Mikio Kashiwagi joined the Asian Development Bank (ADB), the Manila-based multilateral lending institution, in 2003 to heed a calling. Having spent 32 years in commercial banking—the last two as deputy president of UBS Global Asset Management in Japan—the soft-spoken 55-year-old surrendered his stock options for a chance to support the bank’s mandate of poverty alleviation. As treasurer of the US$50 bn agency, Kashiwagi oversees the funding, investment, risk management, and treasury services of the ADB, ensuring that it is financially strong to respond to the needs of its developing member countries. He brings his personal philosophy to bear at a time when the ADB is seeing its net income rise, while Asian countries are accumulating vast reserves. Against this backdrop, Kashiwagi is pushing for dramatic changes in the way the 40-year-old ADB operates, and in the way Asian countries are using their newfound liquidity.
Why did you leave investment banking for a development organization?
I always wanted to work in Asia for Asia. I belong to the old generation, where we tend to see higher values in serving the public. I worked for 30 years with Industrial Bank of Japan, which used to be a development bank that had been privatized even before I joined. All that time, although I had been doing well in investment banking and asset management, I always felt in my heart that it was not what I wanted to do, so it was a great opportunity for me to join the ADB. The treasury work is basically the same; the ADB is playing on the same level as the rest of the market. But I can make full use of my accumulated expertise knowing that I’m serving a cause other than the stock price of my bank.
How have the ADB’s sources of funds changed over the years?
We have two distinct windows of operations. One is what we call ordinary capital resources (OCR), which is the balance sheet operation of the bank. We have equity from shareholders that we leverage from market borrowings. Every year, we issue bonds in the international market—this year we’re issuing around US$5 bn—which we then lend to our developing member countries at Libor plus 40 basis points (bp). The ADB is a triple-A rated entity. The other window, the Asian Development Fund (ADF), is where we receive contributions from donor countries, which we put in trust funds and administer. This is more concessionary; we lend at 1 percent per annum for 30 years. The OCR operation, on a very long-term perspective, has been growing at a compound rate of 5 percent every year, but the ADF has expanded more because of increased concern on poverty worldwide. (Loans from OCR make up about 80 percent of total.)
What’s the most difficult aspect of your job?
It’s actually the daily financial management that is most challenging. I focus very much on three things. First is the cost of funds for our borrowers. Our cost of funding has a direct impact on that of our borrowers. Every six months, we review what has been our real cost of funding, and if it happened to be Libor less 30 bp, then we give a 30 bp rebate to our borrowers. This is a very transparent performance indicator, so I want to make sure that we have the best borrowings.