Adopt additional methods of reporting volume that can reflect the distinct nature of the trade finance guarantee instrument and provide a better picture of the relative size of the GTFP in IFC.
2. GTFP short-term guarantee "commitments" are treated in the same manner as long-term IFC investments, even though they have an average tenor of 5 months, compared to tenors of several years for long-term loans. This may overstate the size of the GTFP relative to other IFC activities. Although the GTFP accounted for 39 percent of IFC commitments in 2012, it accounted for 2.4 percent of IFC's capital 1.2 percent of IFC's staff costs and 0.6 percent of IFC's profit.
Original Response: Agreed: IFC agrees that commitment volume for GTFP has different characteristics than traditional IFC products (as loans and equity are different), and simply consolidating volume could inappropriately imply incomparable growth if an audience were to assume all volume was generated by traditional products. However, commitment volume is a broadly accepted WBG measurement, and changing the term's definition in this case would also be contrary to reporting accuracy. We did not find any evaluative basis in the report regarding the appropriateness of IFC's current methodology vis-à -vis its peers and industry best practice. IFC would consider reporting GTFP commitment volume separate from IFC's other business lines. We would also report GTFP's outstanding portfolio balances and economic capital utilization.
IFC Action 7: Consider additional methods of reporting commitment volume that reflects trade finance business.
Indicator: N/A
Target: Shift IFC's reporting to Outstanding Portfolio vs. Commitment Volume
Timeline: 1Q15
In its FY15 Update, IEG verified the reporting of both long-term and short-term financing in the FY15 Annual Report and concluded that this recommendation has been fully adopted by the Management. This is due to the fact that IFC started reporting the average annual outstanding portfolio balance for GTFP in its FY15 Annual Report. For example, in FY15, IFC had an average outstanding balance of US$ 2.8 billion in trade finance (pg. 56 of FY15 Annual Report). Furthermore, the long-term commitments in the FY15 Annual Report did not include short-term finance. For example, total long-term commitments from IFC's own account was about US$ 10.54 billion in FY15 as compared to US$ 9.97 billion in FY14 (Source: FY15 Annual Report. Table: World Bank Group Financing For Partner Countries). Based on the above evidence of separate reporting of Short-Term and Long-Term financing, IEG upgrades Implementation Status as Inactive (All actions are completed).
Although Management has not provided any updates on this recommendation in this yearâs MAR, IEG has verified the reporting of long-term and short-term financing in the most recent (FY15) Annual Report and concludes that this recommendation has been fully adopted by the Management. That is, IFC has started reporting the average annual outstanding portfolio balance for GTFP in its Annual Report (the most recent being FY15) --- âIn FY15, IFC had an average outstanding balance of $2.8 billion in trade financeâ (pg. 56). Also, long-term commitments in the FY15 Annual Report did not include short-term finance. For example, in the FY15 Annual Report under the table âWORLD BANK GROUP FINANCING FOR PARTNER COUNTRIES â, total long-term commitments for IFCâs own account was about US$ 10.54 billion in FY15 as compared to US$ 9.97 billion in FY14.
IEG acknowledges that IFC has reported the average annual outstanding portfolio balance and commitment volume of short-term finance (STF) in the IFC Road Map FY15-17 report (IFC/SecM2014-0028). Also, it is mentioned on Page 4 of IFCs FY14 Annual Report that begining in FY15, IFC plans to change its current practice of reporting the cumulative commitment volume of its short-term finance (STF) business over the course of a fiscal year, and then aggregating that with its long-term finance (LTF) commitment volumes to reporting STF business based on the average annual outstanding portfolio of its STF business in a fiscal year, and report that separately from its LTF business. It is also mentioned in the annual report that had the new practice been applied to FY14, GTFP and GTSF, included in loans and guarantees, would have been lowered by $4.3 billion in FY14 (lower by $4.6 billion - FY13).
IEG also acknowledges that IFCs audited statements are regulated regulated and in compliance with US GAAP.
The recommendation of shifting GTFP reporting to average outstanding balance has been largely adopted, but not yet implemented in the Corporate Scorecard and in IFCs Annual Report.
Completed. IFC Management Team has signed off and Average Outstanding Portfolio balance is reported in IFC Scorecards from FY15 forward.