Morningstar DBRS Publishes Final Global Methodology for Rating Supranational Institutions

Morningstar DBRS finalized its Global Methodology for Rating Supranational Institutions.

This Methodology presents the criteria for which Multilateral Financial Institutions (MFIs) and other Supranational Institutions ratings are assigned and/or monitored.

The Methodology supersedes the prior version published on February 16, 2024, and is effective as of June 23, 2025.

Morningstar DBRS received some comments during the Request for Comment period, which will not be published per the respondents' requests. Comments received expressed support for the added transparency and encouraged additional clarity with regard to the weights associated with individual factors and metrics within each building block. In addition, respondents raised specific questions regarding metric selection and metric thresholds in some of the building blocks. In particular, respondents expressed some concerns regarding thresholds on metrics relating to earnings and profitability, given the not-for-profit mandates of most multilateral financial institutions.

In response to these comments, Morningstar DBRS has introduced additional clarifications, including with regard to the subfactor weights within each building block and the impact of additional considerations on the final building block assessment. Morningstar DBRS has not modified any of the selected metrics in response to the comments received, which in its assessment remains entirely appropriate for an assessment of credit risk. Morningstar DBRS, however, provided additional details on the mechanism within the methodology, which allows for unusually strong risk profiles and high levels of capitalization to compensate for relatively poor income generation in MFIs. Morningstar DBRS has also raised the thresholds for one indicator, Provisions/IBP, given expectations that the lower provisioning needs associated with the conservative risk management of most supranational institutions will at times be offset by this lower average income generation. Morningstar DBRS has also provided additional details on factors that may influence its assessment of credit and other risks.

The revised Methodology updates and further harmonizes the Intrinsic Assessment section with the analysis outlined in Morningstar DBRS' "Global Methodology for Rating Banks and Banking Organizations" and other related methodologies. Additional metrics and benchmarks have been incorporated into the methodology to provide improved transparency.

No rating actions were taken as a result of the proposed material changes. While the proposed changes could at the margin result in slightly lower Intrinsic Assessments for some supranational institutions, the methodology's approach to assessing the impact of member support remains unchanged, and Morningstar DBRS expects no impact on outstanding credit ratings.

All comments received during the request for comment period have been published to the Morningstar DBRS website, except in cases where confidentiality is requested by the respondent.

Notes:
Morningstar DBRS methodologies are publicly available on its website http://www.dbrs.morningstar.com under Methodologies & Criteria.

For more information on this methodology or on this industry, visit http://www.dbrs.morningstar.com or contact us at info-DBRS@morningstar.com