The Review of International Organizations

, Volume 12, Issue 2, pp 281–306 | Cite as

He who pays the piper calls the tune: Credit rating agencies and multilateral development banks

  • Chris HumphreyEmail author


Multilateral development banks (MDBs) have proved to be one of the most popular and enduring forms of international organization ever created, in large part because of their unique financial model. MDBs raise most of the resources needed for operations from international capital markets rather than government budgets, which greatly increases their financial capacity and attractiveness to member governments. However, this model has a trade-off: MDBs must pay close attention to the perceptions of bond investors, who have little interest in development goals. This paper explores the influence of credit rating agencies (CRAs) on MDB operations, based on an analysis of the methodologies used by CRAs to evaluate MDBs and interviews with MDB financial staff and CRA analysts. The study demonstrates that the methodology used by Standard and Poor’s seriously undervalues the financial strength of MDBs, limiting their ability to pursue their development mandate. These findings suggest that MDB dependence on capital market financing may weaken the ability of major shareholder governments to fully control MDB activities.


Multilateral Development World Bank Capital markets Credit rating agency Standard and Poor’s 



The empirical portion of this paper is a modified version of a working paper written for the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G-24). The author would like to thank Kai Gehring, Erica Gould, Christopher Kilby, Andreas Kruck, Helen Milner, Theresa Squatrito, three anonymous reviewers and the editors of this special issue of the Review of International Organizations for their feedback on earlier versions of this paper. The author is solely responsible for all errors and omissions.


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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.University of ZurichZürichSwitzerland

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