ADB unlocks $100 bn funding capacity with capital management reforms

The reforms, carried out through an update of ADB's Capital Adequacy Framework (CAF), would expand the bank's annual new commitments capacity to more than $36 billion

The Asian Development Bank (ADB) on Friday approved capital management reforms, which would unlock $100 billion in new funding capacity over the next decade to address the region’s overlapping and simultaneous crises. 

The reforms, done through an update of ADB’s Capital Adequacy Framework (CAF), would expand the bank’s annual new commitments capacity to more than $36 billion — an increase of approximately $10 billion — or about 40 per cent.

“The expansion is achieved by optimising ADB’s prudential level of capitalisation while maintaining its overall risk appetite,” ADB said.

The expansion of available funds will be further leveraged through mobilising private and domestic capital. It will move from the billions to trillions required to tackle the climate crisis, ADB said in a press statement.

The measures will enable ADB to provide up to $360 billion of its own financing to its developing member countries (DMC) and private sector clients over the next decade. They 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 G20 independent expert group on strengthening multilateral development banks (MDBs) had said that by 2030 additional spending of $3 trillion will be required to meet the sustainable development goals, and global public goods.

The report has also said that there is a need for a significant increase in new equity of $100 billion across all MDB institutions. 

ADB president Masatsugu Asakawa said in a press statement, “This extra lending power will be extended and leveraged further by renewed efforts to mobilise private and domestic capital and maximise the impact of our work.”

The report of the G20 independent expert group also highlighted that MDBs should change their approach in partnering with the private sector. They should help governments reduce policy and regulatory risks and align financial product offerings with private capital market gaps. ADB reforms come close on the heels of the International Monetary Fund-World Bank meetings in Marrakech (Morocco) next month. There, the G20 Finance Ministers and Central Bank governors will discuss volume two of the report on MDB reforms.