ASIATODAY.ID, MANILA – The Asian Development Bank (ADB) signed two new sovereign exposure exchange agreements (EEAs), strengthening ADB’s ability to lend to borrowing members.
ADB signed a $1 billion agreement with the African Development Bank (AfDB) and a $1.5 billion agreement with the Inter-American Development Bank (IDB). These two new exchanges bring to five the number of EEAs signed by ADB with these multilateral development banks (MDBs) since 2020, for a total of $6 billion.
“Regularly exchanging exposures with other MDBs is a key feature of our balance sheet optimization efforts, allowing us to reduce concentration risk and extend greater assistance to our developing member countries,” ADB Vice-President for Finance and Risk Management Roberta Casali said, October 26, 2024.
“The increasing use of this risk transfer method is a great example of the enhanced cooperation across MDBs and our willingness to work together as a system.”
A sovereign exposure exchange is a risk management tool to reduce portfolio concentration risks. It provides capital relief for sovereign-focused MDBs by exchanging concentrated loan exposures with exposure to countries where their credit exposure is less or nonexistent. By lowering exposure concentration, ADB reduces its capital usage, thereby increasing its lending capacity. It also lowers the net exposure to borrowers included in the exchanges, providing additional borrowing headroom under ADB’s limits framework.
ADB continuously explores ways to effectively manage its capital to help the region address simultaneous crises. In 2023, it unlocked $100 billion in additional lending capacity over the next decade by updating its Capital Adequacy Framework.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 69 members—49 from the region. (AT Network)
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