On 16 October 2026, CETEx brought together national development banks, policymakers, researchers and financial sector experts in Bangkok to examine whether the prudential treatment of national development banks could be constraining their ability to mobilise finance for the climate transition.
Held on the sidelines of the International Monetary Fund and the World Bank Annual Meetings, the event presented and discussed forthcoming CETEx research examining how prudential rules interact with the distinctive mandates, funding structures and risk profiles of national development banks (NDBs).
The discussion focused on an important question: can prudential frameworks better recognise the characteristics of NDBs while continuing to safeguard financial stability?
The role of national development banks
NDBs have an important role in financing long-term development and infrastructure, particularly in areas where private investment alone is insufficient. As governments seek to mobilise greater investment for the climate transition, their ability to deploy capital and help crowd in private finance is becoming increasingly important.
However, CETEx’s forthcoming research suggests that certain aspects of prudential frameworks may penalise NDBs due to their distinct funding mechanism and portfolio characteristics.
Drawing on comparative evidence from BNDES in Brazil, DBSA in South Africa and PT SMI in Indonesia, the research examines three provisions in particular: the sovereign floor, which can prevent exposures to an NDB from receiving lower risk weights for calculating capital requirements relative to that of its sovereign; large exposure rules, which could limit investment in large-scale infrastructure projects of importance to the low-carbon and climate-resilient transition; and the prudential treatment of infrastructure and equity exposures, where risk weights may not necessarily reflect the actual risks and historical financial performance that NDBs face.
CETEx Executive Director Rob Patalano was joined by PT SMI President Director Reynaldi Hermansjah for opening remarks. This was followed by CETEx Visiting Professor in Practice Vera Songwe, Senior Policy Fellow Joseph Feyertag, Policy Fellow Herlina Utamawati, and Senior Research Lead for Private Capital Mobilisation Fernanda Gimenes, who all presented the research and its key findings.
Finding a proportionate approach
The presentation was followed by a roundtable moderated by CETEx Visiting Professor in Practice Chatib Basri, bringing together perspectives from national development banks, policymakers and international organisations.
Rather than considering whether NDBs should sit outside prudential frameworks, the discussion centred on how those frameworks could better account for differences between development banks and commercial financial institutions.
Participants considered how the sovereign floor can affect the cost of capital for NDBs, how large exposure limits interact with institutions whose mandates may require concentrated investment in major infrastructure, and whether the treatment of project finance, guarantees and equity adequately reflects the risks involved.
These questions point towards a broader challenge: how can regulation remain appropriately risk-sensitive while enabling NDBs to fulfil their development and climate mandates?
From diagnosis to reform
The conversation also explored what a realistic pathway towards reform could look like.
Participants considered the roles of national regulators and international standard-setters acknowledging distinct characteristics of NDBs to increase their capacity to mobilise climate finance. A central consideration was how greater flexibility might be introduced where justified by underlying risks, without weakening the safeguards designed to maintain financial stability.
This distinction is important. The objective is not simply to lower prudential requirements in order to increase lending. Rather, the discussion highlighted the case for examining whether regulatory treatment accurately reflects institutions’ underlying risk, funding and ownership characteristics, and whether greater proportionality could enable well-capitalised NDBs to scale up climate finance for the low-carbon and climate transition. The discussion also highlighted the role of credit rating agencies, which often cap the rating of NDBs to that of their respective sovereign, despite data showing comparatively low portfolio-level risks.
Strengthening collaboration
The event concluded with keynote remarks from Herman Saheruddin, Director General of Financial Sector Stability and Development at Indonesia’s Ministry of Finance.
It also marked a further step in collaboration between CETEx and PT SMI, with the two organisations signing a collaboration agreement following the roundtable.
Bringing together perspectives from development finance, government, international organisations, research and civil society, the Bangkok discussion underscored the importance of examining the interaction between financial regulation and the investment required for the transition.
As policymakers look for ways to significantly mobilise climate finance, understanding whether existing frameworks create unintended constraints will be an important part of that conversation. A prudential framework that accurately reflects risk while recognising the distinctive role of national development banks could help ensure that financial stability and climate investment are mutually reinforcing rather than competing objectives.
