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BP 13.50 - Cancellations


These policies were prepared for use by World Bank staff and are not necessarily a complete treatment of the subject.
BP 13.50
August, 2002
 

This Bank Procedures statement was revised in April 2012 to streamline clearance procedures by removing the requirement for legal clearance of (i) the acknowledgement of borrower cancellation and notice of resulting changes to the withdrawal schedule; and (ii) notice to borrower of amortization schedule change resulting from cancellation. It was previously revised March 2012 to take into account the provisions of OP/BP 9.00, issued in February 2012; and in April 2007 consequent to the issuance of OP/BP 12.00, Disbursement and to reflect title change to "finance officer" (formerly disbursement officer) that took effect on July 1, 2002.

Note: This BP 13.50 replaces BP 13.50 dated August 1994. Questions may be addressed to opmanual@worldbank.org.

 
 
Revised April 2012
 
1. The procedures set out in this BP apply to loan1 cancellations that do not follow a suspension of disbursements.2

Cancellation by the Borrower

2. The borrower cancels by giving notice (signed by the borrower's representative authorized under the legal agreement) in accordance with the relevant provisions of the applicable General Conditions and Standard Conditions.3  Though Bank approval is not required, the Bank acknowledges the cancellation request and dates the cancellation as effective on the day the request was received. The Bank does not accept requests by the borrower for retroactive cancellations.4

3. The task team leader (TL) prepares the acknowledgment and a notice to the borrower of the revised withdrawal schedule,5 which are cleared by the finance officer and signed by the country director.6 The acknowledgement and notice are copied to the lawyer and Controllers. The TL also revises the disbursement projections in the Systems Applications and Products (SAP) system.7
 
Cancellation by the Bank

4. The TL prepares a restructuring paper justifying cancellation, and two notices to the borrower: (a) a cancellation notice, and (b) a notice of the revised withdrawal schedule reflecting the cancellation (see sample notices in OPCS Templates). The lawyer (unless the cancellation occurs because of the closing date's expiration) and finance officer clear the restructuring paper and notices.8 The country director signs both notices. The TL also revises the disbursement projections in SAP.9

5. A cancellation by the Bank normally takes effect on the date of the notice, except when the remaining balance in the loan account is canceled after the closing date.10 Cancellations of the remaining loan balance are normally backdated to the latest of (a) the closing date, (b) the final date for receipt of withdrawal applications by the Bank, or (c) the final date the loan account was charged for a disbursement or credited for a refund. Exceptions to this procedure are approved by the country director in consultation with CTR Director. The country director notifies the Corporate Secretariat so that it may be reflected in the Report to the Executive Directors on Bank and IDA Operations.
 
Revised Amortization Schedule

6. If the loan agreement includes an amortization schedule specifying principal repayment amounts (e.g., currency pool loans and variable spread loans), once an amount of the loan has been canceled, the change is reflected in a revised amortization schedule. For these types of loans, the loan accounting officer prepares and forwards the revised schedule to the country director who transmits it to the borrower, with a cover letter cleared by Controllers. For this purpose, the canceled loan amount is normally prorated to the remaining loan principal maturities.11 The lawyer is copied on the notification letter.  (A sample transmittal letter to the borrower is available in the OPCS Templates).

7. The amortization of IDA credits pertaining to the repayment of the amount withdrawn and outstanding is specified as a percentage of the principal amount of the credit, so that no revision is required.
 
Cofinanciers

8. For projects cofinanced by other lenders, the Vice President, Resource Mobilization and Cofinancing (RMC), is consulted at an early stage of processing about any proposed cancellation and also about any communications to cofinanciers regarding such cancellation. Before the Bank communicates its decision to the borrower, the TL contacts the project cofinanciers that have formal arrangements with the Bank (e.g., through a cofinancing agreement, a memorandum of understanding, or a letter of administration concerning the project) to notify them of the cancellation or consult with them in accordance with the cofinancing agreement.
 
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  1. Except where the context otherwise requires, "loans" includes IDA credits and IDA grants; and "Bank" includes both IBRD and IDA. In the case of grants, if the Grant Agreement between the Bank and the recipient of grant funds incorporates some or all of the relevant cancellation provisions of the General Conditions, OP/BP 13.50 applies to the extent the relevant provisions have been so incorporated. For example, Sections 6.01 and 6.03 of the General Conditions are normally incorporated in Grant Agreements providing for grants of more than US$1 million under the Global Environment Facility (GEF) (other than GEF grants for projects executed by organizations identified by the GEF Council as eligible to work with the GEF through expanded opportunities for project preparation and implementation; such organizations include, inter alia, regional development banks and UN agencies such as FAO and UNIDO). Thus, for these GEF grants, the provisions of OP/BP 13.50 applies. For the cancellation of: (a) GEF grants not covered by OP/BP 13.50, see the GEF Operations website or consult the GEF Executive Coordinator, ENVGC; (b) trust fund grants not covered by OP/BP 13.50, consult the Head, Trust Funds Oversight Team, TFO; and (c) Development Grants Facility (DGF), including IDF grants not covered by OP/BP 13.50, consult the Manager, Development Grants Facility, TFO. For the cancellation of Project Preparation Facility advances, see OP/BP 8.10, Project Preparation Facility. Loan cancellation is also dealt with in OP/BP 9.00, Program-for-Results Financing, OP/BP 11.00, Procurement; OP/BP 13.05, Project Supervision; OP/BP 13.30, Closing Dates; and OP/BP 13.40, Suspension of Disbursements.
  2. For post-suspension cancellations, see OP/BP 13.40, Suspension of Disbursements.
  3. See the relevant General Conditions Applicable to Loan and Guarantee Agreements or the relevant General Conditions Applicable to Development Credit Agreements or Standard Conditions applicable to the respective financing.
  4. Under exceptional circumstances, the Bank may consider a borrower's request for retroactive cancellation which will require the approval of the Managing Director, Operations (MDO).
  5. See sample letters in the OPCS Templates.
  6. For GEF grants to which this BP applies, the notice is also cleared by and copied to the GEF Regional coordinator. For trust fund grants to which this BP applies, the notice is also cleared by and copied to: (a) the Trust Fund Program administrator in the case of programmatic trust fund grants (e.g., grants under PHRD, JSDF, BNPP), (b) the Trust Fund Oversight Team, TFO in the case of other trust fund grants (e.g., freestanding trust fund grants), (c) the DGF secretariat in the case of DGF grants, (d) the IDF secretariat in the case of IDF grants, and (e) the Post Conflict Fund secretariat in the case of post-conflict grants.
  7. See BP 13.05, Project Supervision, for procedures for handling amendments to the legal agreements if the borrower's notice of cancellation is accompanied by a request for such amendment.
  8. For GEF grants to which this BP applies, the memorandum and notices are also cleared with and copied to the GEF Regional coordinator. For trust fund grants to which this BP applies, the memorandum and notices are also cleared with and copied to: (a) the Trust Fund Program Administrator in the case of programmatic trust fund grants (e.g., grants under PHRD, JSDF, BNPP facilities ), (b) the Trust Fund Oversight Team, TFO in the case of other trust fund grants (e.g., freestanding trust funds), (c) the DGF the DGF secretariat in the case of DGF grants, (d) the IDF secretariat in the case of IDF grants, and (e) the Post Conflict Fund secretariat in the case of post-conflict grants. In addition, according to the terms of the relevant Trust Fund Agreements between a donor and the Bank, cancellation by the Bank of grant amounts under that agreement may require prior approval of, or consultation with, the donor.
  9. If the cancellation is being processed in conjunction with a request by the borrower for an amendment to the legal agreements, the lawyer should be consulted and if it is considered appropriate, the proposed amendments could be addressed at the same time. See OP 13.05, Project Supervision, for procedures to be followed in processing the amendments.
  10. For procedures to be followed for cancellations following the closing date, see BP 13.30, Closing Dates.
  11. Section 6.05 of the General Conditions applicable to Loan and Guarantee Agreements for Currency Pool and Single Currency Loans provides that such prorating applies unless the Borrower and the Bank agree otherwise.



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