Caribbean Development Bank returns to ‘stable’ outlook

-based on S&P review

The Caribbean Develop-ment Bank (CDB) has announced that Standard and Poor (S&P) has revised its outlook from “negative” to “stable” and has affirmed its “AA/A-1+” status on long and short-term foreign currency ratings.

In a press release, the CDB said it welcomed S&P’s review of its 2013 results. S&P made the announcement on Friday, May 16 stating that factors which contributed to the shift to “stable” include 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% as of Dec. 31, 2013 to offset the significant embedded credit risk in its portfolio, the CDB’s “strong” business profile and its “very strong” financial profile, its role as a prominent lender in the Caribbean and ability to lend to sovereigns through the credit cycle, the demonstration of members support for the Bank’s mandate by granting a 38% increase of paid-in capital in 2010 and the 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 Dr Warren Smith, President of CDB.

According to the press release, among the measures implemented 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. Dr Smith said the Bank is “encouraged by the gains made within the region in 2013 in 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.”

S&P described the CDB as having a strong business profile. This is reflected in the Rating Agency’s assessment of the Bank’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 its 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.”

The CDB also maintains a strong AA/A-1+ rating with Moody’s Rating Agency which in November 2013 revised the bank’s outlook from “negative to stable”, the release said.

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