating performance is largely dependent on net interest income, which continues to benefit from relatively high interest rates prevailing in the euro area. While KfW’s profitability is modest, the bank has been profitably every year since 2009.
Outlook and rating sensitivities
The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the coming 12 to 18 months.
Downside scenarios for the rating and Outlooks are (individually or collectively):
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Downgrade of the Federal Republic of Germany’s sovereign ratings;
- Changes to KfW’s legal framework or guarantee structure, notably weakening government support.
Qualitative Scorecard QS1 and Equalisation Factor
Scope applies a top-down approach (QS1) in assessing the creditworthiness of KfW, which takes the public sponsor’s rating (Federal Republic of Germany: AAA/Stable) as the starting point. Scope sees ‘strong’ integration between KfW and the Federal Republic of Germany, reflecting the bank’s: i) full public ownership with 80% owned by the Federal Republic and 20% by the Federal States; ii) public legal status as an ‘Anstalt des öffentlichen Rechts’ (public law institution); iii) fulfilment of operating activities exclusively on behalf of the government, with the purpose of implementing economic and social policies; and iv) its high financial interdependence with the Federal Republic due to significant financing provided for public investments and supporting economic development at the national, regional and local levels.
For further details, please see Appendix I of the associated rating report.
Scope then applies a rating equalisation factor given the explicit, unconditional, unlimited, statutory, direct and irrevocable guarantee of the Federal Republic of Germany for KfW’s obligations with respect to money borrowed, bonds and notes issued, and derivative transactions entered into by KfW, as well as obligations of third parties that are expressly guaranteed by KfW.
The approach also includes a supplementary analysis of the entity’s business and financial risk profiles, which has no bearing on the final credit ratings.
The assessments under QS1 and the rating equalisation factor result in an indicative rating of AAA.
The results were discussed and confirmed by a rating committee.
Environmental, Social and Governance (ESG) factors
ESG factors material to KfW’s credit quality are captured by Scope’s rating approach through several analytical areas.
Governance and social considerations are material to KfW’s credit rating and were included in Scope’s assessment of: i) KfW’s level of integration with the public sponsor, highlighting the supportive legal framework that requires the bank to comply with its statutes and fulfil its role as a competition-neutral public-law institution, including the provision of key services to support the domestic economy; and ii) KfW’s standalone fundamentals in the supplementary analysis, highlighting its conservative risk profile and management.
The KfWplus initiative is central to the bank’s strategic agenda, emphasising a foundational focus on climate and environmental aspects in its promotional business. It aims to harmonise three strategic objectives: i) mapping KfW’s financing activities to the UN Sustainable Development Goals (SDGs). KfW aims to map 100% of annual new business to at least one SDG. In the financial year 2024, 98.2% of new promotional commitments could be allocated to an SDG; ii) the “tranSForm” project guided KfW’s strategic efforts in the area of sustainable finance from 2020 until end-2024. This includes alignment of financing activities with a 1.5° climate target under the Paris Agreement and underscores KfW’s commitment to support the federal government’s goal of reducing emissions; and iii) an environment quota target with the aim of 38% of new commitment volumes to focus on financing climate-related and environmental public promotional programmes. The environment quota of 44% at group level in 2024 was above this target.
To strategically advance the group's long-term commitment to sustainability, the 2029 strategic objectives include a target of achieving an average position among the top three development and promotional banks within a designated “Best of the Best” peer group. This group consists of the ten highest-rated development and promotional banks as assessed by the respective peer categories of three leading ESG rating agencies: ISS, MSCI, and Sustainalytics.
KfW's green bond framework, which was initially introduced in 2014, supports various project categories aimed at climate change mitigation and sustainable development and is regularly revised to align with market standards and comply with the EU taxonomy. The latest update to the framework became effective from January 2024. As the green finance market evolves, KfW periodically reviews the framework, including its alignment with updated versions of the ICMA Green Bond Principles, with the aim of maintaining or improving transparency and reporting disclosures.
KfW has been an active player in the green bond market and stands as one of the largest issuers globally, with outstanding EUR green bond issuances totalling EUR 54bn as of end-May 2025. The bank issued EUR 12.2bn in green bonds during 2024 and intends to issue approximately EUR 10bn in 2025. KfW continues to actively contribute to the qualitative development of the green bond market through market initiatives and direct engagement with market participants.
Editorial Note:
* There was an amendment to a sentence in the section ‘Key rating drivers: Equalisation factor’ on 18 June 2025. The original publication referred to an additional guarantee obligation (Gewährträgerhaftung) provided by the Federal Republic of Germany. The issuer confirmed that this no longer applies.
** The word was amended on 18 June 2025. In the original publication, the text read "three-fold".
Rating Committee
The main points discussed during the rating committee were: i) the level of integration with the public sponsor; ii) the liability support mechanism; and iii) a supplementary analysis of KfW’s fundamentals.
Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Government Related Entities Rating Methodology, 10 December 2024), 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 Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
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 Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.
Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Eiko Sievert, Executive Director
Person responsible for approval of the Credit Ratings: Alvise Lennkh-Yunus, Managing Director
The local currency Credit Ratings/Outlooks were first released by Scope Ratings on 4 December 2015. The Credit Ratings/Outlooks were last updated on 21 June 2024.
The foreign currency Credit Ratings/Outlooks were first released by Scope Ratings on 6 June 2025.
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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.
Conditions of use / exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab 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. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.
Eiko Sievert
Analyst
Alvise Lennkh-Yunus
Team leader
