RFAs’ Financial Structures and Lending Capacities: A Statutory, Accounting and Credit Rating Perspective

35 Pages Posted: 3 Aug 2020

See all articles by Gong Cheng

Gong Cheng

European Stability Mechanism

Alvise Lennkh

European Stability Mechanism

Date Written: May 28, 2020

Abstract

This paper documents the diverse financial structures – including capital structures and funding strategies – of Regional Financing Arrangements (RFAs) and offers an analysis of RFAs’ lending capacity from a statutory, accounting and credit rating perspective. Using credit rating agencies’ methodologies, the paper presents the dynamic relationship between RFAs’ financial structures, the support from their member states and their resulting creditworthiness. A stylised model is developed to demonstrate how the relative size of an institution’s paid-in and callable capital, together with its member states’ support, could have an impact on the overall credit rating and lending capacity of an RFA. This paper contributes to the growing policy discussions on the heterogeneity of RFAs and their rising importance in the Global Financial Safety Net.

Keywords: Regional Financing Arrangements, IMF, Credit rating, Capital, Lending capacity, Global Financial Safety Net

JEL Classification: F33; F34; F53; F55; G24

Suggested Citation

Cheng, Gong and Lennkh, Alvise, RFAs’ Financial Structures and Lending Capacities: A Statutory, Accounting and Credit Rating Perspective (May 28, 2020). European Stability Mechanism Working Paper No. 44, Available at SSRN: https://ssrn.com/abstract=3666209 or http://dx.doi.org/10.2139/ssrn.3666209

Gong Cheng (Contact Author)

European Stability Mechanism ( email )

6a Circuit de la Foire Internationale
L-1347
Luxembourg

Alvise Lennkh

European Stability Mechanism ( email )

6a Circuit de la Foire Internationale
L-1347
Luxembourg

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