World Bank report reveals procedures and governance of callable capital

The World Bank report examines when callable capital could be called, how a call could be made, and how shareholders could respond.

The World Bank published a report on Friday that reviews the procedures and governance of callable capital, providing more clarity and transparency on the value of this financial commitment from the institution’s shareholders.

This information will help rating agencies to better assess the value of callable capital to Multilateral Development Banks (MDBs). It responds to requests from the rating agencies for more information on how shareholders would respond to a call. Additional recognition by rating agencies of the value of callable capital could potentially allow the World Bank and other MDBs to expand financial capacity to tackle growing development needs and improve the lives of millions.

Callable capital is a commitment from World Bank shareholders to step in with new funds to help the International Bank for Reconstruction and Development (IBRD) meet its bond and guarantee obligations under extreme circumstances. IBRD’s strong financial framework, including callable capital, align with its Triple-A credit rating.

The World Bank report examines when callable capital could be called, how a call could be made, and how shareholders could respond. The analysis:

Confirms through a reverse stress testing exercise that the likelihood of a call on capital is extremely remote.Includes detailed information on some member country processes to respond to a call on callable capital.

Highlights shareholder country commitments to callable capital which are legally binding and backed by member countries.As of June 30, 2023, IBRD had a total of $296 billion in callable capital, accounting for 93 percent of its $318 billion total subscribed capital, with the remaining 7%, or $22 billion, in paid-in capital, according to the report.

The report comprises efforts by the World Bank and other MDBs to implement recommendations from the G20-sponsored Independent Review of MDB Capital Adequacy Frameworks. Similar reports on callable capital are being published by the African Development Bank, the Inter-American Development Bank, the Asian Development Bank and the European Bank for Reconstruction and Development.