Publish What You Pay calls for all private, commercial and retail banks to require transparency of revenues from extractive industries as a condition for all resource-backed loans to developing countries, meaning loans which are secured against future resource revenues.

Resource-backed loans are taken out by governments from banks at high interest rates and are paid back by revenues from future resource extraction. At best, the provision of resource-backed loans may have undermined the work of multilateral institutions like the IMF in countries like Angola by providing governments with funds which are not subject to the strict conditions of IMF loans. At worst, resource-backed loans to such countries may provide a whole system of parallel financing, outside of public scrutiny, which supports the shadow state and provides opportunities for cash to be diverted into private pockets. Such information is not being made routinely available to civil society, in whose name such debts are arranged. As with resource revenues, ordinary citizens cannot know whether such loans are appropriate and are therefore unable to hold their government to account over the use of credit facilities.

Banks may favour such loans because they earn high interest rates and are secured against future resource extraction, but the banks risk making themselves complicit with the misappropriation of state funds unless provisions are in place to check that loans are being properly used and to ensure that the borrowing government's fiscal management is transparent. Banks should therefore disclose all resource-backed loans and require that the borrowers agree to be audited in a transparent fashion, as a condition of receiving the loan. In cases where a state oil company was the recipient of an resource-backed loan, the audit would need to reveal not only its receipt of the money but subsequent transfers of money to the government.

The voluntary Wolfsberg Principles, created by 11 leading banks and Publish What You Pay coalition member Transparency International, seek to deny the use of banking services for ‘criminal purposes’. Each signatory bank will ‘endeavour to accept only those clients whose source of wealth and funds can be reasonably established to be legitimate’. This could easily and effectively be extended to cover disclosure of resource-backed loans. At the moment, several Wolfsberg signatories, including ABN Amro, Citibank and Société Générale, lend money to Angola for purposes unknown. More broadly, the issue of loan disclosure needs to be factored into future ‘know-your-customer’ requirements by banks.

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