African Development Bank Details Callable Capital Framework in New Report

The African Development Bank (AfDB) has released a comprehensive report outlining the legal and procedural framework for invoking callable capital, a crucial financial safeguard. This publication comes as a response to a G20 recommendation and an independent review of Multilateral Development Banks (MDBs) capital adequacy frameworks.

Callable capital is the part of the bank's capital that shareholders commit to providing in the unlikely event that the AfDB cannot fulfill its debt obligations. This mechanism serves as a financial safety net, ensuring the bank's stability and operational integrity.

The report highlights the specific conditions under which callable capital might be activated and details the processes involved for both the bank and its shareholders.

This initiative aims to enhance transparency and provide vital information to credit rating agencies, which play a significant role in assessing the bank’s financial health.

Additionally, the document includes findings from a reverse stress testing exercise. This test evaluates the potential scenarios that could necessitate the calling of callable capital, ensuring that the bank and its shareholders are well-prepared for any financial contingencies.

This clarification of callable capital processes aligns with similar disclosures by other major development banks, including the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, and the World Bank.