International Bank for Reconstruction andDevelopment

Management’s Discussion & Analysis
andCondensed Quarterly Financial Statements
September 30, 2020
(Unaudited)Management’s Discussion and Analysis

International Bank for Reconstruction and Development(IBRD)
Management’s Discussion and Analysis
September 30, 2020
Contents
Section I: Executive Summary

Summary Financial Results

4

Section II: Overview

Financial Business Model
Basis of Reporting

6
8

Section III: Financial Results

Summary of Financial Results
Net Income

1011

Section IV: Risk Management

Risk GovernanceManagement of IBRD’s Risks

16
16

Section V: Governance

Senior Management Changes

25

List of Tables, Figures and Boxes

List of Tables, Figures and Boxes
TablesFigures
Box

26
26
26
26

IBRD Management’s Discussion and Analysis: September 30, 20201Section I: Executive Summary

Management’s Discussion and Analysis

This Management’s Discussion and Analysis (MD&A) reflects the results of the International Bank for Reconstruction
and Development’s (IBRD’s) financial performance for the three months ended September 30, 2020 (FY21 YTD).
This document should be read in conjunction with IBRD’s Financial Statements and MD&A for the fiscal year ended
June 30, 2020 (FY20). For information relating to IBRD’s development operations’ results and corporate performance,
refer to the World Bank Corporate Scorecard and Sustainability Review.

Box 1: Selected Financial Data
In millions of U.S. dollars, except ratios which are in percentages
As of and for the three months
ended September 30,
2020

As of and for the fiscal years ended June 30,

2019

2020

2019

2018

2017

Lending Highlights (Section III)Net commitments a$

Gross disbursements
Net disbursements

b

b

3,121

$

4,009

$

27,976 $23,191 $23,002 $22,611

7,437

3,236

20,23820,182

17,38917,861

5,161

960

10,622

10,091

5,638

8,731

Income Statement
Board of Governors-approved andother transfers

$

-

$

676

Net income (loss)

(81)

$

(116)

(340) $

(338) $

(178) $

(497)

(42)

505

698

(237)

Balance Sheet
Total assets$

306,305$

277,377$ 296,804 $ 283,031 $ 263,800 $ 258,648

Net investment portfolio

82,60175,02982,485

81,12773,492

71,667Net loans outstanding

209,528

191,983

202,158

192,752

183,588

177,422

Borrowing portfolio

243,390

221,667

237,231

228,763

213,652

207,144

Total equity

41,345

42,13840,387

42,11541,84439,798

Non-GAAP Measures
Allocable Income (Section III)

$

339

$

370

$

1,381 $

1,190 $

1,161 $

795

Usable Equity c, d (Section IV)$

47,922$45,367$

47,138 $45,360 $43,518 $41,720

22.8%

22.8%

22.9%

22.8%

Equity-to-loans Ratio d (Section IV)

22.6%

22.9%

a. Amounts are net of full terminations and cancellations approved in the same fiscal year and include guarantee commitments andguarantee facilities that have been approved by the Executive Directors (referred to as “the Board” in this document).
b. Amounts include transactions with the International Finance Corporation (IFC) and loan origination fees.
c. Excludes amounts associated with unrealized mark-to-market gains/losses on non-trading portfolios, net and related cumulativetranslation adjustments.
d. Ratio is computed using usable equity and excludes the respective periods’ income. Full fiscal year usable equity includes
proposed transfer to the General Reserve.

2

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section I: Executive Summary

Section I: Executive Summary
With its many years of experience and its depth of knowledge in the international development arena, IBRD plays a
key role in achieving the World Bank Group’s (WBG 1 ) goal of helping countries achieve better development
outcomes. IBRD contributes to both the WBG’s twin goals of ending extreme poverty and promoting sharedprosperity, and to the Forward Look2, by providing countries with loans, advisory services and analytical support.
IBRD and its affiliated organizations seek to help countries achieve improvements in growth, job creation, poverty
reduction, governance, the environment, climate adaptation and resilience, human capital, infrastructure and debt
transparency.
To meet its development goals, the WBG is increasing its focus on country programs in order to improve growth anddevelopment outcomes. The Bank’s operational realignment, which came into effect on July 1st, strengthens thecountry-driven delivery model, while strengthening thought leadership on development issues of critical importanceto sustainable growth and poverty alleviation. Support is being expanded for countries at lower levels of income, andfragile and conflict-affected states. The new model also strengthens the focus on Africa by creating two Vice
Presidencies, one focused on Western and Central Africa and the other on Eastern and Southern Africa.
In March 2020, in response to the global outbreak of the coronavirus disease (COVID-19) and to support global public
goods, as part of a WBG package, IBRD announced that it could deploy an estimated range of $50-$55 billion overthe next 15 months to support member countries in their efforts to contain the pandemic and respond to its immediate
health consequences as well as to address the social and economic effects. This amount was estimated in compliancewith IBRD’s Financial Sustainability Framework based on market conditions at that time. Given the continued
uncertainty around the outbreak’s full impact on markets, as well as on client needs, these estimates are subject torevisions in order to ensure continued compliance with all risk limits. IBRD’s operational response includes threestages: a) Relief stage that involves emergency response to the health threat, b) Restructuring stage that focuses on
strengthening health systems, restoring human capital, and restructuring of firms and sectors. and c) Resilient recovery
stage that entails new opportunities to build a more sustainable, inclusive and resilient future. Each stage is structured
through four thematic crisis response pillars: i) Saving lives, ii) Protecting the poor and vulnerable, iii) Ensuring
sustainable business growth and job creation, and iv) Strengthening policies, institutions and investments.
This approach anchors a flexible and focused WBG response to the crisis rooted in its comparative advantages andtailored to the specific circumstances of client groups and individual countries.

1

The other WBG institutions are the International Development Association (IDA), the International Finance Corporation (IFC), theMultilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

2

The Forward Look: A Vision for the WBG in 2030, describes how the WBG will deliver on its twin goals and its three priorities. The
Forward Look rests on four pillars: serving all clients; mobilizing resources for development; leading on global issues; and improving
the business model.

IBRD Management’s Discussion and Analysis: September 30, 20203

Management’s Discussion and Analysis

Section I: Executive Summary

Summary Financial Results
The financial performance of IBRD reflects the impact of the measures put in place in previous years to increase its
financial capacity and ensure its long-term financial sustainability, along with evolving market conditions.

Net Income and Allocable Income
IBRD earned net income of $676 million for the first three months of FY21, compared with a net loss of $116 million
during the same period in FY20. The change from a net loss in FY20 YTD to net income in FY21 YTD was primarily
due to net unrealized mark-to-market gains on IBRD’s non-trading portfolios. Unrealized mark-to-market gains andlosses on non-trading portfolios introduce volatility to IBRD’s net income. Given IBRD’s intention to maintain its
non-trading portfolio positions, unrealized mark-to-market gains and losses are not included in IBRD’s allocable
income.
Allocable income is the income measure IBRD uses for making net income allocation decisions. During the first threemonths of FY21, allocable income was $339 million, a decrease of $31 million from the same period in FY20. The
decrease was primarily due to the increase in the provision for credit losses and the increase in net non-interest
expenses. (See Section III).
In millions of U.S dollars – YTD
Net Income/Loss

Allocable Income

Unrealized Gains/Losses

1,000
1,000

500

800

0

600

-500

400

-1,000200-1,500
FY17

FY18

FY19

FY20

0

FY21

FY17

FY18

FY19

FY20

FY21

Loans
IBRD’s lending operations during the first three months of FY21 resulted in $3.1 billion of new net loan commitments(net of full terminations and cancellations approved in the same fiscal year) and $7.4 billion of gross loan
disbursements. Positive net disbursement activity was the key driver in the increase in net loans outstanding, from
$202.2 billion as of June 30, 2020 to $209.5 billion as of September 30, 2020.
In billions of U.S dollars
Net Commitments
10
8
6
4
2
0

FY17 FY18 FY19 FY20 FY21YTD YTD YTD YTD YTDDisbursements
10
8
6
4
2
0
-2
FY17
YTD

FY18
YTD

Gross

Net Loans outstanding
250
200
150

Net

100
50

FY19
YTD

FY20
YTD

FY21
YTD

0
Jun 17 Jun 18 Jun 19 Jun 20 Sep 20

Net lending commitments (including guarantees) were $0.9 billion lower compared with the same period in FY20
(Table 5). The regions with the largest share of commitments in FY21 were Europe and Central Asia with 39% and
Latin America and the Caribbean with 30%.

4IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section I: Executive Summary

Investments
IBRD’s net investment portfolio marginally increased by $0.1
billion, from $82.5 billion as of June 30, 2020 to $82.6 billion as of
September 30, 2020. The investments remain concentrated in theupper end of the credit spectrum, with 74% rated AA or above (seeTable 9), reflecting IBRD’s objective of principal protection and its
resulting preference for high-quality investments.
The net investment portfolio level remained stable and adequate tomeet IBRD’s financial commitments even under potential
scenarios of severe market disruption.

In billions of US dollars
Net Investment Portfolio
250
200
150
100
50
0
Jun 17 Jun 18 Jun 19 Jun 20 Sep 20

Borrowings
As of September 30, 2020, the borrowing portfolio totaled $243.4
billion, $6.2 billion above June 30, 2020. The increase was mainly
due to net medium-and long-term debt issuances during the period.
The funds raised financed development and lending operations andsatisfied liquidity requirements.

In billions of US dollars
Borrowing Portfolio
250
200
150
100
50
0
Jun 17 Jun 18 Jun 19 Jun 20 Sep 20

Usable Equity and Equity-to-Loans Ratio
IBRD’s usable equity increased marginally compared with June 30,
2020. During the first three months of FY21, IBRD received $147
million of paid-in capital under the General and Selective Capital
Increases (GCI and SCI), bringing the cumulative amounts
received to $1.7 billion, 23% of the total amount expected.

Ratio in percentages

The Equity-to-Loans ratio was 22.6% as of September 30, 2020,
marginally lower compared with 22.8% as of June 30, 2020, as theincrease in the loan and other exposures outpaced the increase in
usable equity.

10%

Equity to Loans Ratio
30%
20%

0%
Jun 17 Jun 18 Jun 19 Jun 20 Sep 20

IBRD Management’s Discussion and Analysis: September 30, 20205

Management’s Discussion and Analysis

Section II: Overview

Section II: Overview
IBRD, an international organization owned by its 189-member countries, is one of the five institutions of the WBG.
Each institution is legally and financially independent, with separate assets and liabilities. IBRD is not liable for the
obligations of the other institutions.
IBRD is one of the largest Multilateral Development Banks (MDB) in the world and combines knowledge services
and financing with a global reach. IBRD’s value derives from its ability to help eligible borrowing members address
their development challenges and meet their rising demand for innovative products. IBRD provides loans, guarantees,
and other financial products for development-focused projects and programs to creditworthy middle-income and lowincome countries to support sustainable development. By operating across a full range of country clients, IBRD
maintains a depth of development knowledge, uses its convening power to promote development and advance theglobal public goods agenda, and coordinates responses to regional and global challenges.
Member countries use IBRD’s technical advice and analysis and convening power to develop or implement better
policies, programs, and reforms that help sustain development over the long term. The products delivered range fromdevelopment data, to reports in key social economic and social issues at the local, country, regional and global levels.
The products also include knowledge-sharing workshops focused on local issues, to flagship events and fora to address
the most pressing global development challenges.

Financial Business Model
IBRD’s objective is not to maximize profits, but to earn adequate income to ensure that it has the long-term financial
capacity necessary to support its development activities. IBRD seeks to generate sufficient revenue to finance its
operations as well as to be able to set aside funds in reserves to strengthen its financial position. It also seeks to provide
support to IDA and trust funds via income transfers for other developmental purposes.
IBRD’s financial strength rests on the support it receives from its shareholders, and on its array of financial policies
and practices. Shareholder support for IBRD is reflected in the capital backing it continues to receive from its members
and in the record of its borrowing member countries in meeting their debt service obligations to IBRD. Sound financial
and risk management policies and practices have enabled IBRD to maintain adequate capital, diversify its funding
sources, hold a portfolio of liquid investments to meet its financial commitments, and limit its risks, including credit
and market risks.
IBRD offers its borrowers, in middle income and creditworthy low-income countries, long-term loans with maturities
of up to 35 years. Borrowers may customize their repayment terms to meet their debt management or project needs,
and loans are offered on fixed and variable terms in multiple currencies. However, borrowers have generally preferredloans denominated in U.S. dollars and euros. IBRD also supports its borrowers by providing access to risk
management products such as derivative instruments, including currency and interest rate swaps and interest rate caps
and collars.
To meet its development goals, it is important for IBRD to intermediate funds for lending from the international capital
markets. IBRD’s loans are financed through its equity, and from borrowings raised in the capital markets. IBRD is
rated triple-A by the major rating agencies and its bonds are viewed as high-quality securities by investors. IBRD’s
funding strategy is aimed at achieving the best long-term value on a sustainable basis for its borrowing members. This
strategy has enabled IBRD to borrow at favorable market terms and pass the savings on to its borrowing members.
IBRD’s annual funding volumes vary from year to year, and funds raised are used to finance IBRD’s development
projects and programs in member countries. Funds not deployed for lending are maintained in IBRD’s investment
portfolio to supply liquidity for its operations. Figure 1 illustrates IBRD’s financial business model.

6

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section II: Overview

Figure 1: IBRD’s Financial Business Model

IBRD uses derivatives to manage its exposure to various market risks from the above activities. These are used toalign the interest and currency composition of its assets (loan and investment portfolios) with that of its liabilities(borrowing portfolio), and to stabilize earnings on the portion of the loan portfolio funded by equity. See Section IV:
Risk Management for additional details on how IBRD uses derivatives.
Management believes that these risk management strategies, taken together, effectively manage market risk in IBRD’soperations from an economic perspective. However, these strategies entail the use of derivatives, which introduce
volatility on net income through unrealized mark-to-market gains and losses (particularly given the long-term natureof some of IBRD’s assets and liabilities). Accordingly, Management makes decisions on income allocation without
reference to unrealized mark-to-market gains and losses on risk management instruments in the non-trading portfolios– see Basis of Reporting – Allocable Income.

Financial Performance
IBRD’s primary sources of revenue are from loans and investments, both net of funding costs (see Figure 2). Theserevenues cover administrative expenses, provision for losses on loans and other exposures3 (LLP), as well as transfers
to Reserves, Surplus, and for other development purposes including transfers to IDA.
In addition, other development activities generate non-interest revenue that is classified as Revenue from externally
funded activities. These external funds include trust funds, reimbursable funds and revenues from fee-based services
to member countries. Non-interest revenue from externally funded activities provides additional capacity to support
the development needs of client countries.
The financial results for FY21 reflect the impact of the measures implemented in prior years to enhance IBRD’s
financial sustainability. These measures are intended to increase IBRD’s equity, lending capacity, and its ability tofund priorities that meet shareholder goals while also ensuring its long-term financial sustainability.
In 2018, the Board of Governors (the Governors) endorsed a capital package consisting of a series of policy andfinancial measures designed to enhance IBRD’s financial capacity on a sustainable basis. The package included thefollowing:
1) a GCI and SCI that will provide up to $7.5 billion in additional paid-in capital, which was approved by theGovernors on October 1, 2018;2) new loan pricing measures, which became effective from July 1, 2018;3) an increase in the Single Borrower Limit (SBL) with differentiation based on per capita income;3

Other exposures include deferred drawdown options (DDO), irrevocable commitments, exposures to member countries’ derivatives
and guarantees.

IBRD Management’s Discussion and Analysis: September 30, 20207

Management’s Discussion and Analysis

Section II: Overview4) continued efficiency measures and administrative simplification; and5) a financial sustainability framework, under which management provides an update of the sustainable annual
lending level and the Board approves a crisis buffer, which enables IBRD to respond to crises.
Figure 2: Sources and Uses of Revenue
Sources

Uses

Simplified
Balance Sheet

Revenue

Funding

Net Interest
RevenueLiquidInv.

Return on
Investments

Cost ofdebt

Investment
Revenue, net

Loan revenue

Cost ofdebt

Loan Interest
Revenue, net

D
e
b
t

L
o
a
n
s

Admin
Expenses

LLP

Reserves
Allocable
IncomeEquity

IDA, Other
transfers &Surplus

Basis of Reporting
Financial Statements
IBRD’s financial statements conform with accounting principles generally accepted in the United States of America(U.S. GAAP). All financial instruments in the investment and borrowing portfolios and all derivatives are reported atfair value, with changes in fair value reported in the Statement of Income, except for changes in IBRD’s own credit,
which are reflected in Other Comprehensive Income. IBRD’s loans are reported at amortized cost, except for loans
with embedded derivatives, if any, which are reported at fair value. Management uses net income as the basis forderiving allocable income, as discussed below.
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU, along with its subsequent amendments,
introduces a new credit loss methodology, the Current Expected Credit Losses (CECL) methodology. The ASUs also
requires additional credit risk measurement disclosures. IBRD adopted the ASUs on July 1, 2020 (see Notes toCondensed Quarterly Financial Statements, Note A – Summary of Significant Accounting and Related Policies).

Allocable Income
IBRD’s Articles of Agreement (the Articles) require that the Governors determine the allocation of income at the endof every fiscal year. Allocable income, which is a non-GAAP financial measure, is an internal management measurethat reflects income available for allocation. IBRD defines allocable income as net income after certain adjustments,that are approved by the Board at the end of every fiscal year. These adjustments primarily relate to unrealized markto-market gains and losses associated with its non-trading portfolios, as well as the expenses for Board of Governorsapproved and other transfers, which primarily relate to the allocation of the prior year’s net income.
See Financial Results Section (Section III) and Table 1 for details of the adjustments to reported net income required
to calculate allocable income.

8

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section II: Overview

The volatility in IBRD’s net income is primarily driven by the unrealized mark-to-market gains and losses on thederivative instruments in IBRD’s non-trading portfolios: loans, borrowings, and other asset/liability management(ALM). IBRD’s risk management strategy entails the use of derivatives to manage market risk. These derivatives
are primarily used to align the interest rate and currency bases of its assets and liabilities. IBRD has elected not todesignate any hedging relationships for accounting purposes. Rather, all derivative instruments are reported at fairvalue on the Balance Sheet, with changes in fair values reflected in the Statement of Income.
In line with its financial risk management policies, for the non-trading portfolios, unrealized gains and losses from
instruments carried at fair value (borrowings, and derivatives in the loans and other ALM portfolios) are excluded
from allocable income.
For the trading portfolio (investment portfolio), allocable income includes both realized and unrealized mark-tomarket gains and losses.

IBRD Management’s Discussion and Analysis: September 30, 20209Section III: Financial Results

Management’s Discussion and Analysis

Section III: Financial Results
Summary of Financial Results
The following is a discussion of the key drivers of IBRD’s financial performance, including a reconciliation between
IBRD’s net income and allocable income.
Table 1: Condensed Statement of Income
In millions of U.S. dollars
For the three months ended September 30,
Interest revenue, net of borrowing expenses
Loan interest revenue, net
Other ALM derivatives, net
Investment revenue, net a
Net interest revenue
Provision for losses on loans and other exposures, net
Net non-interest expenses (Table 7)
Net other revenue (Table 6)
Board of Governors-approved and other transfers
Non-functional currency translation adjustments, gains / (losses) net
Unrealized mark-to-market gains/ (losses) on non-trading portfolios, net b
Net income (loss)
Adjustments to reconcile net income to allocable income:Pension c and other adjustments
Board of Governors-approved and other transfers
Non-functional currency translation adjustments, gains / (losses) net
Unrealized mark-to-market gains/ (losses) on non-trading portfolios, net b
Allocable income

2020
$

$

466
126
27
619
(37)
(329)
66
11
346
676

$

20
(11)
(346)
339

$

2019
$

$

576
(5)
40
611
(6)
(307)
52
(81)
(385)
(116)

$

20
81
385
370

$

Variance
$

$

(110)
131
(13)
8
(31)
(22)
14
81
11
731
792

$

(81)
(11)
(731)
(31)

$

a. Amounts include unrealized mark-to-market gains (losses) on the Investments-Trading portfolio.
b. Adjusted to exclude amounts reclassified to realized gains (losses).
c. Adjustment to pension accounting expense to arrive at pension plan contributions. Pension plan contributions were $57 million for
FY21 YTD, and $54 million for FY20 YTD.

IBRD’s principal assets are its loans to member countries. These are financed by IBRD’s equity and borrowings fromthe capital markets.
As of September 30, 2020, total assets increased by 3% from June 30, 2020. The increase was primarily driven by theincrease in net loans outstanding.
Table 2: Condensed Balance Sheet
In millions of U.S. dollars
September 30,
2020

As of
Investments and due from banks a
Net loans outstanding b
Derivative assets, net
Other assets
Total Assets$$

Borrowings
Derivative liabilities, net
Other liabilities
EquityTotal Liabilities and Equity
a.
b.

10

$

86,906
209,5284,598
5,273
306,305

June 30, 2020$$

86,031
202,158
3,744
4,871
296,804

Variance
$

$

875
7,370
854
402
9,501

251,074
1,160

243,240
1,473

7,834
(313)

12,726
41,345306,305

11,70440,387
296,804

1,022
958
9,501

$

$

September 30, 2020 includes - investments of $84,974 million (June 30,2020 - $84,161 million) and due from banks of $1,932
million (June 30,2020 -$1,870 million).
The fair value of IBRD’s loans was $217,169 million as of September 30, 2020 ($209,613 million – June 30, 2020).

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section III: Financial Results

Net Income
IBRD had net income of $676 million for the first three months of FY21, compared with net loss of $116 million
during the same period in FY20. The increase in FY21 YTD primarily reflects unrealized mark-to-market gains on
the loan-related derivatives and the borrowing portfolio, mainly driven by the increasing interest rates during theperiod (see Table 1 and Notes to Condensed Quarterly Financial Statements, Note K: Fair Value Disclosures, Table
K10).

Results from Lending activities
Loan Interest Revenue, net
Loans are funded by equity, and borrowings raised in the capital markets. The lending rates for all of IBRD’s loans
are based on the underlying cost of the borrowings funding these loans.
For the first three months of FY21, IBRD’s loan interest revenue, net was $466 million, a decrease of $110 million
compared with the same period in FY20 (Figure 4). The decrease was driven mainly by the effect of the decreasing
interest rates during the period on the portion of the loan portfolio that is sensitive to interest rate movements. Thiswas partially offset by the higher lending volume during the period.
Under IBRD’s pricing policy, the cost of funding is passed on to borrowers. This pricing policy, combined with theeffect of IBRD’s other ALM derivatives, which moderates the impact of rates on the portion of the loan portfolio
sensitive to interest rate movements, stabilizes interest revenue earned from loans. The combined effect of the interest
revenue from Other ALM derivatives, net, along with loan interest revenue, net was an increase of $21 million for the
first three months of FY21 compared to the same period of FY20.
Table 3: Net Loans Outstanding activity

Figure 3: Net Loans Outstanding

In millions of U.S. dollars

In billions of U.S. dollars

Net Loans outstanding as of June 30, 2020
Activity during the period:
Gross loan disbursements
Loan repayments
Accumulated provision for loan losses
Deferred Loan Income
Translation adjustment impact
Total activity
Net Loans outstanding as of September 30, 2020$$$

202,158250

7,437(2,276)
428
(3)
1,784
7,370
209,528

200

193

202

210

Jun 19Jun 20

Sep 20

150
100
50
0

Figure 4: Loan Interest Revenue, net
In millions of U.S. dollars, YTD
700
600
500
400
300
200
100
0
FY17

FY18

FY19

FY20

FY21

IBRD Management’s Discussion and Analysis: September 30, 202011

Section III: Financial Results

Management’s Discussion and Analysis

As of September 30, 2020, 80% of IBRD’s total loans outstanding after derivatives were denominated in U.S. dollars,and 19% were denominated in Euro. For the regional presentation of loans outstanding, see Notes to Condensed
Quarterly Financial Statements, Note D: Loans and other exposures, Table D7.
Gross disbursements during the first three months of FY21 were $7.4 billion, 130% higher compared with the same
period in FY20 (Table 4), primarily due to higher activity in Development Policy Financing (DPF) operations.
Table 4: Gross Disbursements by Region
In millions of U.S. dollars
For the three months ended
September 30,
Eastern and Southern Africa a
Western and Central Africa a
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Total

2020
$

$

Amount
53
15
1,119
533
3,087
1,171
1,459
7,437

2019
% of total
1%
*
15
7
41
16
20
100%

Amount
21
68
718
382
1,381
411
255
3,236

$

$

% of total
1%
2
22
12
42
13
8
100%

$

$

Variance
32
(53)
401
151
1,706
760
1,204
4,201

a. Effective July 1, 2020, the Africa Region was reorganized into two regions: Eastern and Southern Africa and Western and Central
Africa. Prior period numbers have been reclassified and presented for comparability.
* Indicates percentages less than 0.5%.

Net commitments during the first three months of FY21 were $3.1 billion, 22% lower compared with the same period
in FY20 (Table 5), primarily due to lower activity in DPF operations.
Table 5: Net Commitments by Region
In millions of U.S. dollars
For the three months ended
September 30,
Eastern and Southern Africa a
Western and Central Africa a
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Total

2020
$

$

Amount
600
1,196
925
200
200
3,121

2019
% of total
0%
19
39
30
6
6
100%

$

$

Amount
1,320
170
696
1,158
500
165
4,009

% of total
33%
4
17
29
13
4
100%

$

$

Variance(1,320)
430
500
(233)
(300)
35
(888)

a. Effective July 1, 2020, the Africa Region was reorganized into two regions: Eastern and Southern Africa and Western and Central
Africa. Prior period numbers have been reclassified and presented for comparability.

Results from Investing Activities
Investment Portfolio
IBRD’s net investment portfolio was $82.6 billion as of September 30, 2020 ($82.5 billion as of June 30, 2020). Of
this amount, $79.9 billion related to the liquid asset portfolio ($79.9 billion as of June 30, 2020). See Notes toCondensed Quarterly Financial Statements, Note C: Investments. The liquid asset portfolio remained stable as theincrease in net loan disbursements was primarily offset by the new debt issuances during the period.

Net Investment Revenue
For the first three months of FY21, IBRD’s net investment revenue was $27 million, $13 million lower compared withthe same period in FY20, mainly due to the lower interest rate environment in the current period.

12

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Figure 6: Net Investment Revenue

Figure 5: Net Investment Portfolio

In millions of U.S. dollars, YTD

In billions of U.S. dollars
90
80
70
60
50
40
30
20
10
0

82

81

Section III: Financial Results

83

60
40
20
0
-20
-40
-60

Jun 19Jun 20

FY17

Sep 20

FY18

FY19

FY20

FY21

Results from Borrowing Activities
As of September 30, 2020, the borrowing portfolio totaled $243.4 billion, a $6.2 billion increase compared with June30, 2020 (See Notes to Condensed Quarterly Financial Statements, Note E: Borrowings). The increase was primarily
due to net issuances of medium-and long-term debt during the period. The medium-and long-term debt issuances of$15.7 billion during the period were highly diversified with an average maturity of 7.4 years. The funds raised financed
development lending operations and satisfied the liquidity requirements.
Figure 7: Borrowing Portfolio
In billions of U.S. dollars
300
250

Medium-and long-term Borrowings

Short-term Borrowings
11

10

11

219

226

233

Jun 19Jun 20

Sep 20

200
150
100
50
0

Net Other Revenue
Net other revenue represents certain non-interest sources of revenue. Table 6 provides details on the composition of
net other revenue, which was $14 million higher in the first three months of FY21, compared with the same period in
FY20. The increase was mainly due to the higher earnings from Post-Employment Benefit Plan (PEBP).
Table 6: Net Other Revenue
In millions of U.S. dollars
For the three months ended September 30,
Loan commitment fees
Guarantee fees
Net Earnings from Post-Employment Benefit Plan (PEBP) and Post-Retirement
Contribution Reserve Fund (PCRF)
PEF and PAF a
OthersNet other revenue (Table 1)

$

$

2020
29
3

$

2019
27
4

$

Variance
2
(1)

33

1

32

*
1
66

(2)
22
52

2
(21)
14

$

$

a. Amounts are fully offset by fair value changes in trades (facing counterparties) related to PEF and PAF, which are included in
Unrealized mark-to market gains/(losses) on non-trading portfolios, net (Table 1).In July 2020, all PEF related trades matured.
* Indicates amounts less than $0.5 million.

IBRD Management’s Discussion and Analysis: September 30, 202013

Section III: Financial Results

Management’s Discussion and Analysis

Net Non-Interest Expenses
As shown in Table 7, IBRD’s net non-interest expenses primarily comprise administrative expenses, net of revenue
from externally-funded activities. IBRD/IDA's administrative budget is a single resource envelope that funds the
combined work programs of IBRD and IDA. The allocation of net administrative expenses between IBRD and IDA
is based on an agreed cost and revenue-sharing methodology, approved by their Boards, which is primarily driven by
the relative level of lending, knowledge services, and other services between these two institutions. The administrative
expenses shown in Table 7 include costs related to IBRD-executed trust funds and other externally funded activities.
Figure 8: Net Non-Interest Expenses
In millions of U.S. dollars, YTD
400
350
300
250
200
150
100
50
0
FY17

FY18

FY19

FY20

FY21

Table 7: Net Non-Interest Expenses
In millions of U.S. dollars
For the three months ended September 30,
Administrative and pension expenses
Staff costs
TravelConsultant and contractual services
Pension and other post-retirement benefitsaCommunications and technology
Premises and equipment
Other expenses
Total administrative and pension expensesb
Revenue from externally funded activities
Reimbursable revenue – IBRD executed trust funds
Other revenue
Total revenue from externally funded activities
Net non-interest expenses (Table 1)

2020
$

$

240
2
65
110
13
29
12
471

$
$

(83)
(59)
(142)
329

2019
$

$

244
30
66
75
12
32
17
476

$
$

(105)
(64)
(169)
307

Variance
$

$

(4)
(28)
(1)
35
1
(3)
(5)
(5)

$
$

22
5
27
22

a. Includes all components of pension costs. See Notes to Condensed Quarterly Financial Statements, Note J: Pension and Other
Post-Retirement Benefits.
b. Includes expenses related to IBRD executed trust funds of $83 million and $105 million for FY20.

Net non-interest expenses for the first three months of FY21 increased compared with the same period last year. This
primarily reflects an increase in pension costs driven by decrease in discount rate resulting in higher amortization of
unrecognized actuarial losses.

Unrealized mark-to-market gains/losses on non-trading portfolios
Unrealized mark-to-market gains and losses associated with non-trading portfolios, are excluded from reported net
income to arrive at allocable income. As a result, from a long-term financial sustainability perspective, income
allocations are based on amounts that have been realized (except for the Investments-Trading portfolio, as previously
discussed). For the first three months of FY21, $346 million of net unrealized mark-to-market gains ($385 million net
unrealized mark-to-market losses for same period in FY20) were excluded from reported net income to arrive at
allocable income (see Table 1 and Notes to Condensed Quarterly Financial Statements, Note K: Fair Value
Disclosures, Table K 10).

14

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section III: Financial Results

Loan Portfolio
Loans are reported at amortized cost, whereas the derivatives which convert the loans with fixed-rate to variable-rate
instruments are reported at fair value. As a result, while from an economic perspective, IBRD’s loans after the effectof derivatives carry variable interest rates, and therefore have a low sensitivity to interest rates, this is not reflected in
the reported net income. Net income includes only unrealized mark to market gains and losses on loan related
derivatives, which for the first three months of FY21 was a gain of $304 million. To show the full economic effect of
IBRD’s risk management policies, see Section IV: Risk Management for additional details on how IBRD uses
derivatives in the loan portfolio.

Borrowing Portfolio
IBRD’s bonds and the related derivatives are reported at fair value, and, therefore, unrealized mark-to-market gains
and losses on the borrowing related derivatives are offset by unrealized mark-to-market gains and losses on theunderlying bonds, except for changes in IBRD’s own credit, referred to as the Debit Valuation Allowance (DVA)
which are recorded in AOCL. For the first three months of FY21, the DVA includes $616 million of unrealized markto-market losses resulting mainly from the tightening of IBRD’s credit spreads relative to LIBOR during the first threemonths of FY21. As of September 30, 2020, IBRD’s Condensed Balance Sheet included a cumulative DVA of $598
million reflected in AOCL, associated with the changes in its own credit for financial liabilities measured under thefair value option (borrowings, see Notes to the Condensed Quarterly Financial Statements, Note K – Other Fair Value
Disclosures).

Other ALM Portfolio
IBRD uses derivatives to stabilize its interest revenue from the portion of loans funded by equity. Other ALM portfolio
consists of derivatives which convert variable rate cash flows to fixed rate cash flows. These derivatives are at fairvalue. For the first three months of FY21, IBRD recorded unrealized mark to market losses of $136 million on thisportfolio primarily due to the increase in U.S. dollar interest rates during the period. As of September 30, 2020, theduration of this portfolio is 3.1 years.

Transfers to Affiliated Organizations
Since 1964, IBRD has made transfers to IDA out of its net income, upon approval by the Board of Governors. Undera formula-based approach for IBRD's income support to IDA, the amount of income transfer recommended for IDA
is a function of IBRD's financial results. For allocations out of the FY20 Net Income, the Board approved IBRD’s
management’s proposal to hold $331 million in the IBRD’s Surplus account, as a measure of prudence in view of thecurrent uncertain outlook due to the COVID-19 crisis, retaining the option to keep those funds with IBRD to strengthen
its reserves should a downside scenario materialize. IBRD’s Management will make further recommendations to theBoard later in FY21, which could include transferring these funds to IDA, for the approval of the Governors.

IBRD Management’s Discussion and Analysis: September 30, 202015

Management’s Discussion and Analysis

Section IV: Risk Management

Section IV: Risk Management
Risk Governance
IBRD’s risk management processes and practices continually evolve to reflect changes in activities in response tomarket, credit, product, operational, and other developments. The Board, particularly Audit Committee (AC)members, periodically review trends in IBRD’s risk profiles and performance, and any major developments in risk
management policies and controls.
Management believes that effective risk management is critical for its overall operations. Accordingly, the risk
management governance structure is designed to manage the principal risks IBRD assumes in its activities, andsupports Management in its oversight function, particularly in coordinating different aspects of risk management, andin connection with risks that are common across functional areas.
IBRD’s financial and operational risk governance structure is built on the “three lines of defense” principle where:i.

Business units are responsible for directly managing risks in their respective functional areas,ii.

The Vice President and WBG Chief Risk Officer (CRO) provides direction, challenge, and oversight overfinancial and operational risk activities, andiii.

Internal Audit provides independent oversight.

IBRD’s risk management process comprises risk identification, assessment, response and risk monitoring andreporting. IBRD has policies and procedures under which risk owners and corporate functions are responsible for
identifying, assessing, responding to, monitoring and reporting risks.

Risk Oversight and Coverage
The CRO has an overview of both financial and operational risks. These risks include (i) country credit risks in thecore sovereign-lending business, (ii) market and counterparty risks, including liquidity risk, and (iii) operational risks
relating to people, processes and systems. In addition, the CRO works closely with IFC, MIGA, and IDA’s
Management, to review, measure, aggregate, and report on risks, and share best practices across the WBG. The CRO
also helps enhance cooperation between the entities and facilitates knowledge sharing in the risk management
function.
The risk of IBRD’s operations not meeting their development outcomes (development outcome risk) in IBRD’s
lending activities is monitored at the corporate level by Operations Policy and Country Services (OPCS). Where fraudand corruption risks may impact IBRD-financed projects, OPCS, the regions and practice groups, and the Integrity
Vice Presidency jointly address such issues.

Management of IBRD’s Risks
IBRD assumes financial risks in order to achieve its development and strategic objectives. IBRD’s financial risk
management framework is designed to enable and support the institution in achieving its goals in a financiallysustainable manner. IBRD manages credit, market and operational risks for its financial activities, which includelending, borrowing and investing. The primary financial risk to IBRD is the country credit risk inherent in its loan
portfolio. IBRD is also exposed to risks in its liquid asset and derivative portfolios, where the major risks are interest
rate, exchange rate, commercial counterparty credit, and liquidity risks. IBRD’s operational risk management
framework is based on a structured and uniform approach to identify, assess and monitor key operational risks acrossbusiness units.
In an effort to maximize IBRD’s capacity to lend to member countries for development purposes, IBRD limits its
exposure to market and counterparty credit risks. In addition, to ensure that the financial risks associated with its loans
and other exposures do not exceed its risk-bearing capacity, IBRD uses a strategic capital adequacy framework as a
key medium-term capital planning tool.

16

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section IV: Risk Management

Coronavirus Disease 2019 (COVID-19) Outbreak
The outbreak of COVID-19 has resulted in governments worldwide enacting emergency measures to combat the
spread of the virus. These measures, which include the implementation of travel bans, quarantine periods and social
distancing, have caused material disruption to businesses globally, resulting in an economic slowdown. Governments
and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic
conditions.
In light of COVID-19, IBRD faces additional credit, market and operational risks for its activities. IBRD continues tomonitor developments and to manage the risks associated with all its portfolios. IBRD’s announced lending capacity
response to the outbreak was estimated within its existing financial, operational and risk management policies as wellas prescribed limits, which have not been modified for this response to the outbreak, as described in Section I.
As of September 30, 2020, IBRD had sufficient resources to meet its liquidity requirements and continues to haveaccess to capital market resources, despite recent market volatility. The liquid asset portfolio was 118% of the Target
Liquidity Level. In the first three months in FY21, IBRD continued to maintain a robust liquidity position andflexibility to access the necessary liquidity resources. In October 2020, IBRD issued a $6 billion 5-year Global Debt
Offering.
Management remains vigilant in assessing funding needs in the medium and longer-term to manage the effect ofpossible severe market movements.
As of the reporting date, country credit risk and counterparty credit risk remain in line with the existing governanceframework and established credit limits. The loan loss provisions reflect IBRD’s current assessment of country risk
ratings. The fair values of related financial instruments reflect counterparty credit risk in IBRD’s portfolios.
Developments in the market continue to be closely monitored and managed.
Home-based work continues in IBRD offices throughout the world, with certain exceptions, in line with IBRD’s
Business Continuity Procedure. In addition, IBRD has adopted other prudent measures to ensure the health and safetyof its employees, including imposing travel restrictions, and holding public events in virtual format.
While the duration of the COVID-19 pandemic and its effects are difficult to predict at this time, IBRD has continued
to respond to demand and operate our core business functions effectively by utilizing technology for remote work,and by leveraging our extensive local presence in client countries around the world.
Management has an office reopening framework that prioritizes staff health and safety while taking into
consideration risks including business continuity. The office reopening framework provides for the incremental
return to office and on-site business activities in stages or “tiers,” allowing for enough time in between tiers to assess
risk and preparedness indicators. IBRD continues to monitor risks associated with COVID-19 and prepare plans to
respond in case the situation deteriorates.

Capital Adequacy
IBRD holds capital to cover the credit, market and operational risks inherent in its operating activities and financial
assets. Country credit risk is the most substantive risk covered by IBRD’s equity.
IBRD’s capital adequacy is the degree to which its equity is sufficient to withstand unexpected shocks. IBRD’s Board
monitors IBRD’s capital adequacy within a strategic capital adequacy framework and uses the equity-to-loans ratio
as a key indicator of capital adequacy. The framework seeks to ensure that IBRD’s equity is aligned with the financial
risk associated with its loan portfolio as well as other exposures over a medium-term capital-planning horizon.
As shown in Table 8, IBRD’s equity-to-loans ratio marginally decreased to 22.6% as of September 30, 2020, from
22.8% as of June 30, 2020, and remained above the 20% minimum ratio under the strategic capital adequacy
framework. In line with IBRD’s currency management policy, exchange rate movements during the period did nothave an impact on IBRD’s equity-to-loans ratio. Under the currency management policy, to minimize exchange raterisk, IBRD matches its borrowing obligations in any one currency (after derivatives) with assets in the same currency.
In addition, IBRD periodically undertakes currency conversions to align the currency composition of its equity withthat of its outstanding loans, across major currencies.

IBRD Management’s Discussion and Analysis: September 30, 202017

Section IV: Risk Management

Management’s Discussion and Analysis
Table 8: Equity-to-Loans Ratio
In millions of U.S. dollars

Variance

As of
Usable paid-in capitalSpecial reserve
General reserve a
Cumulative translation adjustment b
Other adjustments
Equity (usable equity)
Loans exposure
Present value of guarantees
Effective but undisbursed DDOs
Related accumulated provisions
Deferred loan income
Other exposures
Loans (total exposure)

September 30, 2020

June 30, 2020$

17,540293
30,387(385)
87
47,922$

211,188
3,014(1,212)(481)(723)
211,786$$$$

Equity-to-Loans Ratio

17,288293
30,387(737)(93)
47,138$204,231
3,264
1,834(1,669)(474)(727)
206,459

$

$

$

22.6%

Due toActivities

Total
252
352
180
784

$

6,957
(250)
(1,834)
457
(7)
4
5,327

$

$

$

150
203
353

$

5,161
(321)
(1,834)
466
(3)
4
3,473

$

Due toTranslation
Adjustments
$
102
352
(23)
$
431
$

$

1,796
71
(9)
(4)
1,854

22.8%

a. June 30, 2020 amount includes the proposed transfer to the General Reserve, which was approved by IBRD's Executive
Directors on August 7, 2020.
b. Excludes cumulative translation amounts associated with the unrealized mark-to-market gains/losses on non-trading portfolios,
net.

Credit Risk
IBRD faces two types of credit risk: country credit risk and counterparty credit risk. Country credit risk is the risk ofloss due to a country not meeting its contractual obligations, and counterparty credit risk is the risk of loss attributable
to a counterparty not honoring its contractual obligations. IBRD is exposed to commercial as well as non-commercial
counterparty credit risk.

Country Credit Risk
IBRD manages country credit risk by using individual country exposure limits and takes into account factors such as
population size and the economic situation in the country. In addition, IBRD conducts stress tests of the effects ofchanges in market variables and of potential geopolitical events on its portfolio to complement its capital adequacy
framework.
Figure 9: Country Exposures as of September 30, 2020
In billions of U.S. dollars

Top Ten Country Exposures
Indonesia
India
BrazilChina
MexicoColombia
TurkeyEgypt
Philippines
Argentina

17.7
16.7
15.8
15.0
14.6
12.2
11.3
11.2
8.1
8.0
0

18

2

4

6

8

10

12

14

16

IBRD Management’s Discussion and Analysis: September 30, 2020

18

20

Management’s Discussion and Analysis

Section IV: Risk Management

Portfolio Concentration Risk
Portfolio concentration risk, which arises when a small group of borrowers account for a large share of loans
outstanding, is a key concern for IBRD. The ten countries with the highest exposures accounted for 61% of IBRD’s
total exposure as of September 30, 2020.
Concentration risk is carefully managed, in part, by applying an exposure limit to a single borrowing country for theaggregate balance of loans outstanding, the present value of guarantees, the undisbursed portion of Deferred
Drawdown Options (DDOs), and other eligible exposures that have become effective. Under the current guidelines,
IBRD’s exposure to a single borrowing country is restricted to the lower of an Equitable Access Limit (EAL) and theSingle Borrower Limit (SBL).
The SBL framework reflects a dual-SBL system, which differentiates between countries below the Graduation
Discussion Income (GDI) threshold and those above it. Under this system, for FY21 the SBL is $23.5 billion forhighly creditworthy countries below the GDI, and $20.5 billion for highly creditworthy countries above the GDI.

Accumulated Provision on Loans and Other Exposures
Beginning July 1, 2020, IBRD records a provision to reflect the expected losses inherent in its loan and otherexposures, including protection provided under the Exposure Exchange Agreement. Prior to July 1, 2020, theprovision was determined based on a probable incurred loss model. On July 1, 2020, IBRD recorded a transition
adjustment of $203 million, increasing the opening balance of retained earnings. This adjustment represented thedifference between the previous method and CECL (see Notes to Condensed Quarterly Financial Statements, Note A– Summary of Significant Accounting and Related Policies). For the first three months of FY21, IBRD recorded a
provision for losses on loans and other exposures of $37 million, primarily reflecting the impact of the change in
exposures and severity during the period.
As of September 30, 2020, IBRD’s accumulated provision for losses on loans and other exposures was $1,533 million,
including $303 million of accumulated provision related to Loan commitments (see Notes to Condensed Quarterly
Financial Statements, Note D: Loans and Other Exposures). This was less than 1% of the underlying exposures ($1,698
million as of June 30, 2020, less than 1% of total exposures).
As of September 30, 2020, 0.2% of IBRD’s loans were in nonaccrual status and all related to Zimbabwe. During thefirst three months of FY21, IBRD did not receive any payments towards overdue interest and principal from Zimbabwe($0.75 million for FY20 YTD). (See Notes to Condensed Quarterly Financial Statements, Note D: Loans and Other
Exposures).

Counterparty Credit Risk
IBRD is exposed to commercial and non-commercial counterparty credit risk.

Commercial Counterparty Credit Risk
Commercial counterparty credit risk is the risk that counterparties fail to meet their payment obligations under theterms of the contract or other financial instruments. Effective management of counterparty credit risk is vital to thesuccess of IBRD’s funding, investment, and asset/liability management activities. The monitoring and managementof these risks is continuous as the market environment evolves.
As a result of IBRD’s use of mark-to-market collateral arrangements for swap transactions, its residual commercial
counterparty credit risk is concentrated in the investment portfolio, in instruments issued by sovereign governments
and non-sovereign holdings (including Agencies, Asset Backed Securities, Corporates, and Time Deposits). IBRD’s
overall commercial counterparty credit exposure increased by $0.7 billion during the first three months of FY21, to$84.1 billion as of September 30, 2020, consistent with the increase in the investment portfolio.
As shown in Table 9, the credit quality of IBRD’s investment portfolio remains concentrated in the upper end of thecredit spectrum, with 74% of the portfolio rated AA or above and the remainder predominantly rated A. The exposureswith the AAA and AA rated counterparties primarily related to sovereign debt and time deposits. The A rated
counterparties principally consisted of financial institutions (limited to short-term deposits and swaps) and sovereigndebt.

IBRD Management’s Discussion and Analysis: September 30, 202019

Section IV: Risk Management

Management’s Discussion and Analysis

Table 9: Commercial Credit Exposure, Net of Collateral Held, by Counterparty Rating
In millions of U.S. dollars
As of September 30, 2020
Investments
Counterparty Rating a
AAA
AA
A
BBB
BB or lower/unrated
Total

Sovereigns$
25,691
2,066
10,421
1
39$
38,218$$Net Swap
Exposure
$
273
599
$
872

Non-Sovereigns
13,921
20,137
10,88746
644,997

Total Exposure
39,612
22,476
21,90747
45$
84,087% of Total
47%
27
26
*
*
100%

Total Exposure
36,68926,01820,58839
46$
83,380% of Total
44%
31
25
*
*
100%

$

As of June 30, 2020
Investments
Counterparty Rating a
AAA
AA
A
BBB
BB or lower/unrated
Total

Sovereigns$
22,6202,109
11,1281
41$
35,899$$Non-Sovereigns
14,06923,2269,245
38
546,583

Net Swap
Exposure
$
683
215
$
898

$

a. Average rating is calculated using available ratings from the three major rating agencies; however, if ratings are not available
from each of the three rating agencies, IBRD uses the average of the ratings available from any of such rating agencies or asingle rating if an instrument or issuer (as applicable) is rated by only one rating agency.
* Indicates amount less than $0.5 million or percentage less than 0.5%.

Non-Commercial Counterparty Credit Risk
In addition to its derivative transactions with commercial counterparties, IBRD offers derivative-intermediation
services to borrowing member countries, as well as to affiliated and non-affiliated organizations, to help meet theirdevelopment needs and fulfill their development mandates (See Table 10).
IBRD has a master derivatives agreement with the International Finance Facility for Immunization (IFFIm), underwhich several transactions have been executed. IBRD has the right to call for collateral above an agreed specified
threshold. As of September 30, 2020, IBRD had not exercised this right, but may do so under the existing terms of theagreement. Rather than calling for collateral, IBRD and IFFIm have agreed to manage IBRD’s exposure by applying
a risk management buffer to the gearing ratio limit. The gearing ratio limit represents the maximum amount of IFFIm’s
net financial obligations less cash and liquid assets, as a percentage of the net present value of its financial assets.
Table 10: Non-Commercial Counterparty Credit Risk
In millions of U.S. dollars
Exposures as of September 30, 2020
Non-Commercial
Counterparty
Borrowing Member
Countries

Instrument
used

Purpose of derivative transaction

Derivatives

Assist borrowing member countries with managing risks

Affiliated Organization

Derivatives

Intermediation on behalf of IDA

Non-Affiliated Organization Derivatives$

Assist IFFIm with managing risks

IBRD Management’s Discussion and Analysis: September 30, 2020

Net
Exposure

11,653

$

1,362
$

20

Notional

2,030
15,045

1,711
-

$

303
2,014

Management’s Discussion and Analysis

Section IV: Risk Management

Effect of Changes in Credit Spreads
The sensitivity of IBRD’s portfolios to changes in credit spreads is shown in the table below, where the amountrepresents the dollar change in fair value which corresponds to a one basis point parallel upward shift in credit spreads.
Table 11: Effect of Credit on IBRD’s Portfolios
In millions of U.S. dollars
As of September 30, 2020

Credit Effect on Portfolio
Sensitivity a

Borrowing portfolio
Loan portfolio b
Other ALM portfolio
Investment portfolio
Total gains

$

95
(37)
(*)
(4)
54

$

a. Excludes CVA and DVA on derivatives.
b. If loans were measured at fair value.
* Sensitivity is marginal.

Market Risk
IBRD is exposed to changes in interest and exchange rates, and it uses various strategies to minimize its exposure tomarket risk.

Interest Rate Risk
Under its current interest rate risk management strategy, IBRD seeks to match the interest rate sensitivity of its assets(loan and investment trading portfolios) with those of its liabilities (borrowing portfolio) by using derivatives, such as
interest rate swaps. These derivatives effectively convert IBRD’s financial assets and liabilities into variable-rate
instruments. After considering the effects of these derivatives, virtually the entire loan and borrowing portfolios arecarried at variable interest rates. The sensitivity of these portfolios to interest rate movements, after the effect ofderivatives, is shown in the table below where the amount represents the dollar change in fair value which corresponds
to a one basis point parallel upward shift in interest rates.
Table 12: Effect of Interest Rates on IBRD’s Portfolios
In millions of U.S. dollars
As of September 30, 2020

Interest Rate Effect on Portfolio
Sensitivity a

Borrowing portfolio
Loan portfolio b
Other ALM portfolio
Investment portfolio

$

6
(17)
(13)
(1)

Total losses

$

(25)

a. After the effects of derivatives.
b. If loans were measured at fair value.

IBRD Management’s Discussion and Analysis: September 30, 202021

Section IV: Risk Management

Management’s Discussion and Analysis

Figure 10 illustrates how the use of derivatives affects the overall sensitivity of the borrowing, loan, other ALM andinvestment portfolios. It illustrates the extent to which each portfolio is economically hedged. For example, for the
borrowing portfolio a one-basis-point upward parallel shift in interest rates would result in $95 million of unrealized
mark-to-market gains on bonds which would be offset by $89 million of unrealized mark-to-market losses on swaps.
Loans are illustrated as if they were measured at fair value.
Figure 10: Sensitivity to Interest Rates as of September 30, 2020
(Dollar change in fair value corresponding to a one-basis-point upward parallel shift in interest rates)
In millions of U.S. dollars
Other ALM Portfolio
Borrowing Portfolio
Loan Portfolio
Swaps Bonds

Loans 0 Swaps

-89

-51

95

34

Swaps

0

Investment Portfolio
Investments

-13

-1

-90 -60 -30 0 30 60 90-60 -40 -20 0 20 40 60-60 -40 -20

Net Sensitivity = $6 million

Net Sensitivity = $(17) million

Net Sensitivity= $(13) million

0

20 40 60

-60 -40 -20 0

20 40 60

Net Sensitivity = $(1) million

IBRD faces three main sources of interest rate risk: the interest rate sensitivity of the income earned in a low interest
rate environment, fixed-spread loans refinancing risk, and interest rate risk on the liquid asset portfolio.

Low Interest Rate Environment
Loans to borrowing countries
Under IBRD’s loan agreements, if an interest rate formula yields a negative rate, the interest rate is fixed at zero.
Liquid Asset Portfolio
IBRD’s existing guidelines allow for the investment in a wide variety of credit products in both developed andemerging market economies (see investment eligibility criteria in IBRD’s MD&A as of June 30, 2020). Low andnegative fixed interest rates present a challenge for the investment of the liquid asset portfolio. However, even markets
with negative rates can provide positive spread returns once the investment is swapped back into a U.S. dollar floatingbasis. In the first three months of FY21, despite the low interest rate environment, IBRD was able to generate a positive
return, net of funding costs on its liquid asset portfolio (see Table 1).

Fixed Spread Loan Refinancing Risk
Refinancing risk for funding fixed-spread loans relates to the potential impact of any future deterioration in IBRD'sfunding spread. IBRD does not match the maturity of its funding with that of its fixed spread loans as this would resultin significantly higher financing costs for all loans. Instead, IBRD targets a shorter average funding maturity andmanages the refinancing risk through two technical components of the fixed-spread loan pricing, both of which canbe changed at Management’s discretion:Projected funding cost: Management’s best estimate of average funding costs over the life of the loan



Risk premium: a charge for the risk that actual funding costs are higher than projected

Liquid Asset Portfolio Spread Exposure
The interest rate risk on IBRD’s liquid asset portfolio, including the risk that the value of assets in the portfolio willfluctuate in response to changes in market interest rates, is managed within specified duration-mismatch limits. The
liquid asset portfolio has spread exposure because IBRD holds instruments other than the short-term bank deposits
represented by the portfolios’ London Interbank Bid Rate (LIBID) benchmark. These investments generally yieldpositive returns over the benchmark but can generate mark-to-market losses if their spreads relative to LIBOR widen.

22

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section IV: Risk Management

Other Interest Rate Risks
Interest rate risk also arises from other variables, including differences in timing between the contractual maturities
or re-pricing of IBRD’s assets, liabilities, and derivative instruments. On variable-rate assets and liabilities, IBRD is
exposed to timing mismatches between the re-set dates on its variable-rate receivables and payables. IBRD monitorsthese exposures and may execute overlay interest rate swaps to reduce sizable timing mismatches.

Alternative Reference Rate
In July 2017, the Financial Conduct Authority (FCA), the regulator of LIBOR, announced that it will no longer compel
panel banks to submit rates required to calculate LIBOR after December 31, 2021 and, therefore, market participants,
including IBRD and its borrowers need to move to alternative reference rates because the availability of LIBOR after
this date is not a certainty. Although, the transition from LIBOR is faced with numerous uncertainties and challenges,
the transition decision is aimed at increased transparency in the financial markets by better aligning the alternativereference rates with actual market transactions.
IBRD previously completed an initial impact assessment of its exposure, both quantitatively and qualitatively, to
LIBOR and developed an implementation roadmap for the LIBOR transition. As part of the communication strategy
for the transition, senior management has also met with various internal and external key stakeholders to discuss theimportant nature of the transition. In FY20, IBRD’s Executive Directors endorsed an omnibus amendment processwith borrowers for loan agreements to address the replacement of LIBOR, allowing IBRD to maintain and preserve
the pre-existing relationship between its funding costs and lending rates and maintain the principles of fairness andequivalence for any replaced reference rate. The planned contract amendments will enable similar treatment to allloans by bringing the fallback provisions related to changes in the reference rate in the General Conditions into
conformity with the revised General Conditions of December 2018. The new language permits IBRD to transition theinterest rate to alternative reference rates when a suitable alternative is available, and it is appropriate to do so. During
FY21, loan agreement omnibus amendments were distributed to borrowers and IBRD has started receiving signed
amendments from borrowers. IBRD is actively working through this transition and is analyzing the impact frommultiple perspectives: lending, funding, accounting, operations, information technology, liquidity investing, risk andlegal, considering the portfolio of existing loans and other instruments that use LIBOR as a benchmark. IBRD willcontinue to work with key stakeholders, including internal subject matter experts, senior management, borrowers,
industry groups and other market participants, to mitigate potential financial and operational risks to which IBRD is
exposed and to ensure an orderly transition to the alternative reference rates. IBRD is managing the transition
prudently and in a cost-effective manner.

Exchange Rate Risk
IBRD holds its assets and liabilities mainly in U.S. dollars and euro. However, the reported levels of its assets,
liabilities, income, and expenses in the financial statements are affected by exchange rate movements in all thecurrencies in which IBRD transacts, relative to its reporting currency, the U.S. dollar. While IBRD’s equity could be
affected by exchange rate movements, IBRD’s risk management policies work to minimize the exchange rate risk in
its capital adequacy, by immunizing the equity-to-loans ratio against exchange rate movements.
To minimize exchange rate risk, IBRD matches its borrowing obligations in any one currency (after derivative
activities) with assets in the same currency. In addition, IBRD undertakes periodic currency conversions to align thecurrency composition of its equity with that of its outstanding loans across major currencies. Together, these policies
are designed to minimize the impact of exchange rate fluctuations on the equity-to-loans ratio; thereby preserving
IBRD’s ability to absorb unexpected losses from arrears on loan repayments better, regardless of exchange
movements. As a result, exchange rate movements during the period generally do not have an impact on the overall
equity-to-loans ratio.

Liquidity Risk
Liquidity risk arises in the general funding of IBRD’s activities and in managing its financial position. It includes therisk of IBRD being unable to fund its portfolio of assets at appropriate maturities and rates, and the risk of being
unable to liquidate a position in a timely manner at a reasonable price.
Under IBRD’s liquidity management guidelines, aggregate liquid asset holdings are kept at or above a specified
Prudential Minimum to safeguard against cash flow interruptions.

IBRD Management’s Discussion and Analysis: September 30, 202023

Management’s Discussion and Analysis

Section IV: Risk Management

The Target Liquidity Level represents twelve-months’ coverage as calculated at the start of every fiscal year. The
Prudential Minimum is defined as 80% of the Target Liquidity Level. The 150% maximum guideline (150% of Target
Liquidity Level) applies to the portfolio and it continues to function as a guideline rather than a hard ceiling (see Table
13).
Table 13: Liquidity Levels for FY21
In billions of U.S. dollars
Target Liquidity Level
Guideline Maximum Liquidity Level
Prudential Minimum Liquidity Level
Liquid Asset Portfolio
as of September 30, 2020

% Of Target Liquidity Level

68.0
102.0

150%

54.4

80%

79.9

118%

The FY21 Target Liquidity Level is $2 billion higher than the prior year, reflecting the higher Prudential Minimum,
as well as higher projected debt service for FY21.

Operational Risk
Operational risk is defined as the risk of financial loss, or damage to IBRD’s reputation resulting from inadequate or
failed internal processes, people and systems, or from external events.
IBRD recognizes the importance of operational risk management activities, which are embedded in its financial
operations. As part of its business activities, IBRD is exposed to a range of operational risks including physical security
and staff health and safety, data and cyber security, business continuity, and third-party vendor risks. IBRD’s approach
to identifying and managing operational risk includes a dedicated program for these risks and a robust process that
includes assessing and prioritizing operational risks, monitoring and reporting relevant key risk indicators, aggregating
and analyzing internal and external events, and identifying emerging risks that may affect business units anddeveloping risk response and mitigating actions.

24

IBRD Management’s Discussion and Analysis: September 30, 2020

Management’s Discussion and Analysis

Section V: Governance

Section V: Governance
Senior Management Changes
There were no Senior Management changes during the period.

IBRD Management’s Discussion and Analysis: September 30, 202025

Management’s Discussion and Analysis

List of Tables, Figures and Boxes
TablesTable 1: Condensed Statement of Income
Table 2: Condensed Balance Sheet
Table 3: Net Loans Outstanding activity
Table 4: Gross Disbursements by Region
Table 5: Net Commitments by Region
Table 6: Net Other Revenue
Table 7: Net Non-Interest Expenses
Table 8: Equity-to-Loans Ratio
Table 9: Commercial Credit Exposure, Net of Collateral Held, by Counterparty Rating
Table 10: Non-Commercial Counterparty Credit Risk
Table 11: Effect of Credit on IBRD’s Portfolios
Table 12: Effect of Interest Rates on IBRD’s Portfolios
Table 13: Liquidity Levels for FY21

10
10
11
12
12
13
14
18
20
20
21
21
24

FiguresFigure 1: IBRD’s Financial Business Model
Figure 2: Sources and Uses of Revenue
Figure 3: Net Loans Outstanding
Figure 4: Loan Interest Revenue, net
Figure 5: Net Investment Portfolio
Figure 6: Net Investment Revenue
Figure 7: Borrowing Portfolio
Figure 8: Net Non-Interest Expenses
Figure 9: Country Exposures as of September 30, 2020
Figure 10: Sensitivity to Interest Rates as of September 30, 2020

7
8
11
11
13
13
13
14
18
22

Box
Box 1: Selected Financial Data

26

IBRD Management’s Discussion and Analysis: September 30, 20202

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT(IBRD)CONTENTS
September 30, 2020

CONDENSED QUARTERLY FINANCIAL STATEMENTSCONDENSED BALANCE SHEET

28

CONDENSED STATEMENT OF INCOME

30

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

31

CONDENSED STATEMENT OF CHANGES IN RETAINED EARNINGS

31

CONDENSED STATEMENT OF CASH FLOWS

32

NOTES TO THE CONDENSED QUARTERLY FINANCIAL STATEMENTS

33

INDEPENDENT AUDITORS’ REVIEW REPORT60

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)27

CONDENSED BALANCE SHEET
Expressed in millions of U.S. dollars
September 30, 2020
(Unaudited)

June 30, 2020
(Unaudited)

AssetsDue from banks—Notes C and K
Unrestricted cash$

Restricted cash
Investments-Trading (including securities transferred under repurchaseor securities lending agreements of $9 million—September 30,
2020; $8 million—June 30, 2020)—Notes C and K
Securities purchased under resale agreements—Note C and K
Derivative assets, net—Notes C, E, F and K

1,810

$

1,748

122

122

1,932

1,870

84,582

83,767

392

394

4,598

3,744

275,825

274,047

Loans outstanding—Notes D, I and K
Total loans approved
Less undisbursed balance (including signed loan commitments of$54,942 million — September 30, 2020, and $54,834 million —June 30, 2020)
Loans outstanding(64,637)(69,816)

211,188

204,231

Less:
Accumulated provision for loan losses(1,179)(1,599)Deferred loan income

(481)

(474)

Net loans outstanding

209,528

202,158

Other assets—Notes C, D, E and I

5,273

4,871

Total assets

28$

306,305$

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

296,804

September 30, 2020
(Unaudited)

June 30, 2020
(Unaudited)

Liabilities
Borrowings—Notes E and K$

Securities sold under repurchase agreements, securities lent under
securities lending agreements, and payable for cash collateral
received—Notes C and K

251,074$

243,24095

36

Derivative liabilities, net—Notes C, E, F and K

1,160

1,473

Other liabilities—Notes C, D and I

12,631

11,668

Total liabilities

264,960

256,417289,306

288,002(271,125)(269,968)

18,181

18,034

Nonnegotiable, noninterest-bearing demand obligations on accountof subscribed capital

(366)

(373)

Receivable amounts to maintain value of currency holdings

(249)

(299)

Deferred amounts to maintain value of currency holdings

30

(14)

Retained earnings (see Condensed Statement of Changes in
Retained Earnings; Note G)

29,64428,765

Accumulated other comprehensive loss—Note J(5,895)(5,726)

Total equity

41,34540,387

EquityCapital stock—Note B
Authorized capital (2,783,873 shares—September 30, 2020, andJune 30, 2020)
Subscribed capital (2,398,189 shares—September 30, 2020, and2,387,388 shares—June 30, 2020)
Less uncalled portion of subscriptions
Paid-in capital

Total liabilities and equity$

306,305$

296,804

The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)29

CONDENSED STATEMENT OF INCOME
Expressed in millions of U.S. dollars
Three Months Ended September 30,(Unaudited)
2020
2019
Net interest revenue
Interest revenue
Loans, net—Note D

$

718

$

1,324

Other asset/liability management derivatives, net

126

(5)

Investments-Trading, net

80

413

Other, net

1

5

(343)

(1,182)

Interest revenue, net of borrowing expenses

582

555

Provision for losses on loans and other exposures—Note D

(38)

(6)

Borrowing expenses, net—Note E

Non-interest revenue
Revenue from externally funded activities—Note I

142

169

Commitment charges—Note D

29

27

Other

10

32

181

228

(468)

(490)

Pension—Note H

(3)

14

Other

(6)

(6)

(477)

(482)

-

(81)

Non-functional currency translation adjustments, net

11-

Unrealized mark-to-market gains on Investments-Trading
portfolio, net—Notes F and K

71

54

Unrealized mark-to-market gains (losses) on non-trading
portfolios, net—Notes D, E, F and K

346

(384)

Total
Non-interest expenses
Administrative—Notes H and I

Total
Board of Governors-approved and other transfers—Note G

Net income (loss)

$

676

$

(116)

The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

30

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Expressed in millions of U.S. dollars

Three Months Ended September 30,(Unaudited)
2020
2019
Net income (loss)

$

676

$

(116)

Other comprehensive income—Note J
Reclassification to net income:Amortization of unrecognized net actuarial losses

94

43

Amortization of unrecognized prior service costs

6

6

Net Change in Debit Valuation Adjustment (DVA) on Fair Value
option elected liabilities

(616)

61

Currency translation adjustments on functional currency

347

(283)

(169)

(173)

Total other comprehensive loss
Comprehensive income (loss)

$

507

$

(289)

CONDENSED STATEMENT OF CHANGES IN RETAINED EARNINGS
Expressed in millions of U.S. dollars
Three Months Ended September 30,(Unaudited)
2020
2019
Retained earnings at beginning of the fiscal year$

Cumulative effect of change in accounting principle—Notes A, D
and G

$

28,807203

Net income (loss)
Retained earnings at end of the period

28,765-676$

29,644(116)$

28,691The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)31

CONDENSED STATEMENT OF CASH FLOWS
Expressed in millions of U.S. dollars
Three Months Ended September 30,(Unaudited)
2020
2019
Cash flows from investing activities
Loans
Disbursements
Principal repayments
Principal prepayments
Loan origination fees received
Net derivatives-loans
Other investing activities, net
Net cash used in investing activities$

Cash flows from financing activities
Medium and long-term borrowings
New issues
Retirements
Short-term borrowings (original maturities greater than 90 days)
New issues
Retirements
Net short-term borrowings (original maturities less than 90 days)
Net derivatives-borrowings
Capital subscriptions
Net cash provided by (used in) financing activities
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income to net cash used in operating
activities:
Unrealized mark-to-market (gains) losses on non-trading
portfolios, net
Non-functional currency translation adjustments, net
Depreciation and amortization
Provision for losses on loans and other exposures
Changes in:
Investments portfolio
Other assets and liabilities
Net cash provided by operating activities
Effect of exchange rate changes on unrestricted and restricted cash
Net increase in unrestricted and restricted cash
Unrestricted and restricted cash at beginning of the fiscal year
Unrestricted and restricted cash at end of the period$
Supplemental disclosure
Increase (decrease) in ending balances resulting from exchange rate
fluctuations
Loans outstanding$
Investment portfolio
Borrowing portfolio
Capitalized loan origination fees included in total loans
Interest paid on borrowing portfolio(7,427)
2,276
7
3
(26)
(5,167)$(3,226)
2,260
15
3
3
(25)
(970)

15,600(10,334)

13,705(19,617)

6,851(5,158)(2,243)
(154)
147
4,709

3,863
(4,607)
1,196
(195)
388
(5,267)

676

(116)

(346)
(11)
167
38

384
241
6

270
(330)
464

6,302
(369)
6,448

56
62
1,870
1,932

(18)
193
895
1,088

1,796
132
1,414
10
684

$

$

(1,738)(7)(1,134)10
1,351

The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

32

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)NOTES TO CONDENSED QUARTERLY FINANCIAL STATEMENTSNOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIESBasis of Preparation
These unaudited condensed quarterly financial statements and notes should be read in conjunction with the June 30,
2020, audited financial statements and notes included therein. The condensed comparative information that has been
derived from the June 30, 2020, audited financial statements has not been audited. In the opinion of management,
the condensed quarterly financial statements reflect all adjustments necessary for a fair presentation of IBRD’s
financial position and results of operations in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP).
Management makes estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the condensed quarterly financial statements and thereported amounts of income and expenses during the reporting periods. Due to the inherent uncertainty involved in
making those estimates, actual results could differ from those estimates. Areas in which significant estimates havebeen made include, but are not limited to, the provision for losses on loans and other exposures, valuation of certain
instruments carried at fair value, and valuation of pension and other postretirement plan-related liabilities. The
results of operations for the first three months of the current fiscal year are not necessarily indicative of results that
may be expected for the full year.
Certain reclassifications of the prior year’s information have been made to conform with the current year’s
presentation.
Accounting and Reporting Developments
Evaluated accounting standards:
In March 2020, the FASB issued ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects ofReference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to
the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden of the
expected market transition from LIBOR and other interbank offered rates. To be eligible for the optional expedients,
modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual
cash flows must be related only to replacement of a reference rate. The relief is temporary and is only available
through December 31, 2022. IBRD will apply the standard consistently to contractual amendments made to allapplicable floating rate instruments indexed to IBOR (inter-bank offered rate) rates. IBRD adopted the standard
effective June 30, 2020 and the adoption did not have a material impact on the financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework –Changes to the Disclosure Requirements for Fair Value Measurement, which amends certain disclosure
requirements of ASC 820. The guidance became effective for IBRD on July 1, 2020. The adoption of this ASU had
no material impact on IBRD’s financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That Is a Service Contract, which amends ASC 350-40. The guidance became effective for IBRD on July 1, 2020.
The adoption of this ASU had no material impact on IBRD’s financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement ofCredit Losses on Financial Instruments (CECL ASU). The ASU and its subsequent amendments introduce a newmodel for the accounting of credit losses on loans and other financial assets measured at amortized cost. The current
expected credit loss (CECL) model, requires an entity to estimate the credit losses expected over the life of an
exposure, considering historical information, current information, and reasonable and supportable forecasts.
Additionally, the ASUs require enhanced disclosures about credit quality and significant estimates and judgments
used in estimating credit losses.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)33

For IBRD, the ASUs became effective on July 1, 2020. The transition adjustment increased Retained earnings by$203 million, which reflects the decrease in the expected credit losses relating to loans and other exposures under
CECL compared to the previous “incurred loss” model. The impact is mainly driven by the use of implied forward
interest rates under CECL compared to historical average interest rates under the previous methodology. Implied
forward interest rates declined to historically low levels in the context of the global pandemic. This impact waspartially offset by the inclusion of signed loan commitments in the determination of the provision and therequirement to provision over the full life of IBRD’s long maturity profile credit exposures.
See the table below for details of the CECL transition adjustment as of July 1, 2020. The transition adjustment had
no impact on the Statement of Income. See Note D — Loans and Other Exposures and Note G — Retained
Earnings, Allocations and Transfers, for additional details.
In millions of U.S. dollars
Location on the Condensed
Balance Sheet
Accumulated provision related to:Loans outstanding
Signed loan commitments
Other exposures
Total impact on accumulated provision
Recoverable asset relating to guarantee
received under the Exposure Exchange
Agreements (EEAs)
Retained earnings

Accumulated provision forloan losses
Other liabilities
Other liabilities
Other assets

June 30, 2020
As reported

Impact of the
adoption of the
CECL ASU

July 1, 2020
Adjusted

$

(465)

$

1,134

$

298
52
1,484

$

1,599

$

99
1,698

$

298
(47)
(214)

$

(28)

$

11

$

(17)

$

28,765$203$

28,968As a result of the implementation of the CECL ASU, the significant accounting policies have been updated asfollows.
Accumulated Provision for Losses on Loans and Other Exposures: Management determines the appropriate level ofaccumulated provisions for losses on exposures, which reflects the expected losses inherent in IBRD’s exposures.
The exposures are disaggregated into two groups: exposures in accrual status and exposures in nonaccrual status.
For countries in accrual status, these exposures are grouped in pools of borrowers with similar risk ratings. The
expected credit losses related to loans and other exposures are calculated over the life of the instruments bymultiplying the annual expected exposures by the expected default frequency (probability of default to IBRD) andby the estimated severity of the loss given default. The provision for expected losses on loans is the sum of the
expected annual losses over the expected life of the instruments. The total exposure for provisioning under CECL isthe current exposure and the expected exposure over the life of the instrument. Each risk rating is mapped to theannual expected default frequencies using IBRD's credit migration matrix, based on historical observations of credit
ratings at the beginning and at the end of each year. Expected losses on loan exposures comprise estimates ofpotential losses arising from default and nonpayment of principal amounts due, as well as the economic loss due todelays in receiving payments. The severity of loss given default is determined at each balance sheet date, based on
historical experience as well as parameters adjusted for current conditions during the reasonable and supportable
forecast period of IBRD. The severity of loss is dependent on the borrower’s eligibility, namely: IBRD, Blend(IBRD and IDA) and IDA, with the highest severity associated with IDA. The borrower’s eligibility is assessed atleast annually. The main factors used to determine the loss severity are the delays in receiving loan payments
resulting in economic losses to IBRD based on the effective interest rate of the exposure, as well as the length oftime in nonaccrual status.
For the calculation of expected credit losses, IBRD applies a three-year reasonable and supportable forecast period,as IBRD has the most reliable and available economic data during this period. IBRD also applies ten-year
straight-line reversion to mean to reflect the historical pattern of rating migration to mean of its loan portfolio. All
exposures for counties in nonaccrual status are individually assessed.

34

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)Loan commitments: Following the implementation of CECL, IBRD now records provision for expected losses on
undisbursed loan commitments including Deferred Drawdown Options (DDOs), when signed. The signature of theloan agreement is a binding event that prevents IBRD from withdrawing from the agreement unconditionally. The
projected disbursements of signed loan commitments, adjusted by the cancellations based on historical experience,is multiplied by the probability of losses and loss given default to determine the expected credit losses related to loan
commitments. The provision is included in Other liabilities on the Condensed Balance Sheet.
Guarantees: IBRD records a contingent liability for the expected losses related to guarantees over the projected lifeof the instruments.
Accounting standards under evaluation:
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans –General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit
Plans, which amends ASC 715 disclosure requirements related to defined benefit pension and other postretirement
plans for annual periods. The guidance will be effective for IBRD from the fiscal year ending June 30, 2021. IBRD
is currently evaluating the impact of this ASU on its financial statements.
NOTE B—CAPITAL STOCK
The following table provides a summary of changes in IBRD’s authorized and subscribed shares:
Table B1: IBRD’s shares
As of June 30, 2019
General Capital Increase/Selective Capital Increase (GCI/SCI)
As of June 30, 2020
GCI/SCI
As of September 30, 2020

Authorized shares
2,783,873
2,783,873
2,783,873

Subscribed shares
2,320,659
66,7292,387,388
10,801
2,398,189

The following table provides a summary of the changes in subscribed capital, uncalled portion of subscriptions andpaid-in capital:
Table B2: IBRD’s capital
In millions of U.S. dollars

As of June 30, 2019
GCI/SCI
As of June 30, 2020
GCI/SCI
As of September 30, 2020

Subscribed capital$
279,953
8,049
288,0021,304$
289,306

Uncalled portionof subscriptions$(262,892)(7,076)(269,968)(1,157)$(271,125)

Paid-in capital$
17,061
973
18,034
147$
18,181The uncalled portion of subscriptions is subject to call only when required to meet the obligations incurred by IBRD
as a result of borrowings or guaranteeing loans.
On October 1, 2018, IBRD’s Board of Governors approved two resolutions that increased IBRD’s authorized
capital. The total increase in authorized capital was $57.5 billion, of which, $27.8 billion and $29.7 billion relate to
the GCI and SCI, respectively. Under the terms of the 2018 GCI and SCI, paid-in capital is expected to increase by
up to $7.5 billion over a five-year period ending September 2023. As of September 30, 2020, the cumulative
subscription payments received related to the 2018 capital increases was $1.7 billion.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)35

NOTE C—INVESTMENTS
As of September 30, 2020, IBRD’s investments include the liquid asset portfolio and holdings relating to the
Advance Market Commitment for Pneumococcal Vaccines Initiative (AMC), Post Employment Benefit Plan(PEBP), the Postretirement Contribution Reserve Fund (PCRF) and the Local Currency Market Development(LCMD) investments. LCMD investments are investments in sovereign bonds denominated in the local currenciesof less developed markets and funded by borrowings in the same currency with matching volume, payment andmaturity characteristics.
The composition of IBRD’s net investment portfolio was as follows:
Table C1: Net investment portfolio composition
In millions of U.S. dollars
September 30, 2020
Net Investment Portfolio
Liquid asset portfolio
PEBP holdings
PCRF holdings
AMC holdings
LCMD investments
Total

$

$

79,871
1,979
476
236
39
82,601

June 30, 2020$

79,908
1,847
450
239
41
82,485$Investments held by IBRD are designated as trading and are reported at fair value, or at face value, whichapproximates fair value. As of September 30, 2020, Investments-Trading was primarily comprised of government
and agency obligations, and time deposits (58% and 38%, respectively), with all instruments classified as Level 1 orLevel 2 within the fair value hierarchy. As of September 30, 2020, the largest holdings of Investments-Trading froma single counterparty were U.S. Treasuries (11%) and Japanese Government Instruments (10%). Over 99% of
IBRD’s investments as of September 30, 2020 were rated A and above, by a major rating agency.
A summary of IBRD’s Investments-Trading was as follows:
Table C2: Investments-Trading composition
In millions of U.S. dollars
September 30, 2020
Government and agency obligations
Time deposits
Asset-backed Securities (ABS)
Alternative investments a
Equity securities
Total

$

$

48,906
31,725
2,505
1,028
418
84,582June 30, 2020$$

48,44930,982
3,012
942
382
83,767a. Comprised of investments in hedge funds, private equity funds and real estate funds, related to PEBP holdings, at net asset value(NAV).

36

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)IBRD manages its investments on a net portfolio basis. The following table summarizes IBRD’s net portfolio
position:
Table C3: Net investment portfolio position
In millions of U.S. dollars
September 30, 2020
Investments - Trading
Securities purchased under resale agreements$

Securities sold under repurchase agreements, securities lent
under securities lending agreements, and payable for cash
collateral received a
Derivative assets

84,582392$$

83,767394(2,403)(2,161)

165
46
2

169
51
3

213

223

(818)
(429)
(4)

(625)
(328)
(2)
(955)
1,430
193
(406)
82,485Currency swaps and forward contracts
Interest rate swaps
Other
Total
Derivative liabilities
Currency swaps and forward contracts
Interest rate swaps
Other
Total
Cash held in investment portfolio b
Receivable from investment securities traded and other assets c
Payable for investment securities purchased d
Net investment portfolio

June 30, 2020

(1,251)
1,530
392
(854)
82,601$a. Includes $2,393 million of cash collateral received from counterparties under derivative agreements ($2,152 million—June 30, 2020).
b. This amount is included in Unrestricted cash under Due from banks on the Condensed Balance Sheet.
c. This amount is included in Other assets on the Condensed Balance Sheet.
d. This amount includes $149 million of liabilities related to PCRF payable, which is included in Other liabilities on the Condensed
Balance Sheet ($141 million—June 30, 2020), and $163 million of liabilities related to short sales ($162 million—June 30, 2020).

IBRD uses derivative instruments to manage currency and interest rate risks in the investment portfolio. For details
regarding these instruments, see Note F—Derivative Instruments.
The following table summarizes the currency composition and the weighted average repricing period of IBRD’s net
investment portfolio:
Table C4: Net investment portfolio currency composition after derivatives
In millions of U.S. dollars
September 30, 2020
Carrying
Weighted average
Valuerepricing (years) a

Currency
U.S. dollar
OthersTotal$$

77,883
4,718
82,601

0.18
0.18
0.18

Carrying
Value$$

June 30, 2020
Weighted average
repricing (years) a

78,6693,816
82,485

0.19
0.31
0.19

a. The average repricing represents the remaining period to the contractual repricing or maturity date, whichever is earlier, weighted by the
carrying value of the instruments. This indicates the average length of time for which interest rates are fixed. Alternative investments andequity securities are not subject to repricing.

Commercial Credit Risk
For the purpose of risk management, IBRD is party to a variety of financial transactions, certain of which involve
elements of credit risk. Credit risk exposure represents the maximum potential loss due to possible non-performanceby obligors and counterparties under the terms of the contracts. For all securities, IBRD limits trading to a list of
authorized dealers and counterparties. In addition, IBRD receives collateral in connection with resale agreements aswell as swap agreements. This collateral serves to mitigate IBRD’s exposure to credit risk.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)37

Swap Agreements: Credit risk is mitigated through the application of eligibility criteria and volume limits fortransactions with individual counterparties and through the use of mark-to-market collateral arrangements for swap
transactions. IBRD may require collateral in the form of cash or other approved liquid securities from individual
counterparties in order to mitigate its credit exposure.
IBRD has entered into master derivative agreements which contain legally enforceable close-out netting provisions.
These agreements may further reduce the gross credit risk exposure related to the swaps. Credit risk with financial
assets subject to a master derivatives arrangement is further reduced under these agreements to the extent thatpayments and receipts with the counterparty are netted at settlement. The reduction in exposure as a result of these
netting provisions can vary due to the impact of changes in market conditions on existing and new transactions. The
extent of the reduction in exposure may therefore change substantially within a short period of time following thebalance sheet date. For more information on netting and offsetting provisions see Note F—Derivative Instruments.
The following is a summary of the collateral received by IBRD in relation to swap transactions:
Table C5: Collateral received
In millions of U.S. dollars
September 30, 2020
Collateral received
Cash
Securities
Total collateral received
Collateral permitted to be repledged
Amount of collateral repledged
Amount of Cash Collateral invested

$
$
$

2,393
1,834
4,227
4,227
999

June 30, 2020
$
$
$

2,152
1,011
3,163
3,163
888

Securities Lending: IBRD may engage in securities lending and repurchases, against adequate collateral, as well as
securities borrowing and reverse repurchases (resales) of government and agency obligations, corporate securities,
ABS and Mortgage-backed securities. These transactions have been conducted under legally enforceable masternetting arrangements, which allow IBRD to reduce its gross credit exposure related to these transactions. For
balance sheet presentation purposes, IBRD presents its securities lending and repurchases, as well as resales, on agross basis. As of September 30, 2020 and June 30, 2020, there were no amounts that could potentially be offset as aresult of legally enforceable master netting arrangements.
Securities lending and repurchase agreements expose IBRD to several risks, including counterparty risk,
reinvestment risk, and risk of a collateral gap (increase or decrease in the fair value of collateral pledged). IBRD has
procedures in place to ensure that trading activity and balances under these agreements are below predefinedcounterparty and maturity limits, and to actively manage net counterparty exposure, after collateral, through daily
mark-to-market. Whenever the collateral pledged by IBRD related to its borrowings under repurchase agreements
and securities lending agreements declines in value, the transaction is repriced as appropriate by returning cash orpledging additional collateral.
Transfers of securities by IBRD to counterparties are not accounted for as sales as the accounting criteria for thetreatment as a sale have not been met. Counterparties are permitted to repledge these securities until the repurchasedate.
As of September 30, 2020, liabilities relating to securities transferred under repurchase or securities lending
agreements amounted to $10 million ($9 million — June 30, 2020) and there were no unsettled trades relating torepurchase or securities lending agreements.
In the case of resale agreements, IBRD receives collateral in the form of liquid securities and is permitted torepledge these securities. While these transactions are legally considered to be true purchases and sales, thesecurities received are not recorded on IBRD’s Balance Sheet as the accounting criteria for treatment as a sale havenot been met. As of September 30, 2020 and June 30, 2020, there were no unsettled trades pertaining to securities
purchased under resale agreements. For the resale agreements, IBRD received securities with a fair value of $392
million ($396 million—June 30, 2020). As of September 30, 2020 and June 30, 2020, none of these securities had
been transferred.

38

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)NOTE D—LOANS AND OTHER EXPOSURESIBRD’s loans and other exposures (together, “exposures”) are generally made to, or guaranteed by, member
countries of IBRD. In addition, IBRD may also make loans to the International Finance Corporation (IFC), an
affiliated organization, without any guarantee. Other exposures include: Signed loan commitments (including DDOs
and Irrevocable Commitments), Exposures to Member Countries’ Derivatives, and Guarantees. As of September 30,
2020, all IBRD’s loans were reported at amortized cost.
IBRD uses derivatives to manage the currency risk as well as the interest rate risk between its loans and borrowings.
For details regarding derivatives used in the loan portfolio, see Note F—Derivative Instruments.
As of September 30, 2020 accrued interest receivable on loans of $990 million is included in Other assets on theCondensed Balance Sheet ($987 million—June 30, 2020).
As of September 30, 2020, only 0.2% of IBRD’s loans were in nonaccrual status and related to one borrower. The
total provision for losses on accrual and nonaccrual loans accounted for 0.6% of the total loan portfolio. Based on
IBRD’s internal credit quality indicators, the majority of loans outstanding are in the medium-risk and high-risk
classes.
Credit Quality of Sovereign Exposures
Based on an evaluation of IBRD’s exposures, management has determined that IBRD has one portfolio segment –Sovereign Exposures. IBRD’s loans constitute the majority of the Sovereign Exposures portfolio segment.
IBRD’s country risk ratings are an assessment of its borrowers’ ability and willingness to repay IBRD on time andin full. These ratings are internal credit quality indicators. Individual country risk ratings are derived on the basis ofboth quantitative and qualitative analyses. The components considered in the analysis can be grouped broadly into
eight categories: political risk, external debt and liquidity, fiscal policy and public debt burden, balance of payment
risks, economic structure and growth prospects, monetary and exchange rate policy, financial sector risks, andcorporate sector debt and vulnerabilities. For the purpose of analyzing the risk characteristics of IBRD’s exposures,
these exposures are grouped into three classes in accordance with assigned borrower risk ratings, which relate to thelikelihood of loss: Low, Medium and High risk classes, as well as exposures in nonaccrual status. IBRD considers
all exposures in nonaccrual status to be impaired.
IBRD’s borrowers’ country risk ratings are key determinants in the provision for losses as sovereign exposures aregrouped in pools of borrowers with similar risk ratings for the purpose of the calculation of the expected credit
losses. Country risk ratings are determined in review meetings that take place several times a year. All countries arereviewed at least once a year, or more frequently, if circumstances warrant, to determine the appropriate ratings.
An assessment was performed to determine whether a qualitative adjustment was needed to reflect the impact of
COVID-19 in the loan loss provision as of September 30, 2020. Management concluded that a qualitative
adjustment beyond the regular application of IBRD’s loan loss provision framework was not warranted. The
following tables provide an aging analysis of the loans outstanding:
Table D1: Loan portfolio aging structure
In millions of U.S. dollars

Days past due
Risk Class
Low
MediumHigh
Loans in accrual status
Loans in nonaccrual status

Up to 45

46-60

$

*
*
-

$

Total

$

*

$

61-90

September 30, 2020
Total Past
91-180Over 180
Due

-

$

-

$

-

$

433

$

*
*
433

$

23,75995,496
91,500210,755-$ 23,759
95,496
91,500210,755
433

-

$

-

$

-

$ 433

$

433

$ 210,755$211,188

Current

Total* Indicates amount less than $0.5 million.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)39

Table D1.1
In millions of U.S. dollars
June 30, 2020
Days past due
Risk Class
Low
MediumHigh
Loans in accrual status
Loans in nonaccrual status

Up to 45

46-60

$

-

$

-

$

Total

$

-

$

-

$

91-180Over 180

Total Past
Due

-

$

-

$

433

$

-

$

-

$

433

$

61-90

Current

Total

433

$ 23,424
90,71989,655
203,798-$ 23,424
90,71989,655
203,798433

433$ 203,798$204,231

IBRD considers the signature date the most appropriate indicator for origination as the decision to originate a loan tosovereign borrowers is made at the time of signature rather than at disbursement. IBRD applies the practical
expedient to exclude accrued interest from the table below as allowed by the CECL ASU.
The table below discloses the outstanding balances of IBRD’s loan portfolio as of September 30, 2020, classified by
the year the loan agreement was signed.
Table D2: Loan portfolio vintage disclosure
In millions of U.S. dollars
September 30, 2020
Fiscal Year (Origination)

Risk ClassHigh
MediumLow
Loans in accrual status
Loans in nonaccrual status
Total

2021

2020

2019

2018

2017

Loans
CAT DDOs CAT DDOs outstanding
Disbursed Converted
as of
and
to Term
September
Prior Years Revolving
Loans
30, 2020$$ 4,078 $
4,872
13
8,963
$ 8,963 $

5,402
3,560
363
9,325
9,325

$ 5,385
3,780
146
9,311
$ 9,311$ 7,363
4,303
1,586
13,252$ 13,252$ 68,115
74,12921,651
163,895
433$ 164,328

457
2,563
3,020
$ 3,020

$

$

432
1,069
1,501
1,501

$

$

268
1,220
1,488
1,488

$

91,50095,49623,759210,755433$ 211,188

The amount of Catastrophe Deferred Drawdown Option (CAT DDOs) converted to term loans during the threemonths ended September 30, 2020, is $7 million (Nil —three months ended September 30, 2019).
Accumulated Provision for Losses on Loans and Other Exposures
Management determines the appropriate level of accumulated provision for losses, which reflects the expected
losses inherent in IBRD’s exposures. Delays in receiving loan payments result in economic losses to IBRD since itdoes not charge additional interest on any overdue interest or loan charges. These economic losses are equal to thedifference between the present value of payments of interest and charges made according to the related loan'scontractual terms and the present value of its expected future cash flows. It is IBRD’s practice not to write off its
loans. Historically, all contractual obligations associated with exposures in nonaccrual status were eventuallycleared, thereby allowing borrowers to emerge from nonaccrual status. To date, no loans have been written off by
IBRD.
Management reassesses the adequacy of the accumulated provision and the reasonableness of the inputs used, on aperiodic basis, at least annually, and adjustments to the accumulated provision are recorded as a charge to or releaseof provision in the Statement of Income.

40

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

The beginning balance of accumulated provision for the current period was decreased by the $214 million transition
adjustment recorded upon adoption of CECL on July 1, 2020. The transition adjustment corresponds to thedifference between the accumulated provision calculated under the “incurred loss” model and the CECL model.
Changes to the Accumulated provision for losses on loans and other exposures are summarized below:
Table D3: Accumulated provision
In millions of U.S. dollars
September 30, 2020
Loans
Loan
outstanding commitments Other a
Accumulated provision, beginning of the
fiscal year
CECL Transition adjustment
Adjusted Accumulated provision,
beginning of the fiscal year
Provision - charge (release)
Translation adjustment
Accumulated provision, end of theperiod/fiscal year
Composed of accumulated provision forlosses on:
Loans in accrual status
Loans in nonaccrual status
Total
Loans, end of the period/fiscal year:
Loans at amortized cost in accrual status
Loans at amortized cost in nonaccrual
status
Total

$

1,599
(465)

$

1,134
37
8
$

1,179

$

963
216
1,179

$

298

$

298
3
2
$

303

$

Total

99 $ 1,698
(47)
(214)
52
(2)
1

1,484
38
11

51

$ 1,533

June 30, 2020
Loans
outstanding Other a
Total
$

1,574
-

$

114 $ 1,688
-

1,574
32
(7)
$

1,599

$

1,383
216
1,599

$

$ 210,755$ 203,798

433$ 211,188433$ 204,231

114
(14)
(1)
$

1,688
18
(8)

99 $ 1,698

a. Provision does not include recoverable asset relating to Guarantee received under the EEAs (for more details see
Guarantees section).
Reported as Follows
Condensed Balance Sheet
Condensed Statement of Income
Accumulated Provision for Losses on:
Loans outstanding

Accumulated provision for loan losses Provision for losses on loans and otherexposures

Loan commitments and other exposures
Other liabilities(excluding exposures to member countries’
derivatives)

Provision for losses on loans and otherexposures

Overdue Amounts
IBRD considers loans to be past due when a borrower fails to make payment on any principal, interest or othercharges due to IBRD on the dates provided in the contractual loan agreement.
At September 30, 2020, there were no principal or interest amounts on loans in accrual status, that were overdue by
more than three months. The following tables provide a summary of selected financial information related to loans
in nonaccrual status:
Table D4: Loans in nonaccrual status
In millions of U.S. dollars
Recorded investment in nonaccrual loans a
Accumulated provision for loan losses on nonaccrual loans
Average recorded investment in nonaccrual loans for the fiscal year
Overdue amounts of nonaccrual loans:
Principal
Interest and charges

September 30, 2020
$
433
216
433
1,025
433
592

$

June 30, 2020
433
216
433
1,015
433
582

a. A loan loss provision has been recorded against each of the loans in nonaccrual status.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)41

Table D4.1:
In millions of U.S. dollars
Three Months Ended September 30,
2020
2019
Interest revenue not recognized as a result of loans being in nonaccrual status

$

7

$

7

During the three months ended September 30, 2020 and September 30, 2019, no loans were placed in nonaccrual
status or restored to accrual status.
In addition, during the three months ended September 30, 2020, no interest income was recognized on loans in
nonaccrual status (less than $1 million — three months ended September 30, 2019).
Information relating to the sole borrowing member with loans or guarantees in nonaccrual status is presented in thefollowing table:
Table D4.2
In millions of U.S. dollars
Principal
Outstanding

Borrower
Zimbabwe$433

Principal, Interest andCharges Overdue
$

1,025

Nonaccrual
Since
October 2000

Guarantees
Guarantees of $6,642 million were outstanding as of September 30, 2020 ($6,898 million—June 30, 2020). This
amount represents the maximum potential amount of undiscounted future payments that IBRD could be required tomake under these guarantees and is not included in the Condensed Balance Sheet. These guarantees have original
maturities ranging between 6 and 20 years, and expire in decreasing amounts through 2039.
As of September 30, 2020, liabilities of $419 million related to IBRD's obligations under guarantees ($463
million—June 30, 2020), have been included in Other liabilities on the Condensed Balance Sheet. These include theaccumulated provision for guarantee losses of $51 million ($98 million—June 30, 2020). The cumulative effect of
the adoption of the CECL ASU was a decrease of $48 million in the accumulated provision for guarantee losses asof July 1, 2020.
During the three months ended September 30, 2020 and September 30, 2019, no guarantees provided by IBRD werecalled.

42

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)IBRD participates in Exposure Exchange Agreements (EEA) which are recognized as financial guarantees in thefinancial statements. Information on the location and amounts associated with the EEAs executed with Multilateral
Investment Guarantee Agency (MIGA), African Development Bank (AfDB) and Inter-American Development Bank(IADB) included in the Condensed Balance Sheet and Condensed Statement of Income is presented in the following
table:
Table D5: Amounts associated with EEAs
In millions of U.S. dollars
September 30, 2020

Guarantee provided a,cGuarantee received b

Notional
Amount$ 3,648(3,646)$
2(Stand readyobligation)
Asset
$
(205)
205
$
-

(Provision)
Recoverable
Asset
$
(21)
18
$
(3)

June 30, 2020
Notional
Amount$ 3,651(3,651)$(*)(Stand readyobligation)
Asset
$
(210)
210
$
-

(Provision)
Recoverable Location on Condensed
Asset
Balance Sheet$(38)
Other liabilities
28
Other assets$(10)

a. For the three months ended September 30, 2020, Provisions for losses on loans and other exposures, line on the Condensed
Statement of Income includes less than $1 million charge relating to Guarantee provided (Nil —three months ended September
30,2019). The cumulative effect of the adoption of the CECL ASU was a decrease of $18 million in the accumulated provision relating
to Guarantee provided, as of July 1, 2020.
b. For the three months ended September 30, 2020, Other, net, line on the Condensed Statement of Income includes less than $1 millionof gain in relation to Recoverable asset relating to Guarantee received (Nil—three months ended September 30, 2019). The cumulative
effect of the adoption of the CECL ASU was a decrease of $11 million in the recoverable asset relating to Guarantee received, as ofJuly 1, 2020.
c. Notional amount, Stand ready obligation and Provision for the guarantee provided are included in guarantees outstanding of $6,642
million, obligations under guarantees of $419 million and accumulated provision for guarantee losses of $51 million, respectively($6,898 million, $463 million and $98 million, respectively—June 30, 2020).
* Indicates amount less than $0.5 million.

Waivers of Loan Charges
IBRD provides waivers on eligible loans, which include a portion of interest on loans, a portion of the commitment
charge on undisbursed balances and a portion of the front-end fee charged on all eligible loans. Waivers areapproved annually by the Executive Directors of IBRD. As part of the IBRD’s COVID-19 response under the Fast
Track COVID-19 Facility, the Executive Directors of IBRD approved the waiver of commitment/standby fees forhealth-related COVID-19 operations payable during the first year of each financing and a reduced front-end fee of
25 bps for Catastrophe Deferred Drawdown Options approved under the IBRD’s COVID-19 response.
The forgone income resulting from waivers of loan charges is summarized in the following table:
Table D6: Waivers of loan charges
In millions of U.S. dollars
Three Months Ended September 30,
2020
Interest waivers

$

2019
7

$

9

Commitment charge waivers

1*

Front-end fee waivers

1

2

Total

$

9

$

11

* Indicates amount less than $0.5 million.

Concentration risk
Loan revenue comprises interest, commitment fees, loan origination fees and prepayment premiums, net of waivers.
For the three months ended September 30, 2020, there was no country that contributed more than 10% of the totalloan revenue.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)43

Information about IBRD’s loans outstanding and associated loan revenue by geographic region is presented in thefollowing table:
Table D7: Loan revenue and associated outstanding loan balances
In millions of U.S. dollars
RegionEastern and Southern Africab
Western and Central Africab
East Asia and Pacific
Europe and Central Asia
Latin America and the
Caribbean
Middle East and North Africa
South Asia
Total

As of and for the three months ended
September 30, 2020
September 30, 2019
Loan Revenue a
Loans Outstanding
Loan Revenue a
Loans Outstanding
$

$

55
8
196
142

$

4,225
1,488
45,191
46,734

338
117
68
924

64,46529,916
19,169$ 211,188

$

$

62
8
351
209

$

507
186
132
1,455

3,595
1,329
42,39944,29959,292
26,994
16,102$ 194,010

a. Does not include interest expenses, net of $177 million from loan related derivatives ($104 million—September 30, 2019).
Includes commitment charges of $29 million ($27 million—September 30, 2019).
b. Effective July 1, 2020, Africa region has been reorganized into two regions: Eastern and Southern Africa and Western andCentral Africa.

NOTE E—BORROWINGSIBRD issues unsubordinated and unsecured fixed and variable rate debt in a variety of currencies. Variable rates
may be based on, for example, exchange rates or interest rates.
Borrowings issued by IBRD are carried and reported at fair value. As of September 30, 2020, 98% of the
instruments in the portfolio were classified as Level 2, within the fair value hierarchy. In addition, most of these
instruments were denominated in U.S. dollars and euro (61% and 13%, respectively).
IBRD uses derivative contracts to manage the currency risk as well as the interest rate risk between its loans andborrowings. For details regarding the derivatives used, see Note F—Derivative Instruments.
Table E1: Borrowings after derivatives
In millions of U.S. dollars
September 30, 2020a

Borrowings
Currency swaps, net
Interest rate swaps, net$$

251,074466(8,150)243,390

June 30, 2020$$

243,240
2,211(8,220)237,231

a. Includes $100 million of unsettled borrowings, representing a non-cash financing activity, for which there is a related
receivable included in Other assets on the Condensed Balance Sheet ($3 million—June 30, 2020).

For the three months ended September 30, 2020, Borrowing expenses on the Condensed Statement of Income of$343 million ($1,182 million—three months ended September 30, 2019) include $707 million of interest revenue,
net, related to derivatives associated with the Borrowing portfolio ($136 million—three months ended September
30, 2019).
For the three months ended September 30, 2020, the amount of interest paid on zero-coupon bonds and bonds withinsignificant coupon interest rates was $61 million ($112 million—three months ended September 30,2019), and is
not included in the Interest paid on borrowing portfolio in the Supplemental disclosure of the Statement of Cash
Flows.

44

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)NOTE F—DERIVATIVE INSTRUMENTS
IBRD uses derivative instruments in its investment, loan and borrowing portfolios, and for asset/liability
management purposes. It also offers derivative intermediation services to clients and concurrently enters into
offsetting transactions with market counterparties. The following table summarizes IBRD’s use of derivatives in its
various financial portfolios:
Portfolio

Derivative instruments used

Purpose / Risk being managed

Risk management purposes:
Investments

Currency swaps, currency forward contracts,
interest rate swaps, options, swaptions andfutures contracts, To-Be-Announced (TBA)
securities

Loans

Currency swaps and interest rate swaps

Borrowings

Currency swaps and interest rate swaps

Other asset/liability
management derivatives

Currency swaps and interest rate swaps

Manage currency and interest rate risks in theportfolio
Manage currency risk as well as interest rate risks
between loans and borrowings
Manage currency risk as well as interest rate risks
between loans and borrowings
Manage currency risk and the duration of IBRD’s
equityOther purposes:
Client operations

Currency swaps, currency forward contracts,
and interest rate swaps

Assist clients in managing risks

The derivatives in the related tables of Note F are presented on a net basis by instrument. A reconciliation to the
Balance Sheet presentation is shown in table F1.
Offsetting assets and liabilities
IBRD enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements with
substantially all of its derivative counterparties. These legally enforceable master netting agreements give IBRD theright to liquidate securities held as collateral and to offset receivables and payables with the same counterparty, inthe event of default by the counterparty.
The following table summarizes information on derivative assets and liabilities (before and after netting
adjustments) that are reflected on IBRD’s Condensed Balance Sheet. Gross amounts in the tables represent theamounts receivable (payable) for instruments that are in a net asset (net liability) position. The effects of legally
enforceable master netting agreements are applied on an aggregate basis to the total derivative asset and liability
position. The net derivative asset positions have been further reduced by the cash and securities collateral received.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)45

Table F1: Derivative assets and liabilities before and after netting adjustments
In millions of U.S. dollars

Interest rate swaps
Currency swaps a
Other b
Total
Less:
Amounts subject to legally
enforceable master netting
agreements
Cash collateral received c
Net derivative position on the
Balance Sheet
Less:
Securities collateral received c
Net derivative exposure after
collateral

September 30, 2020
Location on the Condensed Balance Sheet
Derivative Assets
Derivative Liabilities
Gross Amounts Net Amounts
Gross
Gross Amounts Net Amounts
Gross Amounts
OffsetPresented
Amounts
OffsetPresented$
21,600$(7,763) $13,837$
21,726$(13,678) $8,048
70,923(64,046)
6,877
72,766(65,872)
6,894
2
*
2
4
*
4
$
94,496$(79,550) $14,946d$
92,525$(71,809) $20,716d

13,810e

13,786f

2,308
$

4,598

$

1,160

1,749
$

2,849

a. Includes currency forward contracts and structured swaps.
b. These relate to swaptions, exchange-traded options and futures contracts.
c. Does not include excess collateral received.
d. Total is based on amounts where derivatives have been netted by instrument.
e. Includes $35 million CVA adjustment.
f. Includes $11 million DVA adjustment.
* Indicates amount less than $0.5 million

Table F1.1
In millions of U.S. dollars

Interest rate swaps
Currency swaps a
Other b
Total
Less:
Amounts subject to legally
enforceable master netting
agreements
Cash collateral received c
Net derivative position on the
Balance Sheet
Less:
Securities collateral received c
Net derivative exposure after
collateral

June 30, 2020
Location on the Condensed Balance Sheet
Derivative Assets
Derivative Liabilities
Gross Amounts Net Amounts
Gross
Gross Amounts Net Amounts
Gross Amounts
OffsetPresented
Amounts
OffsetPresented$
22,129$(7,834) $14,295$
21,381$(13,011) $8,370
61,415(55,342)
6,073
79,079(71,492)
7,587
3
*
3
3
(1)
2
$ 100,463$(84,504) $15,959d$
83,547$(63,176) $20,371d14,502e
2,125
$

3,744
928

$

2,816

a. Includes currency forward contracts and structured swaps.
b. These relate to swaptions, exchange-traded options and futures contracts.
c. Does not include excess collateral received.
d. Total is based on amounts where derivatives have been netted by instrument.
e. Includes $28 million CVA adjustment.
f. Includes $12 million DVA adjustment.
* Indicates amount less than $0.5 million

46

14,486f

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

$

1,473

The following table provides information about the credit risk exposures of IBRD’s derivative instruments byportfolio, before the effects of master netting arrangements and collateral:
Table F2: Credit risk exposure of the derivative instruments
In millions of U.S. dollars
Interest rate
swaps
Investments
Loans
Client operations
Borrowings
Other asset/liability management derivatives
Total Exposure

$

$

46
79
1,700
9,195
2,817
13,837

September 30, 2020
Currency swaps(including currency
Other aforward contracts)
$

$

165
1,084
766
4,862
6,877

$

2
2

$

Total
$

213
1,163
2,466
14,057
2,817$ 20,716

In millions of U.S. dollars
June 30, 2020
Interest rate
swaps
Investments
Loans
Client operations
Borrowings
Other asset/liability management derivatives
Total Exposure

$

$

51
42
1,722
9,498
2,982
14,295Currency swaps(including currency
forward contracts)
$

$

169
1,134
769
4,001
6,073

Other a
$

3
-

$

3

Total
$

223
1,176
2,491
13,4992,982$ 20,371

a. Includes swaptions, exchange-traded options and futures contracts and TBAs. Exchange-traded instruments are generally
subject to daily margin requirements and are deemed to have no material credit risk. All swaptions, options and futures contracts
are interest rate contracts.

The volume of derivative contracts is measured using the U.S. dollar equivalent notional balance. The notionalbalance represents the face value, or reference value, on which the calculations of payments on the derivative
instruments are determined. At September 30, 2020, the notional amounts of IBRD’s derivative contracts
outstanding were as follows: interest rate contracts $439,492 million ($474,644 million—June 30, 2020), currency
swaps $131,610 million ($127,276 million—June 30, 2020), long positions of other derivatives $247 million ($362
million at June 30, 2020), and short positions of other derivatives $57 million ($56 million— June 30, 2020).
IBRD is not required to post collateral under its derivative agreements as long as it maintains a triple-A credit rating.
The aggregate fair value of all derivative instruments with credit-risk related contingent features that are in a liability
position on September 30, 2020 is $950 million ($1,138 million—June 30, 2020). IBRD has not posted any
collateral with these counterparties due to its triple-A credit rating.
If the credit-risk related contingent features underlying these agreements were triggered to the extent that IBRD
would be required to post collateral as of September 30, 2020, the amount of collateral that would need to be posted
would be $122 million ($156 million—June 30, 2020). Subsequent triggers of contingent features would requireposting of additional collateral, up to a maximum of $950 million ($1,138 million—June 30, 2020). In contrast,
IBRD received collateral totaling $4,227 million as of September 30, 2020 ($3,163 million—June 30, 2020), in
relation to swap transactions (see Note C—Investments).

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

47

The following table provides information on the location and amount of unrealized mark-to-market gains and losseson the non-trading derivatives and their location on the Condensed Statement of Income:Table F3: Unrealized mark-to-market gains and losses on non-trading derivatives a
In millions of U.S. dollars

Reported as:
Interest rate swaps
Currency swaps (including currency
forward contracts and structured swaps)
Total

Unrealized mark-to-market gains(losses) on non-trading portfolios,
net

Unrealized mark-to-market gains (losses)
Three Months Ended September 30,
2020
2019
$

(220)

$

1,075

$

(9)
(229)

$

381
1,456

a. For alternative disclosures about trading derivatives, see table F4.

All of the instruments in IBRD's investment portfolio are held for trading purposes. Within the investment portfolio,
IBRD holds highly rated fixed income securities, equity securities as well as derivatives. The trading portfolio isprimarily held to ensure the availability of funds to meet future cash flow requirements and for liquidity
management purposes.
The following table provides information on the location and amount of unrealized mark-to-market gains and losseson the net Investments – Trading portfolio and their location on the Condensed Statement of Income:Table F4: Unrealized mark-to-market gains and losses on net investment-trading portfolio
In millions of U.S. dollars
Reported as:

Type of instrument
Fixed income (including associated derivatives)
EquityTotal

Unrealized mark-to-market gains (losses) a
Three Months Ended September 30,
2020
2019
$
$

39
32
71

$
$

54
(*)
54

a. Amounts associated with each type of instrument include gains and losses on both derivative instruments and non-derivative
instruments.
* Indicates amount less than $0.5 million.

NOTE G—RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS
IBRD makes net income allocation decisions on the basis of reported net income, adjusted to exclude unrealized
mark-to-market gains and losses on non-trading portfolios, net, restricted income and Board of Governors-approved
and other transfers, and after considering the allocation to the pension reserve.
On August 6, 2020, IBRD’s Executive Directors approved the following allocations relating to the net income
earned in the fiscal year ended June 30, 2020; an increase in General Reserve by $950 million and an increase in thePension Reserve by $62 million.
On August 24, 2020, IBRD’s Board of Governors approved a transfer of $20 million from Surplus to the IBRD
Fund for Innovative Global Public Goods Solutions (GPG Fund). The transfer was made on September 4, 2020.
Subsequent events:
On October 7, 2020, IBRD’s Board of Governors approved a transfer of $80 million from Surplus to the Trust Fundfor Gaza and West Bank. The transfer was made on October 19, 2020.
On October 15, 2020, IBRD’s Board of Governors approved a transfer of $431 million to Surplus out of the net
income earned in the fiscal year ended June 30, 2020 which consists of $100 million to provide grant support fordevelopment needs, and $331 million representing the final amount calculated in accordance with the formula for
IBRD’s income support to IDA, subject to the understanding that the latter amount shall be considered for transfer to
IDA should downside risks to IBRD not materialize.

48

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)Retained earnings comprise the following components:
Table G1: Retained earnings composition
In millions of U.S. dollars
September 30, 2020$
293
30,387731
80(3,302) b
1,107
54
294
$ 29,644

Special reserve
General reserve
Pension reserve
Surplus
Cumulative fair value adjustments a
Unallocated net income
Restricted retained earnings
Other reserves c
Total

June 30, 2020
293
29,437793
100(2,166) b
298
(5)
15
$
28,765$a. Unrealized mark-to-market gains or losses, net applicable to non-trading portfolios reported at fair value.
b. Includes cumulative effect of $155 million related to the change in accounting principle from the adoption of ASU 2016-01 on
instrument specific credit risk for fair value option elected liabilities (DVA), on July 1, 2018.
c. Comprised of non-functional currency translation gains/losses, the unutilized portion of the transfer to the GPG Fund and thecumulative effect related to the adoption of ASU 2016-13 (CECL).

NOTE H—PENSION AND OTHER POSTRETIREMENT BENEFITSIBRD, IFC and the Multilateral Investment Guarantee Agency (MIGA) participate in the defined benefit Staff
Retirement Plan (SRP), a Retired Staff Benefits Plan (RSBP) and PEBP that cover substantially all of their staff
members.
All costs, assets and liabilities associated with these pension plans are allocated between IBRD, IFC and MIGA
based upon their employees’ respective participation in the plans. Costs allocated to IBRD are then shared between
IBRD and IDA based on an agreed cost-sharing methodology.
The following table summarizes the benefit costs associated with the SRP, RSBP, and PEBP for IBRD and IDA:
Table H1: Pension plan benefit costs
In millions of U.S. dollars
Three Months Ended
September 30, 2020
SRP
RSBP PEBP
Total

Three Months Ended
September 30, 2019SRP
RSBP PEBP

Total

Benefit costService cost
$ 160 $
Interest cost
147
Expected return on plan assets(242)
Amortization of unrecognized prior service costsa
1
Amortization of unrecognized net actuarial lossesa
78

43 $
27
(41)
4
3

28 $ 231
14
188
(283)
1
6
13
94

$ 137
172
(256)
1
22

$

36 $ 24 $ 197
30
17
219
(43)
(299)
4
1
6
21
43

Net periodic pension cost
Of which:
IBRD’s share
IDA’s share

$ 144

$

36 $

56 $

236

$

76

$

27

$ 63 $

166

$

$

17 $
19

26 $
30

110
126

$

34
42

$

12
15

$ 29 $
34

75
91

67
77

a. Included in Amounts reclassified into net income in Note J—Accumulated Other Comprehensive Loss.

The components of net periodic pension cost, other than the service cost component, are included in the Non-interest
expense—Pension line item on the Condensed Statement of Income. The service cost component is included in the
Non-interest expense—Administrative expenses line item.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

49

The following table provides the amounts of IBRD’s pension service cost:
Table H2: Pension service cost
In millions of U.S. dollars
Three Months Ended
September 30, 2020
SRP
RSBP PEBP
Service cost
Of which:
IBRD’s share a
IDA’s share

Three Months Ended
September 30, 2019SRP
RSBP PEBP Total

Total

$

160 $

43

$ 28

$ 231

$

137

$

36

$ 24 $

197

$

74 $
86

20
23

$ 13
15

$ 107
124

$

62
75

$

16
20

$ 11 $
13

89
108

a. Included in Administrative non-interest expenses line on the Condensed Statement of Income.

NOTE I—TRANSACTIONS WITH AFFILIATED ORGANIZATIONSIBRD transacts with affiliated organizations by providing loans, administrative and derivative intermediation
services, as well as through its pension and other postretirement benefit plans.
In addition, IBRD provides transfers to IDA out of its net income, upon approval by the Board of Governors (seeNote G—Retained Earnings, Allocations and Transfers).
IBRD had the following receivables from (payables to) its affiliated organizations:
Table I1: IBRD’s receivables and payables with affiliated organizations
In millions of U.S. dollars
September 30, 2020
IFC
MIGA
Total

IDA
Administrative Services, net
Derivative Transactions a
Derivative assets, net
Derivative liabilities, net$

Pension and Other Postretirement
Benefits
Investments
$

203

$

43

$

12

$

258

June 30, 2020
IFC
MIGA

IDA
$

271

$

63

$ 13

Total
$

347

51
(75)

-

-

51
(75)

53
(74)

-

-

53
(74)

(597)
-

(503)
(149)

(19)
-

(1,119)
(149)

(620)
-

(477)
(141)

(18)
-

(1,115)
(141)

(7) $

(1,034)(370)$ (555)$ (5)(418) $ (609) $

$

$

(930)

a. Presented on a net basis by instrument. For details on derivative transactions relating to swap intermediation services provided
by IBRD to IDA see Note F—Derivative Instruments.

The receivables from (payables to) these affiliated organizations are reported in the Condensed Balance Sheet as
follows:
Receivables / Payables related to:Reported as:

Loans

Loans outstanding

Receivable for administrative services a

Other assets

Receivables (payables) for derivative transactions

Derivative assets/liabilities – net

Payable for pension and other postretirement benefits
Other liabilities
a. Includes amounts payable to IDA for its share of investments associated with PCRF. This payable is included in Other liabilities
on the Condensed Balance Sheet.

50

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)Loans and other exposures
IBRD has a Local Currency Loan Facility Agreement with IFC, which is capped at $300 million. As of September
30, 2020 and June 30, 2020, there were no loans outstanding under this facility.
During the fiscal year ended June 30, 2014, IBRD entered into an exposure exchange agreement with MIGA underwhich IBRD and MIGA exchanged selected exposures, with each divesting exposure in countries where theirlending capacities are limited, in return for exposure in countries where they have excess lending capacity. Under
the agreement, IBRD and MIGA have each exchanged $120 million of notional exposure as follows: MIGA
assumes IBRD's loan principal and interest exposure in exchange for IBRD's assumption of principal and interest
exposure of MIGA under its Non-Honoring of Sovereign Financial Obligation agreement. As of September 30,
2020, assets related to IBRD’s right to be indemnified under this agreement amounted to $1 million ($1 million—
June 30, 2020), while liabilities related to IBRD’s obligation under this agreement amounted to $1 million ($1million—June 30, 2020). These include an accumulated provision for guarantee losses of less than $1 million (lessthan $1 million—June 30, 2020).
Administrative Services
Expenses jointly incurred by IBRD and IDA are allocated based on an agreed cost-sharing methodology, andamounts are settled quarterly. For the three months ended September 30, 2020, IBRD’s administrative expenses are
net of the share of expenses allocated to IDA of $455 million ($454 million—three months ended September 30,2019).
Revenue
Revenue jointly earned by IBRD and IDA is allocated based on an agreed revenue-sharing methodology. Amounts
are settled quarterly. For the three months ended September 30, 2020, IBRD’s revenue is net of revenue allocated to
IDA of $57 million ($66 million—three months ended September 30, 2019) and is included in Revenue fromexternally funded activities on the Condensed Statement of Income.
Revenue from externally funded activities includes revenue from contracts with clients, who are not affiliated with
IBRD, as shown in tables I2 and I3 below:
Table I2: Revenue from contracts with clients
In millions of U.S. dollars
Three Months Ended September 30,
2020
2019
Trust fund fees

$

17

$

22

Other
Total

$

24
41

$

24
46

Of which:
IBRD's share
IDA's share

$

21
20

$

Description
Administrative and trustee services for trust funds
Reimbursable advisory services and asset
management services

22
24

Each revenue stream represents compensation for services provided and the related revenue is recognized over time.
IBRD’s rights to consideration are deemed unconditional and are classified as receivables. IBRD also has an
obligation to transfer certain services for which it has received consideration in advance. Such considerations arepresented as contract liabilities and are subsequently recognized as revenue, when the related performanceobligation is satisfied.
The following table shows IBRD’s receivables and contract liabilities related to revenue from contracts with clients:
Table I3: Receivables and contract liabilities related to revenue from contracts with clients
In millions of U.S. dollars
Receivables
Contract liabilities

September 30, 2020
$
86
174

$

June 30, 2020
114
169

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

51

The amount of fee revenue associated with services provided to affiliated organizations is included in Revenue fromexternally funded activities on the Condensed Statement of Income, as follows:
Table I4: Fee revenue from affiliated organizations
In millions of U.S. dollars

Fees charged to IFC
Fees charged to MIGA$

Three Months Ended September 30,
2020
2019
19
$
17
1
1

Pension and Other Postretirement Benefits
The payable to IDA represents IDA’s net share of prepaid costs for pension and other postretirement benefit plans
and PEBP assets. These will be realized over the life of the plan participants.
The payables to IFC and MIGA represent their respective share of PEBP assets. The PEBP assets are managed by
IBRD and are part of the investment portfolio.
For Pension and Other Postretirement Benefits-related disclosure see Note H—Pension and Other Postretirement
Benefits.
Derivative transactions
These relate to currency forward contracts entered into by IDA, with IBRD acting as the intermediary with themarket.
Investments
These relate to investments that IBRD has made on behalf of IFC, associated with the PCRF and are included in
Investments-Trading on IBRD’s Condensed Balance Sheet. The corresponding payable to IFC is included in theamount payable for investment securities purchased. As a result, there is no impact on IBRD’s investments net
asset value from these transactions.
NOTE J—ACCUMULATED OTHER COMPREHENSIVE LOSS
Comprehensive income or loss consists of net income and other gains and losses affecting equity that, under U.S.
GAAP, are excluded from net income. Other comprehensive income (loss) comprises currency translation
adjustments on assets and liabilities denominated in euro; DVA on fair value elected liabilities, the cumulative
effects of a change in accounting principle related to the implementation of U.S. GAAP requirements; and pensionrelated items. These items are presented in the Condensed Statement of Comprehensive Income.
The following tables present the changes in Accumulated Other Comprehensive Loss (AOCL) balances:
Table J1: AOCL changes
In millions of U.S. dollars

Cumulative Translation Adjustments on
functional currency
DVA on Fair Value option elected liabilities
Unrecognized Net Actuarial (Losses) Gains on
Benefit Plans
Unrecognized Prior Service (Costs) Credits on
Benefit Plans
Other
Total Accumulated Other
Comprehensive Loss

52

Balance,
beginning of
the fiscal year

Three Months Ended September 30, 2020
Amounts
Net
reclassified
Changes
Changes
into net
during thein AOCL
incomeperiodBalance, end of
the period

$

$

$

$

(106)
1,214

347
(605)

$

(11)

$

347
(616)

241
598

(6,745)-94

94(6,651)

(89)
*

-

6
*

6
*

(83)
*

(5,726)

$

(258)

$

89

$

(169)

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)$(5,895)

Table J1.1:
In millions of U.S. dollars

Cumulative Translation Adjustments on
functional currency
DVA on Fair Value option elected liabilities
Unrecognized Net Actuarial (Losses) Gains on
Benefit Plans
Unrecognized Prior Service (Costs) Credits on
Benefit Plans
Other
Total Accumulated Other
Comprehensive Loss

Balance,
beginning of
the fiscal year

Three Months Ended September 30, 2019
Amounts
Net
reclassified
Changes
Changes
into net
during theperiodin AOCL
incomeBalance, end of
the period

$

$

$

$

(18)
705

(283)
61

$

(*)

$

(283)
61

(301)
766

(3,678)-43

43(3,635)

(112)
(*)

-

6
*

6
*

(106)
(*)

(3,103)

$

(222)

$

49

$

(173)

$

(3,276)* Indicates amount less than $0.5 million.

NOTE K—FAIR VALUE DISCLOSURES
Valuation Methods and Assumptions
As of September 30, 2020 and June 30, 2020, IBRD had no assets or liabilities measured at fair value on a nonrecurring basis.
Due from Banks
The carrying amount of unrestricted and restricted currencies is considered a reasonable estimate of the fair value ofthese positions.
Loans and Loan commitments
There were no loans carried at fair value as of September 30, 2020 and June 30, 2020. IBRD’s loans and loan
commitments would be classified as Level 3 within the fair value hierarchy.
Summarized below are the techniques applied in determining the fair values of IBRD’s financial instruments.
Investment securities
Investment securities are classified based on management’s intention on the date of purchase, their nature, and
IBRD’s policies governing the level and use of such investments. As of September 30, 2020, all of the financial
instruments in IBRD’s investment portfolio were classified as trading. These securities are carried and reported atfair value, or at face value or NAV, which approximates fair value. Where available, quoted market prices are used
to determine the fair value of trading securities. Examples include most government and agency securities, mutual
funds, futures contracts, exchange-traded equity securities and ABS and To-Be-Announced (TBA) securities.
For instruments for which market quotations are not available, fair values are determined using model-based
valuation techniques, whether internally-generated or vendor-supplied, that include the standard discounted cash
flow method using market observable inputs such as yield curves, credit spreads, and constant prepayment rates.
Where applicable, unobservable inputs such as constant prepayment rates, probability of default and loss severity areused. Unless quoted prices are available, time deposits are reported at face value, which approximates fair value, as
they are short term in nature.
Securities purchased under resale agreements, Securities sold under repurchase agreements, and Securities lent
under securities lending agreements
These securities are of a short-term nature and reported at face value, which approximates fair value.
Discount notes and vanilla bonds
Discount notes and vanilla bonds are valued using the standard discounted cash flow method which relies on market
observable inputs such as yield curves, foreign exchange rates, basis spreads and funding spreads. Where available,
quoted market prices are used to determine the fair value of short-term notes.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)53

Structured bonds
Structured bonds issued by IBRD have coupon or repayment terms linked to the level or the performance of interest
rates, foreign exchange rates, equity indices, catastrophic events or commodities. The fair value of the structured
bonds is generally derived using the discounted cash flow method based on estimated future payoffs determined byapplicable models and computation of embedded optionality such as caps, floors and calls. A wide range of industry
standard models such as one factor Hull-White, LIBOR Market Model and Black-Scholes are used depending on thespecific structure. These models incorporate market observable inputs, such as yield curves, foreign exchange rates,
basis spreads, funding spreads, interest rate volatilities, equity index volatilities and equity indices. Where
applicable, the models also incorporate significant unobservable inputs such as correlations and long-dated interest
rate volatilities. Generally, the movements in correlations are considered to be independent of movements in longdated interest rate volatilities.
Derivative instruments
Derivative contracts include currency forward contracts, TBAs, swaptions, exchange traded options and futurescontracts, currency swaps and interest rate swaps. Currency swaps and interest rate swaps are either plain vanilla or
structured. Currency forward contracts and plain vanilla currency and interest rate swaps are valued using thestandard discounted cash flow methods using market observable inputs such as yield curves, foreign exchange rates,
basis spreads and funding spreads. For structured currency and interest rate swaps, which primarily consist of
callable swaps linked to interest rates, foreign exchange rates, and equity indices, valuation models and inputs
similar to the ones applicable to structured bonds valuation are used. Where applicable, the models also incorporatesignificant unobservable inputs such as correlations and long-dated interest rate volatilities.
Valuation adjustments on fair value option elected liabilities
The DVA on Fair Value Option Elected Liabilities is measured by revaluing each liability to determine the changes
in fair value of that liability arising from changes in IBRD’s cost of funding relative to LIBOR.
The table below presents IBRD’s estimates of fair value of its financial assets and liabilities along with theirrespective carrying amounts:
Table K1: Fair value and carrying amount of financial assets and liabilities
In millions of U.S. dollars

AssetsDue from banks
Investments-Trading (including Securities
purchased under resale agreements)

September 30, 2020
Carrying Value
Fair Value

June 30, 2020
Carrying Value
Fair Value

$

$

1,932

$

1,932

1,870

$

1,870

84,974

84,974

84,161

84,161

Net loans outstanding

209,528

217,169

202,158

209,613

Derivative assets, net

4,598

4,598

3,744

3,744

251,074

251,080

243,240

243,247

Liabilities
Borrowings
Securities sold/lent under repurchaseagreements/securities lending agreements
and payable for cash collateral received
Derivative liabilities, net

95

95

36

36

1,160

1,160

1,473

1,473

As of September 30, 2020, IBRD’s signed loan commitments had a fair value of $1.9 billion ($1.9 million—June 30,2020).

54

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

The following tables present IBRD’s fair value hierarchy for assets and liabilities measured at fair value on arecurring basis. Note that the fair value of alternative investments and certain equities is calculated using NAV. As aresult, these amounts are included in the respective asset class totals and not in the fair value hierarchy, in
accordance with the permitted practical expedient under U.S. GAAP.
Table K2: Fair value hierarchy of IBRD’s assets and liabilities
In millions of U.S. dollars
Fair Value Measurements on a Recurring Basis
September 30, 2020
Level 3
Level 2

Level 1
Assets:Investments – Trading
Government and agency obligations
Time deposits
ABS
Alternative investments a
Equity securities
Total Investments – Trading
Securities purchased under resale agreements
Derivative Assets
Currency swaps b
Interest rate swaps
Other C

$

$
$

$
Less:
Amounts subject to legally enforceable masternetting agreements e
Cash collateral received e
Derivative Assets, net
Liabilities:
Borrowings$
Securities sold under repurchase agreements andsecurities lent under securities lending
agreements d
Derivative Liabilities
Currency swaps b
Interest rate swaps
Other c$Less:
Amounts subject to legally enforceable masternetting agreements f
Derivative Liabilities, net

20,5242,361
418
23,30347-

2
2$ 28,382
29,364
2,505$ 60,251
345

$

$

$

6,694
13,6772$ 20,373

$

$

Total

-

$

183
160
343

$

$

48,906
31,725
2,505
1,028
418
84,582
392

$

6,877
13,8372
20,716$

13,810
2,308
4,598

$

251,074-$ 245,808$ 5,266

-

10

-

10

6,610
7,928
2
$ 14,540

284
120
404

$

6,894
8,048
4
14,946$

13,786
1,160$

a. Investments at NAV related to PEBP holdings, not included in the fair value hierarchy.
b. Includes currency forward contracts and structured swaps.
c. These relate to swaptions, exchange traded options and future contracts and TBA securities.
d. Excludes $2,393 million relating to payable for cash collateral received.
e. Includes $35 million CVA adjustment.
f. Includes $11 million DVA adjustment.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)55

Table K2.1:
In millions of U.S. dollars
Fair Value Measurements on a Recurring Basis
June 30, 2020
Level 2
Level 3

Level 1
Assets:Investments – Trading
Government and agency obligations
Time deposits
ABS
Alternative investments a
Equity securities
Total Investments – Trading
Securities purchased under resale agreements
Derivative Assets
Currency swaps b
Interest rate swaps
Other C

$

$

$
$

Less:
Amounts subject to legally enforceable masternetting agreements e
Cash collateral received
Derivative Asset, net
Liabilities:
Borrowings
Securities sold under repurchase agreements
and securities lent under securities lending
agreements f
Derivative Liabilities
Currency swaps b
Interest rate swaps
Other c$$19,3681,850
382
21,60053$

29,081
29,132
3,012$ 61,225
341

*
-

$

5,916
14,1543$ 20,073

$

$

$
$

Total

-

$

157
141
298

$

$

48,44930,982
3,012
942
382
83,767
394

$

6,073
14,295
3
20,371$

14,502
2,125
3,744

$

243,240-$ 237,893$ 5,347

-

9

-

9

*
-

7,277
8,207
2
$ 15,486

310
163
473

$

7,587
8,370
2
15,959$14,486
1,473

$

Less:
Amounts subject to legally enforceable masternetting agreements f
Derivative Liabilities, net
a. Investments at NAV related to PEBP holdings, not included in the fair value hierarchy.
b. Includes currency forward contracts and structured swaps.
c. These relate to swaptions, exchange traded options and future contracts and TBA securities.
d. Excludes $2,152 million relating to payable for cash collateral received.
e. Includes $28 million CVA adjustment.
f. Includes $12 million DVA adjustment.
* Indicates amount less than $0.5 million.

IBRD’s Level 3 borrowings primarily relate to structured bonds. The fair value of these bonds is estimated using
discounted cash flow valuation models that incorporate model parameters, observable market inputs, andunobservable inputs. The significant unobservable inputs used in the fair value measurement of structured bonds andswaps are correlations and long-dated interest rate volatilities. Generally, the movements in correlations are
considered to be independent of the movements in long-dated interest rate volatilities.
Correlation is the statistical measurement of the relationship between two variables. For contracts where the holder
benefits from the convergence of the underlying index prices (e.g. interest rates and foreign exchange rates), an
increase in correlation would generally result in an increase in the fair value of the instrument. The magnitude anddirection of the fair value adjustment would depend on whether the holder is short or long the option.
Interest rate volatility is the extent to which the level of interest rates changes over time. For purchased options, anincrease in volatility would generally result in an increase in the fair value. In general, the volatility used to price theoption depends on the maturity of the underlying instrument and the option strike price. During the three months
ended September 30, 2020, and the fiscal year ended June 30, 2020, the interest rate volatilities for certain
currencies were extrapolated for certain tenors and, thus, are considered an unobservable input.
In certain instances, particularly for instruments with coupon or repayment terms linked to catastrophic events,
management relies on instrument valuations supplied by external pricing vendors.

56

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

The following table provides a summary of the valuation technique applied in determining fair values of these Level
3 instruments and quantitative information regarding the significant unobservable inputs used. Level 3 instruments
represent 2.1% of IBRD’s borrowings.
Table K3: Level 3 Borrowings and derivatives valuation technique and quantitative information regarding
the significant unobservable inputs:
In millions of U.S. dollars
Fair Value at
September 30, 2020

Fair Value atJune 30,
2020

Valuation
Technique

Borrowings$5,266$5,347

Discounted
Cash Flow

Derivative
liabilities($61)($175)

Discounted
Cash Flow

Range (average),
September 30,
2020-53% to 76% (6%)
37% to 757%
(304%)-53% to 76% (6%)
37% to 757%
(304%)

Unobservable
input
Correlations
Interest rate
volatilities
Correlations
Interest rate
volatilities

Range (average),
June 30, 2020
-55% to 76% (7%)
37% to 412%
(183%)-55% to 76% (7%)
37% to 412%
(183%)The table below provides the details of all inter-level transfers. Transfers between Level 2 and Level 3 are due tochanges in observable inputs.
Table K4: Borrowings and derivatives inter level transfers
In millions of U.S. dollars
Three Months Ended
September 30, 2020
Level 3
Level 2Three Months Ended
September 30, 2019
Level 2
Level 3

Borrowings
Transfer into (out of)Transfer (out of) into

$

21
21

$

(21)
(21)

$

2
(309)
(307)

$

(2)
309
307

Derivative assets, net
Transfer into (out of)Transfer (out of) into

$

-

$

-

$

*
(1)
(1)

$

(*)
1
1

Derivative liabilities, net
Transfer (into) out ofTransfer out of (into)

$

$

9
9
8

$

$

2
2
2

$

Total Derivative Transfers, net

(2)
(2)
(2)

(9)
(9)
(8)

$

$

$

* Indicates amount less than $0.5 million.

The following tables provides a summary of changes in the fair value of IBRD’s Level 3 borrowings andderivatives:
Table K5: Borrowings Level 3 changes
In millions of U.S. dollars
Three Months Ended September 30,
2020
2019
Beginning of the fiscal year
IssuancesSettlements
Total realized/unrealized mark-to-market losses (gains) in:Net (loss) income
Other comprehensive income
Transfers to (from) Level 3, net
End of the period

$

$

5,347
34
(266)
119
53
(21)
5,266

$

$

4,941
361
(266)
60
(16)
307
5,387

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)57

Table K5.1: Derivatives Level 3 changes
In millions of U.S. dollars

Beginning of the fiscal year
IssuancesSettlements
Total realized/unrealized markto-market gains in:
Net (loss) income
Other comprehensive income
Transfers to (from) Level 3, net
End of the period

Three Months Ended September 30, 2020
Derivatives, Assets/(Liabilities)
Currency
Interest Rate
Swaps
Swaps
Total
$
(153)
$
(22)
$ (175)
(1)
(1)
(5)
(8)
(3)

$

39
15
2
(101)

$

65
2
40

$

Three Months Ended September 30, 2019
Derivatives, Assets/(Liabilities)
Currency
Interest
Swaps
Rate Swaps
Total
$
(62)
$ (120)$ (182)
(4)
(4)
4
89
93

104
17
2
(61)

$

18
(6)
(8)
(58)

32
(1)
-

$

50
(7)
(8)
(58)

$

Information on the unrealized gains or losses included in the Condensed Statement of Income and Condensed
Statement of Comprehensive Income relating to IBRD’s Level 3 borrowings and derivatives that are still held at thereporting dates, is presented in the following table:
Table K6: Unrealized gains or losses relating to IBRD’s Level 3 borrowings and derivatives
In millions of U.S. dollars
Three Months Ended September 30,
2020
2019
Reported as follows:
Borrowings
Net (loss) income a$Other Comprehensive Income b

(85)

$

(89)

(53)

17

Derivatives
Net (loss) income a$Other Comprehensive Income c

92

$

114

17

(8)

a. Amounts are included in Unrealized mark-to-market gains (losses) on non-trading portfolios, net on the Condensed Statement of
Income.
b. Amounts are included in Currency translation adjustment and Net Change in Debt Valuation Adjustment (DVA) on fair value
option elected liabilities, on the Statement of Comprehensive Income.
c. Amounts are included Currency translation adjustment, on the Statement of Comprehensive Income.

Table K7: Borrowings fair value and contractual principal balance
In millions of U.S. dollars
September 30, 2020
June 30, 2020

Principal Amount Due
Upon Maturity$
246,171$
238,674

Fair Value$
251,074$
243,240$$

Difference
4,903
4,566

The following table provides information on the changes in fair value due to the change in IBRD’s own credit risk
for financial liabilities measured under the fair value option, included in the Condensed Statement of Other
Comprehensive Income:Table K8: Changes in fair value due to IBRD’s own credit risk
In millions of U.S. dollars
Unrealized mark-to-market (losses) gains due to DVA on fair value
option elected liabilities
DVA on Fair Value Option Elected Liabilities
Amounts reclassified to net income upon derecognition of a liability
Net change in DVA on Fair Value Option Elected Liabilities$$

Three Months Ended September 30,
2020
2019
(605)
$
61
(11)
(*)
(616)
$
61

* Indicates amount less than $0.5 million.

58

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)

The following table provides information on the cumulative changes in fair value due to the change in IBRD’s owncredit risk for financial liabilities measured under the fair value option, as well as where those amounts are includedin the Condensed Balance Sheet:
Table K9: Cumulative changes in fair value due to the change in IBRD’s own-credit risk
In millions of U.S. dollars
DVA on fair value option elected liabilities
Reported as follows:
Accumulated other comprehensive loss

September 30, 2020$

June 30, 2020

598

$

1,214

Table K10: Unrealized mark-to-market gains or losses on investments-trading, and non-trading portfolios,net
In millions of U.S. dollars

Investments-Trading

Three Months Ended
Three Months Ended
September 30, 2020
September 30, 2019
Unrealized
Unrealized
gains (losses)
gains (losses)
Unrealized
Realized gains
Unrealized
Realized gains
excludingexcludinggains (losses)(losses)
gains (losses)(losses)realized
realizedamounts aamounts a
$
(577)
$
648
$
71
$
195
$
(141)
$
54

Non-trading portfolios, net
Loan derivatives—Note F
Other assets/liabilities
management derivatives, net
Borrowings, including derivatives—Notes E and F
Client operations derivatives
Total
$

-

304

304

-

(634)

(634)

-

(136)

(136)

-

144

144

*
*

176
2
346

176
2
346

1
1

109
(4)
(385)

110 b
(4)
(384)

$

$

b

$

$

$

a. Adjusted to exclude amounts reclassified to realized gains (losses).
b. Includes $399 million of unrealized mark-to-market losses related to derivatives associated with borrowings (unrealized
mark-to-market gains of $1,950 million —three months ended September 30, 2019).
* Indicates amount less than $0.5 million.

NOTE L—CONTINGENCIESIn light of the COVID-19 pandemic, IBRD faces additional credit, market and operational risks. The duration of the
COVID-19 pandemic is difficult to predict at this time, as are the extent and efficacy of economic interventions bygovernments and central banks. The length and severity of the pandemic and the related developments, as well as
the impact on the financial results and position of IBRD in future periods cannot be reasonably estimated at thispoint in time and continue to evolve. IBRD continues to monitor the developments and to manage the risks
associated with its various portfolios within existing financial policies and limits.
From time to time, IBRD may be named as a defendant or co-defendant in legal actions on different grounds invarious jurisdictions. The outcome of any existing legal action, in which IBRD has been named as a defendant or
codefendant, as of and for the fiscal year ended September 30, 2020, is not expected to have a material adverse
effect on IBRD's financial position, results of operations or cash flows.

IBRD Condensed Quarterly Financial Statements: September 30, 2020 (Unaudited)59

INDEPENDENT AUDITORS’ REVIEW REPORT
Deloitte & Touche LLP
7900 Tysons One Place
Suite 800
McLean, VA 22102
USA
Tel: +1 703 251 1000
Fax: +1 703 251 3400
www.deloitte.com

INDEPENDENT AUDITORS’ REVIEW REPORT
President and Board of Executive Directors
International Bank for Reconstruction and Development:
We have reviewed the accompanying condensed balance sheet of the International Bank for Reconstruction and Development(“IBRD”) as of September 30, 2020, and the related condensed statements of income, comprehensive income, changes in retained
earnings, and cash flows for the three‐month periods ended September 30, 2020 and 2019 (the "interim financial information”).
Management’s Responsibility for the Interim Financial Information
IBRD’s management is responsible for the preparation and fair presentation of the interim financial information in accordance withaccounting principles generally accepted in the United States of America; this responsibility includes the design, implementation,and maintenance of internal control sufficient to provide a reasonable basis for the preparation and fair presentation of interim
financial information in accordance with accounting principles generally accepted in the United States of America.
Auditors’ Responsibility
Our responsibility is to conduct our reviews in accordance with auditing standards generally accepted in the United States ofAmerica applicable to reviews of interim financial information. A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantiallyless in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America,
the objective of which is the expression of an opinion regarding the financial information. Accordingly, we do not express such an
opinion.
Conclusion
Based on our reviews, we are not aware of any material modifications that should be made to the interim financial informationreferred to above for it to be in accordance with accounting principles generally accepted in the United States of America.
Report on Condensed Balance Sheet as of June 30, 2020
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the balance
sheet of IBRD as of June 30, 2020, and the related statements of income, comprehensive income, changes in retained earnings,
and cash flows for the year then ended (not presented herein); and we expressed an unmodified audit opinion on those audited
financial statements in our report dated August 7, 2020. In our opinion, the accompanying condensed balance sheet of IBRD as ofJune 30, 2020, is consistent, in all material respects, with the audited financial statements from which it has been derived.

November 13, 202060