Bank Group Post-Conflict Assistance Policy Guidelines
Arrears Clearance Framework
On April 12, 2004 the Boards of Directors of the African Development Bank (ADB) and the African Development Fund (ADF) approved policy guidelines for the Bank Group’s assistance to post-conflict countries (PCCs)1. The policy guidelines set forth the priority areas for the Bank Group’s intervention in PCCs as well as the most appropriate instruments for re-engagement and assistance programs.
Issuing Date: 23-DEC-2004 12:00 AM
Bank Group Credit Policy
The Evolution of the Bank Group Credit Policy
1.1 Prior to the adoption in 1992 of the Country Exposure Policy (Document ADBIBD/WP/92195), the Bank’s lending operations were conducted on the basis of very broadly defined principles rather than on a formal credit policy. These principles were outlined in the Agreement Establishing the African Development Bank (amended in May 1979) which stipulates that: “the Bank should extend lending to borrowing countries paying due regard to the prospects the borrower would meet its obligations on schedule”.
1.2 Following the African debt crisis in the late 1980’s and early 90’s, during which several ADB borrowers accumulated significant loan arrears, it became clear that an explicit credit policy to guide lending to borrowing countries and to manage the Bank’s exposure needed to be developed. Consequently, in September 1992, a country exposure policy was adopted by the Bank. The policy outlined detailed standards to guide new lending operations aimed at enhancing the soundness of the Bank’s loan portfolio. Among the new standards adopted was a uniform exposure ceiling for all countries that should not exceed 15% of the Bank’s portfolio. During this period, many of the other multilateral and bilateral lenders to African governments began switching away from traditional loans to grants and highly concessionary funds; the ADB, on the other hand, was less responsive to these circumstances and continued to extend non-concessional loans to these countries.
1.3 In 1993, an Exposure Monitoring Committee was established to oversee the implementation of the country exposure policy. The Committee met regularly from its inception through mid-1994 to review individual country lending strategy with a view to recommending appropriate changes. However, the immediate impact of the new country exposure policy was limited because only few countries were close to the 15% lending ceiling. As ADB loan arrears continued to m
Issuing Date: 10-DEC-2004 12:00 AM
Capital Adequacy and Exposure Management Policy
Recent Policy Developments
1.1 As part of the Bank’s on-going financial reform program, the Board of Directors has reviewed a number of proposals for enhancing the Bank’s credit and exposure management policies. Among them, the Board confirmed the Bank’s policy for country eligibility to ADB non-concessionary resources (ADB/WP/BD/98/33), approved a new provisioning policy (ADB/WP/BD/98/124 & 125), and discussed ways to reinforce the arrears policy by increasing possible sanctions on non-performing borrowers (ADB/BD/WP/99/46). These initiatives have helped to bring most of the Bank’s policies and guidelines for controlling expected losses broadly in line with internationally accepted industry best practices. The purpose of the paper attached therefore is to address the second group of policies, namely the policies which focus on low probability or unexpected losses with a view to introducing enhancements which will likewise bring the Bank up to date with developments in the industry’s best practices.
Issuing Date: 10-DEC-2004 12:00 AM
These guidelines (the “Guidelines”) are issued pursuant to the General Authority
on the Bank’s Financial Products and Services adopted by the Board of Directors
of the Bank on 12 January 2000 (Resolution. B/BD/2000/01) (the “General
Authority”). The General Authority empowers Management to formulate specific
operational guidelines for the development, administration, and pricing of the
Bank’s financial products and services within the parameters that have been set
out therein. In accordance with the General Authority, the Guidelines shall be
approved by the President, without further need for Board approval.
