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Investing.com -- On Friday, Fitch Ratings confirmed the Long-Term Foreign-Currency Issuer Default Rating (LTFC IDR) of the Bank of England (BoE) at ’AA-’ and maintained a stable outlook.
The BoE’s rating is directly tied to the UK sovereign rating, as the BoE serves as the monetary branch of the UK government. Therefore, its credit profile mirrors that of the sovereign government. Currently, Fitch only rates the three-year maturity US dollar bonds of the BoE. This rating does not extend to the BoE’s typical central-bank liabilities, such as bank notes or commercial bank reserves, which are monetary liabilities and not rateable debt.
The BoE’s rating reflects its central role in the UK and international financial system and is underpinned by support from the UK sovereign. The near certainty of sovereign support for the BoE is due to its national strategic importance and its ownership by the UK Treasury.
In terms of ESG (Environmental, Social, and Governance) considerations, the UK scores ’5[+]’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. These scores are based on the World Bank Governance Indicators (WBGI) which play a significant role in Fitch’s proprietary Sovereign Rating Model (SRM). The UK’s high WBGI percentile ranking at the 85th percentile reflects its long history of stable and peaceful political transitions, well-established rights for political participation, strong institutional capacity, effective rule of law, and low corruption levels.
The BoE’s rating is sensitive to changes in the UK sovereign rating. Any negative changes in the UK sovereign rating could lead to a downgrade of the BoE’s rating. Conversely, any positive changes in the UK sovereign rating could lead to an upgrade of the BoE’s rating.
The ESG considerations for the BoE are the same as those for the UK sovereign. The key information used in the analysis is described in the Applicable Criteria.
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