GBRW Consulting has been analysing the major Multilateral Development Banks - International Bank for Reconstruction & Development, or World Bank; International Finance Corporation; Inter-American Development Bank; African Development Bank; Asian Development Bank and European Bank for Reconstruction and Development- since the late 1990s.
This is the second of two presentations available on SlideShare. It illustrates some of the main characteristics of the financial statements of this very specialised group of institutions, which we refer to as MDBs.
1. MULTILATERAL
DEVELOPMENT BANKS
PART 2 OF 2: AN INTRODUCTION
TO MULTILATERAL DEVELOPMENT BANKS
LONDON
WASHINGTON DC
SINGAPORE
GLOBAL EXPERIENCE, PRACTICAL EXPERTISE
2. INTRODUCTION
GBRW Consulting has been analysing the major Multilateral Development
Banks (International Bank for Reconstruction & Development, or World
Bank; International Finance Corporation; Inter-American Development
Bank; African Development Bank; Asian Development Bank and European
Bank for Reconstruction and Development) since the late 1990s.
We provide analysis, training and consultancy for Government
shareholders and other interested parties on issues which include
strategy, governance, communication with stakeholders and capital
adequacy.
This is the second of two presentations available on SlideShare. It
illustrates some of the main characteristics of the financial statements of
this very specialised group of institutions, which we refer to as MDBs.
3. The first slide shows the Total Assets of each bank.
After a flat period between 2003 and 2007, they have grown significantly
in the past six years.
Data used in the following slides are based December 2012 year end
accounts (for the Inter-American Development Bank; African Development
Bank; Asian Development Bank and European Bank for Reconstruction and
Development) and June 2013 accounts (for International Bank for
Reconstruction & Development and International Finance Corporation).
5. The next slide compares the loans made by each MDB.
Loans are the largest component of Development Related Exposure (DRE),
the term used to describe the development financing activities of each of
the banks.
The other elements of DRE are equity investments by the banks (mainly
IFC and EBRD) and guarantees issued by them on behalf of borrowers.
7. Total Development Related Exposure for each bank is shown next.
This provides the most comprehensive way of comparing the development
financing activities of each bank.
8. Total Development Related Exposure
(DRE) ($ million)
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
IBRD
IADB
ADB
EBRD
AfDB
IFC
9. The breakdown of Development Related Exposure which follows again
shows the predominance of lending in the banks’ development financing.
Guarantees represent less than 2% of total DRE, even though many parties
believe that MDB guarantees represent a highly effective means of
leveraging additional private sector financing.
IFC’s and EBRD’s activity as providers of equity financing is clearly
illustrated.
10. What does DRE involve?
100%
90%
80%
70%
60%
Loans
50%
Equity investments
40%
Guarantees
30%
20%
10%
0%
IBRD
IADB
ADB
EBRD
AfDB
IFC
11. By looking at the relative composition of the banks’ balance sheets, the
size of their investment portfolios (“Liquid assets”) in relation to their DRE
can be seen in the following slide.
Interest rate and currency swaps are an important feature of the MDBs’
fund raising operations. Their contractual rights to receive payments
under swap contracts are included in the “Other Assets” balances (the
Liabilities & Equity side of of each MDB’s balance sheet similarly shows its
obligation to make payments under swap contracts).
The IBRD and AsDB show the highest levels of entries under this heading,
which increases their balance sheet totals when compared to the other
MDBs.
12. Comparison of balance sheets: Assets
100%
90%
80%
70%
60%
Liquid assets
50%
Total DRE
40%
Other Assets
30%
20%
10%
0%
IBRD
IADB
ADB
EBRD
AfDB
IFC
13. The banks’ investment portfolios are shown as a percentage of their
Development Related Exposure in the following slide.
In the case of the EBRD and AfDB, liquid assets are respectively 78% and
65% of DRE; the IFC has liquid assets exceeding 100% of its assets used in
development financing.
15. An important factor underpinning MDBs’ “AAA” credit ratings is their
callable capital, which represents an obligation by shareholders to pay in
additional capital if this is ever required.
The size of this callable capital for each bank can be seen in the next slide.
The slide also shows each bank’s equity, or shareholders’ funds, which
consists of paid in capital and retained profits.
IFC (which is a member of the World Bank Group) is the only MDB not to
have callable capital.
16. Equity and Callable Capital ($ million)
250,000
200,000
150,000
100,000
50,000
0
IBRD
IADB
Equity
ADB
EBRD
Callable Capital
AfDB
IFC
17. It is important not to confuse the lending activities of the MDBs, which are
generally done at commercial interest rates, with those of their
concessional, or “soft lending” affiliates.
The concessional arm of the World Bank group, the International
Development Association, or IDA, is the longest established. The Asian,
African and Inter-American Development Banks have the Asian
Development Fund, African Development Fund and Fund For Special
Operations. (No fund is shown against the IFC as it is also part of the
World Bank group.)
The EBRD is the exception; although it has a number of special trust funds,
it does not have a concessional arm because of its mandate to focus on
the private sector. The relative sizes of the MDBs and their concessional
funds are shown in the next slide.
19. FURTHER INFORMATION
GBRW regularly provides training on the role of MDBs in international
financial markets to delegates from major development institutions
(contact us for a course outline).
The major ratings agencies (Fitch, Standard & Poor’s and Moody’s)
produce credit analyses on the MDBs which are available on their
websites.
Copies of the MDBs’ annual financial statements can be downloaded from
the MDBs’ own websites.
For discussion of some of the general issues relating to MDBs, please see
Part 1 of this presentation on Slideshare.
20. PROFILE AND CONTACTS
Paul Rex,
Managing Director
You can find out more about GBRW
Consulting by visiting our website on
http://www.gbrw.com
Visit my LinkedIn profile at
http://www.linkedin.com/in/paulrexgbrw
and feel free to connect
Email us at mail@gbrw.com
Paul is the Managing Director of GBRW and
began his career with 18 years of lending, credit
and management experience at senior level
with Chemical Bank (now JP Morgan Chase) and
Crédit Agricole.
He has been involved in international
development finance consulting for the past 20
years and has worked on assignments in more
than 20 countries, including Bahrain,
Bangladesh, Belize, China, Egypt, Mongolia,
Poland, Russia, Serbia, Sierra Leone, Singapore,
Uganda, Ukraine, and West Bank/Gaza.
Paul has an MA from the University of Oxford, is
a Fellow of the Academy of Experts, a Freeman
of the City of London and a member of the
Worshipful Company of International Bankers.
