Yellen pressures the World Bank to expand its balance sheet

However, he stopped short of asking World Bank shareholders, among which the United States is the largest, to provide more capital, a move that the bank’s management seems willing to consider.

“The Bank must strengthen its financial capacity by responsibly expanding its current financial resources”Yellen declared in a speech at the Center for Strategic and International Studies, a Washington think tank.

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The Treasury official, who acts as the US administration’s interlocutor with global financial institutions, explicitly endorsed a Group of 20 report published last year that offered a series of recommendations on how multilateral development banks could increase their capacity to loan.

The comments come months after World Bank President David Malpass, a Donald Trump appointee, came under fire for asking a question at a conference on the causes of climate change, fueling concerns that he is not providing enough leadership on the topic. Malpass has defended the bank’s record and its role.

“The United States strongly supports studying and implementing a number of the report’s recommendations, and doing it expeditiously”Yellen said.

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Specifically, he referred to recommendations that the bank consider securitizing some of its loans—by repackaging and selling them to private investors—which would free up space for more lending, and to use subordinated debt instruments, securities that put some investors first in the loss line.

The speech fills in the details of Yellen’s call last October for the World Bank, and other international development banks, to go beyond their primary mission of lending to specific countries for specific development projects within their borders.

That mission, pursued since the bank’s creation after World War II, is “insufficient to face the moment”Yellen said Thursday. Without ignoring its original objectives, the bank should also do more to deal with global threats.

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“Changes must include updating the bank’s mission to encompass global challenges along with its goals of poverty reduction and shared prosperity”he pointed.

“The time has come for these banks to address global challenges head-on, with the necessary urgency and scale”Yellen declared.

He also reiterated his call for the bank to do more to catalyze private sector participation.

“International public funding alone will not reach anywhere near the level of funding needed to effectively address global challenges and achieve the Sustainable Development Goals”he claimed.

However, a key aspect is whether the Bank needs more financing from its public shareholders.

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The World Bank produced in December a new “Roadmap” for the job Yellen started applying for in October. In the report, the bank stated that it saw a need to “a massive increase in support from the world community to developing countries”and stated that the increase in shareholder capital was an option that was being studied.

The US is the largest shareholder in the World Bank and its voice often carries the greatest weight in the institution. By tradition, Washington also appoints the president of the institution.

Yellen was careful to acknowledge the progress the World Bank has made in the four months since her call for change, but she also kept up the pressure on bank management and other stakeholders.

“The Bank should start implementing the first phase of simpler changes, such as its mission update, before its spring meetings in April”said.

“A second phase of work to change incentives, operating focus and lending capacity should be decided at the bank’s annual meetings in October. The agenda should also be applied in the regional development banks”, added.

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