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World Bank Group shareholders Sweden and Iceland announced commitments to invest in hybrid capital, a financial product with leveraging potential that substantially expands the Bank’s lending capacity.
Sweden and Iceland join 13 other countries that together are investing more than $11.7 billion in hybrid capital and a Portfolio Guarantee Platform, financial instruments that could expand the Bank’s lending by an additional $72.5 billion over 10 years.
“It is through the generosity of our shareholders that we can invest in projects that drive development impact and address the most pressing global challenges,” said Managing Director and World Bank Group Chief Financial Officer Anshula Kant. “This kind of investment translates into better health care, more jobs and greater opportunities as we build a more sustainable future.”
Said Sweden’s Finance Minister Elisabeth Svantesson of her country’s contribution: “I am happy to announce that Sweden is planning to invest in hybrid capital. With its high leverage, this new instrument allows us shareholders to efficiently boost IBRD's financing capacity. Our investment is a testimony to Sweden’s support for the impressive job that the Bank has done in updating its financial model and developing new financial innovations.
Iceland’s Foreign Affairs Minister Thordis Kolbrun Reykfjord Gylfadottir said of their contribution: “The World Bank is the world’s premier development institution and a priority partner in Iceland's development cooperation. Innovative financial instruments like hybrid capital are crucial to meet the growing financing needs of IBRD´s partner countries and Iceland is happy to support the Bank in that journey.“
Note to editors: Hybrid capital is a subordinated debt instrument with unique leveraging potential, while the Portfolio Guarantee Platform provides a shared approach to risk that makes World Bank financing more readily available. The platform permits shareholders with high credit ratings to step in if a borrower fails to pay back an IBRD loan. These two products were created as part of a series of reforms recommended by the G20’s Independent Panel for Review of Multilateral Development Banks (MDBs) Capital Adequacy Frameworks (CAF). Another reform was adjusting the Bank’s loan-to equity ratio which expands financial capacity by US$70 billion over 10 years. Increasing the bilateral guarantee limit added US$10 billion more. Together, all these measures and financial instruments are expected to add more than $150 billion in new financing capacity over 10 years.
