The Inter-American Development Bank (IADB) has approved a new capital adequacy policy to enhance its financial and risk management capabilities.
The new policy will enable the bank to maintain lending during downturns while ensuring it has the necessary amount of capital to support its AAA credit rating.
The new policy defines and measures the financial risks that are relevant for capital adequacy, including credit and market risks in its lending and treasury portfolios, as well as operational risk. In addition, the new policy provides a general framework that allows the bank to make flexible adjustments to changing market conditions.
The new guidelines set specific risk limits for investments and derivatives, enabling management to design efficient funding and investment strategies.
In the past three years the IADB has taken several steps to strengthen its risk and financing management. In 2007, the bank created an independent risk management office and the following year the IADB began implementing its new credit risk classification system. Last year, the IADB approved a new liquidity policy.
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