Multilateral Development Banks’ callable capital integration into capital adequacy frameworks (Jun 2024)


Callable capital is a crucial component in the Capital Adequacy Frameworks (CAFs) of Multilateral Development Banks (MDBs). It acts as a financial safety net, enhancing creditworthiness and providing leverage capacity. Callable capital refers to the portion of a MDB’s subscribed capital that can be called upon from member countries if required to meet financial obligations. It is not paid in but serves as a commitment to back the MDB’s borrowing and lending activities in the event that additional capital is required.
Despite its importance, callable capital faces challenges in terms of availability, operational flexibility, and prompt execution due to the complex and time-consuming processes involved in capital calls. Recent reviews and reports by major MDBs highlighted the following challenges:

• Delayed Access: Callable capital is not immediately available, requiring formal calls and potentially facing delays
• Credit Perception: Calling capital might be perceived as a sign of distress
• Operational Constraints: Limited utility in day-to-day operations due to conditional nature

While callable capital is valuable, maintaining substantial paid-in capital and financial guarantees remains essential for MDBs to ensure robust and flexible financial operations. The focus on enhancing callable capital policies is ongoing, aiming to maximise investment capacities and ensure long-term sustainability.



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