After repeatedly coming to the rescue of Barbados and other regional countries in their time of financial trouble, the Caribbean Development Bank is now facing its own challenge and needs their help.

In the face of its third credit rating downgrade in six months, the most recent by Standard & Poors on Wednesday, the Barbados-based institution raised $600 million in “new cash”, and started to address “internal issues” including risk management, and the structure of its own borrowing.

But CDB President, Dr. Warren Smith, making it clear the organisation’s current difficulties had little to do with management complacency, today appealed to Barbados and the bank’s 17 other Borrowing Member Countries to repay their loans on time, otherwise the bank would be in further trouble.

News of the difficulties came today from Smith and other members of the management team who spoke to members of the media during a news conference at the CDB’s Wildey offices this morning.

After losing its treasured S&P AAA rating in June, the development financier has now had it further reduced from AA+ stable to AA negative.

Smith said since the first downgrade his institution had taken steps to resolve the rating agency’s concerns, but stressed it did not have control over exogenous factors, including how the BMCs were managing their economic affairs.

A few weeks ago CDB successfully raised US$300 million on the international capital market, and the president said repayment arrangements and availability of such funds met requirements about which S&P had raised concern.

Additionally, the bank is improving its risk management, including establishing a dedicated risk management unit and hiring a chief risk officer.

“So we have addressed internally the two main issues that were identified by the rating agencies as the principle reasons for the downgrade of the institution earlier this year,” he noted.

“Unfortunately, however, the external weaknesses affecting the CDB and which contributed to the lowering of its rating will not be that easy to resolve… A couple of our countries have found themselves in a position where they are having difficulty meeting their obligations on the payment of their loans. They have fallen behind the schedule of payments that are required; that does not play well with the rating agencies,” Smith said.

“The other factor is one of our countries has also paid another set of creditors before they paid CDB and that is a violation of … preferred creditor status, which is a status enjoyed by all multilateral institutions like CDB.”

While saying it was not the end of the world and that the bank remained “very strong”, the official said unless BMCs met their obligations to the bank it faced a “real risk” of further credit rating downgrade.

“We have less control over what is going on in the countries and the economic situation out there is not good. The prospects for the next year or two do not appear to be very, very favourable. I don’t think the prosecutes in the short to medium term are looking great and that’s a risk for us,” he pointed out.

“Having said that, we are doing everything, working with these countries to ensure that they shore up CDB because they need us as much as we need them.” (SC)

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