The Inter-American Development Bank announces that its Board of Executive Directors approved a new liquidity policy on December 9th 2009.
The liquidity policy provides the measure for the level of prudential liquidity that the Bank should hold to give it the flexibility to remain, either by choice or due to market disruptions, out of the capital markets for a period of time while continuing to be able to meet its obligations.
Under the new policy, the IDB will hold an investment portfolio sufficient to cover at least six months of cash outflows. The new policy replaces the previous balance-sheet based approach, where the size of the portfolio was fixed at percentages of the projected year-end outstanding loan balance.
The new cash flow-based policy, which will take effect on January 1st 2010, brings the IDB in line with other comparable multilateral development institutions. The new policy follows an external panel recommendation for the IDB to review its liquidity policy. The panel analyzed the Bank’s investment policies and the impact of the global financial crisis on its investments.