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I would like to reiterate again that the Bank’s overall financial position remains strong despite the crisis… With its strong capital and liquidity position, the Bank will continue to scale up its assistance to RMCs and assist them in overcoming the effects of the crisis,” Bank Group Risk Management Director, Kodeidja Diallo, said.
Question: The end of the last year was characterized by a severe global financial crisis. What do you think 2009 has in store for us regarding the crisis?
Answer: The financial crisis has expanded and intensified across the world and now threatens the world economy with a deep recession. The second half of 2008 has been the most intense with financial markets plunging and financial institutions reluctant to lend. Governments have intervened with various support packages, which have gone some way in stabilizing the global financial system. It is obviously difficult to make any predictions about what will happen in the year ahead, but we are not yet out of the crisis and expect this year to remain difficult.
Question: How has the financial crisis affected the Bank’s portfolio?
Answer: 2008 was an exceptionally challenging year for all participants in the global financial markets, including the Bank. However the Bank’s prudent and proactive financial and risk management policies and practices have helped to cushion it against the adverse effects of the ongoing financial crisis. The “flight to quality” by investors has so far benefited high quality bond issuers like the Bank. The Bank continues to maintain a healthy level of capital; and its AAA rating has been re-affirmed by all 4 rating agencies. As a result of its strong capital and liquidity position, the Bank is ready to scale up the level of development assistance to its RMCs during this period of global financial distress.
Question: What initiatives has the Risks Management Department (FFMA) put in place to deal with the crisis?
Answer: By the nature of its activities, FFMA is involved in many aspects of the financial crisis and works closely with many other structures within the Bank to address the crisis. The first impact of the crisis was felt through the Bank’s treasury activities where FFMA strengthened its counterparty risk monitoring activities and enhanced collateral management and portfolio valuation processes and activities. The risk management infrastructure has been enhanced and new market risk monitoring tools developed to provide not only daily dashboard (biggest exposures, downgrades, limit breaches, etc.) to managers and all staff involved in treasury finance, but also decision support information for the Bank’s Asset and Liability Management Committee (ALCO).
The impact of the crisis, with some time lag, will be felt by most of the Bank’s borrowers. As a response to the possible spill-over effect of the crisis, FFMA has enhanced its credit assessment processes, particularly for non-sovereign borrowers with the implementation of internal credit rating framework. Credit guidelines have also been extensively reviewed and they provide room for new instruments and risk mitigation products.
I would like to reiterate again that the Bank’s overall financial position remains strong despite the crisis. With its strong capital and liquidity position, the Bank will continue to scale up its assistance to RMCs and assist them in overcoming the effects of the crisis.