The bank benefits from solid support from its 67 member countries, 48 of which are in the Asia Pacific region. Some 64.5% of the bank’s capital is held by OECD countries, such as the US (’AAA’/’F1+’/Stable) and Japan (’AA’/’F1+’/Stable) with 15.6% of the shares each. Only a portion (7%) of the capital has been paid in; the remainder may be called if the bank cannot service its debt obligations. Given the high credit standing of shareholders (16 were rated ’AAA’ at end-2008), Fitch believes support would be granted if needed.

The ADB has not been significantly affected by the financial crisis; exposure to subprime assets was small (US$117 million or 0.7% of total treasury portfolio) and has been largely liquidated with realized losses limited to US$24.8 million in 2008. This reflects the bank’s highly conservative risk management of its liquidity and credit risk exposure. ABS exposure was limited to only US$758 million (4.7% of the total treasury portfolio). In addition, net income rose to US$1.1 billion in 2008 from US$765.2 million in 2007, mostly due to US$451 million of unrealized gains on the fair-valuation of the bank’s outstanding debt.

Like other multilateral development banks (MDBs), ADB’s portfolio consists mainly of loans to public entities in countries with low credit quality, and is highly concentrated: at end-2008, financing extended to speculative-grade countries accounted for 58.3% of the loan portfolio, while the bank’s 10 largest borrowers accounted for 94.8% of total lending. Nevertheless, ADB maintains high levels of capitalisation; Fitch’s ratio of usable capital to required capital was little changed at a comfortable 10.1x at end-2008 (2007: 10.9x). Moreover, the bank’s shareholders approved, in May 2009, a 200% capital increase which will enable ADB to increase its lending capacity.

Demand for ADB loans is expected to increase US$10 billionn in 2009-2010 as countries in Asia Pacific weather the effects of the global financial crisis. Although no sovereign loans are currently impaired, loan loss reserves increased in H109 due to the increased risk profile of some sovereign borrowers. However, credit risk is mitigated by ADB’s preferred creditor status, a unique feature of MDBs, which confers priority over other creditors in case of default by a sovereign. ADB has never suffered any losses of principal on a public loan.

The ADB is an MDB established in 1966 to promote the social and economic development of the Asia Pacific region. It provides loans to developing member countries under preferential conditions that they could not obtain on the capital markets given their low credit ratings. Headquartered in Manila, the ADB employed 2,506 staff at end-2008.