THE CARIBBEAN DEVELOPMENT Bank (CDB) has welcomed Standard and Poor’s revision of its outlook from negative to stable and affirmation of its AA/A-1+ status on long and short term foreign currency ratings.
Following review of CDB’s 2013 results, S&P made the announcement on May 16 stating that factors which contributed to the shift to stable included:
the abatement of external liquidity pressures among some of the Bank’s largest borrowers
high capital adequacy with a risk-adjusted capital ratio of 23 per cent as of December 31, 2013 to offset the significant embedded credit risk in its portfolio
CDB’s “strong” business profile and its “very strong” financial profile
it’s role as a prominent lender in the Caribbean and ability to lend to sovereigns through the credit cycle
demonstration of members support for the Bank’s mandate by granting a 38 per cent increase of paid-in capital in 2010
strengthening of its risk management structures and monitoring over the past 18 months.
“We welcome the revision in our outlook to stable and are satisfied that the measures we have taken have been successful in contributing to the improvement in outlook. We have strengthened our risk management structures and monitoring; further improved capital adequacy and continued with good liquidity planning. Our priority continues to be equipping ourselves to remain a strong institution which has the confidence of our partners and provides timely, effective support to our BMCs,” said CDB president Dr Warren Smith.
Among the changes were: further improvements to profitability; increased monitoring and compliance; establishing the foundation for a successful private sector initiative and strengthening balance sheet capital adequacy to improve our external rating.
“We are encouraged by the gains made within the region in 2013 in fiscal and debt sustainability where they have occurred, while being mindful of the continued challenges of: accelerating growth, sustaining fiscal consolidation, and containing the debt burden. Our performance is inextricably linked to that of our member countries’ performance generally, and to their support of the Bank’s preferred creditor status specifically,” Smith said.
S&P described CDB as having a strong business profile. This is reflected in the rating agency’s assessment of CDB’s mandate and of its public policy role as a prominent lender through the credit cycle for its borrowing members in the Caribbean.
S&P noted that the Bank’s borrowing members have treated the CDB as a preferred creditor in most periods of stressed external liquidity—evidence of the strength and stability of CDB’s relationship with its shareholders.
S&P further noted that significant support from non-regional members, including the funding of CDB’s Special Development Fund (not rated), which provides grants and concessional loans to lower-income countries, had helped sustain the credit quality of the rated ordinary capital resources.
The Review concluded: “In our calculations, a potential moderate credit deterioration of some of CDB’s borrowing members would have limited effect on the Bank’s capital adequacy.”
CDB also maintains a strong Aa1 rating with Moody’s Rating Agency which in November 2013 revised the Bank’s outlook from negative to stable. (PR)
