Capital Markets

Liquidity

Liquidity provides ADB with the critical link between its financial strength and its developmental mission. The overriding objective of the liquidity policy is to enable ADB to (i) to obtain the most cost-efficient funding under various market situations, and (ii) optimally manage liquidity in order to achieve its developmental mission of fighting poverty in Asia and the Pacific region. At the same time the liquidity policy follows conservative banking principles in supporting and sustaining ADB's superior financial strength.

ADB maintains a prudential level of liquidity at all times (up to 50% of the proxy net cash requirements for the next three years) to sustain uninterrupted availability of funds to meet loan disbursements, debt servicing and other cash requirements for a period of up to 18 months under both normal and stress conditions.

The management of liquidity by way of ADB's investment strategy is primarily focused on maintaining the value of invested capital and readily available liquidity. Subject to these constraints ADB strives to maximize return within well defined parameters stipulated in the Investment Authority and Guidelines. As of 30 June 2008, liquid investments were held in 21 currencies and invested in high credit quality securities. These include the following:

• Government and government-related debt instruments
• Time deposits and other short term unconditional obligations of banks and other financial institutions (A-rated or above)
• Corporate bonds (A-rated or above)
• Mortgage-backed securities (AAA-rated)
• Asset-backed securities (AAA-rated)