Capital Markets

Asset Quality – Sovereign Focus

ADB has a very well-performing loan portfolio due primarily to its sovereign focus and preferred creditor status. As of 31 December 2007, 95.1% of ADB ordinary operations have been made as sovereign loans with the remaining 4.9% as non-sovereign 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 non-sovereign 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. As of 31 December 2007, one sovereign loan with principal outstanding of $2.3 million was in non accrual status. During the year, loan loss provision of $0.4 million was written back on one sovereign loan, decreasing the accumulated loan loss provision to $5.7 million.

The breakdown of ADB's sovereign loan portfolio by country can be seen below:

Breakdown by Borrower As of 31 December 2007

Breakdown by Sector As of 31 December 2007