Target 140+ part 2 Lecture 27

Asian Development Bank (ADB)

− Establishment: Founded in 1966, the Asian Development Bank is a multilateral financial
institution.
− Membership: It has 68 member countries, of which 49 are from the Asia-Pacific region.
− Core Objectives: ADB is dedicated to fostering a prosperous, inclusive, resilient, and
sustainable Asia-Pacific. It is also committed to eliminating extreme poverty.
− Major Shareholders: As of the end of 2019, the largest shareholders are Japan and the
United States, each holding 15.6% of total shares, followed by China (6.4%), India (6.3%),
and Australia (5.8%).
− Headquarters: The institution is based in Manila, Philippines.
− Reports =Asian Development outlook.

What is IF-CAP?
The Innovative Finance Facility for Climate in Asia and the Pacific, or IF-CAP, is a multi-donor
financing partnership facility with the goal of scaling-up finance for accelerated action against
climate change in Asia and the Pacific. IF-CAP partners will provide guarantees for parts of
ADB’s sovereign loan portfolios to enable ADB to free up capital to increase lending for
climate investments.
Masala Bond
• Masala Bonds are rupee-denominated bonds issued by Indian firms outside of India.
• They are debt products that aid in the raising of funds in local currency from international
investors.
• These bonds can be issued by both the government and private businesses.
• The goal of such bonds was to stimulate Indian culture at the international platform as
‘masala’ is a Hindi word for spices.

Maharaja Bonds:
Definition: Maharaja Bonds are rupee-denominated bonds issued in India by the World
Bank's IFC.

Issuance Location: Unlike Masala Bonds, Maharaja Bonds are issued within India.

Currency: They are also denominated in Indian Rupees (₹).

Financial Stability Board
• The Financial Stability Board (FSB) is an international body, established as a not-for-profit
association under Swiss law, that monitors and makes recommendations about the global
financial system.
• It was established after the G20 London summit in April 2009 as a successor to the
Financial Stability Forum (FSF).
• The Board includes all G20 major economies, FSF members, and the European
Commission.
• Hosted and funded by: the Bank for International Settlements
• Headquarters: Basel, Switzerland

Functions:
− Assess vulnerabilities affecting the global financial system.
− Coordinate with international bodies for better policy development.
− Set guidelines and policy recommendations.
− Promotes international financial stability

Bank for International Settlements (BIS)

− is to support central banks' pursuit of monetary and financial stability through
international cooperation, and to act as a bank for central banks.
− HQ - Baset Switzerland
− Members - 63

Functions
− Monetary Policy: Provides a forum for central banks to discuss and coordinate monetary
policy.
− Financial Stability: Works to improve the functioning and stability of the global financial
system.
− Banking Supervision: Hosts the Basel Committee on Banking Supervision, which
formulates banking standards like Basel III.

Global Systemically Important Bank (G-SIB)

• Bank whose systemic risk profile is deemed to be of such importance that the bank’s
failure would trigger a wider financial crisis and threaten the global economy.
• These are selected by Financial Stability Board (FSB), in consultation with the Basel
Committee on Banking Supervision (BCBS)
• Total number of G-SIBs at present=30.

Basel Committee on Banking Supervision (BCBS)

− Purpose: To strengthen the regulation, supervision, and practices of banks worldwide.
− Establishment: Founded in 1974.
− Parent Organization: Hosted by the Bank for International Settlements (BIS).
− Headquarters: Basel, Switzerland.

DOMESTIC SYSTEMICALLY IMPORTANT BANKS (D-SIBS)

• D-SIBS are those interconnected entities, whose failure can impact the whole of the
financial system create instability i.e., they are too big too fail.
• D-SIBS are designated on basis of their:
1. Size
2. Interconnectedness
3. Lack of readily available substitutes or financial institution infrastructure
4. Complexity
• To be listed as D- SIB, a bank needs to have assets that exceed 2 percent of national GDP.
• Concept of D-SIB was adopted in aftermath of 2008 financial crisis.
FSDC:
• The Financial Stability and Development Council (FSDC) was constituted in December,
2010.
• The FSDC was set up to strengthen and institutionalise the mechanism for maintaining
financial stability, enhancing interregulatory coordination and promoting financial sector
development.
• It is not a statutory body.
• The Council is chaired by the Union Finance Minister.
New Development Bank
• The New Development Bank (NDB), formerly referred to as the BRICS Development Bank,
is a multilateral development bank established by the BRICS states (Brazil, Russia, India,
China and South Africa).
• According to the Agreement on the NDB, "the Bank shall support public or private projects
through loans, guarantees, equity participation and other financial instruments."
• Moreover, the NDB "shall cooperate with international organizations and other financial
entities, and provide technical assistance for projects to be supported by the Bank."
• Headquarters: Shanghai, China

Formation of New Development Bank

• The idea for setting up the bank was proposed by India at the 4th BRICS summit in 2012
held in Delhi. The creation of a new development bank was the main theme of the
meeting.
• BRICS leaders agreed to set up a Development bank at the 5th BRICS summit held in
Durban, South Africa on 27 March 2013.
• On 15 July 2014, the first day of the 6th BRICS summit held in Fortaleza, Brazil, the BRICS
states signed the Agreement on the New Development Bank, which makes provisions for
the legal basis of the bank.
• In a separate agreement, a reserve currency pool worth $100 billion was set up by BRICS
nations.

Membership
• The five founding members of the Bank include Brazil, Russia, India, China and South
Africa.
• Bank's Articles of Agreement specify that all members of the United Nations could be
members of the bank, however the share of the BRICS nations can never be less than 55%
of voting power.
• In 2021, Bangladesh and the United Arab Emirates, joined and Egypt joined the NDB in
2023.
• Uruguay is a prospective member, i.e it has been admitted by NDB’s Board of Governors
and will officially become a member country once they deposit their instrument of
accession.
Capital
• The New Development Bank has an initial subscribed capital of US$50 billion and an initial
authorized capital of US$100 billion.
• The initial subscribed capital is equally distributed among the founding members, thus
adhering to One Member One Vote principle.
• Each member cannot increase its share of capital without all other four members
agreeing.
• The bank will allow new members to join but the BRICS capital share cannot fall below
55%.
Asian Infrastructure Investment Bank (AIIB)
• China launched the AIIB in 2016 as a counterweight to Western-dominated global
financial institutions such as the World Bank and the International Monetary Fund.
• The project was pushed by Chinese President Xi Jinping, who has also thrown his weight
behind the BRI, a global trade and infrastructure initiative that has drawn criticism from
some Western powers for a perceived lack of transparency.
• The AIIB has 106 global members, including Australia, Canada, France and Germany. The
United States is not an AIIB member.
• India was among the AIIB's 57 founding members in 2016. It is also its second-largest
shareholder (with 7.62% voting shares) after China (26.06%).
• The Mission of the AIIB is to improve social and economic outcomes in Asia.
• Headquarters: Beijing
• China is the largest shareholder with 26.61 % voting shares in the bank, followed by India
(7.6%), Russia (6.01%), and Germany (4.2 %).
• Voting Rights of AIIB: China is the largest shareholder with 26.61 % voting shares in the
bank, followed by India (7.6%), Russia (6.01%), and Germany (4.2 %). The regional
members hold 75% of the total voting power in the Bank.

World Bank Group

− World Bank Group is a unique global partnership: five institutions working for sustainable
solutions that reduce poverty and build shared prosperity in developing countries.
− HQ of World Bank = Washington DC
− International Bank for Reconstruction and Development (IBRD) provides loans, credits,
and grants to middle income countries.
− International Development Association (IDA) provides low- or no-interest loans to low-
income countries.
− The International Finance Corporation (IFC) provides investment, advice, and asset
management to companies and governments.
− The Multilateral Guarantee Agency (MIGA) insures lenders and investors against political
risk such as war.
− The International Centre for the Settlement of Investment Disputes (ICSID) settles
investment-disputes between investors and countries.

Reports of World Bank:

a) Ease of Doing Business
b) World Development Report
c) Global Economic Prospect (GEP) Report
d) Remittance Report
e) Ease of Living Index
f) India Development Update
g) Universal Health Coverage Index
h) The Service Trade Restriction Index
i) Human capital index