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EIB Internal Rating Model and Methodology Presentation to ISLTC

March 26, 2009. 2. European Investment Bank . EIB Internal Rating Model and Methodology. Overview of Basle II Issuance in June 2004 of the Revised Framework for International Convergence of Capital Measurement and Capital Standards (Basle II") to replace the 1998 Accord (Basle I")A more risk-se

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EIB Internal Rating Model and Methodology Presentation to ISLTC

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    1. March 26, 2009 1 European Investment Bank EIB Internal Rating Model and Methodology Presentation to ISLTC I am part of the CPI division, one out of 3 divisions of the CRD department. The CPI division is in turn split in 2 units: one dealing with all industrial sectors (Industry unit) and the other one (infra unit) which is responsible for telecoms, all transport sectors (Air Transport, Maritime, Roads + Motorways, Railways), urban and social sectors, as well as water and environment protection sectors. So, based on this sector split between the 2 units, obviously it is the Infra unit which is mainly confronted with Public Sector counterparts. AgendaI am part of the CPI division, one out of 3 divisions of the CRD department. The CPI division is in turn split in 2 units: one dealing with all industrial sectors (Industry unit) and the other one (infra unit) which is responsible for telecoms, all transport sectors (Air Transport, Maritime, Roads + Motorways, Railways), urban and social sectors, as well as water and environment protection sectors. So, based on this sector split between the 2 units, obviously it is the Infra unit which is mainly confronted with Public Sector counterparts. Agenda

    2. March 26, 2009 2 European Investment Bank EIB Internal Rating Model and Methodology Overview of Basle II Issuance in June 2004 of the Revised Framework for International Convergence of Capital Measurement and Capital Standards (“Basle II”) to replace the 1998 Accord (“Basle I”) A more risk-sensitive approach to determining minimum capital requirements. A key element of Basle II is the greater reliance on a bank’s internal rating system in calculating risk weighted assets and regulatory capital charges. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    3. March 26, 2009 3 European Investment Bank EIB Internal Rating Model and Methodology Implementation of IRM January 2005 – Bank decision to adopt IRB Advanced Approach January 2006 – Approval of IRM for internally rating EU counterparts January 2009 – Approval to extend IRM to Non-EU counterparts Advised by CSSF Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    4. March 26, 2009 4 European Investment Bank IRB Advanced Approach – Implications for EIB (1/2) All counterparts must be internally rated. IRB Banks must have in place rating and risk estimation systems that provide a meaningful assessment of borrower and facility characteristics. A bank must have a meaningful distribution of exposures across grades with no excessive concentrations, on both its borrower-rating and its facility-rating scales. To meet this objective, a bank must have a minimum of seven borrower grades for non-defaulted borrowers and one for those that have defaulted. Banks must have specific rating definitions, processes and criteria for assigning exposure to grades within a rating system. Credit scoring models are permissible as the primary or partial basis of rating assignments but sufficient human judgment and oversight is necessary to ensure that all relevant and material information is taken into consideration. EIB Internal Rating Model and Methodology Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    5. March 26, 2009 5 European Investment Bank IRB Advanced Approach – Implications for EIB (2/2) Rating assignments and periodic rating reviews must be completed and approved by a party independent from those that stand to benefit from the extension of credit. Ratings must be refreshed at least on an annual basis. A bank must collect and store data on key borrower and facility characteristics to provide effective support to its internal credit risk measurement. Banks must maintain rating histories on borrowers and guarantors, including the ratings since the borrower/guarantor was assigned an initial internal rating, the dates the ratings were assigned, the methodology and key data used to derive the rating and the person responsible. Internal ratings must play an essential role in the credit approval, risk management, internal capital allocations and corporate governance functions of banks using the IRB approach. EIB Internal Rating Model and Methodology Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    6. March 26, 2009 6 European Investment Bank Old EIB rating scale EIB Internal Rating Model and Methodology Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    7. March 26, 2009 7 European Investment Bank A new more granular EIB rating scale EIB Internal Rating Model and Methodology Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    8. March 26, 2009 8 European Investment Bank The Rating Process EIB Internal Rating Model and Methodology Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    9. March 26, 2009 9 European Investment Bank EIB Internal Rating Model and Methodology Scoring sheet for Corporates (1/2) Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    10. March 26, 2009 10 European Investment Bank EIB Internal Rating Model and Methodology Scoring sheet for Corporates (2/2) Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    11. March 26, 2009 11 European Investment Bank EIB Internal Rating Model and Methodology Scoring sheet for Banks Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    12. March 26, 2009 12 European Investment Bank EIB Internal Rating Model and Methodology Scoring sheet for SSPAs Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    13. March 26, 2009 13 European Investment Bank EIB Internal Rating Model and Methodology Scoring sheet for PSEs Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    14. March 26, 2009 14 European Investment Bank EIB Internal Rating Model and Methodology Rating criteria of the Corporate scoring sheet Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    15. March 26, 2009 15 European Investment Bank EIB Internal Rating Model and Methodology Group Adjustment Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    16. March 26, 2009 16 European Investment Bank EIB Internal Rating Model and Methodology Sovereign Adjustment Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    17. March 26, 2009 17 European Investment Bank EIB Internal Rating Model and Methodology Country Test (1/3) Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    18. March 26, 2009 18 European Investment Bank EIB Internal Rating Model and Methodology Country Test (2/3) Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    19. March 26, 2009 19 European Investment Bank EIB Internal Rating Model and Methodology Country Test (3/3) Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    20. March 26, 2009 20 European Investment Bank EIB Internal Rating Model and Methodology Project and Structured Finance counterparts For Project Finance counterparts, the Bank has decided to use the Supervisory Slotting Criteria Approach (Annex VII, Part 1, paragraphs 5 and 29 of the Capital Requirements Directive). Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

    21. March 26, 2009 21 European Investment Bank EIB Internal Rating Model and Methodology Sector Specific Risk Factors To assist in scoring corporates in different sectors: Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart. Intro The Bank developed in 2005 an internal rating model for assigning ratings to all its counterparts that is compliant with the Basel II requirements under the IRB Advanced Approach. EIB’s internal rating model for all its Corporate, Bank, Public Sector Entities and Sub-Sovereign Public Authorities (SSPA) counterparts is based on a scoring system constructed around various key rating criteria that drive the counterpart’s intrinsic creditworthiness combined with a limited number of expert adjustments. In general the Bank’s scoring sheets have been designed along similar lines to the rating methodologies of external rating agencies, and are based on a fundamental business and financial analysis of a counterpart’s risk profile. ------------------ The approach retained for EIB‘s internal rating system is the „model-based approach“ with judgmental overrides. Thus, EIB‘s internal ratings for counterparts will primarily be based on a risk criteria scoring sheet combined with a limited number of expert judgments. The scoring sheet is based on a fundamental business and financial analysis and arrives at an average score from which a stand-alone rating for a counterpart is derived. It has been designed to cover all relevant, qualitative and quantitative information necessary to assess a counterpart‘s creditworthiness. If and when appropriate, the standalone rating may be adjusted up or down taking into account the likelihood and degree of parent/sovereign support/link and/or country ceiling considerations. Finally, as not everything relevant to a counterpart’s probability of default can be dealt with in a scoring model, or as not all information may have been taken into account on a timely basis the rating process allows for checking the model’s output against a limited number of overriding factors such as external ratings, market information (e.g. credit spreads), and expert judgment (i.e. any other factor considered relevant by the credit officer and support by appropriate evidence). These “overrides” are nevertheless not systematic but rather exceptions to the rule. After having taken into account these adjustments, a final internal rating is assigned to the counterpart.

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