Towards a More Efficient Use of Multilateral Development Bankss Capital

Settimo, Riccardo

doi:10.2139/ssrn.3056276

Cited by 5 publications

(8 citation statements)

References 3 publications

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“…However, our interpretation of revision of callable capital treatment under the proposed S&P methodology differs from that of Humphrey (), as our study only includes AA+ callable capital of MDBs, which have an SACP of AA+, whereas Humphrey () includes callable capital for all MDBs irrespective of their SACP. Our lending headroom estimates under the scenario of no capital increase and optimizing while maintaining AAA and opting for AA+ rating are also largely in line with Settimo (), after the adjustment for liquidity requirement (Table ).…”

Section: Methodology and Resultssupporting

confidence: 80%

“…Humphrey () argues that such constraints in the S&P methodology limit the operational capacity of MDBs. Perraudin, Powell, and Yang () and Settimo () agree with these claims and report that if the S&P were to use a more industry standard approach to measure portfolio concentration and PCT, MDBs could lend significantly more.…”

Section: Lending Headroom and Aggregate Portfolio (Values In Us$ Billmentioning

confidence: 93%

“…In a more recent study, Settimo () studies seven major AAA‐rated MDBs including IBRD, International Finance Corporation (IFC), AfDB, EBRD, EIB, ADB and IADB and found that seven MDBs can collectively increase their purpose‐related exposure (PRE), an S&P term for lending portfolio and includes loans, guarantees and investments that are linked to MDBs' respective development mission, by around US$785billion or 88 per cent in comparison with their end‐2015 PRE levels by maintaining their current AAA ICR. Distribution of additional lending headroom was found to be not uniform, with IBRD and EIB having considerable headroom for increasing exposure while others appeared to be operating close to their thresholds.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Humphrey () states that the ‘trade‐offs of one of the major MDBs going sub‐AAA have never been thoroughly explored outside MDB treasuries and would be worth investigating'. The Settimo () study pointed out that targeting a lower‐than‐AAA rating could lead to a higher cost of funding for MDB but did not attempt to estimate such costs.…”

Section: Literature Reviewmentioning

confidence: 99%

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Scaling Up for Sustainable Development: Benefits and Costs of Expanding and Optimizing Balance Sheet in the Multilateral Development Banks

Munir

Gallagher

2020

J of Intl Development

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Multilateral development banks (MDBs) seemingly face a dilemma whereby rating agencies require them to maintain low‐risk profiles; otherwise, they may be at risk of downgrade. Meanwhile, MDBs are faced with the pressure to increase quantum of their lending operations. This paper estimates the lending headroom available to ‘AAA'‐rated MDBs under scenarios that attempt to manage both of these parameters. Our estimates suggest that MDBs can collectively increase their lending between US$598billion and US$1268billion (65–137 per cent) and that for at least four MDBs, the policy option of opting for ‘AA+' may possibly be a viable case. © 2020 John Wiley & Sons, Ltd.

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Section: Methodology and Resultssupporting

confidence: 80%

Section: Lending Headroom and Aggregate Portfolio (Values In Us$ Billmentioning

confidence: 93%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Scaling Up for Sustainable Development: Benefits and Costs of Expanding and Optimizing Balance Sheet in the Multilateral Development Banks

Munir

Gallagher

2020

J of Intl Development

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“…Section 4 concludes and provides some policy suggestions. 7 A synthetic description of these methodologies can also be found in Settimo (2017 and2019).…”

Section: Table 1 Main Balance Sheets Items (Millions Of Dollars)mentioning

confidence: 99%

Will Multilateral Development Banks Weather the Covid-19 Crisis?

Settimo

2021

SSRN Journal

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We assess the impact of the COVID-19 crisis on the financing capacity of the four major multilateral development banks (MDBs) specialized in sovereign lending (IBRD, ADB, IADB, AfDB), based on available capital buffers and while maintaining triple-A ratings. The capacity of MDBs to expand development exposures, on aggregate estimated in the range of $860-896 billion, would grow to $985-1,020 billion, benefiting from the capital increases approved recently. Simultaneously, a number of potential factors -such as the foreseeable increase in exposures due to the MDBs' countercyclical role, the deterioration in the ratings of borrowing and non-borrowing member countries, and the possible weakening of 'preferred creditor treatment' (PCT) -could substantially erode this lending capacity, reducing it to $116-227 billion. Therefore, in the post-pandemic period, it will be crucial to preserve the PCT of MDBs, also in the hypothetical case of debt restructuring episodes. Other policy suggestions go in the direction of reviving balance sheet optimization initiatives, improving harmonization among MDBs' risk-management procedures and securing credit risk guarantees from highly rated entities.

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Mobilising Private Funding of Development Finance

McHugh

2021

The Journal of Development Studies

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Successful delivery of the United Nations Sustainable Development Goals (SDGs) is dependent upon mobilising private sector finance. From a lending perspective, this requires banks to co-invest or otherwise divert more resources to development finance. To provide insights into the effectiveness of this important initiative, this paper reviews key literature across Scopus, Web of Science and Google Scholar using a defined set of keyword searches. Four main themes of future research are identified. First, the international political economy has an influence on the competitive conditions in development finance and these forces need to be explained. Second, the structure of development projects affects the extent to which private sector capital is willing to be mobilised. More insights are needed into how private sector banks can be influenced. Third, the manner in which development banks participate in development projects affects the availability of credit. A greater understanding of their role could unlock greater financing flows. Finally, it is shown that risk appetite and mitigation of development finance affects pricing and credit availability which is another critical component of delivering the SDGs.

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Towards a More Efficient Use of Multilateral Development Bankss Capital

Cited by 5 publications

References 3 publications

Scaling Up for Sustainable Development: Benefits and Costs of Expanding and Optimizing Balance Sheet in the Multilateral Development Banks

Scaling Up for Sustainable Development: Benefits and Costs of Expanding and Optimizing Balance Sheet in the Multilateral Development Banks

Will Multilateral Development Banks Weather the Covid-19 Crisis?

Mobilising Private Funding of Development Finance

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