How likely are multilateral development banks to need callable capital? Implications for risk frameworks and lending capacity

It is difficult to pinpoint exactly when an MDB might fail in a stress scenario and require callable capital because there are so many factors to consider. However, a key point is that stress is likely to occur before an MDB would have exhausted all of its capital resources. Scenario modelling can provide better visibility on how these adverse situations might develop. It is possible to estimate the probability of an MDB needing callable capital, the time frame over which this might occur, and the potential notional size of a call in USD billions. →