Institutional Presentation - Central American Bank for Economic Integration October 2016 - BCIE
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Institutional Presentation
Central American Bank for Economic Integration
October 2016
Central American Bank for Economic Integration
INDEX
1. Macroeconomic Overview
2. CABEI’s Role and Policy Importance
3. Equity and Profitability
4. Funding and Liquidity
5. Credit Risk Management
6. Comparison with other MDBs - Rating
2
Central American Bank for Economic Integration
Fact Sheet
Guatemala
Key Economic Facts
Extension: 547,352 km2 El Salvador
Population: 55.4 million, over 70% below 39 years of age Costa Rica
Population density: 86.63 people per km2 Honduras
Population Growth: 1.28%
Nicaragua
Regional GDP: US$263 billion
Belize
Panama
Central America is home to 7% of the planet’s biodiversity and
exhibits great geological, geographic, climatic and biotic diversity. Dominican
Republic 3
Privileged situation in terms of annual regional water availability
with an estimated 23 thousand cubic meters per inhabitant.
The agricultural sector is one of the main drivers of the region’s
economy, accounting for approximately 11% of GDP; this share
grows to 18% when agro-industry is included. It is the main source
of food and industrial inputs and produces 35% of the region’s
exports.
3
Central American Bank for Economic Integration
Key Statistics for Central America: Economic Outlook
During 2000-2007, higher inflation rates were observed across
During 2000-2007, average economic growth rate of CA region was LATAM averaging 7.2% - CA region reached 7.9%.
3.9% , whereas LATAM reached 3.6%.
After the economic crisis, average growth rate of CA declined to During 2008-2014, inflation gap between both regions decreased.
2.7% - LATAM reached 3.0%. LATAM inflation was reported at 6.7% - CA inflation at 5.5% .
The forecast for economic growth for 2015-2016 in Latin America is
The projections for 2015-2016 estimate that LATAM will be around
around 0.26% whereas Central America’s forecast is 3.5%.
11.3%; while CA will be 2.9%.
Latin America: Economic Growth Latin America: Inflation
(Percentage) (Percentage)
5.0 12.0
4.0 10.0
8.0
3.0
6.0
2.0
4.0
1.0 2.0
0.0 0.0
2000-2007 2008-2014 2015-2016 2000-2007 2008-2014 2015-2016
Latin America and the Caribbean Central America Latin America and the Caribbean Central America
4
Central American Bank for Economic Integration
Key Statistics for Central America : Economic Outlook
During 2000-2007, most of CA countries reported fiscal deficits around
Growth in Central government debt is one of the major concerns for
LATAM´s regional average (3.0%).
LATAM and CA authorities.
The impact of recent economic crisis affected the fiscal position of CA
Public debt has been increasing in order to finance fiscal budget gaps.
countries. Local authorities keep making and implementing important
Local governments top this issue in their agendas.
policy measures.
Central America: CG Debt Central America: Fiscal Deficit
(Percentage of GDP) 8.0 (Percentage of GDP)
140
7.0
120
6.0
100
5.0
80
4.0
60 3.0
40 2.0
20 1.0
0 0.0
2000-2007 2008-2014 2015-2016 2000-2007 2008-2014 2015-2016
Costa Rica El Salvador Guatemala Costa Rica El Salvador Guatemala
Honduras Nicaragua LAC Honduras Nicaragua LAC
5
Central American Bank for Economic Integration
Vulnerabilities: Central America vs South America
Given South America’s dependence on hard
commodity exports, the sub-region has a relatively
high exposure to a drop in hard commodity prices.
The situation is different for countries in Central
America, as it could actually benefit from a drop in
commodity prices, especially energy prices.
Central America depends more on economic
conditions in the U.S., as it is its main commercial
partner and source of remittances.
6
Central American Bank for Economic Integration
Central America: Trade Integration Agreements and Regional Initiatives
Following substantial work towards regional trade integration over the last half century, Central America has emphasized multilateral initiatives that underpin integration:
Initiatives Year approved Benefits
Free trade agreement between Chile Formally signed October Improved hemispheric integration.
and Central America of 1999 Improved rules for the investments promotion.
Create an expanded and secure market for the goods produced.
Free trade agreement between Panama Formally signed March Improved commercial relationship in the region.
and Central America of 2002 Increased the economic and social development.
Central America* – USA Free Trade Formally signed May of Improved commercial relationship in the region.
Agreement 2004 Increased the market access.
(DR-CAFTA) Encouraged a complementary agenda for Central America Region.
Free trade agreement between Mexico Formally signed Improved the competitiveness between Central America en Mexico.
and Central America November of 2011 Increased the economic and social development.
Removed commercial barriers and facilitated the trade between Central America and Mexico.
The European Union - Central America Formally signed June of Improved commercial and cooperative relationship between regions.
Association Agreement (EU-CAAA) 2012 Increased social development in the Central America Region.
Free trade agreement between Korea Under Negotiation On June 18th 2015, Central American countries and Korea launched negotiations towards a free trade
and Central America** agreement. The first round of negotiations for the CA-Korea FTA took place on September 2015, in Seoul,
Korea. The second round of free trade negotiations was held on November 2015, in San Salvador, El
Salvador. The third round of free trade negotiations between Central America and Korea was held from 22-
26 February 2016 in San Francisco, United States. Further talks regarding this free trade agreement took
place on March and April 2016 in Seoul, Korea. CABEI is supporting the process through a non-refundable
cooperation granted to the Central American countries.
*Includes Dominican Republic 7
**Includes Panama
Central American Bank for Economic Integration
INDEX
1. Macroeconomic Overview
2. CABEI’s Role and Policy Importance
3. Equity and Profitability
4. Funding and Liquidity
5. Credit Risk Management
6. Comparison with other MDBs - Rating
8
Central American Bank for Economic Integration
CABEI's Objective
CABEI's Objective
Article No. 2 of the Constitutive Agreement:
The Bank’s objective shall be to promote the economic integration and
the balanced economic and social development of the Central American
region, which includes the founding countries and the non-founding
regional countries.
9
Central American Bank for Economic Integration
About CABEI: Member Countries
Supranational development bank focused on Dominican
Central America, founded in 1960 Belize
Republic
Headquartered in Tegucigalpa, Honduras Honduras
Guatemala
Founding Members: Nicaragua
El Salvador El Salvador
Guatemala Panama
Honduras Costa Rica
Nicaragua
Costa Rica
Non-Founding Regional Members: Mexico
Dominican Republic (2007)
Panama (2007)
Belize (2006) (*)
Spain
Non-Regional Members:
Colombia
ROC Taiwan (1992)
Mexico (1992) Founding Members
Argentina (1995) Non-Founding Regional Members
Colombia (1997) Non-Regional Members
Spain (2005)
Argentina ROC (Taiwan)
(*) As of November 9, 2016, Belize became a non-founding regional member
10Central American Bank for Economic Integration
About CABEI: Organizational Structure
Board of
Governors
CABEI has 321 employees situated at its
On July 15th, 2013, CABEI's Board
headquarters in Tegucigalpa and its 5
of Governors re-elected Dr. Nick
Board of Directors regional offices (1 regional office for
Rischbieth as CABEI's Executive
each Founding Member Country). In the
President for a new five-year
short term, the Bank expects to open two
period beginning December 1st,
additional regional offices, one in
2013 and ending on November
Panama and the other in Dominican
30th, 2018.
Republic.
Executive President
Executive Vice-President
Operations and Financial Credit
Sector and Risk Management
Technology Management Management
Countries Division Division
Division Division Division
11Central American Bank for Economic Integration
About CABEI: CABEI’s Preferred Creditor Status
As a supranational institution and under its Constitutive Agreement, CABEI has
been accorded in the territory of its member states Preferred Creditor Status.
(*) Average ratings based on the individual ratings assigned to Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica by Moody's Investors Service.
September 2015: “The bank benefits from similar privileges and immunities granted to other multilateral development banks (MDBs). As CABEI is the main provider of long-term
funding in the region, Fitch Ratings assumes that member countries, even if experiencing severe difficulties, will continue to honour CABEI‘s preferred creditor status and exempt its
private-sector borrowers from any measures that may affect the transfer and/or convertibility of their debt service payments.”
June 2015: “Moody's assessment of borrower quality takes into consideration not only the sovereign ratings of the borrowers, but also the likelihood that they will continue to extend
to CABEI its 'most preferred' creditor status. Based on historical experience, we deem this to be highly likely, more so given CABEI’s critical role as the main source of official
multilateral financing for the region.”
12Central American Bank for Economic Integration
About CABEI: CABEI’s Preferred Creditor Status
As a supranational institution and under its Constitutive Agreement, CABEI is granted preferred creditor status
on the territory of its member states .
All of CABEI’s assets and properties are considered public international property and are immune from search,
requisition, confiscation, expropriation or any other form of apprehension or forced alienation by executive or
legislative action.
CABEI, its income, property and other assets, as well as the operations and transactions it carries out pursuant to
its Constitutive Agreement, shall be exempt from all taxation and from all custom duties or other charges of a
similar nature. CABEI shall also be exempt from any obligation relating to the payment, withholding or collection
of any tax, contribution or duty.
No tax or lien may be levied on any obligation or securities issued or guaranteed by CABEI, including any dividend
or interest thereon, by whomsoever held.
13Central American Bank for Economic Integration
CABEI is the dominant MDB in the Central American Region
CABEI, IADB and World Bank participation (%) of total
disbursements to the Region¹ in the last ten years (2005-2014)
1 Includes Guatemala, El Salvador, Honduras,
Nicaragua and Costa Rica
* Includes CII & FOMIN,
** Includes IFC & IDA,
Total Disbursements 2005-2014: Source: www.iadb.org, www.worldbank.org
US$28.0 billion CABEI.
Through the years CABEI has consolidated its role as the Multilateral Development Bank with the most relevant presence in the Central American region.
This consolidation has been mainly derived from the Preferred Creditor Treatment conferred to CABEI by its member countries.
14Central American Bank for Economic Integration
Rising importance of CABEI in the region.
Since its creation, CABEI has disbursed over US$24.4 billion to the Central American region.
More than 57% of those disbursements have taken place over the past 10 years.
During periods when several multilateral development banks have frozen disbursements to some Central American countries (Nicaragua, Honduras and
Guatemala), CABEI continued to fulfill its mandate, thus strengthening the Preferred Creditor Treatment conferred to it by its member countries.
15Central American Bank for Economic Integration
SICA Member Countries
CABEI / New Members
SICA’s purpose is to achieve the integration of Central
America for the Isthmus to become a Region of Peace,
Freedom, Democracy and Development.
CABEI is SICA’s financial arm.
16Central American Bank for Economic Integration
Modifications to CABEI´s Constitutive Agreement
On February 12th, 2015 CABEI’s Board of Governors approved amendments to the Constitutive Agreement with three main objectives:
On January 25th, the Legislative
Assembly of Costa Rica ratified the
modifications to CABEI's Constitutive
Agreement.
These reforms became effective on June
9, 2016, given that literal d) Article 35 of
CABEI’s Constitutive Agreement, states
that such reforms shall become effective
for all its members three (3) months after
the date of its official communication,
which occurred on March 8, 2016; after
the publication of the respective law
(No.9350) on Costa Rica’s Official
Gazette.
Following the change made in Article No.
2 of the Constitutive Agreement, now all
the member countries of CABEI can be
recipients of financing from the Bank to
attend programs and projects.
17Central American Bank for Economic Integration
Regional Projects & Loan Portfolio
Diversification Initiatives
Over 50 years promoting regional integration
18Central American Bank for Economic Integration
Approvals and Disbursements – June 2016
19
*6 month periodCentral American Bank for Economic Integration
Operations by Country & Focus Area: June 2016 Approvals and Disbursements
20Central American Bank for Economic Integration
Operations: Over 50 years promoting regional integration
CABEI approved road infrastructure projects in the Approvals of more than US$3,800 millions in Energy
region for US$4,905 millions. Projects.
Total paved kilometers funded amounted to 4,100 Increased installed capacity for approximately 4,100
km., representing 4.2% of total roads. MW from 1970-2014, or more than 45.0% of the 2014
total.
Widening and reconstruction of more than 6,000 km.,
or 6.4 % of paved roads. This installed capacity accounted for more than 30.0%
of the total power generated.
Results:
Physical integration Funding for the energy sector, focused mainly on
More efficient transportation for goods and renewable energy.
people between countries and cities.
Increased value of the agricultural, industrial, Renewable energy funded by CABEI produced savings
commercial and tourism sectors. of US$1,600.0 millions in imported hydrocarbons.
CABEI has funded more than US$8,686 millions to
support various programs to impact: micro, small and
medium size enterprises (SMEs), educational loans,
housing municipalities, foreign trade, productive
sectors and financial sector strengthening.
Disbursements aimed at Programs for SMEs,
education and social housing have benefited more
than 971,000 end users.
CABEI has supported the most vulnerable population
sectors through microfinance, allowing the Bank to
reach the poorest households in rural areas, thereby
promoting social and economic development in
Central America.
Central American Road Map Central American Electrical Interconnection
21Central American Bank for Economic Integration
Operations: Notable projects under the Mesoamerican Project
Social Housing Initiative Transportation and Facilitation of Trade:
Integration Goal: Integration Goal:
The program supports low cost housing, develops institutional International Network of Mesoamerican Highways (RICAM),
capacity, and regional and national financial instruments. Sea Transport Project (TMCD) and Mesoamerican Multimodal
Transportation System (STMM), focus on more efficient
This program is executed by CABEI with the advice and partial transport of people and goods.
financial support (19.4%) of the Mexican Government, within
the Mesoamerican Project initiative. CABEI's Investment:
CABEI's investment is about US$1,287 millions. Beneficiary
CABEI's Investment: countries: Belize, Guatemala, El Salvador, Honduras, and
CABEI is providing more than US$222.99 millions through its Nicaragua.
network of 101 regional public and private sector financial
intermediaries. Impact:
More than 500km of roads.
Impact: Generation of more than 3,000 permanent and temporary
This program provides housing for 48,912 low-income jobs. Daily use of these roads is by more than 170 thousand
families, distributed amongst the five countries of the region. Energy Interconnectivity people.
Social Housing Integration Goals: Road Network
The SIEPAC has two main goals: (a) support the creation and
consolidation of the Regional Electricity Market (MER) with
the creation and establishments of legal, institutional and
technical mechanisms, which will enable an easier
participation of the private sector in the energy sector, and (b)
to establish the regional interconnected electricity lines that
will allow electricity exchanges between all MER actors.
CABEI's Investment:
CABEI's investment is about US$100.0 millions, which
represents 20.0% of the total project investment.
Impact:
Increase electricity coverage in the energy integration region.
Implemented regional projects increasing installed capacity
by 300 MW. Jobs generation during construction phase will
be more than 2,000 jobs (700 permanent). Construction of
road access related to the electricity lines.
22Central American Bank for Economic Integration
Loan Portfolio Diversification: Approvals during 2015
Program for the Strengthening of Research and Development Honda-Puerto Salgar-Girardot Highway (Republic of
Capacities, (PROFOCAID, for its acronym in Spanish) Colombia)
(Argentine Republic)
The Project involves the rehabilitation and improvement of
The program consists of the allocation and transfer of grants to 190 km of highway, the construction of 32 bridges and the
research institutions and / or professionals in research and reconstruction of other 26 existing bridges, with the objective
development, to carry out research projects in order to expand of improve the accessibility to the Center-South Region of
the frontiers of knowledge, aiming for exponential multiplier Colombia. The project is part of the Fourth Generation
effect on the competitiveness of the Central American region. Program of Road Concessions, promoted by the Government
As part of the components of this program, 100 doctoral level of of Colombia, in the framework of its National Development
studies scholarships will be awarded to Central Americans to Plan 2014-2018.
study in Argentina.
CABEI Investment:
CABEI Investment: The amount to be financed by is CABEI US$136.0 million.
CABEI will partially finance the program with an approved
amount of up to US$50.0 million.
RANC
Line 2 of the Panama Metro (Republic of Panama)
The overall objective of the Project is to provide an agile,
efficient and clean transportation system to improve the
country's competitiveness and the quality of life for residents
and visitors of Panama City, through a fast, economic, safe and
reliable transportation system.
CABEI Investment:
The amount to be financed by CABEI is US$200.0 million.
23Central American Bank for Economic Integration
Loan Portfolio Diversification: Approvals during 2015
During 2015, CABEI’s loan approvals in regional non-founding and extra-regional member countries reached US$406 million, or 22% of total approvals.
Such level of approvals begins the loan portfolio diversification process, established as an objective under the amendments to CABEI’s Constitutive Agreement.
For 2016, 25% (US466 million) of the projected loan approvals are expected to be for non-founding members
24Central American Bank for Economic Integration
2015-2019 Institutional Strategy
25Central American Bank for Economic Integration
Operations: 2015-2019 Institutional Strategy
The Institutional Strategy seeks to maximize the impact of CABEI's operations on:
Sustainable Economic Development of the Region.
Sustainable Development Goals (SDGs) of the of the 2030 Agenda for Sustainable Development.
26Central American Bank for Economic Integration
Operations: 2015-2019 Institutional Strategy - Focus Areas
Productive Infrastructure Energy
Financial Intermediation and Rural Development and the
Development Finance Environment
Human Development and
Competitiveness Services
Social Infrastructure
27Central American Bank for Economic Integration
Diverse Range of Products and Clients
Products Our Clients
Loans
Co-Financing Public
A/B Loans Sector
Guarantees
Letters of Credit
Working Capital Lines
Corporate Financial
Trade Lines
Private Sector
Factoring
Sector
Pre-investment Loans
Technical Cooperation
Leasing
28Central American Bank for Economic Integration
Strategic Objectives of the Institutional Strategy (2015-2019)
29Central American Bank for Economic Integration
INDEX
1. Macroeconomic Overview
2. CABEI’s Role and Policy Importance
3. Equity and Profitability
4. Funding and Liquidity
5. Credit Risk Management
6. Comparison with other MDBs - Rating
30Central American Bank for Economic Integration
Balance Sheet
31Central American Bank for Economic Integration
Balance Sheet
Balance Sheet as of June 30th, 2016
(US$ Million)
Assets Liabilities and Equity
Total US$9,266 Total US$9,266 32Central American Bank for Economic Integration
Balance Sheet Structure
5.1%
9.6% 5.7%
4.9% 7.4%
10.5%
33Central American Bank for Economic Integration
Financials: Balance Sheet – Loan Portfolio
As of June 30th, 2016
Total Loan Portfolio US$6,115 Million
Loan Portfolio by Country
6.4% 0.6%
34Central American Bank for Economic Integration
Financials: Balance Sheet – Loan Portfolio Distribution by Institutional Sector and Focus Area
Loan Portfolio by Institutional Sector Loan Portfolio by Focus Area
(US$ million)
CABEI’s loan portfolio is mainly in the public sector; which grants CABEI preferred creditor status.
Within the private sector, the portfolio has a greater proportion corresponding to the financial sector (with 55% ), in line with the
trend observed over the past 5 years.
35Central American Bank for Economic Integration
Loan Portfolio – Institutional Sector Distribution
As a result of CABEI’s “Back to Basics” strategy, which looks to enhance public sector exposure, there has been a significant shift in the Bank´s loan
portfolio distribution by institutional sector. Consequently, private sector exposure has declined from a high of 44% in 2006 to 21% in June 2016.
36Central American Bank for Economic Integration
Profits and Capitalization
37Central American Bank for Economic Integration
Consistent Profits
Moody’s: “Net income before provisions grew 35% year-on-year in 2015, the highest growth rate in record, with net income reaching US$159.5 million at
the end of the year, up from US$102.9 million. Given CABEI's policy of capitalizing retained earnings, this result will positively contribute to capital growth.”
38Central American Bank for Economic Integration
Sound Financial Position
The capital adequacy ratio is the main pillar to assure
CABEI’s financial soundness.
The bank has a strict capital adequacy requirement (35%).
CABEI also monitors the Capital Adequacy Ratio established
in Basel II and Basel III Accords; as of June 30th, 2016 the
ratio reached 35.4%.
39Central American Bank for Economic Integration
Panama and Dominican Republic Capital Increase
Request from the Republic of Panama to increase its
share subscription in CABEI
Total Projected Capital
As a response to the Constitutive Agreement modifications, on Installments
December 14th 2015, the Republic of Panama, requested to 2016-2019
increase in US$197.4 million its share subscription on CABEI’s US$117.9 million
capital structure.
Such request was approved by CABEI’s Board of Governors on
February 12th 2016 by Resolution No. AG-3/2016.
Request from the Dominican Republic to increase its
share subscription in CABEI
As a response to the Constitutive Agreement modifications, on
January 13th 2016, the Dominican Republic, requested to
increase in US$197.4 million its share subscription on CABEI’s
capital structure.
Such request was approved by CABEI’s Board of Governors on
February 12th 2016 by Resolution No. AG-4/2016. As a result of the capitalization scheme implementation approved in
2009, as well as the capital increase requests conveyed by Panama and
The aforementioned capital subscriptions will generate the Dominican Republic, capital payments are now an important source
new capital installments for the Bank for an aggregate of capital; complementing the Bank’s consistent net income generation.
amount of US$98.2 million to be received in 4 years; All members are current with the payment of their respective capital
exceeding by US$13.7 million the capital payments to installments.
be received as a result of the Capitalization Scheme
implemented in 2012 (US$84.5 million). 40Central American Bank for Economic Integration
Capital Structure
Capital Structure as of September 30, 2016
41Central American Bank for Economic Integration
CABEI’s Projected Capital Structure
Projected Capital Structure
Assumptions:
Projections include the increase of the share subscription
of Dominican Republic on CABEI’s capital structure.
Includes the transformation of the Special Contributions
made by Belize to “B” Series Shares.
With the increase of share subscriptions of non-
founding regional countries, participation of the
founding member countries goes from 64.4% to
59.2%.
Panama´s and the Dominican Republic´s capital
increases, together with the approved
amendments to the Constitutive Agreement
further strengthen CABEI´s "business profile" to
fortify it´s relationship with all its partners and
diversify its shareholder structure.
42Central American Bank for Economic Integration
INDEX
1. Macroeconomic Overview
2. CABEI’s Role and Policy Importance
3. Equity and Profitability
4. Funding and Liquidity
5. Credit Risk Management
6. Comparison with other MDBs - Rating
43Central American Bank for Economic Integration
Financials: Liquidity Risk - Investment Portfolio & Liquidity Levels
Cash and Investment Portfolio - June 2016
Instrument US$ Million %
Cash 22 1%
Money Market 1,637 60%
Investment Funds 137 5%
Bonds 911 34%
Total Investment Portfolio 2,686 99%
Cash + Investment Portfolio 2,707 100%
Liquidity risk is mitigated by CABEI’s internal ALM Policy, which requires holding a minimum liquid asset
coverage of 6 months of gross cash requirements which includes loan disbursements, debt service
obligations and operating expenses.
CABEI also maintains a high level of liquid assets in relation to its total assets.
In line with international risk management standards, CABEI monitors both the Liquidity Coverage Ratio
(LCR) and the Net Stable Funding Ratio (NSFR) proposed by Basel III. As of December 31st 2015, the
aforementioned ratios stood at 2.56x and 1.08x, respectively.
At June 2016, the effective duration of the Investment Portfolio was 0.56 years.
44Central American Bank for Economic Integration
Evolution of Funding Sources
CABEI's financing structure has been evolving due to an active participation in capital markets, which reflects the good perception international markets have regarding its
credit profile and maturity as an institution.
CABEI's financing structure reflects the institution’s preference for stable funding sources.
45Central American Bank for Economic Integration
Financials: Funding Diversification
Bonds Payable/Distribution by Markets and Currencies
CABEI has a highly diversified funding base and has maintained an uninterrupted access to the international capital markets.
As of June 30th, 2016, CABEI has made debt placements in 19 different currencies and 22 different markets (incorporating the Norwegian Crown and
Norwegian market in 2016).
46Central American Bank for Economic Integration
Financials: Funding Diversification
Europe
43%
United States
14%
Asia
14%
Latam
29%
During the period of global financial turmoil and as an indication of the favorable market perception towards the Institution, CABEI maintained
uninterrupted access to the international capital markets .
On March 2016, CABEI upsized its MTN Program from US$4.0 billion to US$6.0 billion, given its relevance towards the procurement of stable funding.
47Central American Bank for Economic Integration
International Partners
To further its mission, for over 50 years CABEI has partnered with a wide range of institutions including governments, development banks, and
official agencies to channel resources to key sectors such as microfinance, renewable energy, infrastructure, rural development, and education.
48Central American Bank for Economic Integration
CABEI: A Strong Partner for Combating Climate Change in Central America
CABEI has made a strong commitment to supporting climate change mitigation and adaptation initiatives in the region.
The Bank is currently undergoing the process of Accreditation of the Green Climate Fund.
Recipient of Preparatory Support from the GCF.
An accreditation decision expected in the upcoming months.
Strong support for accreditation by Central American NDAs.
Accredited with EU-DEVCO and the Adaptation Fund.
Climate Adaptation and Mitigation programs managed by CABEI:
Green SME Initiative, with KfW and EU.
ARECA Partial Guarantee Program, with Finland, GEF, and UNDP.
CAMbio, Biodiversity agriculture program, with GEF and UNDP.
Member of IDFC, reporting Climate Change activities under the Club’s flagship report “Green Climate Mapping” since 2013.
CABEI has the competitive advantages to support the region’s climate change priorities:
Regional presence.
Sectorial Experience.
Strong partner articulation.
Solid track record mobilizing resources and blending.
49Central American Bank for Economic Integration
INDEX
1. Macroeconomic Overview
2. CABEI’s Role and Policy Importance
3. Equity and Profitability
4. Funding and Liquidity
5. Credit Risk Management
6. Comparison with other MDBs - Rating
50Central American Bank for Economic Integration
Financials: Credit Risk - Risk Management Policy
Capital Adequacy and Leverage
Main Credit Policies: Main Credit Policies for Derivatives Exposures:
Policies:
CABEI´s Capital Adequacy Ratio requires CABEI´s participation in project finance private Subscription of Credit Support Annexes (CSAs) with all
that total equity represent at least 35% of sector loans must not exceed 40% of the total counterparties in order to mitigate the credit exposure. In that
total risk weighted assets. amount of the loan during its life (60% for sense, CABEI has established thresholds and margin calls
projects with amounts lower than US$25 (collateral).
CABEI´s total loan portfolio shall not million or with public sector participation).
exceed 3.5 times its total equity (Gearing Credit risk in derivatives has been eliminated by requiring daily
Ratio). For corporate private sector loans, the collateral collateral and establish a "threshold" of 0. As part of this initiative,
put forth by the client, must maintain a since December 2013, a third party provides collateral
CABEI´s maximum leverage cannot exceed minimum coverage of 100% of the total loan. management service to CABEI.
3 times its total equity (Debt / Equity).
Single Client Exposure (Private) must not Calculation of net positions with counterparties under ISDA
By policy, the ALCO Committee should exceed 5% of the Bank´s equity, and the agreements.
monitor the capital adequacy indicator exposure to a regulated private financial
that incorporates the criteria established economic group must not exceed 10%. All counterparties must be approved by the ALCO Committee.
in the framework of Basel II and III.
State or mixed institutions with majority state Counterparties in derivatives contracts must have an investment
By policy, the ALCO Committee should participation with NSG should not exceed 20% grade rating. If an existing counterparty is downgraded below
monitor the leverage ratio established of CABEI’s equity. investment grade, no new derivative contracts can be agreed
under Basel III. between such entity and CABEI.
Credit exposure limits with derivative counterparties are defined
by the following conditions:
Financial internacional counterparties: Up to US$50
million.
For clients (Government, Financial Institutions o
Corporates): ALCO Approval.
51Central American Bank for Economic Integration
Credit Risk - Improving Credit Quality
Loans in non-accrual status are those whose arrears of
installments of principal or contractual interest exceed
90 days in the case of Private Sector loans and 180
days for Public Sector loans.
All Public Sector borrowers are current with their
payments in line with the Preferred Creditor
Treatment they grant CABEI.
CABEI’s asset quality is under control.
52Central American Bank for Economic Integration
INDEX
1. Macroeconomic Overview
2. CABEI’s Role and Policy Importance
3. Equity and Profitability
4. Funding and Liquidity
5. Credit Risk Management
6. Comparison with other MDBs - Rating
53Central American Bank for Economic Integration
Key Financial Indicators
54Central American Bank for Economic Integration
Peer Comparison
Concept CABEI Peer Comparison
Relevance Very Important for its Regional Shareholders. More important than IADB and CAF in Central America.
Loan Portfolio Credit Quality Index has improved Allowance for Loan Losses Coverage is higher than its
Credit Quality
consistently. peers.
Leverage Superior. Well diversified funding structure. Lower leverage ratios than IADB and CAF.
Equity/Total Assets Solid capital ratios without adjustments. Average is higher than IADB and CAF.
Currently receiving capital installments from its
Paid-In Capital member countries as a result of the capitalization CAF presents higher frequency in capital increases.
scheme approved in 2009.
Solid and stable profitability ratios; all net income is Better cost-income ratios, ROE, ROA and NII than IADB
Profitability
capitalized to the General Reserve. and CAF.
Liquidity Comparable and more stable. Superior than IADB average ratios and lower than CAF.
55Central American Bank for Economic Integration
Financials: Credit Ratings
Credit Ratings to Date Key Factors Supporting Investment Grade Rating:
Rating Multilateral/preferred Diversified fund procurement
Last creditor status
Agency Long- Short- Outlook
Reviewed
Term Term Strong capitalization Continued support from the
international community
Moody's* A1 P-1 Stable Jun-15
High liquidity
Fitch A F1 Positive Sep-16 Demonstrated shareholder
Sound asset quality support
S&P A A-1 Positive Jul-16
Sustained growth Conservative financial
JCR AA- N/A Stable Mar-16 policies/strict credit policies
*According to Moody’s Supranational Rating Methodology, CABEI’s
indicative Rating Range is: Aa1-Aa3.
Moody’s (Stable)
12 Upgrades in 13 years
Fitch Ratings (Positive)
Standard & Poor’s (Positive)
Japan Credit Rating (Stable)
56Central American Bank for Economic Integration
Banco Centroamericano
de Integración Económica
/ www.bcie.org
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