The Manila-based multilateral development bank, the Asian Development Bank (ADB), decided to expand its funds to enable it to mobilize financing to help the region face crises in the next decade.
In a statement, ADB said these efforts would unlock $100 billion in new funding to help Developing Member Countries (DMCs) to overcome “overlapping, simultaneous crises.”
The reforms were introduced by updating ADB’s Capital Adequacy Framework (CAF). They expand the bank’s annual new commitments capacity to more than $36 billion—an increase of approximately $10 billion, or about 40 percent.
“Our decision today is part of ADB’s response to the call for multilateral development banks [MDB] to do more with our resources and faster,” ADB President Masatsugu Asakawa said.
“These resources will help the region manage a complex set of overlapping crises, address gender inequality, and provide for basic needs in the context of the existential challenge of climate change. This extra lending power will be extended and leveraged further by renewed efforts to mobilize private and domestic capital and maximize the impact of our work,” he explained.
The expansion will optimize ADB’s prudential level of capitalization, while maintaining its overall risk appetite. The reforms also create a Countercyclical Lending Buffer to support ADB developing member countries (DMCs) facing unexpected crises.
The measures, which will enable ADB to provide up to $360 billion of its financing to its DMCs and private sector clients over the next decade, are designed to ensure ADB maintains its AAA credit rating and its ability to provide DMCs with funding at low cost and with long maturities.
The reforms will also help safeguard ADB’s AAA credit rating by introducing a recovery plan to prevent capital erosion during financial stress. ADB’s capital adequacy framework is reviewed every three years.
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