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Second Credit Rating Agency Roundtable

On the sidelines of the Annual Meetings of the International Monetary Fund and the World Bank Group, Chief Financial and Risk Officers from all major multilateral development banks and other development financial institutions (jointly referred to as MDBs) convened with Credit Rating Agencies (CRAs) in Marrakech. This gathering reaffirms MDBs’ commitment to proactive engagement with CRAs and marks the second such meeting in 2023. 

At the heart of the dialogue was the urgent call to update CRA’s rating criteria. As efforts towards fulfilling the Sustainable Development Goals continue, MDBs believe it is critical that risk mitigants embedded in their business model and demonstrated throughout different economic cycles be properly reflected in the rating criteria to allow MDBs to make the most efficient use of available resources, maximize their lending capacity, and preserve their current credit ratings. These efforts can allow for additional vital investment in projects that can change the lives of underserved communities and catalyze sustainable development. 

Key takeaways from this second roundtable encompassed discussions on: (i) the role of callable capital in determining capital adequacy and the efforts currently underway by MDBs and shareholders to clarify instrument mechanics and explore the potential for enhancing the instrument, (ii) affording proper weight to the preferred creditor status that MDBs enjoy in relation to their sovereign lending and (iii) re-evaluating capital allocation approaches, especially concerning development assets portfolio concentration. 

Both CFOs and CROs emphasized the need for CRAs to take into account the points and perspectives shared during the discussion and to reflect them in their rating criteria. In response, CRAs offered valuable insights into their views on the topics discussed and outlined the procedural steps should a change to their rating criteria be deemed necessary. CFOs and CROs reiterated their commitment to continue working with CRAs and to provide additional data, including on the topics covered. The dialogue is set to continue, with a third roundtable scheduled for April 2024.