Magazine article American Banker

Why Did Asian Region Bank Draw 1,000 to Its Meeting.?

Magazine article American Banker

Why Did Asian Region Bank Draw 1,000 to Its Meeting.?

Article excerpt

AMSTERDAM -- Easily the most colorful figure at last week's annual meeting of the Asian Development Bank here was Gerrit Fokkema, resplendent in his blue, red, and gold uniform and his plumed helmet as he conducted the Amsterdam police band for the arrival of Queen Beatrix.

More intriguing for a visitor seeing the bank close up for the first time was a simple question: Do regional development banks like this one make any useful contribution to their member countries and the world economy? The short answer seems to be yes, because the contribution, while small, is at that all-important margin where every little bit helps. And the presence of nearly 1,000 international commercial and investment bankers was evidence of the banking system's material interest.

The Asian Development Bank is headquartered in Manila but has twice held annual meetings in Europe. This latest annual meeting was itself a routine occasion -- the only contentious issue was displacement of Taiwan by the People's Republic of China and that was left for the future -- so it provided a good opportunity for some fundamental questions.

At first glance, it is by no means obvious what gap the Asian development Bank and others like it fill -- among official institutions and the commercial banking system -- in channeling financial flows between countries for trade and investment. Created in 1966, the bank has 45 member nations. But except for Cambodia and three small states with a combined population of about 160,000, its membership overlaps with the 145 countries belonging to the World Bank, on which the Asian Development Bank is modeled.

As with the World Bank, capital subscribed by the Asian Development Bank members is for the sole purpose of guaranteeing bondholders. Like the World Bank, the Asian Development Bank raises funds on world capital markets for loans to members -- except for concessionary financing contributed by richer governments for distribution to poorer recipients through a "soft loan window" resembling the International Development Association of the World Bank.

Like that of the World Bank, lending by the Asian Development Bank is formally limited to its capital plus reserves but in practice is kept even below that cautious ratio, compared with loan ratios ranging from 15 to 20 times capital and reserves commercial banks. As a result, the Asian Development Bank, like the World Bank, has a top credit rating for selling its bonds. Again, like the World Bank, the Asian Development Bank charges market-related rates of interest on the funds it lends to members and sets rigorous criteria for projects financed even through its soft-loan arm, the Asian Development Fund.

There is overlap, also, with the club of mature industrialized countries, the Organization for Economic Cooperation and Development, because the Asian Development Bank's membership includes all 17 OECD members offering aid to developing nations through the Development Assistance Committee of the OECD. …

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