Oversight Note on Credit Risk Management

Mar 2011
This evaluation examines IDB's management of credit risk of Non-Sovereign Guaranteed Operations. Although the IDB is not subject to the Principles for the Management of Credit Risk issued by the Basel Committee for Banking Supervision, these principles have been used as guidelines for this assessment. It can be concluded that the IDB largely complies with Basel's credit risk management principles. To further develop what is already a solid foundation for its credit risk management system, it is recommended that the IDB adopts a comprehensive Credit Risk Framework that clearly defines its risk appetite for NSG. Such framework should spell out the objectives and procedures supporting the desired NSG loan/guarantee portfolio. The strengthening of the Portfolio Management Function is also recommended to complement the current credit administration and risk management functions being carried out by the originating divisions within SCF and OMJ, PMU and RMG. The IDB should also address the risks posed by the current absence of an integrated information system to support the loan/guarantee granting, administration, risk and portfolio management.