Scope’s Government-Related Entity Methodology is based on a qualitative, principles-based ‘segmentation-approach’ to account for the wide variety of entities and organisations, varying jurisdictions and resulting different relationships of GREs with their respective governments.

GRE methodology highlights

Scope’s approach starts with the analysis of the strength relationship between the GRE and the sponsoring government. Based on the GRE’s level of integration with the government, Scope then chooses either the ‘Top-Down’ or ‘Bottom-Up’ approach to determine the primary driver of the GRE’s rating.

The ‘Top-Down’ approach takes the sponsoring government’s rating as the starting point and then applies indicative notching based on Scope’s assessment of i) the ‘control and regular government support’ and ii) the ‘likelihood of exceptional support’ for the GRE. In case of statutory guarantees for the GRE, Scope will directly align the GRE’s with the government’s rating.

Scope’s ‘Bottom-Up’ approach starts with the assessment of the GRE’s stand-alone credit quality, and then, applies credit uplift factors. The extent of the upward notching is based on Scope’s assessment of i) the government’s ‘capacity to provide support’, and ii) the government’s ‘willingness to provide support’.

In a third step, Scope performs a supplementary analysis which can have credit-positive or negative implications for the final rating or no implications at all. This can include an assessment of the fundamentals of the GRE (under the ‘Top-Down’ approach) and the risk of potential negative interventions by the government (under both approaches).

Summary of key changes

• The scope of the methodology has been broadened by extending the definition of GRE to charitable and not-for profit entities, such as certain European higher education institutions with no public ownership.
• The scope of the assessment of the level of integration with the government has been broadened to allow for the consideration of entities that do not have a clear ownership structure by adding a funding criterion.
• The update also contains editorial changes and minor modifications to increase clarity and transparency.

GREs with no shareholders may thus be effectively captured by the updated GRE methodology. The methodology update does not affect any existing ratings or rating outlooks.

The proposed changes were published on May 11 as a call for comments. No comments were received during the consultation period which ended on June 11. The final methodology is published with no analytical changes versus the call for comments. Scope has clarified however that the broadening of the scope of the methodology applies only to certain European higher education institutions.

Download the updated methodology.