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Multilateral Development Banks’ Capital Adequacy Frameworks: options for reform?

ODI
September 15, 2022

About the discussion

In 2021, G20 members created an independent panel to evaluate whether multilateral development bank (MDB) shareholder capital is being used efficiently and to understand whether MDBs can lend more without threatening their long-term financial integrity. This was in response to a growing sense among policy-makers that MDBs need reforming if they are to play a more meaningful role in addressing the global crises of today and tomorrow.

The panel’s Independent Review of MDBs’ Capital Adequacy Frameworks report was subsequently published in July. It centred on five recommended reforms: re-evaluating MDB risk limits, recognising the benefits of callable capital, expanding the use of financial innovations, enhancing dialogue with credit rating agencies, and promoting greater transparency regarding MDB credit performance.

As well as discussing the recommendations of the report and framing the emerging issues and priorities, this webinar will explore the following questions:

– Are MDB capital adequacy policies fit for purpose to face current global challenges?

– Can MDBs safely lend more without threatening their bond ratings?

Running order

00:00 Sara Pantuliano (ODI) – opens webinar and welcomes speakers and guests

05:50 Francesca Utili (Government of Italy) – why an independent panel review of MDB’s capital adequacy?

08:25 Frannie Léautier (SouthBridge Group and Chair of G20’s Independent Review of Multilateral Development Banks’ Capital Adequacy Frameworks) – the rationale for the panel’s work, the panel’s approach to undertaking its work; briefly highlights the panel’s five key recommendations

14:34 Hans Peter Lankes (London School of Economics) – methodology and benchmarking undertaken by the panel; governance of MDB capital adequacy frameworks

20:40 Chris Humphrey (ODI) –panel recommendations on how MDBs and credit rating agencies evaluate MDB risk; preferred creditor treatment; callable capital

26:27 Nancy Lee (Center for Global Development) – panel recommendations on Innovations to the MDB business model

32:16 Masood Ahmed (Center for Global Development) – launches discussion among panellists

35:00 Wempi Saputra (Government of Indonesia) – G20 member-countries’ responses to the report

42:20 Afsaneh Beschloss (RockCreek and former Treasurer World Bank) – ratings and ratings agencies; innovations and new tools – increasing leverage, making better use of MDB callable capital, “halo effect” to draw in private capital

54:00 Rajiv Shah (Rockefeller Foundation) – a stronger, more agile and better-funded MDB system; using AAA rating to better effect; public-private partnerships; political urgency

01:03:28 Maria del Carmen Bonilla Rodriguez (Government of Mexico) – Mexico supports the panel’s report; halo effect; public-private partnerships including SPVs

01:10:40 Frannie Léautier – report’s impact so far; implement the report’s recommendations as a package (not pick from a menu); response to concerns re risks of reform agenda

01:20:50 Wempi Saputra – encourage a co-ordinated approach between MDBs; G20 IFI working group to develop a roadmap for implementation

01:24:16 Rajiv Shah – political importance of reforms, to support stability and climate transition

01:28:11 Maria del Carmen Bonilla Rodriguez – urgency of need; talk to the ratings agencies

01:28:36 Afsaneh Beschloss – explain the recommendations to the shareholders and ratings agencies in detail; talk to private and public re halo effect

01:30:58 Masood Ahmed – use the next 18 months for a breakthrough on balance sheet optimisation

01:32:55 Sara Pantuliano – the next few months will be critical to turn the recommendations of the report into action.

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