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Comparative Statistics: Local And Regional Government Risk Indicators: Europe Remains Resilient

This report does not constitute a rating action.

S&P Global Ratings assigns credit ratings to local and regional governments (LRGs) based on its qualitative and quantitative analysis of financial, economic, managerial, and institutional factors. Our analytical framework for rating LRGs comprises six major components, including the institutional framework, economy, financial management, budgetary performance, liquidity, and debt burden.

Our assessment of the institutional framework is an important component of the rating. The institutional and legislative environment in which an LRG operates provides an important context for evaluating the LRG's individual credit profile. Therefore, we combine our assessment of the institutional framework and the five other factors listed above to determine an indicative credit level for an individual LRG. We then adjust this level for certain overriding factors to provide the final rating for the respective LRG (see "Methodology For Rating Local And Regional Governments Outside Of The U.S.," published July 15, 2019).

LRG Characteristics By Rating Category

Europe, the Middle East, and Africa (EMEA) is the only region globally where we find the full spectrum of rating categories. This is mainly due to the region's economic diversity and the different institutional frameworks, which range from extremely predictable and supportive to very volatile and underfunded, mostly in emerging markets.

We expect European LRGs' credit quality will remain resilient as the economy gradually recovers and lending rates decline from peak levels. Although stronger economic performance supports revenue growth, a rise in expenditure due to the lagged effects of inflation and rising demand for public services will dampen a stark improvement in budgetary performance. This will increase the debt burden, particularly in weaker rating categories.

Weaker institutional settings and a decline in the quality of financial management will further constrain ratings on LRGs in speculative-grade categories. The limited predictability of financial policies and the associated uncertainty can lead to higher borrowing costs, particularly in the case of entities with limited access to deep capital markets. The availability of EU funds and investor confidence are critical for their ability to maintain sufficient liquidity.

Geopolitical risks remain a key challenge to our base-case scenario and could lead to prolonged periods of slow economic growth and higher-than-expected interest rates. In such a scenario, we anticipate budgetary performance and debt levels will deteriorate across all rating categories.

Chart 1

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Chart 2

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'AAA'

LRGs in the 'AAA' category are located in Germany, Norway, Sweden, and Switzerland, benefit from strong economies, and operate within institutional frameworks that are extremely predictable and supportive. All LRGs have prudent financial management practices that promote detailed long-term planning and good internal and external risk management. Most LRGs within this category enjoy very good access to external liquidity to fund any unexpected short-term financial needs. Since our previous report in September 2023, we have upgraded three Swiss LRGs to the 'AAA' category from the 'AA' category. We note that we have not downgraded any LRGs in this rating category over the same period, reflecting that our ratings on LRGs in this category are very stable.

Other common characteristics of 'AAA' rated LRGs include:

  • Very strong economic base. Median national GDP per capita was high at about $55,592 in 2023, with very high local GDP per capita, particularly in Switzerland.
  • Strong budgetary performance. Economic recovery will support budgetary performance over the short term. Operating surpluses will remain solid, albeit slightly lower than in 2023, due to continued spending pressures from the lagged effects of inflation and investment needs. We expect small deficits after capital accounts over 2022-2026, with a median of 0.1%.
  • Low but increasing debt burden. We expect median tax-supported debt will increase to an average of 40.6% of consolidated operating revenues over 2024-2026, based on higher spending pressures. Median interest payments will be very low and stable in an international comparison and remain below 1% of operating revenues.

Table 1

Assessments for European local and regional government risk indicators ('AAA' rated)
Rating factor assessments
Foreign currency ratings§ Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

Germany*

AAA/Stable/A-1+

State of Bavaria

AAA/Stable/A-1+ 1 1 1 2 1 2

State of Saxony

AAA/Negative/A-1+ 1 2 1 2 1 2

Norway*

AAA/Stable/A-1+

City of Oslo

AAA/Negative 1 1 1 2 2 3

Sweden*

AAA/Stable/A-1+

City of Helsingborg

AAA/Stable/A-1+ 1 1 1 2 2 2

City of Malmo

AAA/Stable/A-1+ 1 2 1 2 1 2

City of Stockholm

AAA/Stable/A-1+ 1 1 1 2 1 2

City of Vasteras

AAA/Stable/A-1+ 1 1 1 2 1 3

Municipality of Lund

AAA/Stable/A-1+ 1 1 2 2 1 2

Municipality of Nacka

AAA/Stable/A-1+ 1 1 2 2 1 2

Municipality of Taby

AAA/Stable 1 1 2 2 1 2

Region of Skane

AAA/Stable 1 1 2 3 1 1

Region of Vastra Gotaland

AAA/Stable/A-1+ 1 1 2 3 1 1

Switzerland*

AAA/Stable/A-1+

Canton of Aargau

AAA/Stable/A-1+ 1 1 2 1 1 2

Canton of Basel-City

AAA/Stable/A-1+ 1 1 1 1 1 4

Canton of Basel-Country

AAA/Stable/A-1+ 1 1 1 1 1 4

Canton of Solothurn

AAA/Stable/A-1+ 1 1 2 1 1 3

Canton of St. Gallen

AAA/Stable/A-1+ 1 1 1 1 1 2

Canton of Vaud

AAA/Stable 1 1 1 3 1 1

Canton of Zurich

AAA/Stable 1 1 1 2 1 3

City of Zurich

AAA/Stable/A-1+ 1 1 1 2 1 3
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest. *Unsolicited ratings. §Issuer credit rating as of Sept. 13, 2024.

Table 2

European local and regional government financial and economic statistics ('AAA' rated)
Local GDP (nominal) per capita (US$) (single units) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
Global median 87,417.3 55,592.0 10.3 10.6 0.5 0.0 28.9 34.4 29.4 32.3 0.9 0.9
EMEA median 86,045.8 55,592.0 7.4 6.8 -0.5 -0.1 40.8 46.4 37.8 40.6 0.5 0.8
Germany

State of Bavaria

62,005.0 52,837.9 12.0 13.6 0.5 1.6 25.3 23.8 25.3 23.8 0.5 0.5

State of Saxony

41,244.0 52,837.9 8.9 11.6 -3.5 -0.7 29.4 28.7 29.4 28.7 0.2 0.5
Norway

City of Oslo

N.A. 88,415.4 4.4 5.9 -7.5 -5.3 84.9 87.0 84.9 87.0 2.3 2.4
Sweden

City of Helsingborg

N.A. 55,592.0 10.2 10.1 0.8 0.0 70.4 69.6 50.1 48.9 2.3 2.5

City of Malmo

N.A. 55,592.0 7.1 6.6 -0.5 -0.1 52.2 59.8 46.2 53.1 0.8 1.4

City of Stockholm

N.A. 55,592.0 9.4 7.0 1.3 -0.2 100.7 104.3 82.4 85.6 2.4 2.6

City of Vasteras

N.A. 55,592.0 10.2 9.3 2.2 1.0 96.1 103.1 64.0 68.6 2.5 2.8

Municipality of Lund

N.A. 55,592.0 5.4 6.0 5.4 -0.8 77.3 79.0 72.9 75.4 2.2 2.1

Municipality of Nacka

N.A. 55,592.0 7.1 6.5 -4.1 -2.6 26.9 34.4 25.3 32.3 0.5 0.9

Municipality of Taby

N.A. 55,592.0 13.1 10.4 4.2 1.0 22.6 27.2 22.9 27.3 0.4 0.7

Region of Skane

N.A. 55,592.0 3.1 5.4 -3.7 -1.3 16.7 17.1 18.4 18.8 0.3 0.4

Region of Vastra Gotaland

N.A. 55,592.0 7.6 7.2 1.1 0.3 7.3 8.7 7.4 8.8 0.1 0.1
Switzerland

Canton of Aargau

74,661.4 98,747.9 7.6 6.6 -0.2 1.9 12.4 11.4 18.7 22.0 0.2 0.2

Canton of Basel-City

236,785.3 98,747.9 14.0 10.8 5.6 -0.8 53.3 58.3 56.3 62.3 0.3 0.4

Canton of Basel-Country

87,417.3 98,747.9 4.1 7.3 -2.4 0.9 80.6 76.9 82.0 78.3 1.0 0.9

Canton of Solothurn

80,730.4 98,747.9 3.2 5.9 -0.6 1.9 73.9 67.7 74.3 68.2 0.9 0.9

Canton of St. Gallen

95,108.2 98,747.9 1.1 4.5 -3.3 1.2 12.8 12.3 21.7 19.8 0.2 0.2

Canton of Vaud

84,674.2 98,747.9 1.4 4.2 -4.0 -0.1 6.8 5.3 6.8 5.3 0.2 0.2

Canton of Zurich

113,532.4 98,747.9 3.2 4.3 -2.2 -1.4 28.9 31.8 28.9 31.8 0.3 0.5

City of Zurich

217,730.6 98,747.9 11.5 10.6 -5.1 -4.8 62.8 64.3 62.8 64.3 0.8 1.0
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer. N.A.--Not available.
'AA'

The largest number of rated LRGs in EMEA are in the 'AA' category, with 44 entities in nine European countries: Austria, the Czech Republic, France, Germany, Norway, Spain, Sweden, Switzerland, and the U.K. Most 'AA' rated LRGs operate within institutional frameworks that are very predictable and well-balanced, with the exceptions of the City of Brno in the Czech Republic, Spanish special status entities, and the French departments, which operate within evolving institutional frameworks.

Financial management practices promote detailed long-term planning and good internal and external risk management. In general, LRGs in this rating category have weaker credit profiles than their 'AAA' rated peers because of weaker institutional frameworks and higher debt burdens.

Since our previous publication, we have added three newly rated LRGs to the 'AA' category: Collectivité européenne d'Alsace, Région Provences-Alpes-Côté d'Azur, and Lancashire County Council.

Key economic and financial risk indicators for 'AA' rated LRGs comprise:

  • Very strong economic base. Median national GDP per capita was about $55,592 in 2023, the same as in the 'AAA' category. Some 'AA' rated entities--such as Swiss cantons and cities, as well as Swedish municipalities and regions--benefit from very high local GDP per capita.
  • Strong budgetary performance. 'AA' rated LRGs have sound operating surpluses and slightly higher deficits after capital accounts than 'AAA' rated entities.
  • Moderate debt burden. We project median tax-supported debt will be at 88.3% of consolidated operating revenues over 2022-2026, which is more than double the level of 'AAA' rated LRGs. Median interest payments are low but will likely increase to an average of about 2.2% of operating revenues over 2022-2026. This is the highest level among investment-grade LRGs and a consequence of 'AA' rated LRGs' higher debt burden and their debt structure.

Table 3

Assessments for European local and regional government risk indicators ('AA' rated)
Rating factor assessments
Foreign currency ratings§ Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

Austria*

AA+/Positive/A-1+

State of Burgenland

AA/Stable/A-1+ 2 2 2 3 1 2

State of Lower Austria

AA/Stable/A-1+ 2 1 2 3 1 4

State of Styria

AA/Stable/A-1+ 2 1 2 3 1 3

State of Tyrol

AA+/Stable/A-1+ 2 1 2 2 1 2

State of Upper Austria

AA+/Stable/A-1+ 2 1 1 2 1 3

State of Vorarlberg

AA+/Stable/A-1+ 2 1 1 2 1 2

Czech Republic*

AA-/Stable/A-1+

City of Brno

AA-/Stable/A-1+ 3 3 3 1 1 1

France*

AA-/Stable/A-1+

Region of Auvergne-Rhone-Alpes

AA-/Stable/A-1+ 2 1 1 2 1 2

City of Paris

AA-/Stable/A-1+ 2 1 2 2 2 4

Collectivite Europeenne d'Alsace

AA-/Stable/A-1+ 3 1 1 2 1 3

Communaute D'Agglomeration De Cergy Pontoise

AA-/Stable 2 2 2 2 1 4

Department of Gironde

AA-/Negative/A-1+ 3 1 2 3 1 4

Department of Hauts-de-Seine

AA-/Stable/A-1+ 3 1 2 3 2 2

Hauts-de-France

AA-/Stable/A-1+ 2 2 2 2 1 4

Intercity of Saint-Quentin-en-Yvelines

AA-/Stable/A-1+ 2 2 2 1 1 5

Region of Pays de la Loire

AA-/Stable/A-1+ 2 1 1 2 2 4

Region of Provence-Alpes-Cote d'Azur

AA-/Stable/A-1+ 2 1 2 3 1 4

Germany*

AAA/Stable/A-1+

State of Baden-Wuerttemberg

AA+/Positive/A-1+ 1 1 1 2 1 4

State of Hesse

AA+/Stable/A-1+ 1 1 1 3 2 4

State of North Rhine-Westphalia

AA/Stable/A-1+ 1 1 2 3 1 5

Norway*

AAA/Stable/A-1+

Municipality of Stavanger

AA+/Positive/A-1+ 1 1 2 2 1 3

Spain*

A/Stable/A-1

Autonomous Community of Navarre

AA-/Stable 3 1 2 1 1 2

Autonomous Community of the Basque Country

AA-/Stable 3 1 2 2 1 3

Historical Territory of Bizkaia

AA-/Stable/A-1+ 3 1 2 1 1 2

Sweden*

AAA/Stable/A-1+

City of Boras

AA+/Stable/A-1+ 1 1 2 3 1 3

City of Goteborg

AA+/Stable/A-1+ 1 1 2 3 1 3

City of Uppsala

AA+/Stable/A-1+ 1 1 2 3 1 2

Municipality of Huddinge

AA+/Positive/A-1+ 1 1 2 2 2 2

Municipality of Jonkoping

AA+/Stable/A-1+ 1 1 2 2 3 3

Municipality of Linkoping

AA+/Stable/A-1+ 1 1 2 2 1 3

Municipality of Norrkoping

AA+/Stable/A-1+ 1 1 2 3 1 3

Municipality of Orebro

AA+/Positive/A-1+ 1 1 2 2 1 3

Municipality of Ostersund

AA+/Stable/A-1+ 1 1 2 2 1 4

Municipality of Sodertalje

AA+/Stable/A-1+ 1 2 1 2 1 3

Municipality of Sundsvall

AA+/Stable/A-1+ 1 1 2 2 1 3

Municipality of Vellinge

AA+/Stable/A-1+ 1 1 2 2 1 3

Municipality of Norrtalje

AA+/Positive/A-1+ 1 1 2 2 1 2

Region of Stockholm

AA+/Positive/A-1+ 1 1 2 3 1 2

Municipality of Trelleborg

AA+/Stable/A-1+ 1 1 2 3 2 3

Switzerland*

AAA/Stable/A-1+

City of Geneva

AA-/Positive 2 1 2 2 3 4

City of Lausanne

AA-/Stable 2 1 2 3 2 4

Republic and Canton of Geneva

AA/Positive 1 1 3 3 1 4

U.K.*

AA/Stable/A-1+

Greater London Authority

AA/Stable/A-1+ 2 1 2 3 1 4

Lancashire County Council

AA-/Stable 2 2 3 3 1 2
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest. *Unsolicited ratings. §Issuer credit rating as of Sept. 13, 2024.

Table 4

European local and regional government financial and economic statistics ('AA' rated)
Local GDP (nominal) per capita (US$) (single units) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
Global median 39,246.4 53,431.2 10.2 9.7 -3.7 -3.4 103.6 106.2 98.0 99.0 2.9 3.1
EMEA median 48,901.1 55,592.0 8.4 8.0 -1.3 -1.5 90.7 96.6 83.9 88.3 2.1 2.2
Austria

State of Burgenland

39,858.2 56,790.8 7.4 4.8 -4.2 -2.3 30.3 27.7 46.6 43.7 1.8 1.9

State of Lower Austria

47,852.7 56,790.8 8.9 7.4 0.5 -0.1 110.8 111.0 98.3 98.5 2.0 2.3

State of Styria

50,936.3 56,790.8 6.3 5.7 -11.1 -4.5 81.4 76.2 83.6 78.3 1.2 1.6

State of Tyrol

58,473.9 56,790.8 5.4 7.7 -3.7 -1.1 20.2 18.6 21.9 21.7 0.5 0.5

State of Upper Austria

57,902.9 56,790.8 9.8 9.0 1.0 -0.5 15.6 17.5 21.5 24.0 0.1 0.2

State of Vorarlberg

66,582.6 56,790.8 7.9 8.3 -2.0 -0.5 21.0 19.9 22.9 21.6 0.1 0.1
Czech Republic

City of Brno

29,540.8 30,557.1 31.5 27.8 5.6 5.1 10.8 13.2 10.8 15.1 0.7 0.7
France

Region of Auvergne-Rhone-Alpes

39,246.4 44,826.4 25.1 25.8 1.3 -1.5 83.9 88.3 83.9 91.8 2.4 2.5

City of Paris

N.A. 44,826.4 8.8 6.3 -4.2 -4.9 96.5 103.0 97.8 104.0 2.0 2.3

Collectivite Europeenne d'Alsace

40,145.2 44,826.4 12.1 11.2 -0.8 -1.4 27.6 33.6 116.7 51.5 0.7 0.7

Communaute d'Agglomeration de Cergy-Pontoise

N.A. 44,826.4 25.5 24.4 8.8 -0.5 146.0 156.1 146.0 156.1 2.9 3.5

Department of Gironde

N.A. 44,826.4 -0.4 2.3 -8.7 (6) 53.5 58.8 54.5 59.4 1.3 1.5

Department of Hauts-de-Seine

N.A. 44,826.4 8.5 8.5 -12.8 -9.8 9.3 29.4 13.4 33.2 0.4 1.1

Hauts-de-France

32,642.0 44,826.4 8.4 11.6 -3.3 -2.5 118.9 122.9 121.6 143.6 3.7 3.6

Intercity of Saint-Quentin-en-Yvelines

N.A. 44,826.4 25.4 24.3 -1.0 3.2 126.1 129.4 131.9 134.9 3.7 3.8

Region of Pays de la Loire

39,270.1 44,826.4 19.1 19.4 -3.8 -3.8 146.6 148.5 146.6 148.5 2.6 2.7

Region of Provence-Alpes-Cote d'Azur

41,504.6 44,826.4 17.7 18.7 -4.6 -5.6 129.3 133.2 129.3 133.2 3.0 3.2
Germany

State of Baden-Wuerttemberg

57,839.1 52,837.9 8.8 8.8 1.1 1.3 55.9 56.9 67.4 68.1 1.8 2.2

State of Hesse

57,577.0 52,837.9 3.1 5.2 -1.7 0.8 147.5 142.3 147.5 142.3 2.3 2.4

State of North Rhine-Westphalia

49,949.6 52,837.9 5.4 5.6 -3.6 -3.0 178.8 174.0 185.8 180.7 3.2 3.1
Norway

Municipality of Stavanger

N.A. 88,415.4 5.6 6.6 -6.1 -2.9 78.4 80.5 84.0 86.8 2.8 2.9
Spain

Autonomous Community of Navarre

35,589.3 32,873.6 11.3 9.6 5.3 3.4 47.1 44.2 54.4 51.2 0.7 0.8

Autonomous Community of the Basque Country

37,731.1 32,873.6 8.2 7.5 -2.6 -1.5 78.9 75.8 81.2 78.2 1.5 1.5

Historical Territory of Bizkaia

41,159.7 32,873.6 27.7 27.4 0.5 4.8 80.6 74.6 115.7 110.5 2.3 2.2
Sweden

City of Boras

N.A. 55,592.0 6.4 5.5 -3.5 -2.2 99.8 107.2 83.0 89.1 1.8 1.9

City of Goteborg

N.A. 55,592.0 7.1 5.6 -2.5 -2.5 109.3 116.4 85.1 90.6 2.6 2.4

City of Uppsala

N.A. 55,592.0 6.7 5.7 -1.0 -3.4 90.7 98.7 82.3 87.6 1.5 2.0

Municipality of Huddinge

N.A. 55,592.0 10.1 8.0 3.5 2.8 65.9 68.6 59.1 61.1 1.7 2.1

Municipality of Jonkoping

N.A. 55,592.0 8.5 8.9 -4.4 -3.3 54.9 60.0 78.1 80.7 2.1 2.4

Municipality of Linkoping

N.A. 55,592.0 2.2 2.4 -3.5 -2.9 9.5 78.5 69.2 77.6 2.2 2.3

Municipality of Norrkoping

N.A. 55,592.0 6.1 6.4 -0.8 -1.9 123.1 133.4 104.0 115.9 5.8 3.8

Municipality of Orebro

N.A. 55,592.0 4.5 5.3 1.1 1.1 131.8 131.4 111.1 114.8 3.1 3.2

Municipality of Ostersund

N.A. 55,592.0 14.1 7.9 1.8 -4.7 116.9 135.2 51.6 56.8 4.1 3.9

Municipality of Sodertalje

N.A. 55,592.0 6.0 6.1 2.0 0.1 90.8 95.7 67.0 71.1 3.7 3.9

Municipality of Sundsvall

N.A. 55,592.0 6.6 7.2 -1.0 -0.6 129.2 128.9 104.0 104.0 2.3 2.6

Municipality of Vellinge

N.A. 55,592.0 9.0 9.3 -7.3 -6.1 90.7 97.4 89.8 96.3 1.5 2.0

Municipality of Norrtalje

N.A. 55,592.0 12.8 9.3 2.3 1.0 69.0 74.3 68.2 72.0 2.1 2.6

Region of Stockholm

N.A. 55,592.0 9.2 9.1 0.5 1.2 41.1 38.8 42.8 40.5 1.1 1.1

Municipality of Trelleborg

N.A. 55,592.0 6.3 6.9 -7.1 -5.9 104.3 117.0 88.9 99.5 2.9 3.2
Switzerland

City of Geneva

130,560.6 98,747.9 11.0 10.1 1.8 0.5 124.5 120.2 124.5 120.2 2.1 1.9

City of Lausanne

80,655.0 98,747.9 8.0 8.5 -3.4 -2.9 147.4 144.7 147.4 144.7 2.3 2.2

Republic and Canton of Geneva

128,920.7 98,747.9 16.5 11.9 12.1 6.3 122.3 126.0 119.0 122.0 1.6 1.8
U.K.

Greater London Authority

71,372.6 49,165.6 2.5 2.7 0.3 -2.2 102.8 102.0 160.5 159.7 2.9 3.3

Lancashire County Council

N.A. 49,165.6 -9.9 -0.2 -7.1 -0.9 48.9 46.3 48.9 46.3 2.7 2.0
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer. N.A.--Not available.
'A'

LRGs in the 'A' category are located in Belgium, France, Latvia, Poland, and Spain. LRGs in this category typically operate within evolving institutional frameworks, and their financial management practices are usually strong. In general, institutional frameworks are less predictable and supportive than of those entities in the 'AA' category, and individual credit profiles are weaker due to less robust economies and higher debt burdens. Since our previous publication, we have added the newly rated Overseas Country of French Polynesia to the 'A' category.

'A' rated LRGs exhibit the following common characteristics:

  • Sound economic base. Median national GDP per capita was about $32,874 in 2023.
  • Solid budgetary performance, which is generally similar to that of 'AAA' and 'AA' rated peers. We expect the median operating balance will be about 6.2% of operating revenues, with moderate deficits after capital accounts of 0.9% over 2022-2026.
  • Moderate indebtedness, which is higher than that of higher-rated peers. We expect median tax-supported debt will be 105.2% of consolidated operating revenues over 2022-2026, with median interest payments of about 2.0% of operating revenues over the same period.

Table 5

Assessments for European local and regional government risk indicators ('A' rated)
Rating factor assessments
Foreign currency ratings§ Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

Belgium*

AA/Stable/A-1+

Region of Brussels-Capital

A+/Stable/A-1 2 2 3 4 1 4

France*

AA-/Stable/A-1+

City of Marseille

A+/Stable/A-1 2 3 2 3 2 4

Overseas Country of French Polynesia

A/Stable/A-1 3 3 3 2 1 4

Latvia

A/Stable/A-1

City of Riga

A/Stable/A-1 3 3 4 3 1 3

Poland*

A-/Stable/A-2

City of Krakow

A-/Stable 3 3 3 4 2 3

Spain*

A/Stable/A-1

Autonomous Community of Andalusia

A-/Stable 3 3 3 3 1 3

Autonomous Community of Canary Islands

A/Stable 3 3 2 1 1 2

Autonomous Community of Galicia

A/Stable/A-1 3 2 3 2 2 3

Autonomous Community of Madrid

A/Stable/A-1 3 2 3 3 2 4

Autonomous Community of the Balearic Islands

A-/Stable 3 2 3 2 3 4

City of Barcelona

A/Stable 3 2 2 1 1 1
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest. *Unsolicited ratings. §Issuer credit rating as of Sept. 13, 2024.

Table 6

European local and regional government financial and economic statistics ('A' rated)
Local GDP (nominal) per capita (US$) (single units) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
Global median 39,877.5 34,216.3 7.6 7.5 -2.7 -1.2 146.1 137.2 156.1 151.0 4.0 3.8
EMEA median 34,892.2 32,873.6 7.9 6.2 -2.4 -0.9 100.6 100.2 100.6 105.2 1.7 2.0
Belgium

Region of Brussels-Capital

88,588.3 53,744.8 -5.0 -2.9 -20.5 -16.8 204.6 214.7 204.6 214.7 4.9 5.2
France

City of Marseille

38,970.4 44,826.4 16.0 14.7 4.8 0.1 100.6 105.3 100.6 105.3 2.5 2.8

Overseas Country of French Polynesia

21,943.0 44,826.4 19.6 13.1 4.5 -1.4 75.1 75.6 74.7 74.3 1.7 2.0
Latvia

City of Riga

39,877.5 23,123.3 3.1 6.2 -2.4 -0.9 45.6 44.3 70.1 69.0 3.2 3.2
Poland

City of Krakow

36,269.7 22,072.0 -10.9 -1.6 -22.5 -9.9 87.4 78.8 88.3 82.9 4.8 4.4
Spain

Autonomous Community of Andalusia

22,208.8 32,873.6 -2.9 -0.5 -6.2 -2.5 124.4 120.8 126.6 122.8 1.5 1.7

Autonomous Community of Canary Islands

23,485.1 32,873.6 7.9 6.1 1.8 1.1 62.9 61.6 63.5 62.1 0.7 0.9

Autonomous Community of Galicia

27,279.0 32,873.6 9.6 9.5 -3.0 -0.3 104.0 100.2 109.2 105.2 1.0 1.2

Autonomous Community of Madrid

40,472.1 32,873.6 -3.3 -0.8 -7.7 -5.0 143.3 139.8 148.7 145.1 3.2 3.1

Autonomous Community of the Balearic Islands

31,172.0 32,873.6 8.4 6.8 0.8 -0.1 159.6 153.4 163.3 156.9 1.3 1.6

City of Barcelona

34,892.2 32,873.6 14.2 15.6 -0.6 0.1 29.1 27.2 38.4 36.3 0.8 0.7
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer.
'BBB'

LRGs in the 'BBB' category--the lowest category within the investment-grade segment--are in Italy, Spain, Bulgaria, Croatia, and Poland. They operate within an institutional framework that, although providing generally sufficient resources to meet their responsibilities, remains subject to potential changes. Exceptions include entities in Bulgaria and the City of Zagreb in Croatia, which operate within an unbalanced institutional framework.

Italian and Spanish LRGs in the 'BBB' category benefit from a relatively sound economic base and EU grants to sustain ambitious investment programs, which will not increase deficits after capital accounts over the medium term. Spanish regions' debt burden remains relatively high, but manageable, as they benefit from access to central government-funded liquidity facilities, which cover their entire funding needs. LRGs in Eastern Europe operate in wealthy economies and have generally modest debt burdens.

'BBB' rated LRGs share the following characteristics:

  • Sound economic base. Median national GDP per capita is similar to that of 'A' rated LRGs and was about $35,547 in 2023. Nevertheless, some entities' local GDP per capita ranges between 50% and 70% of the median. Examples include the City of Stara Zagora in Bulgaria, the Campania and Sicily regions in Italy, and the Autonomous Community of Extremadura in Spain.
  • Modest budgetary performance. We expect median operating balances will account for an average of 3.5% of operating revenues over 2022-2026. This is half the level of 'A' rated LRGs. Conversely, median budgetary balances after capital accounts are positive, suggesting lower investments.
  • Average to high debt burden below that of 'A' rated LRGs. We project median tax-supported debt will be about 54.9% of consolidated operating revenues over 2024-2026, which somewhat balances significant differences among 'BBB' rated LRGs. We note that some LRGs have significantly higher tax-supported debt burdens. This is especially the case for rated Spanish LRGs, whose debt burdens resulted from large deficits before 2014 and a gradual budgetary consolidation since. We estimate that the median interest burden will remain stable at 0.9% of operating revenues over 2022-2026.

Table 7

Assessments for European local and regional government risk indicators ('BBB' rated)
Rating factor assessments
Foreign currency ratings§ Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

Bulgaria*

BBB/Positive/A-2

City of Sofia

BBB/Positive 4 3 4 3 1 3

City of Stara Zagora

BBB-/Stable 4 4 4 4 3 1

Croatia*

BBB+/Positive/A-2

City of Zagreb

BBB-/Positive 4 3 4 3 3 3

Italy*

BBB/Stable/A-2

City of Rome

BBB/Stable 3 2 4 3 1 3

Metropolitan City of Rome

BBB/Stable 3 2 3 3 2 2

Region of Campania

BBB/Stable 3 4 4 4 2 2

Region of Liguria

BBB/Stable 3 3 2 3 1 1

Region of Sicily

BBB/Stable 3 4 4 3 2 1

Region of Umbria

BBB/Stable 3 3 2 3 1 1

Poland*

A-/Stable/A-2

City of Lodz

BBB+/Stable 3 3 3 4 3 4

Spain*

A/Stable/A-1

Autonomous Community of Aragon

BBB+/Positive 3 2 3 3 3 4

Autonomous Community of Extremadura

BBB/Stable/A-2 3 3 4 4 4 3
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest. *Unsolicited ratings. §Issuer credit rating as of Sept. 13, 2024.

Table 8

European local and regional government financial and economic statistics ('BBB' rated)
Local GDP (nominal) per capita (US$) (single units) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
Global median 25,129.3 27,472.8 4.9 4.3 0.5 0.1 24.0 28.2 31.7 32.4 0.8 0.9
EMEA median 30,833.8 35,547.2 3.8 3.5 1.4 0.7 31.8 32.3 57.5 54.9 0.8 0.9
Bulgaria*

City of Sofia

34,624.2 15,753.5 8.2 9.0 -0.7 -0.4 30.3 31.6 32.1 33.0 0.7 0.8

City of Stara Zagora

15,884.2 15,753.5 3.9 4.2 -0.3 -1.0 13.7 12.5 13.7 12.5 0.2 0.2
Croatia*

City of Zagreb

30,569.4 21,459.8 16.9 14.3 14.2 1.5 17.7 25.2 76.0 81.8 0.4 0.6
Italy*

City of Rome

35,710.1 38,220.7 6.0 2.4 5.2 -0.1 32.8 33.0 85.6 81.5 0.7 0.9

Metropolitan City of Rome

39,170.6 38,220.7 15.7 11.9 17.7 8.2 63.9 61.9 63.9 61.9 3.0 2.7

Region of Campania

20,769.4 38,220.7 3.7 4.5 1.5 2.6 39.9 38.0 51.0 48.0 1.1 1.1

Region of Liguria

37,640.5 38,220.7 3.8 2.7 1.3 1.7 11.2 10.9 15.6 15.3 0.4 0.3

Region of Sicily

21,152.7 38,220.7 15.4 8.2 12.4 5.5 30.8 31.2 31.4 31.8 0.9 0.9

Region of Umbria

31,098.3 38,220.7 2.2 2.3 2.0 1.5 15.1 14.5 15.9 15.4 0.8 0.8
Poland*

City of Lodz

27,784.5 22,072.0 -1.5 2.1 -19.5 -5.8 92.3 85.0 99.0 90.1 5.3 5.1
Spain*

Autonomous Community of Aragon

32,696.7 32,873.6 2.1 1.3 -3.2 -3.1 165.9 158.2 168.7 159.4 2.1 2.1

Autonomous Community of Extremadura

22,474.2 32,873.6 -2.7 -2.1 -5.1 -4.9 110.8 110.8 110.8 110.7 1.4 1.3
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer.
'BB'

We rate only two LRGs in the 'BB' category. Our rating on the Municipality of Skopje (North Macedonia) is constrained by its relatively weak institutional framework, coupled with weak financial management systems and practices, but counterbalanced by sound budgetary performance and relatively low to moderate indebtedness.

The 'BB' rated Autonomous Community of Valencia differs from other rated Spanish LRGs. Although it operates within a stronger institutional framework, we view the region's financial management as weak. Additionally, it has demonstrated weak budgetary performance and suffers from a very high debt burden, which significantly exceeds those of Spanish peers. This is partly due to below-average funding from the Spanish regional financing system for normal status regions.

Table 9

Assessments for European local and regional government risk indicators ('BB' rated)
Rating factor assessments
Foreign currency ratings§ Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

North Macedonia*

BB-/Stable/B

Municipality of Skopje

BB-/Negative 5 4 4 3 4 2

Spain*

A/Stable/A-1

Autonomous Community of Valencia

BB/Positive/B 3 3 4 5 4 5
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest. *Unsolicited ratings. §Issuer credit rating as of Sept. 13, 2024.

Table 10

European local and regional government financial and economic statistics ('BB' rated)
Local GDP (nominal) per capita (US$) (single units) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
North Macedonia

Municipality of Skopje

11,530.6 8,066.5 17.9 15.9 1.8 -1.5 12.7 12.6 21.5 21.5 0.3 0.4
Spain

Autonomous Community of Valencia

25,770.1 32,873.6 -10.0 -9.9 -13.9 -14.4 315.8 312.1 306.1 302.5 2.5 4.0
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer.
'B'

We rate the Federation of Bosnia and Herzegovina, Republika Srpska in Bosnia and Herzegovina, and the Region of Fergana in Uzbekistan in the 'B' category.

Our ratings on the Federation of Bosnia and Herzegovina and Republika Srpska are constrained by a volatile and unbalanced institutional framework that is characterized by frequent political tensions. The economy in this region is relatively poor, compared with Eastern European peers, with a median GDP per capita of $7,930 in 2023. The Federation of Bosnia and Herzegovina exhibits a stronger budgetary performance and lower debt burden than Republika Srpska.

The Region of Fergana operates within a weaker institutional framework than the entities in Bosnia and Herzegovina and is very volatile and centralized. The region's wealth remains low, with local GDP per capita of about $1,300 in 2023. While it maintains a minimal debt burden and stronger budgetary performance than Republika Srpska, Fergana's ability to influence its budgetary performance is limited due to central government control.

Table 11

Assessments for European local and regional government risk indicators ('B' rated)
Rating factor assessments
Foreign currency ratings § Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

Bosnia and Herzegovina*

B+/Stable/B

Federation of Bosnia and Herzegovina

B+/Stable/B 5 4 4 2 4 5

Republika Srpska

B/Stable 5 4 4 4 5 3

Uzbekistan*

BB-/Stable/B

Fergana Region

B+/Stable 6 5 5 3 3 1
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest. *Unsolicited ratings. §Issuer credit rating as of Sept. 13, 2024.

Table 12

European local and regional government financial and economic statistics ('B' rated)
Local GDP (nominal) per capita (US$) (single units) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
Bosnia and Herzegovina

Federation of Bosnia and Herzegovina

8,073.2 8,380.3 7.3 7.9 4.8 6.7 111.9 111.3 97.9 99.4 3.1 3.5

Republika Srpska

7,795.7 8,380.3 -0.8 0.0 -6.1 -4.1 109.2 104.9 112.5 108.2 3.7 3.5
Uzbekistan

Fergana Region

1,380.2 2,469.8 -0.4 0.0 -0.4 0.0 1.2 0.7 1.2 0.7 0.0 0.0
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer.
'CCC'

We only rate the City of Kyiv (Ukraine) in this category. The rating is primarily based on the effects of the Russia-Ukraine war on the sovereign and the city.

Table 13

Assessments for European local and regional government risk indicators ('CCC' rated)
Rating factor assessments
Foreign currency ratings§ Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

Ukraine*

--/--/SD

City of Kyiv

CCC+/Stable 6 4 5 4 4 2
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest. *Unsolicited ratings. §Issuer credit rating as of Sept. 13, 2024.

Table 14

European local and regional government financial and economic statistics ('CCC' rated)
Local GDP (nominal) per capita (US$) (single units) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
Ukraine

City of Kyiv

15,265.6 4,901.9 5.8 6.1 -3.5 -3.2 2.7 10.6 15.6 27.3 0.7 1.3
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer.
National scale ratings

Of all LRGs we rate in EMEA, we only use a national scale for LRGs in Israel. Almost all Israeli LRGs operate within evolving institutional frameworks, and their financial management practices are usually average. Israeli entities benefit from solid economic growth, with manageable liquidity levels, and share the following characteristics:

  • Solid economic base, with a high national GDP per capita of about $52,341 in 2023.
  • Moderate to weak budgetary performance. We expect operating margins will average 2.6% over 202-2026, with a moderate deficit after capital accounts of 2.2%.
  • Low debt burden. median tax-supported debt will be about 23.9% of consolidated operating revenues over 2022-2026. Median interest payments will also be very low over the same period, at 0.8% of operating revenues. This is one of the lowest ratios among rated LRGs in EMEA.

Table 15

Assessments for European local and regional government risk indicators, only rated at a national scale
Rating factor assessments
National scale ratings§ Institutional framework Economy Financial management Budgetary performance Liquidity Debt burden

Israel*

A+/Negative/A-1

Be'er Sheva

ilAAA/Stable/-- 3 2 3 4 1 2

Municipality of Bnei Brak

ilAAA/Stable/-- 3 3 3 4 1 2

Municipality of Herzliya

ilAAA/Stable/-- 3 1 3 2 1 1

Municipal Association of Igudan

ilAA+/Stable/-- 3 1 2 5 2 5

Municipality of Raanana

ilAAA/Stable/-- 3 1 3 3 2 1

Municipality of Tel Aviv

ilAAA/Stable/-- 3 1 2 3 1 3
Institutional framework assessement is based on a six-point scale, where 1 is the strongest and 6 the weakest, while the other factors are based on a scale from 1 to 5, with 1 being the strongest score and 5 the weakest.

Table 16

European local and regional government financial and economic statistics, only rated at a national scale
Local GDP (nominal) per capita ($) National GDP (nominal) per capita (US$) (single units) Operating balance (% of operating revenues) Balance after capital accounts (% of total revenues) Direct debt (% of operating revenues) Tax-supported debt (% of consolidated operating revenues) Interest (% of operating revenues)
2023a 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average 2023 Five-year average
Israel

Municipality of Be'er Sheva

N.A. 52,341 1.6 2.2 -5.5 -1.5 21.7 22.1 21.7 22.1 0.7 0.8

Municipality of Bnei Brak

N.A. 52,341 1.2 1.4 -2.7 -2 18.7 18.4 18.9 18.6 0.6 0.6

Municipality of Herzliya

N.A. 52,341 4.7 5.5 -5 -4.6 1.1 0.9 1.5 1.3 0.1 0.1

Municipality of Igudan

N.A. 52,341 53.7 53.6 -18.5 -26.2 302.8 322.2 302.8 322.2 7.7 8.3

Municipality of Raanana

N.A. 52,341 1.5 2.3 -1.1 0.1 25.6 25.7 25.6 25.7 1 0.9

Municipality of Tel Aviv

N.A. 52,341 2.5 3 -8.4 -2.3 31.3 31.8 32.1 32.7 0.9 0.8
Five-year averages cover 2022-2026. Data in 2023 refers to actuals whenever available, then estimates or base cases whenever available. The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer. a--Actual. N.A.--Not available.

Related Criteria And Research

Primary Credit Analysts:Felix Ejgel, London + 44 20 7176 6780;
felix.ejgel@spglobal.com
Didre Schneider, Frankfurt +49 69 33 999 244;
didre.schneider@spglobal.com
Secondary Contacts:Alejandro Rodriguez Anglada, Madrid + 34 91 788 7233;
alejandro.rodriguez.anglada@spglobal.com
Carl Nyrerod, Stockholm + 46 84 40 5919;
carl.nyrerod@spglobal.com
Noa Fux, London + 44 20 7176 0730;
noa.fux@spglobal.com
Stephanie Mery, Paris + 0033144207344;
stephanie.mery@spglobal.com
Michael Stroschein, Frankfurt + 49 693 399 9251;
michael.stroschein@spglobal.com
Maxim Rybnikov, London + 44 7824 478 225;
maxim.rybnikov@spglobal.com
Karen Vartapetov, PhD, Frankfurt + 49 693 399 9225;
karen.vartapetov@spglobal.com
Louise Morteveille, Paris;
louise.morteveille@spglobal.com

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