OECD country risk classification (CRC)
The OECD country risk classification is the Participants' system for placing countries into one of eight Country Risk Categories (0 to 7) used to set minimum premium rates (MPRs) for officially supported export credits under the OECD Arrangement. Category 0 is treated as having negligible country risk, so MPRs are established for Categories 1 through 7, not for Category 0. In Category 0, credit risk is treated as predominantly obligor or guarantor risk.
OECD country risk classification on bank export finance desks
On EF desks the classification is the shared country-risk input behind ECA premium floors for Participants' official support. UKEF states that Country Risk Experts within the Participants Group review and agree changes to the OECD country risk classifications. Desk underwriting still applies national cover policies and buyer-risk analysis, but the published category anchors the Arrangement premium floor for medium- and long-term cover, so category moves shift the floor price of ECA cover for a market.
The Arrangement's country credit risk concept covers five elements: general moratoria, political or economic events preventing or delaying transfer of funds, local-currency discharge rules that fail to cover the foreign-currency debt after exchange-rate moves, other foreign-government measures preventing repayment, and force majeure outside the notifying Participant's country (war, expropriation, revolution, riot, civil disturbance, and specified natural disasters and nuclear accidents). That scope overlaps transfer risk and the wider country risk analysis used by banks and ECAs.
Methodology, monitoring and buyer risk
Classification uses the Country Risk Classification Methodology, in place since 1997:
- the Country Risk Assessment Model, which produces a quantitative assessment from three indicator groups: Participants' payment experience, the financial situation and the economic situation, combined with flexible weighting
- a qualitative, country-by-country review of Model results to integrate political risk and other factors not fully captured by the Model, which may adjust the quantitative outcome
Classifications are monitored on an ongoing basis and reviewed at least annually. Changes are communicated immediately by the OECD Secretariat, and after a reclassification Participants must, no later than five working days after that communication, charge premium rates at or above the MPRs for the new category. The Secretariat makes the country risk classifications public.
For administrative reasons, some countries eligible for classification may remain unclassified if they do not generally receive officially supported export credits; Participants may then apply the category they deem appropriate. Separately, obligors and guarantors in Categories 1 to 7 are classified into buyer risk categories that interact with the country category in premium matrices. Sovereigns are classified in buyer risk category SOV/CC0, with a Better than Sovereign (SOV+) category available in limited cases where its criteria are met.
What the classification is not
The OECD country risk classification is produced for Arrangement premium-setting among Participants. It is not a sovereign rating product for capital markets, and it is not a substitute for an export credit agency's own cover decisions, sanctions filters or transaction underwriting. For a lender it is a floor for pricing, not a ceiling for analysis, and elevated categories often point to transfer and convertibility risks that need separate mitigation such as political risk insurance.