Cultivating a Resilient Financial Ecosystem: Selected Insights from Evaluation

Global finance experiences ongoing changes as nations progress through different stages of economic development, influencing their financial structures and vulnerabilities. At the same time, multilateral development banks (MDBs) are under pressure to reform and expand their efforts following a recent review of their capital adequacy frameworks.1 They are urged to enhance their monetary capacity and tailor their operating models for greater effectiveness. This challenge has intensified, particularly for MDBs operating in conflict-affected countries like Ukraine. For instance, EBRD has recently secured a capital increase to help bolster investments in Ukraine.2 Despite the availability of funds, MDBs still grapple with the task of building a resilient financial sector in such fragile contexts.

A stark reality frames this edition of the Connecting the Dots series — the profound impact of multiple crises on countries, erasing decades of growth and poverty reduction in short spans. Though global banking stress has eased in recent months, some countries still grapple with weakened banks (International Monetary Fund (IMF), 2023). Furthermore, cracks in other sectors may emerge, potentially evolving into concerning fault lines. If financial conditions abruptly tighten, adverse feedback loops may be triggered, once more challenging the resilience of the global financial system. The need for a resilient, diversified, and stable financial sector becomes evident as a shield against the disruptive forces that precipitate crises, even if it cannot entirely avert them.

Since the global financial crisis of 2007-2008, International Financial Institutions (IFIs) launched multiple initiatives to strengthen the financial sector and to foster greater financial resilience in their regions of operations. This report takes a step back and collects the evaluation evidence with the goal of offering a panoramic view of challenges and opportunities that shape the IFIs’ quest for financial stability in an ever-changing economic landscape.