Safeguard Policy Statement & Strategy 2020 Midterm Review
Appendix 3: Conservative Financial Policies
Lending Limitation: Under the policy, the total amount of disbursed loans, disbursed equity
investments, and the related prudential buffer, and the maximum amount that could be demanded
from ADB under its guarantee portfolio may not exceed the total of ADB's unimpaired subscribed
capital, reserves, and surplus, exclusive of the special reserve.
Borrowing limitation: ADB's borrowing policy limits ADB's gross outstanding borrowings to no more
than the sum of callable capital of non-borrowing members, paid-in capital, and reserves (including
surplus).
Risk Bearing Capacity: ADB annually assesses its capital adequacy using a stress test methodology
that entails, among other things, estimated non-accrual shocks and their impact on ADB's capital and
income over the next 10 years. The framework provides ADB with the ability to assess its capital
adequacy based on changing portfolio risk profiles as well as on ADB's characteristics as an MDB,
including callable capital structure, preferred creditor status, and developmental mandate.
Conservative Investment Guidelines: The maximum allowable average duration of all investments
outstanding is 4 years. ADB's investment guidelines permit only high quality instruments such as
government and government-agency debt and highly-rated corporate securities. Further, the Office of
Risk Management monitors the investment portfolio on a daily basis and ensures compliance with
prescribed limits.
For further details, please see go to http://www.adb.org/site/investors/credit-fundamentals/financial-
and-risk-management-policies
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