SDG 17: Partnerships for the Goals | SDG 8: Decent Work and Economic Growth
Institutions: Ministry of Finance
The Asian Development Bank (ADB) and the World Bank signed a landmark $3 billion agreement on October 20, 2025, to drastically increase ADB’s ability to lend money to developing nations across Asia and the Pacific. This deal uses a financial technique called a Sovereign Exposure Exchange Agreement (EEA).
It is like insurance for a bank’s loan book: ADB is heavily invested in certain countries, which creates a concentrated risk. By entering this agreement, ADB is essentially swapping a portion of its loan risk in these concentrated areas with the World Bank for risk in countries where ADB has little or no investment. This financial swap immediately reduces ADB’s concentration risk, which in turn lowers the amount of capital (or cushion) it needs to hold against its loans. This move is critical because it gives ADB capital relief, immediately unlocking new lending capacity that can be used for climate and development projects without needing new cash from its member governments. The total capacity unlocked by ADB through these exchanges has now hit $9 billion since 2020, showing a strong strategic partnership among major development banks.
This $3 billion agreement immediately increases the total capital available to ADB for lending, directly enhancing India’s access to large-scale, cost-effective development financing for strategic infrastructure and clean energy projects.
What is a Sovereign Exposure Exchange Agreement (EEA)?→ A Sovereign Exposure Exchange Agreement (EEA) is a risk management tool used by big global lenders, known as Multilateral Development Banks (MDBs), to make their money go further. The “exposure” is the risk of a country defaulting on its loan. An EEA works by having two MDBs formally trade a portion of these risks on their books. This trade diversifies each bank’s portfolio, which reduces the regulatory capital they are required to set aside. The technical benefit is capital relief; the practical benefit is increasing their immediate capacity to finance new, high-impact development projects, particularly in countries facing multiple crises.
Relevant Question for Policy Stakeholders: How will this agreement translate into increased access to climate-resilient, infrastructure and development finance for India and other Asian countries, and what mechanisms will ensure these funds reach priority sectors?
Follow the full news here: https://www.adb.org/news/adb-world-bank-sign-3-billion-agreement-boost-lending-capacity-asia-and-pacific