Capital Markets

Asset Quality

ADB has a very well-performing loan portfolio due primarily to its sovereign focus and preferred creditor status. As of 31 December 2008, 93.4% of ADB ordinary operations have been made as sovereign loans with the remaining 6.6% as nonsovereign loans. ADB has not suffered any losses of principal on sovereign loans and maintains a position of not taking part in debt rescheduling agreements. In the case of nonsovereign loans, ADB may agree to debt rescheduling only after alternative courses of action have been exhausted.

ADB has a very strict policy with regard to non-accrual loans. If a loan is overdue by 60 days, ADB withholds submission of loan proposals to the Board and signing of new loan documents. After 90 days, disbursements are suspended and after 6 months, the loan is placed in non accrual status. In the history of its sovereign loans, only three countries have had loans past due for more than six months and no loans have been written off. During 2008, loan loss provision of $1.3 million was written back on two sovereign loans, decreasing the accumulated loan loss provision to $4.4 million.

As of 31 December 2008, one nonsovereign loan with principal outstanding of $1.67 million was in non accrual status. Loan loss provision for nonsovereign loans totaling $4.97 million were written back/off mainly due to the sale of two loans. This reduced the balance of accumulated loan loss provision for nonsovereign loans to $4.8 million.

The breakdown of ADB's total loan portfolio can be seen below:

Breakdown by Borrower (Sovereign) As of 31 December 2008

Breakdown by Sector (Sovereign and Nonsovereign) As of 31 December 2008