ADB exceeds private equity investment limits
28 April 2008
A confidential report by the Asian Development Bank's evaluation unit reveals that the Bank is violating its own rules by investing more in private equity firms than it is allowed.
The Financial Times (FT) and Reuters reported on April 28 that the Asian Development Bank (ADB) is taking "large risks" by investing more in private equity firms than it is allowed to and that internal controls on such investments show "serious weaknesses." The violations are detailed in a confidential report by the ADB's evaluation unit which claims that the ADB has "breached its capital allocation limit for private equity funds of 5 percent", adding that "a new standard" is needed "for risk management purposes".
According to the FT, the ADB denies violating its own rules and considers the allocations for the private equity fund to be an "internal matter." Concerns over risky investments come as the US and some other ADB shareholders have pushed for an overhaul of the ADB and criticized its focus on large loans to middle-income countries such as China and India rather than smaller loans to poorer nations. The lender's long-term strategic plan was recently rejected by the US and other shareholders because of worries over its ability to meet its goals.
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