PARIS, France, April 30, 2026 u2013 The President of the Caribbean Development Bank (CDB, the Bank), Mr. Daniel M. Best, highlighted the institutionu2019s ongoing efforts to apply innovative financial approaches among Multilateral Development Banks (MDBs), outlining a suite of instruments designed to expand lending capacity, reduce borrowing costs, and unlock critical investment for climate resilience across the Caribbean.
Speaking on April 29 at the FiCS G7 Special Event in Paris, on u201cFinancial Instruments to Lower the Cost of Capital,u201d the President shared perspectives from the Caribbean, highlighting how smaller multilateral development banks can use targeted balance sheet measures to address structural constraints and expand their support to member countries.
A central highlight was CDBu2019s landmark Exposure Exchange Agreement (EEA), a US$450 million transaction executed with the Central American Bank for Economic Integration. The agreement, the first of its kind, significantly reduced concentration risk within CDBu2019s sovereign portfolio.
u201cIn a single year, this transaction reduced our top five borrower concentration ratio from 61% to 38%, without any new shareholder capital injection,u201d Best noted. u201cFor a small MDB like CDB, where concentration limits can constrain lending, this directly translated into increased capacity to serve our borrowing member countries.u201d
Building on this momentum, the Bank is advancing a US$200 million first-loss portfolio guarantee with the Government of Canada. Once finalised, the instrument is expected to unlock between US$300 million and US$400 million in additional lending capacity by reducing credit risk on CDBu2019s balance sheet.
He also underscored CDBu2019s leadership in collaborative MDB solutions, including the development of a multi-guarantor debt-for-resilience transaction alongside the Inter-American Development Bank, World Bank, and Development Bank of Latin America and the Caribbean (CAF). This initiative seeks to address the Caribbeanu2019s dual challenge of high debt and climate vulnerability.
u201cBy leveraging guarantees from MDB partners and private investors, we are creating fiscal space for countries to invest in resilience before disasters strike and without increasing net debt,u201d he explained. u201cThe goal is to reduce borrowing costs, extend maturities, and enable proactive climate investment.u201d
Further reinforcing its forward-looking strategy, CDB is designing a Contingent Capital Facility (CCF) u2013 an innovative loss-absorbing instrument intended to qualify as Tier 2 capital. Under this mechanism, highly rated shareholders would commit capital that is only called upon under predefined stress scenarios.
u201cThis facility ensures that capital support is contractually available precisely when it is needed most, strengthening financial resilience while safeguarding our credit rating,u201d the President said.
President Best also emphasised that collaboration across the MDB system and alignment with credit rating agencies will be critical to scaling these innovations and ensuring they deliver meaningful reductions in the cost of capital for vulnerable regions.