ADB Capital Management Reforms Unlock $100bln of New Financing to Support Asia and the Pacific

The Asian Development Bank (ADB) has approved capital management reforms that unlock US$100 billion in new financing capacity over the next decade to address the region’s overlapping crises. The expansion of available funds will be further enhanced by mobilizing private and domestic capital to move from billions to trillions needed to tackle the climate crisis.

The reforms were introduced through an update of ADB’s Capital Adequacy Framework (CAF). They expand the bank’s annual new commitments capacity to more than $36 billion — an increase of nearly $10 billion, or about 40 percent. Expansion is achieved by improving ADB’s prudential level of capitalization while maintaining its overall risk appetite. The reforms also create a countercyclical credit buffer to support ADB developing member countries (DMCs) facing unexpected crises.

ADB’s measures to provide up to $360 billion in own 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 limited financing to DMCs. with cost and longer maturities. The reforms further protect ADB’s AAA credit rating by introducing a rescue plan to prevent capital erosion during financial crises. ADB’s capital adequacy framework is reviewed every 3 years.

„These important reforms will significantly expand ADB’s ability to support a wide range of critical development initiatives across Asia and the Pacific, including more concessional resources for our most vulnerable members,” said ADB President Masatsuku Asagawa. “Our decision today is part of ADB’s response to help multilateral development banks (MDBs) leverage our resources more quickly. These resources will help the region manage overlapping crises, address gender inequality and provide basic needs in the context of the existential challenge of climate change. This additional lending power will be further extended through renewed efforts to mobilize private and domestic capital and increase the impact of our work.

By expanding the private sector’s involvement in the development agenda, private capital mobilization will play a key role in moving from billions to trillions. Upstream activities will help improve macroeconomic policy, improve the institutional and enabling environment for private sector investment, and increase domestic and foreign investment. Midstream advisory support can help build project pipelines and prepare bankable projects that can attract private sector investment. Downstream financing will be built to pool private capital in development projects, including de-risking the private sector. Upstream mobilization and midstream and downstream mobilization will improve ADB’s balance sheet, which will increase resources for development in the region.