Best Practices

General Operational Policies*

ORDINARY CAPITAL (OC)

SOURCE OF FUNDS

Reference: Agreement Establishing the Inter–American Development Bank, Article II, Section 5. Definition and sources of the Ordinary Capital resources of the Bank.

Reference: AB–1704 (8/94)
Determination of the percentage of foreign exchange financing in each project. Criteria for applying the matrix.

Reference: GP–117 (9/90); GP–117–10 (12/93).
Ordinary Capital. Review of financial policies; borrowing policy; liquidity policy; investment management policy; review of liquidity policy.

Reference: FN–415–3 Rev. (12/89) Ordinary Capital. Lending rate policy. Pool–based variable lending rate methodology. Net income target policy.

PURPOSE AND USE

Reference: Agreement Establishing the Inter–American Development Bank, Article I, Sections 1 and 2(a)(ii), (iii); Article III, Sections 1 and 2(b).
Utilization of Ordinary Capital resources exclusively to implement the purpose and functions of the IDB.

Reference: AB–1704 (8/94)
Key areas of Bank activity.

HANDLING OF ASSETS AND LIABILITIES

Reference: GP–120 (3/96)
Ordinary Capital assets and liability management.

LOAN–LOSS PROVISIONING

Reference: GP–119–1 (12/91)
Review of the policy for provisioning against Ordinary Capital loan losses.

TERMS AND CONDITIONS

Reference: Agreement Establishing the Inter–American Development Bank, Article III, Sections 7 and 8.
Rules and conditions for making or guaranteeing loans; optional conditions.

The following reference documents set out Ordinary Capital lending terms and conditions:

LENDING RATE

For Local–Currency Lending
Reference: GP–66 (3/78)
Lending rate policy and other conditions for lending in nonconvertible currencies.

For Convertible–Currency Loans with the Rate Set at the Time of Disbursement
Reference: FN–173–2 (8/82)
Policy on establishing the interest rate at the time of disbursement, applicable to loans approved between January 1, 1983, and December 31, 1989.

For Convertible–Currency Lending with a Pool–Based Variable Lending Rate.
Reference: FN–415–3 Rev. (12/89); FN–449 (2/91).
Lending rate policy. Pool–based variable lending rate methodology, applicable to loans approved on or after January 1, 1990.
Methodology for adjusting loan charges.

For Lending Through the US Dollar Window
Reference: FN–483–3 (5/94); FN–415–3 Rev. (12/89); FN–449 (2/91).
Establishment of a US dollar window.

SPECIAL RESERVE

Reference: Agreement Establishing the Bank, Article III, Sections 12 and 13
Charging of a special fee on all loans, participations, or guarantees made out of the Ordinary Capital resources of the Bank. Fee revenues are set aside for this reserve in order to meet liabilities of the Bank, pursuant to Article VII, Section 3(b)(i), of the Agreement.

CREDIT FEE

Reference: GN–804 (5/71)
Annual fee which the Bank charges on the 108 undisbursed amount of loans or portions of loans made in currencies other than the currency of the borrower.

Reference: FN–449 (2/91)
Methodology for adjusting loan charges.

Reference: FN–483–3 (5/94)
Establishment of a US dollar window.

Reference: AB–416 (5/75)
Adaptation of the Agreement Establishing the Inter–American Development Bank to the prevailing general conditions and the immediate outlook. Commitment fee.

Reference: GP–66 (3/78); see "Lending Rate".

AMORTIZATION

Reference: GP–21 and GP–21–2 (6/74); DE–77/74
Impact of the present international economic and financial situation on 108 projects financed by the Bank. Adjustment of installments to compensate for exchange fluctuations.

Reference: GP–66 (3/78); see "Lending Rate".

Reference: GP–91–6 (2/81); DEA/81/8 (2/81); GP–91–10 (5/82);
Approved amortization periods for Ordinary Capital loans.

Reference: CA–184 (3/82)
Definition of loan amortization period.

Reference: FN–483–3 (5/94)
Proposal for the establishment of a US dollar window.

GRACE PERIOD

Reference: GN–625 (4/70)
Criteria for establishing the grace period.

Reference: GP–66 (3/78); see "Lending Rate".

Reference: CS–736 (7/81)
Policies and procedures of the Bank on grace periods of Ordinary Capital loans.

Reference: CA–184 (3/82)
Definition of grace period, basic criteria.

Reference: FN–483–3 (5/94)
Proposal for the establishment of a US dollar window.

INSPECTION AND SUPERVISION

Reference: GN–1123 (7/76); GN–1122–1 (9/76); GN–1364 (6/80)
Percentage charged on amount financed to cover inspection and supervision.

Reference: FN–483–3 (5/94); FN–449 (2/91)
Proposal for the establishment of a US dollar window. Method for adjusting loan charges.

USE OF CURRENCIES

Reference: GN–625 (4/70)
Use of currencies for loan amortization and interest payment.

Reference: GN–1122–1 (7/76); DEA/76/37 (9/76)
Currencies used for payment of credit fee and inspection and supervision charge.

Reference: FP-18 (2/79)
Definition of Currency Pooling System.

Reference: GP–21 (6/74); DE–76/74 (6/74); DE–78/74 (6/74)
Impact of the international economic and financial situation on projects financed by the Bank.
Measures taken.

Reference: FN–183 (3/80)
Implementation of the Currency Pooling System.

Reference: DE-6/82 (1/82)
Authorization for implementation of the Currency Pooling System.

Reference: GP–117 (9/90)
Review of financial policies. Currency selection process.

Reference: FN-507-1 (9/96)
Establishment of a single currency facility and change in the currency composition of pool-based (CPS) loans.

USE OF GUARANTEES

Reference: GN-1858–2 (7/95)
Use Bank guarantees.

Reference: FN-508 (8/95)
Pricing of the facility fee for Bank guarantees.

PRIVATE SECTOR

Reference: GN-1860-1 (5/95)
Strategy framework for private sector operations. Financing without government guarantees.

* The operational policies of the Inter-American Development Bank are intended to provide operational guidance to staff in assisting the Bank's borrowing member countries. Over the course of the Bank's more than 40 years of operations, the approach to developing operational policies has taken various forms, ranging from the preparation of detailed guidelines to broad statements of principle and intent. Many policies have not been updated since they were originally issued, and a few reflect emphases and approaches of earlier years which have been superseded by specific mandates of the Bank's Governors, the most recent being the Eighth Replenishment mandates of 1994. In accordance with the Bank's information disclosure policy, the Bank is making all of its operational policies available to the public through the Public Information Center. Users please note that the Bank's operational policies are under a process of continuous review. This review process includes preparation of best practice papers summarizing experience at the Bank and other similar institutions, and sector strategy papers.