The country risk classifications of the Participants to the Arrangement on Officially Supported Export Credits (the "Arrangement") are the most fundamental building block of the Arrangement rules on minimum premium rates for credit risk. They are produced solely for the purpose of setting minimum premium rates for transactions supported according to the Arrangement and they are made public so that any  country that is not an OECD Member or a Participant to the Arrangement may observe the rules of the Arrangement if they so choose. Neither the Participants to the Arrangement or the OECD Secretariat endorse nor encourage their use for any other purpose.

The country risk classifications are meant to reflect country risk. Under the Participants’ system, country risk is composed of transfer and convertibility risk (i.e.the risk a government imposes capital or exchange controls that prevent an entity from converting local currency into foreign currency and/or transferring funds to creditors located outside the country) and cases of force majeure (e.g. war, expropriation, revolution, civil disturbance, floods, earthquakes).

The country risk classifications are not sovereign risk classifications and should not, therefore, be compared with the sovereign risk classifications of private credit rating agencies (CRAs). Conceptually, they are more similar to the "country ceilings" that are produced by some of the major CRAs.

The Participants’ country risk classification system uses a scale of eight risk categories (0-7). According to the rules of the Arrangement, the country riskclassification of High Income OECD countries and other High Income Euro-zone countries is Category 0. While no minimum premium rates are set for transactions involving obligors in Category 0 countries, the premium rates charged should not undercut private market pricing.

The country risk classifications of all other countries are determined through the application of a two-step methodology:

1.      The Country Risk Assessment Model (CRAM) produces a quantitative assessment of country credit risk based on three groups of risk indicators (the payment experience of the Participants, the financial situation and the economic situation).

 

2.      A qualitative assessment of the CRAM results by country risk experts from OECD members, considered country-by-country to integrate political risk and/or other risk factors not taken (fully) into account by the CRAM.

Accordingly, the final country risk classifications are achieved through a thorough discussion amongst experts and a consensus-building process.

The country risk experts meet several times a year. These meetings are organised so as to guarantee that every country is reviewed whenever a fundamental change is observed and at least once a year. Although the meetings and details of the CRAM are confidential and no official reports of the deliberations are made publicly available, the list of country risk classifications is published after each meeting.

Please note that the Participants’ Country Risk Classifications came into existence in 1999 when the Knaepen Package on minimum premium rates was agreed; accordingly no historical classifications are available for prior years.

Prevailing Classifications of Multilateral/Regional Financial Institutions

January 2012