2013-2017_-_Private_Sector_Development_Strategy

focus on credit risk issues, the CRC will continue to
be instrumental in strengthening the credit risk culture
across the institution and will closely monitor growth
of the Bank’s portfolio, notably for private sector
operations. Management is also reviewing the Bank’s
capital adequacy policy toward an economic capital
framework in line with the best banking practices.
At the same time, Management is increasing use of
alternative instruments, as well as seeking risk-sharing
partners to leverage the Bank’s NSO portfolio and
pipeline, while keeping its risk levels within prudential
limits. These measures are intended to enable the Bank
to allocate more headroom to its strategic priorities,
while protecting its financial profile.
In addition, the Bank is improving management of
concentration risk, particularly in the public sector
portfolio, by pursuing geographic diversification and
increasing sovereign lending to creditworthy countries
to which the Bank is underexposed. The current review
of the Bank Group’s broader lending landscape is also
expected to pave the way for additional diversification
opportunities. Concentration of risk by sectors or
instruments in the non-sovereign portfolio, particularly in
the financial sector, is also subject to strong monitoring.
Credit Risk. The Bank’s rating reflects its intrinsic
financial strength, its prudent financial management
and policies, and its strong shareholder support. These
strengths offset the relatively high risk profile of its overall
portfolio, which results from its challenging regional
operating environment. However, the Bank’s own
Weighted Average Risk Rating (WARR) of its portfolio
remains within the limits defined by its risk appetite
statement.
counter-parties. However, the its strong capitalization,
liquidity buffers and risk-management framework
help to offset risks it carries on its balance sheet, and
create substantial headroom in risk-bearing capacity
to expand its lending further. Moreover, the Bank’s
private sector operations in its low-income RMCs are an
obvious avenue to achieve greater geographic diversity
to compensate for the concentration of its sovereign
portfolio in a few countries (some of which have recently
been downgraded because of domestic and external
political and economic factors), and hence are an
element of a Bank-wide portfolio risk mitigation strategy.
Business Process Risk. In an effort to strengthen
internal review, the Bank has, at times, made its
approval process too long and onerous relative to the
Bank’s processing capacity. This makes the Bank
less competitive than other IFIs and limits the potential
productivity of the teams processing NSO.
The Bank’s new NSO guidelines will propose a
streamlined approval process, benchmarked with other
IFIs, to ensure that each step retained in the process
presents “value for money” for the Bank and its clients.
Operational Risk. Since the Bank began to originate
non-sovereign guaranteed transactions, the body
of statutory documents that guide and regulate the
its NSOs has developed incrementally, leading to an
accumulation of policy and guideline directives that now
need to be consolidated and updated.
The PSO portfolio review, the new PSD Policy and
this Strategy establish the foundation for a new PSO
guidelines policy to supersede the numerous existing
policies.
In recent years, the Bank Group has considerably
increased lending to sovereign and private sector
Private Sector Development Strategy, 2013-2017
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