Q: When will the Currency Pool Loan (CPL) withdrawal take place?
A: The CPL will no longer be a choice for all loan commitments for which the invitation to negotiate is issued on or after March 1, 2001.
Q: Why was the Currency Pool Loan (CPLs) withdrawn?
A: The Bank's decision to cease offering CPL terms for new loans is based on the fact that demand for currency pool loans had been on a steady decline since 1993, when the Bank started providing clients with a choice of financial instruments. Over the past two years, non-CPL products have accounted for 98% of new loan commitments. With the fixed spread loan (FSL) introduced in 1999, Bank clients can replicate the main characteristics of currency pool loans and also obtain access to a range of embedded risk management alternatives. Furthermore, while CPLs provided borrowers with relatively stable lending rate and currency composition of their loans, lack of pricing transparency and the difficulties associated with managing and monitoring the risks of their CPL liabilities have contributed to the decline in demand.
Q: How can the CPL's positive features be replicated using IBRD's new financial products?
A: Borrowers can replicate all the features of the CPL by using the FSL and risk management products the IBRD introduced in 1999. For instance, borrowers who want multi-currency obligations with slow moving average interest rates, can select an FSL in multi-currency tranches in their preferred currency proportions, and use the FSL's embedded options to fix the lending rates over a period of time to achieve a moving average lending rate of their preference.
Q: What would be the effect on the financial terms of existing CPLs?
A: The financial terms of existing CPLs, including those loans which are still disbursing, will remain unchanged.
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