International Bank for Reconstruction andDevelopment

Management’s Discussion & Analysis
andCondensed Quarterly Financial Statements
December 31, 2020
(Unaudited)Management’s Discussion and Analysis

International Bank for Reconstruction and Development(IBRD)
Management’s Discussion and Analysis
December 31, 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: December 31, 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 six months ended December 31, 2020 (FY21 YTD). This
document should be read in conjunction with IBRD’s Financial Statements and MD&A for the fiscal year ended June30, 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 six months
ended December 31,
2020
2019

As of and for the fiscal years ended June 30,
2020
2019
2018
2017

Lending Highlights (Section III)Net commitments a
Gross disbursements b
Net disbursements b

Income Statement
Board of Governors-approved andother transfers
Net income (loss)
Balance Sheet
Total assets
Net investment portfolio (Section III)Net loans outstanding
Borrowing portfolio d
Total equity
Non-GAAP Measures
Allocable Income (Section III)
Usable Equity c, e (Section IV)
Equity-to-loans Ratio e (Section IV)$

10,366
13,855
8,986

$

6,527
8,488
3,642

$

27,976
20,238
10,622$

23,191
20,182
10,091$

23,002
17,3895,638$

22,611
17,861
8,731

$

(80)

$

(340)

$

(340)

$

(338)

$

(178)

$

(497)

1,346

444

$

323,756
90,442
215,721
255,418
42,473$ 276,111
70,711
195,870
220,282
42,850$296,804
82,485202,158
237,231
40,387$

283,031
81,127
192,752
228,763
42,115$646
48,825
22.4%

$

$

1,381
47,138
22.8%

$

1,190
45,36022.8%

707
45,722
22.7%

(42)

505

698

(237)

$

263,800
73,492
183,588
213,652
41,844$ 258,648
71,667
177,422
207,144
39,798$$1,161
43,518
22.9%

$

795
41,72022.8%

a. Amounts include guarantee commitments and guarantee facilities that have been approved by the Executive Directors (referred
to as “the Board” in this document) and are net of full terminations and cancellations approved in the same fiscal year and.
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. Includes associated derivatives.
e. 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: December 31, 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 the WBG’s twin goals of ending extreme poverty and promoting shared prosperity,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 World Bank’s (Bank) operational realignment, which came into effect on July 1, 2020,
strengthens the country-driven delivery model, while strengthening thought leadership on development issues ofcritical importance to sustainable growth and poverty alleviation. Support is being expanded for countries at lower
levels of income, and fragile 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. Certain reclassifications of prior years’ information have been made to conform to the current year’s
presentation.
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
through June 30, 2021 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 incompliance with IBRD’s Financial Sustainability Framework based on market conditions at that time and is subject
to revisions in order to ensure continued compliance with established risk limits.

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: December 31, 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 (see Section
II - Financial Performance for details).

Net Income and Allocable Income
IBRD recorded net income of $1,346 million for the first six months of FY21, compared with net income of $444
million during the same period in FY20. The increase in net income was primarily due to higher net unrealized markto-market gains on IBRD’s non-trading portfolios. Unrealized mark-to-market gains and losses on the non-trading
portfolios introduce volatility to IBRD’s net income. Given IBRD’s intention to maintain its non-trading portfolio
positions to maturity, 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 annual net income allocation decisions. During thefirst six months of FY21, allocable income was $646 million, a decrease of $61 million from the same period in FY20.
The decrease was primarily due to lower net investment revenue during the first six months of FY21 as comparedwith the same period in FY20. (See Section III).
In millions of U.S dollars – YTD
Net Income/Loss

Unrealized Gains/Losses

Allocable Income

1,500

1,000

1,000

800

500

600

0

400

-500

200

-1,000
FY17

FY18

FY19

FY20

FY21

0
FY17

FY18

FY19

FY20

FY21

Lending Operations
IBRD’s lending operations during the first six months of FY21 resulted in $10.4 billion of new net loan commitments(net of full terminations and cancellations approved in the same fiscal year) and $13.9 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 $215.7 billion as of December 31, 2020.
In billions of U.S dollars
Net Commitments

Disbursements

20

20

15

15

10

10

5

5
0

0
FY17 FY18 FY19 FY20 FY21YTD YTD YTD YTD YTD

Net Loans outstanding
250
Gross

200
150

Net

100
50
0

FY17 FY18 FY19 FY20 FY21YTD YTD YTD YTD YTD

Jun 17 Jun 18 Jun 19 Jun 20 Dec 20

Net lending commitments (including guarantees) were $3.8 billion higher compared with the same period in FY20
(Table 5). The regions with the largest share of commitments in the first six months of FY21 were Latin America andthe Caribbean with 40% and Europe and Central Asia with 23%.

4

IBRD Management’s Discussion and Analysis: December 31, 2020

Management’s Discussion and Analysis

Section I: Executive Summary

Net Investment Portfolio
IBRD’s net investment portfolio increased by $7.9 billion, from$82.5 billion as of June 30, 2020 to $90.4 billion as of December
31, 2020. The investments remain concentrated in the upper end of
the credit spectrum, with 69% rated AA or above (see Table 9),reflecting IBRD’s objective of principal protection and its
preference for high-quality investments.
The net investment portfolio level remained adequate to meet
IBRD’s financial commitments even under potential scenarios ofsevere market disruption.

In billions of U.S. dollars
Net Investment Portfolio
150
100
50
0
Jun 17 Jun 18 Jun 19 Jun 20 Dec 20

Borrowing Portfolio
As of December 31, 2020, the borrowing portfolio totaled $255.4
billion, $18.2 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 U.S. dollars
Borrowing Portfolio
300
250
200
150
100
50
0
Jun 17 Jun 18 Jun 19 Jun 20 Dec 20

Usable Equity and Equity-to-Loans Ratio
IBRD’s usable equity increased by $1.7 billion compared with June30, 2020. During the first six months of FY21, IBRD received $564
million of paid-in capital subscribed under the 2018 General andSelective Capital Increases (GCI and SCI), bringing the cumulative
amounts received for that increase to $2.1 billion, 28.6% of the total
amount expected.
The Equity-to-Loans ratio was 22.4% as of December 31, 2020,
lower compared with 22.8% as of June 30, 2020, as the increase in
the loan and other exposures outpaced the increase in usable equity.

Ratio in percentages
Equity-to-Loans Ratio
30%
20%
10%
0%
Jun 17 Jun 18 Jun 19 Jun 20 Dec 20

IBRD Management’s Discussion and Analysis: December 31, 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, 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: December 31, 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 introduces
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.
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 equity, lending capacity, and its ability to fund priorities that meetshareholder goals while also ensuring its long-term financial sustainability. The package included the following:
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;4) 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.

3

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

IBRD Management’s Discussion and Analysis: December 31, 20207

Management’s Discussion and Analysis

Section: II Overview

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.
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 areprimarily used to align the interest rate and currency bases of its assets and liabilities. IBRD has elected not to designate
any hedging relationships for accounting purposes. Rather, all derivative instruments are reported at fair value on the
Balance Sheet, with changes in fair values reflected in the Statement of Income.

8

IBRD Management’s Discussion and Analysis: December 31, 2020

Management’s Discussion and Analysis

Section: II Overview

In line with its financial risk management policies, for the non-trading portfolios, unrealized gains and losses from
instruments carried at fair value (borrowing portfolio, and derivatives in the loans and other ALM portfolios) areexcluded 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: December 31, 20209

Management’s Discussion and Analysis

Section III: Financial Results

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 six months ended December 31,
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, (losses) / gains, net
Unrealized mark-to-market gains on non-trading portfolios, net b
Net income
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, losses / (gains), net
Unrealized mark-to-market gains on non-trading portfolios, net b
Allocable income

2020
$

$

885
280
45
1,210
(56)
(676)
157
(80)
(44)
835
1,346

$

11
80
44
(835)
646

$

Impact on income
Decrease
Increase

2019
$

$

1,129
15
91
1,235
(30)
(618)
143
(340)
16
38
444

$

(23)
340
(16)
(38)
707

$

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 $121 million for FY21
YTD, and $112 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 December 31, 2020, total assets increased by 9% from June 30, 2020. The increase was primarily driven by anincrease in net loans outstanding.
Table 2: Condensed Balance Sheet
In millions of U.S. dollars
As of
Due from banks
Investments
Net loans outstanding a
Derivative Assets, net
Other assets
Total Assets$$

Borrowings
Derivative Liabilities, net
Other liabilities
EquityTotal Liabilities and Equity

December 31, 2020
2,005
94,479215,7216,585
4,966
323,756$$

267,900
879
12,50442,473$323,756

June 30, 2020
1,870
84,161
202,158
3,744
4,871
296,804
243,240
1,473
11,70440,387$

296,804

Decrease

Increase
135
10,31813,563
2,841
95
26,952
24,660

(594)
800
2,086

a. The fair value of IBRD’s loans was $223,454 million as of December 31, 2020 ($209,613 million – June 30, 2020).

10

IBRD Management’s Discussion and Analysis: December 31, 2020

26,952Section III: Financial Results

Management’s Discussion and Analysis

Net Income
IBRD had net income of $1,346 million for the first six months of FY21, compared with net income of $444 million
during the same period in FY20. The increase in net income in FY21 YTD primarily reflects unrealized mark-tomarket gains on the loan-related derivatives and the borrowing portfolio, mainly driven by the increase in interest rates
during the period (see Table 1 and Notes to Condensed Quarterly Financial Statements, Note K: Fair Value
Disclosures, Table K11).

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 six months of FY21, IBRD’s loan interest revenue, net was $885 million, a decrease of $244 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 six 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
Change in accumulated provision for loan losses a
Change in deferred Loan Income
Translation adjustments
Total activity
Net Loans outstanding as of December 31, 2020

202,158$

13,855(4,869)
420
(6)
4,163
13,563
215,721

$
$

250
200

193

202

Jun 19Jun 20

216

150
100
50
0

Dec 20a. See Notes to Condensed Quarterly Financial Statements, Note D: Loans andOther Exposures.

Figure 4: Loan Interest Revenue, net
In millions of U.S. dollars, YTD
1,200
1,000
800
600
400
200
0
FY17

FY18

FY19

FY20

FY21

IBRD Management’s Discussion and Analysis: December 31, 202011

Management’s Discussion and Analysis

Section III: Financial Results

As of December 31, 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 six months of FY21 were $13.9 billion, 63% higher compared with the same
period in FY20 (Table 4), primarily due to a higher level of Development Policy Financing (DPF) disbursements.
Table 4: Gross Disbursements by Region
In millions of U.S. dollars
For the six months ended December 31,
Eastern and Southern Africa
Western and Central Africa
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Total

$

$

2020
Amount% of total
158
1%
50
*
2,007
14
1,815
13
5,890
43
1,884
14
2,051
15
13,855
100%

2019
$

$

Amount
558
77
1,642
1,567
2,931
856
857
8,488

% of total
6%
1
19
19
35
10
10
100%

$

$

Variance
(400)
(27)
365
248
2,959
1,028
1,194
5,367

* Indicates percentage less than 0.5%.

Net commitments during the first six months of FY21 were $10.4 billion, 59% higher compared with the same period
in FY20 (Table 5), primarily due to higher levels of DPF and Investment Project Financing (IPF) commitments.
Table 5: Net Commitments by Region
In millions of U.S. dollars
For the six months ended December 31,
Eastern and Southern Africa
Western and Central Africa
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Total

2020
$

$

Amount
40
1,588
2,316
4,175
1,000
1,247
10,3662019% of total
*%
15
23
40
10
12
100%

$

$

Amount
1,425
986
1,210
1,198
1,075
633
6,527

% of total
22%
15
19
18
16
10
100%

$

$

Variance(1,385)
602
1,106
2,977
(75)
614
3,839

* Indicates percentage less than 0.5%.

Results from Investing Activities
Investment Portfolio
IBRD’s net investment portfolio was $90.4 billion as of December 31, 2020 ($82.5 billion as of June 30, 2020). Of
this amount, $87.5 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 increase in the liquid asset portfolio is primarily
due to proceeds from new debt issuances, partially offset by net loan disbursements during the period.

Net Investment Revenue
For the first six months of FY21, IBRD’s net investment revenue was $45 million, $46 million lower compared withthe same period in FY20, mainly due to the lower unrealized mark-to-market gains in the current period.

12

IBRD Management’s Discussion and Analysis: December 31, 2020

Section III: Financial Results

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
100
90
80
70
60
50
40
30
20
10
0

120

90

82

81

100
80
60
40
20
0

Jun 19Jun 20

FY17

Dec 20

FY18

FY19

FY20

FY21

Results from Borrowing Activities
As of December 31, 2020, the borrowing portfolio totaled $255.4 billion, an $18.2 billion increase compared with
June 30, 2020 (See Notes to Condensed Quarterly Financial Statements, Note E: Borrowings). The increase wasprimarily due to net issuances of medium-and long-term debt during the period of $37.4 billion, which were highly
diversified, with an average maturity of 7.8 years. The funds raised financed development lending operations andsatisfied the liquidity requirements.
Figure 7: Borrowing Portfolio (original maturities)
In billions of U.S. dollars
Medium-and long-term Borrowings
300
250

Short-term Borrowings
11

10

11

219

226

244

Jun 19Jun 20Dec 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 six 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 six months ended December 31,
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
57
7

$

2019
56
8

$

Variance
1
(1)

101

25

76

(8)
*
157

30
24
143

(38)
(24)
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). All PEF related trades matured in July 2020.
* Indicates amounts less than $0.5 million.

IBRD Management’s Discussion and Analysis: December 31, 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
800
700
600
500
400
300
200
100
0
FY17

FY18

FY19

FY20

FY21

Table 7: Net Non-Interest Expenses
In millions of U.S. dollars
For the six months ended December 31,
Administrative and pension expenses
Staff costs
TravelConsultant and contractual services
Pension and other post-retirement benefits a
Communications and technology
Premises and equipment
Other expenses
Total administrative and pension expenses b

2020

Variance

$

493
4
168
224
30
61
12

$

478
73
160
149
25
61
6

$

15
(69)
8
75
5
6

$

992

$

952

$

40

Grant making facilities
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)

2019

$
$

15

17

(2)

(200)
(131)
(331)
676

(210)
(141)
(351)
618

10
10
20
58

$
$

$
$

a. Includes all components of pension costs. See Notes to Condensed Quarterly Financial Statements, Note H: Pension and Other
Post-Retirement Benefits.
b. Includes expenses related to IBRD executed trust funds of $200 million for FY21 and $210 million for FY20.

Net non-interest expenses for the first six months of FY21 increased compared with the same period last year. This is
primarily due to the increase in pension costs driven by a decrease in the discount rate, which resulted in higher
amortization of unrecognized actuarial losses, and an increase in the share of costs allocated to IBRD. The increase inadministrative expenses was partially offset by a significant reduction in travel costs due to COVID-19.

Unrealized mark-to-market gains/losses on non-trading portfolios
Unrealized mark-to-market gains and losses associated with the 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 six months of FY21, $835 million of net unrealized mark-to-market gains ($38 million net
unrealized mark-to-market gains for same period in FY20) were excluded from reported net income to arrive at

14

IBRD Management’s Discussion and Analysis: December 31, 2020

Management’s Discussion and Analysis

Section III: Financial Results

allocable income (see Table 1 and Notes to Condensed Quarterly Financial Statements, Note K: Fair Value
Disclosures, Table K11).

Loan Portfolio
Loans are reported at amortized cost, whereas the derivatives which convert the loans from fixed-rate to variable-rate
instruments for asset liability management purposes, are reported at fair value. As a result, while from an economic
perspective, IBRD’s loans after the effect of 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 the unrealized
mark to market gains and losses on loan related derivatives, which for the first six months of FY21 was a gain of $757
million, primarily due to the increase in U.S. dollar interest rates during the period. 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 Adjustment (DVA)
which are recorded in AOCL. For the first six months of FY21, the DVA represents $1,174 million of unrealized
mark-to-market losses resulting mainly from the tightening of IBRD’s credit spreads relative to LIBOR during theperiod. As of December 31, 2020, IBRD’s Condensed Balance Sheet included a cumulative DVA of $ 40 million
loss reflected in AOCL, associated with the changes in its own credit for financial liabilities measured under the fairvalue option (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. The Other ALM
portfolio consists of derivatives which convert variable rate cash flows to fixed rate cash flows. For the first six months
of FY21, IBRD recorded unrealized mark to market losses of $388 million on this portfolio primarily due to theincrease in U.S. dollar interest rates during the period. As of December 31, 2020, the duration of this portfolio was
4.3 years.

Transfers to Affiliated Organizations
Since 1964, IBRD has made transfers to IDA out of its net income, upon approval by the Governors. Under a formulabased approach for IBRD's income support to IDA, the amount of income transfer recommended for IDA is a functionof IBRD's financial results. For allocations out of the FY20 net income, the Board approved holding $331 million in
IBRD’s Surplus account, as a measure of prudence in view of the 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.
Based on the updated outlook, on December 11, 2020, the Board recommended to the Governors the approval of thetransfer of $331 million to IDA. Subsequently, on January 25, 2021, the Governors approved the transfer, which wasmade on February 1, 2021.

IBRD Management’s Discussion and Analysis: December 31, 202015

Management’s Discussion and Analysis

Section IV: Risk Management

Section IV: Risk Management
Risk Governance
IBRD’s risk management processes and practices evolve to reflect changes in activities in response to market, credit,
product, operational, and other developments. The Board, particularly Audit Committee (AC) members, periodicallyreview trends in IBRD’s risk profiles and performance, and any major developments in risk management policies andcontrols.
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 oversees both financial and operational risks. These risks include (i) country credit risks in the core
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: December 31, 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 December 31, 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 129% of the Target
Liquidity Level. In the first six months in FY21, IBRD continued to maintain a robust liquidity position and flexibility
to access the necessary liquidity resources.
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 andon-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 thesituation 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 decreased to 22.4% as of December 31, 2020, from 22.8% as ofJune 30, 2020, and remained above the 20% minimum ratio under the strategic capital adequacy framework. In linewith IBRD’s currency management policy, exchange rate movements during the period did not have an impact on
IBRD’s equity-to-loans ratio. Under the currency management policy, to minimize exchange rate risk, 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 with that of its
outstanding loans, across major currencies.

IBRD Management’s Discussion and Analysis: December 31, 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)

December 31, 2020

June 30, 2020$

18,089293
30,387(1)
57
48,825$

217,409
3,098(1,549)(489)(726)
217,743$$$$

Equity-to-Loans Ratio

$

$

22.4%

Due toActivities

Total

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

$

801
736
150
1,687

$

13,178(166)(1,834)120(15)
111,284

$

$

$

567
203
770

$

8,986
(318)
(1,834)
147
(6)
1
6,976

$

Due toTranslation
Adjustments
$
234
736
(53)
$
917
$

$

4,192
152
(27)
(9)
4,308

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 December 31, 2020
In billions of U.S. dollars

Top Ten Country Exposures
Indonesia
India
MexicoBrazilChina
Colombia
TurkeyEgypt
Argentina
Philippines

17.8
17.0
15.7
15.6
15.3
12.4
11.7
11.5
8.2
8.1
0

18

2

4

6

8

10

12

14

16

IBRD Management’s Discussion and Analysis: December 31, 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, accounts 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 December 31, 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 the incurred loss model. On July 1, 2020, IBRD recorded a transition adjustmentof $203 million, increasing the opening balance of retained earnings. This adjustment represented the difference
between the previous method and CECL (see Notes to Condensed Quarterly Financial Statements, Note A – Summaryof Significant Accounting and Related Policies). For the first six months of FY21, IBRD recorded a provision forlosses on loans and other exposures of $56 million, primarily reflecting the impact of the increase in exposures during
the period.
As of December 31, 2020, IBRD’s accumulated provision for losses on loans and other exposures was $ 1,565 million,
including $317 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 less than 1% of the underlying
exposures ($1,698 million as of June 30, 2020, less than 1% of total exposures).
As of December 31, 2020, 0.2% of IBRD’s loans were in nonaccrual status, all to Zimbabwe. During the first six
months of FY21, IBRD did not receive any payments towards overdue interest and principal from Zimbabwe ($1.5
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 $10.9 billion during the first six months of FY21, to$94.3 billion as of December 31, 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 69% 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: December 31, 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 December 31, 2020
Investments
Counterparty Rating a
AAA
AA
A
BBB
BB or lower/unrated
Total

Sovereigns$
26,826
3,128
15,822
1
39$
45,816$$Net Swap
Exposure
$
1,021
487
$
1,508

Non-Sovereigns
12,491
21,315
13,10241
646,955

Total Exposure
39,31725,464
29,41142
45$
94,279% of Total
42%
27
31
*
*
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 December 31, 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 December 31, 2020
Non-Commercial
Counterparty
Borrowing Member
Countries

Instrument
used

Purpose of derivative transaction

Derivatives

Assist borrowing member countries with managing risks $ 11,798 $Affiliated Organization

Derivatives

Intermediation on behalf of IDA

1,770

Assist IFFIm with managing risks

2,867$ 16,435 $Non-Affiliated Organization Derivatives

20

IBRD Management’s Discussion and Analysis: December 31, 2020

Notional

Net Exposure
1,603
8
406
2,017

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
Credit Effect on
Portfolio

As of December 31, 2020

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

$

$

95
(39)
(*)
(3)
53

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
Interest Rate
Effect on Portfolio

As of December 31, 2020

Sensitivity a
Borrowing portfolio
Loan portfolio b
Other ALM portfolio
Investment portfolio

$

6
(18)
(19)
(1)

Total losses

$

(32)

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

IBRD Management’s Discussion and Analysis: December 31, 202021

Management’s Discussion and Analysis

Section IV: Risk Management

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 $112 million of unrealized
mark-to-market gains on bonds which would be offset by $106 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 December 31, 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-106-120 -60

Loans Swaps
0
-52
34

112

0

60

Swaps

Investment Portfolio
Investments

-19

-1

120

-60 -40 -20 0 20 40 60-60 -40 -20

Net Sensitivity = $6 million

Net Sensitivity = $(18) million

Net Sensitivity= $(19) 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 six 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

See discussion of recent changes in the section below on Alternative Reference Rate.

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: December 31, 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 contract amendments will enable similar treatment to all loans bybringing 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 the interest 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 amendmentsfrom borrowers. IBRD is actively working through this transition and is analyzing the impact from multiple
perspectives: lending, funding, accounting, operations, information technology, liquidity investing, risk and legal,
considering the portfolio of existing loans and other instruments that use LIBOR as a benchmark. As the market
undergoes fundamental changes due to the transition to alternative reference rates, as a part of its interest rate risk
management, on January 26, 2021, IBRD’s Executive Directors approved a suspension of the offering of loans on
fixed spread terms as well as suspension of a related conversion feature from the variable spread terms to fixed spread
terms, effective from April 1, 2021. IBRD will continue 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.

IBRD Management’s Discussion and Analysis: December 31, 202023

Management’s Discussion and Analysis

Section IV: Risk Management

Under IBRD’s liquidity management guidelines, liquid asset holdings are kept at or above a specified Prudential
Minimum to safeguard against cash flow interruptions.
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
Target Liquidity Level
Guideline Maximum Liquidity Level

In billions of U.S. dollars$ 68.0102.0% Of Target Liquidity Level
150%

Prudential Minimum Liquidity Level

54.4

80%

Liquid Asset Portfolio
as of December 31, 2020

87.5

129%

The FY21 Target Liquidity Level is $2 billion higher than the prior year, reflecting the higher Prudential Minimum,
which was due to the 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: December 31, 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: December 31, 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 (original maturities)
Figure 8: Net Non-Interest Expenses
Figure 9: Country Exposures as of December 31, 2020
Figure 10: Sensitivity to Interest Rates as of December 31, 2020

7
8
11
11
13
13
13
14
18
22

Box
Box 1: Selected Financial Data

26

IBRD Management’s Discussion and Analysis: December 31, 20202

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT(IBRD)CONTENTS
December 31, 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 CONDENSED QUARTERLY FINANCIAL STATEMENTS

33

INDEPENDENT AUDITORS’ REVIEW REPORT60

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)27

CONDENSED BALANCE SHEET
Expressed in millions of U.S. dollars

December 31, 2020
(Unaudited)

June 30, 2020
(Unaudited)

AssetsDue from banks—Notes C and K
Unrestricted cash$

Restricted cash

1,883

$

1,748

122

122

2,005

1,870

94,14083,767

339

394

6,585

3,744

Total loans approved

282,895

274,047

Less undisbursed balance (including signed loan commitments of$55,750 million — December 31, 2020, and $54,834 million —June 30, 2020)(65,486)(69,816)

217,409204,231(1,199)(1,599)Deferred loan income

(489)

(474)

Net loans outstanding

215,721202,158

Other assets—Notes C, D, E and I

4,966

4,871

Investments-Trading (including securities transferred under repurchaseor securities lending agreements of $25 million—December 31, 2020;$8 million—June 30, 2020)—Notes C and K
Securities purchased under resale agreements—Notes C and K
Derivative assets, net—Notes C, E, F and K
Loans outstanding—Notes D, I and K

Loans outstanding
Less:
Accumulated provision for loan losses

Total assets

28$

323,756$

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

296,804

December 31, 2020
(Unaudited)

June 30, 2020
(Unaudited)

Liabilities
Borrowings—Notes E and K$

267,900$

243,240

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

35

36

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

879

1,473

Other liabilities—Notes C, D and I

12,46911,668

Total liabilities

281,283

256,417

Subscribed capital (2,427,191 shares—December 31, 2020, and2,387,388 shares—June 30, 2020)

292,804

288,002

Less uncalled portion of subscriptions(274,206)(269,968)

18,59818,034

Nonnegotiable, noninterest-bearing demand obligations on account ofsubscribed capital

(368)

(373)

Receivable amounts to maintain value of currency holdings

(226)

(299)

Deferred amounts to maintain value of currency holdings

142

(14)

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

30,31428,765

Accumulated other comprehensive loss—Note J(5,987)(5,726)

Total equity

42,47340,387

EquityCapital stock—Note B
Authorized capital (2,783,873 shares—December 31, 2020, andJune 30, 2020)

Paid-in capital

Total liabilities and equity$

323,756$

296,804

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

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)29

CONDENSED STATEMENT OF INCOME
Expressed in millions of U.S. dollars

Six Months Ended
Three Months Ended
December 31, (Unaudited) December 31, (Unaudited)
2020
2019
2020
2019
Net interest revenue
Interest revenue
Loans, net—Note D
Other asset/liability management derivatives, net
Investments-Trading, net
Other, net

$

536
154
52
(7)

$

1,186
20
342
40

$ 1,254
280
132
(6)

$

2,510
15
755
45

Borrowing expenses, net—Note E(144)(1,006)(487)(2,188)Interest revenue, net of borrowing expenses

591

582

1,173

1,137

Provision for losses on loans and other exposures—
Note D

(17)

(24)

(55)

(30)

189
28
7
224

182
29
10
221

331
57
17
405

351
56
42
449

(518)
(3)
(15)
(5)
(541)

(490)
14
(17)
(4)
(497)

(986)
(6)
(15)
(11)
(1,018)

(980)
28
(17)
(10)
(979)

(80)

(259)

(80)

(340)

Non-functional currency translation adjustment (losses)
gain, net

(55)

16

(44)

16

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

58

92

129

146

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

490

429

836

45

560

$ 1,346

Non-interest revenue
Revenue from externally funded activities—Note I
Commitment charges—Note D
Other
Total
Non-interest expenses
Administrative—Notes H and I
Pension—Note H
Contributions to special programs
Other
Total
Board of Governors-approved and other transfers—Note
G

Net income

$

670

$

$

444

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

30

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Expressed in millions of U.S. dollars

Net income
Other comprehensive income—Note J

Three Months Ended
December 31, (Unaudited)
2020
2019

Six Months Ended
December 31, (Unaudited)
2020
2019

$

$

670

$

560

1,346

$

444

Reclassification to net income:Amortization of unrecognized net actuarial losses

95

43

189

86

Amortization of unrecognized prior service costs

6

6

12

12

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

(558)

(225)

(1,174)(164)

Currency translation adjustment on functional currency

365

193

712

(90)

(92)

17

(261)

(156)

Total other comprehensive (loss) income
Comprehensive income

$

578

$

577

$

1,085

$

288

CONDENSED STATEMENT OF CHANGES IN RETAINED EARNINGS
Expressed in millions of U.S. dollars

Six Months Ended December 31,(Unaudited)
2020
2019
Retained earnings at beginning of the fiscal year$

Cumulative effect of change in accounting principle—Notes A, D and G
Net income for the period
Retained earnings at end of the period$

28,765$28,807

203

-

1,346

444

30,314$29,251The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

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

CONDENSED STATEMENT OF CASH FLOWS
Expressed in millions of U.S. dollars
Six Months Ended December 31,(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
Adjustments to reconcile net income to net cash (used in) provided byoperating activities
Unrealized mark-to-market (gains) losses on non-trading
portfolios, net
Non-functional currency translation adjustment losses (gains), net
Depreciation and amortization
Provision for losses on loans and other exposures
Changes in:
Investment portfolio
Other assets and liabilities
Net cash (used in) 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$(13,836)
4,855
14
12
34
(53)
(8,974)$(8,473)
4,707
139
5
29
(185)
(3,778)37,066(21,980)

25,022(35,919)

11,132(10,665)
(52)
(591)
564
15,474

12,477(9,073)
259
(551)
481
(7,304)

1,346

444

(836)
44
87
55

(45)
(16)
482
30

(7,132)(52)(6,488)
123
135
1,870
2,005

10,437(150)
11,182
5
105
895
1,000

4,192
371
3,150
18
960

$

$

(498)
7
(381)
15
2,356

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

32

IBRD Condensed Quarterly Financial Statements: December 31, 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, thecondensed 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 ofAmerica (U.S. GAAP).
Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosureof contingent assets and liabilities at the date of the condensed quarterly financial statements and the reported amounts
of income and expenses during the reporting periods. Due to the inherent uncertainty involved in making thoseestimates, actual results could differ from those estimates. Areas in which significant estimates have been madeinclude, 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 six months of the current fiscal year are not necessarily indicative of results that may be expected for thefull year.
Certain reclassifications of the prior year’s information have been made to conform with the current year’s
presentation.
Accounting and Reporting Developments
Accounting Standards evaluated:
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 U.S. 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 throughDecember 31, 2022. IBRD will apply the standard consistently to contractual amendments made to all applicable
floating rate instruments indexed to IBOR (inter-bank offered rate). 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 requirementsof 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 adoptionof 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: December 31, 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 was partially offset
by the inclusion of signed loan commitments in the determination of the provision and the requirement 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 theCondensed Balance
Sheet
Accumulated provision related to:Loans outstanding
Signed loan commitments
Other exposures
Total impact on accumulated provision
Recoverable asset relating to guarantees
received under the Exposure Exchange
Agreements (EEAs)
Retained earnings

Accumulated provision forloan losses
Other liabilities
Other liabilities

Other assets

Impact of the
adoption of the
CECL ASU

June 30, 2020
As reported
$
$

1,599
99
1,698

$
$

(28)
28,765$

July 1, 2020
Adjusted

$

(465)
298
(47)
(214)

$
$

1,134
298
52
1,484

$
$

11
203

$
$

(17)
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 expectedcredit losses related to loans and other exposures are calculated over the life of the instruments by multiplying theannual expected exposures by the expected default frequency (probability of default to IBRD) and by the estimatedseverity 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 is the current exposure andthe expected exposure over the life of the instrument. Each risk rating is mapped to the annual expected default
frequencies using IBRD's credit migration matrix, based on historical observations of credit ratings at the beginningand at the end of each year. Expected losses on loan exposures comprise estimates of potential losses arising fromdefault and nonpayment of principal amounts due, as well as the economic loss due to delays 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 thehighest severity associated with IDA. The borrower’s eligibility is assessed at least annually. The main factors used
to determine the loss severity are the delays in receiving loan payments resulting in economic losses to IBRD basedon the effective interest rate of the exposure, as well as the length of time 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 countries in nonaccrual status are individually assessed.
Loan commitments: Following the implementation of CECL, IBRD now records a 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, ismultiplied by the probability of losses and loss given default to determine the expected credit losses. The provision is
included in Other liabilities on the Condensed Balance Sheet.

34

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)Guarantees: IBRD records a contingent liability for the expected losses related to guarantees over the projected lifeof the instruments. IBRD records a contingent liability based on the estimated exposure at default multiplied by thecorresponding loss given default and the expected default probability for the projected life of the guarantee.
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 for the annual financial statements for 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 December 31, 2020

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

Subscribed shares
2,320,659
66,7292,387,388
39,8032,427,191

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 December 31, 2020

Subscribed capital$ 279,953
8,049
288,0024,802$ 292,804

Uncalled portion ofsubscriptions$ (262,892)(7,076)(269,968)(4,238)$ (274,206)

Paid-in capital$ 17,061
973
18,034564$ 18,598

The 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 December 31, 2020, the cumulative subscription
payments received related to the 2018 capital increases was $2.1 billion.
NOTE C—INVESTMENTS
As of December 31, 2020, IBRD’s investments include the liquid asset portfolio and holdings relating to the AdvanceMarket Commitment for Pneumococcal Vaccines Initiative (AMC), Post Employment Benefit Plan (PEBP), thePostretirement Contribution Reserve Fund (PCRF) and the Local Currency Market Development (LCMD)
investments. LCMD investments are investments in sovereign bonds denominated in the local currencies of lessdeveloped markets and funded by borrowings in the same currency with matching volume, payment and maturity
characteristics.

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

35

The composition of IBRD’s net investment portfolio is as follows:
Table C1: Net investment portfolio composition
In millions of U.S. dollars
December 31, 2020
Net Investment Portfolio
Liquid asset portfolio
PEBP holdings
PCRF holdings
AMC holdings
LCMD investments
Total

$

$

87,499
2,213
503
188
39
90,442June 30, 2020$

79,908
1,847
450
239
41
82,485$Investments held by IBRD are designated as trading and reported at fair value, or at face value which approximatesfair value. As of December 31, 2020, Investments were primarily comprised of government and agency obligations,and time deposits (60% and 36%, respectively), with all the instruments classified as Level 1 or Level 2 within thefair value hierarchy. As of December 31, 2020, the largest holdings of Investments-from a single counterparty wereJapanese Government Instruments (15%) and U.S. Treasuries (10%). Over 99% of IBRD’s investments as ofDecember 31, 2020 were rated A and above, by a major rating agency.
A summary of IBRD’s Investments-Trading is as follows:
Table C2: Investments composition
In millions of U.S. dollars
Government and agency obligations
Time deposits
Asset Backed Securities (ABS)
Alternative investments a
Equity securities a
Total

December 31, 2020$
56,68733,765
2,059
1,144
485
$
94,140June 30, 2020
48,44930,982
3,012
942
382
$
83,767$

a. Related to PEBP holdings. Alternative investments are comprised of investments in hedge funds, private equity funds and realestate funds, at net asset value (NAV).

36

IBRD Condensed Quarterly Financial Statements: December 31, 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
December 31, 2020
Investments-Trading
Securities purchased under resale agreements
Securities sold under repurchase agreements, securities lent under
securities lending agreements, and payable for cash collateral receiveda
Derivative assets
Currency 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 portfoliob
Receivable from investment securities traded and other assetsc
Payable for investment securities purchasedd
Net investment portfolio$$

94,140339

June 30, 2020$

83,767394(3,197)(2,161)

2
29
2
33

169
51
3
223

(1,923)(480)(1)(2,404)
1,611
589
(669)
90,442

(625)
(328)
(2)
(955)
1,430
193
(406)
82,485$a. Includes $3,172 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 $159 million of liabilities related to PCRF payable, which is included in Other liabilities on the Condensed
Balance Sheet ($141 million—June 30, 2020) and $103 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.
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.
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 that 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.

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

37

The following is a summary of the collateral received by IBRD for swap transactions:
Table C4: Collateral received
In millions of U.S. dollars
December 31, 2020
Collateral received
Cash
Securities
Total collateral received
Collateral permitted to be repledged
Amount of collateral repledged
Amount of cash collateral invested

$
$
$

3,172
3,202
6,374
6,374
1,876

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 a gross basis.
As of December 31, 2020 and June 30, 2020, there were no amounts that could potentially be offset as a result oflegally 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 inplace to ensure that trading activity and balances under these agreements are below predefined counterparty andmaturity 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 re-priced as appropriate by returning cash or pledging 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 December 31, 2020, liabilities relating to securities transferred under repurchase or securities lending agreements
amounted to $25 million ($9 million — June 30, 2020) and there were no unsettled trades relating to repurchase or
securities lending agreements.
In the case of resale agreements, IBRD receives collateral in the form of liquid securities and is permitted to repledge
these securities. While these transactions are legally considered to be true purchases and sales, the securities received
are not recorded on IBRD’s Condensed Balance Sheet as the accounting criteria for treatment as a sale have not been
met. As of December 31, 2020 and June 30, 2020, there were no unsettled trades pertaining to securities purchased
under resale agreements. For resale agreements, IBRD received securities with a fair value of $341 million ($396
million—June 30, 2020). As of December 31, 2020 and June 30, 2020 none of these securities had been transferred.
NOTE D—LOANS AND OTHER EXPOSURESIBRD’s loans and other exposures (together, “exposures”) are generally made to, or guaranteed by, member countriesof IBRD. In addition, IBRD may also make loans to the International Finance Corporation (IFC), an affiliatedorganization, without any guarantee. Other exposures include: Signed loan commitments (including DDOs andIrrevocable Commitments), Exposures to Member Countries’ Derivatives, and Guarantees. As of December 31, 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 permitted by CECL, IBRD excludes the interest receivable balance from the amortized cost basis and from therelated disclosures. As of December 31, 2020 accrued interest receivable on loans of $682 million is included in Other
assets on the Condensed Balance Sheet ($987 million—June 30, 2020).
As of December 31, 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.

38

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)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 and in
full. These ratings are internal credit quality indicators. Individual country risk ratings are derived on the basis of bothquantitative and qualitative analyses. The components considered in the analysis can be grouped broadly into eightcategories: 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, and corporate
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’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 are reviewed
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 December 31, 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
Total

Up to 45

46-60

$

$

1
1
1

$

$

-

61-90

As of December 31, 2020
Total Past
91-180Over 180
Due

$

$

$

-

$

-

$

$

434
434

$

$

1
1
434
435

Current$$

24,265 $89,943
102,766
216,974
216,974 $Total
24,26589,943
102,767
216,975434
217,409

Table D1.1
In millions of U.S. dollars
Days past due
Risk class
Low
MediumHigh
Loans in accrual status
Loans in nonaccrual status
Total

Up to 45

46-60

$

$

$

-

$

-

61-90

As of June 30, 2020
Total Past
91-180Over 180
Due

$

$

$

-

$

-

$

$

433
433

$

$

433
433

Current$$

23,424 $90,71989,655
203,798
203,798 $Total
23,42490,71989,655
203,798433
204,231

IBRD considers the signature date of a loan as the best indicator of the decision point in the origination process, rather
than the disbursement date.

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

39

The table below discloses the outstanding balances of IBRD’s loan portfolio as of December 31, 2020, classified by
the year the loan agreement was signed.
Table D2: Loan portfolio vintage disclosure
In millions of U.S. dollars
December 31, 2020
Fiscal Year (Origination)

Risk
Low
MediumHigh
Loans in accrual status
Loans in nonaccrual
status
Total

2021

2020

$

$

2,564
2,276
4,840

$ 4,840

2019

2018

2017

Prior
Years

CAT DDOs CAT DDOs
Disbursed Converted
andto Term
Revolving
Loans

48 $
5,651
5,308
11,007

522
3,015
6,396
9,933

$

178 $ 1,633 $ 21,884 $
3,685
3,888
69,1286,010
8,187
73,583
9,873
13,708 164,595

792
664
1,456

$ 11,007 $

9,933

434
$ 9,873 $ 13,708 $ 165,029 $

1,456

$

$

1,220
343
1,563
1,563

Loans
outstanding
as ofDecember31, 2020$$

24,26589,943
102,767
216,975434
217,409

The amounts of Catastrophe Deferred Drawdown Option (CAT DDOs) converted to term loans during the three andsix months ended December 31, 2020, are $81 million and $88 million respectively.
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 it does not
charge additional interest on any overdue interest or loan charges. These economic losses are equal to the difference
between the present value of payments of interest and charges made according to the related loan's contractual terms
and the present value of its expected future cash flows. It is IBRD’s practice not to write off its loans. Historically, allcontractual obligations associated with exposures in nonaccrual status were eventually cleared, 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 on a quarterly basis and adjustments to theaccumulated provision are recorded as a charge to or release of provision in the Statement of Income. In addition,
reasonableness of the inputs used are reassessed on a periodic basis, at least annually.
The balance of accumulated provision as of July 1, 2020 was decreased by the $214 million transition adjustment
recorded upon adoption of CECL on July 1, 2020. The transition adjustment corresponds to the difference between
the accumulated provision calculated under the “incurred loss” model and the CECL model.

40

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)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
December 31, 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 in accrual status
Loans in nonaccrual status
Total

$

1,599
(465)

$

1,134
46
19
$

1,199

$

982
217
1,199

$

298

$

298
14
5
$

317

Total

99 $ 1,698
(47)
(214)
52
(5)
2

$

June 30, 2020
Loans
outstanding Other a Total$

1,574 $-

114 $ 1,688
-

1,574
32
(7)

114
(14)
(1)

$

1,599 $

99 $ 1,698

$

1,383
216
1,599

1,484
55
26

49 $ 1,565$$ 216,975
434$ 217,409

1,688
18
(8)

$ 203,798
433$ 204,231

a. Provision does not include recoverable asset relating to Guarantees 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 other charges
due to IBRD on the dates provided in the contractual loan agreement.
At December 31, 2020, there were no principal or interest amounts on loans in accrual status, which were overdue by
more than three months.
Zimbabwe is the sole borrowing member with loans or guarantees in nonaccrual status and has been in nonaccrual
status since October 2000.
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 period/fiscal year
Overdue amounts of nonaccrual loans:
Principal
Interest and charges

December 31, 2020
$
434
217
433
1,031
434
597

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: December 31, 2020 (Unaudited)41

Table D4.1
In millions of U.S. dollars
Three Months Ended December 31,
2020
2019
Interest revenue not recognized as a result of loans
being in nonaccrual status

$

7

$

7

Six Months Ended December 31,
2020
2019
$

14

$ 14

During the six months ended December 31, 2020 and December 31, 2019, no loans were placed in nonaccrual status
or restored to accrual status.
In addition, during the six months ended December 31, 2020, no interest income was recognized on loans in
nonaccrual status (less than $1 million —six months ended December 31, 2019).
Guarantees
Guarantees of $6,720 million were outstanding as of December 31, 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 21 years and expire in decreasing amounts through 2042.
As of December 31, 2020, liabilities related to IBRD's obligations under guarantees of $412 million ($463 million—
June 30, 2020), have been included in Other liabilities on the Condensed Balance Sheet. These include theaccumulated provision for guarantee losses of $49 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 as of July
1, 2020.
During the six months ended December 31, 2020 and December 31, 2019, no guarantees provided by IBRD werecalled.
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 the 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

Guarantees provided a,cGuarantees received b

December 31, 2020
(Accumulated
provision)(Stand ready
Recoverable
Notional obligation)
Asset
asset
amount$ 3,645 $ (200)$(19)(3,646)
200
16
$
(1) $
$
(3)

Notional
amount$ 3,651(3,651)$-

June 30, 2020
(Accumulated
provision)(Stand ready
Recoverable
obligation)
Asset
asset
$ (210)
$
(38)
210
28
$
$
(10)

Location on
Condensed
Balance Sheet
Other liabilities
Other assets

a. For the six months ended December 31, 2020, Provisions for losses on loans and other exposures, line on the Condensed
Statement of Income includes $1 million release in provision relating to Guarantees provided (Nil —six months ended December
31, 2019). The cumulative effect of the adoption of the CECL ASU was a decrease of $18 million in the accumulated provision
relating to Guarantees provided, as of July 1, 2020.
b. For the six months ended December 31, 2020, Interest revenue - Other, net, line on the Condensed Statement of Income includes$1 of loss in relation to Recoverable asset relating to Guarantees received (Nil— six months ended December 31, 2019). The
cumulative effect of the adoption of the CECL ASU was a decrease of $11 million in the recoverable asset relating to Guarantees
received, as of July 1, 2020.
c. Notional amount, Stand ready obligation and Provision for the guarantee provided as of December 31, 2020, are included inguarantees outstanding of $6,720 million, obligations under guarantees of $412 million and accumulated provision for guarantee
losses of $49 million, respectively ($6,898 million, $463 million and $98 million, respectively—June 30, 2020).

42

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)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 are approved
annually by the Executive Directors of IBRD. As part of the COVID-19 Strategic Preparedness and Response
Program, the Executive Directors of IBRD approved the waiver of commitment/standby fees for health-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 Fast Track COVID-19 Facility; as well as the waiverof commitment fees for COVID-19 vaccine related projects under the Additional Financing for the first 18 months,
starting from the date of approval of financing for each project.
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

Interest waivers
Commitment charge waivers
Front-end fee waivers
Total

Three Months Ended December 31,
2020
2019
$
6
$
8
1
2
1
$
9
$
9

Six Months Ended December 31,
2020
2019
$
13
$
17
2
3
3
$
18
$
20

Concentration risk
Loan revenue comprises interest, commitment fees, loan origination fees and prepayment premiums, net of waivers.
For the six months ended December 31, 2020, there was no country that contributed more than 10% to the total loan
revenue.
Information about IBRD’s loan revenue and associated loans outstanding by geographic region is presented in thefollowing table:
Table D7: Loan revenue and associated outstanding loan balances
In millions of U.S. dollars

For the six months ended and as ofDecember 31, 2020
December 31, 2019
RegionLoan Revenue a
Loans Outstanding
Loan Revenue a
Loans Outstanding
Latin America and the Caribbean $630$ 66,949$
979$ 60,253
Europe and Central Asia
259
48,488396
45,339345
45,525664
42,810
East Asia and Pacific214
30,873359
27,471
Middle East and North Africa
125
19,472
254
16,460South Asia
110
4,534
123
4,239
Eastern and Southern AfricabbWestern and Central Africa
16
1,568
16
1,359
Total
$
1,699
$ 217,409$
2,791$ 197,931
a. Does not include interest expenses, net of $388 million from loan related derivatives ($225 million—December 31, 2019). Includes
commitment charges of $57 million ($56 million—December 31, 2019).
b. Effective July 1, 2020, Africa region has been reorganized into two regions: Eastern and Southern Africa and Western and Central
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 market interest rates.
Borrowings issued by IBRD are reported at fair value. As of December 31, 2020, 98% of the instruments in theportfolio were classified as Level 2 within the fair value hierarchy. In addition, most of these instruments weredenominated 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.

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)43

Table E1: Borrowings after derivatives
In millions of U.S. dollars
December 31, 2020
$ 267,900(4,453)(8,029)$ 255,418

Borrowings a
Currency swaps, net
Interest rate swaps, net

June 30, 2020$
243,240
2,211(8,220)$237,231

a. There were no unsettled borrowings as of December 31, 2020 ($3 million—June 30, 2020, representing a non-cash financing
activity, for which the related receivable was included in Other assets on the Condensed Balance Sheet )For the six months ended December 31, 2020, Borrowing expenses on the Condensed Statement of Income of $487
million ($2,188 million— six months ended December 31, 2019) include $1,827 million of interest revenue, net related
to derivatives associated with the Borrowing portfolio ($432 million—six months ended December 31, 2019).
For the six months ended December 31, 2020, the amount of interest paid on zero-coupon bonds and bonds withinsignificant coupon interest rates was $109 million ($220 million—six months ended December 31, 2019), and is notincluded in the Interest paid on borrowing portfolio in the Supplemental disclosure of the Condensed Statement of
Cash Flows.
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 risk in theportfolio
Manage currency risk as well as interest rate risk
between loans and borrowings
Manage currency risk as well as interest rate risk
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 in 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, in theevent 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 the amounts 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.

44

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)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 theCondensed Balance Sheet
Less:
Securities collateral received c
Net derivative exposure after
collateral

Gross
Amounts
Recognized$
22,06884,781
3$ 106,852

December 31, 2020
Located on the Condensed Balance Sheet
Derivative Assets
Derivative Liabilities
Gross
Gross
Gross
Amounts
Net Amounts
Amounts
Amounts
Net Amounts
OffsetPresented
Recognized
OffsetPresented$ (8,654)$ 13,414$ 22,386$ (14,704)$ 7,682(74,868)
9,913
74,146(67,418)
6,728
(1)
2
1
1
$ (83,523)$ 23,329d$ 96,533$ (82,122)$ 14,411d

13,582e
3,162

13,532f

6,585

879

3,112
$

3,473

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 $53 million Credit Valuation Adjustment (CVA).
f. Includes $3 million Debit Valuation Adjustment (DVA).

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
Located on the Condensed Balance Sheet
Derivative Assets
Derivative Liabilities
Gross
Gross
Gross
Gross
Amounts
Amounts
Net Amounts
Amounts
Amounts
Net Amounts
Recognized
OffsetPresented
Recognized
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
$ 83,547$ (63,176)$ 20,371d$ 100,463$ (84,504)$ 15,959d$

14,502e
2,125

14,486f

3,744

1,473

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.
f. Includes $12 million DVA.

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

45

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

Investments
Loans
Client operations
Borrowings
Other asset/liability management derivatives
Total exposure

Interest rate
swaps
$
29
221
1,581
9,110
2,473
$
13,414

December 31, 2020
Currency swaps(including currency
forward contracts)
Other a
$
2
$
1
690
746
8,475
$
9,913
$
1

Interest rate
swaps
$
51
42
1,722
9,498
2,982
$
14,295June 30, 2020
Currency swaps(including currency
forward contracts)
Other a
$
169
$
3
1,134
769
4,001
$
6,073
$
3

Total
$

32
911
2,327
17,5852,473
23,328$In millions of U.S. dollars

Investments
Loans
Client operations
Borrowings
Other asset/liability management derivatives
Total exposure

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 areinterest rate contracts.

The volume of derivative contracts is measured using the U.S. dollar equivalent notional balance. The notional balance
represents the face value, or reference value, on which the calculations of payments on the derivative instruments are
determined. At December 31, 2020, the notional amounts of IBRD’s derivative contracts outstanding were as follows:interest rate contracts $452,651 million ($474,644 million—June 30, 2020), currency swaps $148,445 million($127,276 million—June 30, 2020), long positions of other derivatives $249 million ($362 million at June 30, 2020),
and short positions of other derivatives $66 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 were in a liability
position on December 31, 2020 was $679 million ($1,138 million—June 30, 2020). IBRD has not posted any collateralwith 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 on December 31, 2020, the amount of collateral that would need to be posted would be$31 million ($156 million—June 30, 2020). Subsequent triggers of contingent features would require posting ofadditional collateral, up to a maximum of $679 million ($1,138 million—June 30, 2020). In contrast, IBRD received
collateral totaling $6,374 million as of December 31, 2020 ($3,163 million—June 30, 2020), in relation to swap
transactions (see Note C—Investments).
The following table provides information on the amount of unrealized mark-to-market gains and losses on the nontrading derivatives and their location on the Condensed Statement of Income:Table F3: Unrealized mark-to-market gains and losses on non-trading derivatives
In millions of U.S. dollars

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

46

Reported as:
Unrealized mark-tomarket gains (losses)
on non-trading
portfolios, net

Unrealized mark-to-market gains (losses)
Three Months Ended
Six Months Ended
December 31,
December 31,
2020
2019
2020
2019
$ (299)$ (1,057)$ (519)
$
18

$

(283)
(582)

(419)
$ (1,476)(292)$ (811)

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

$

(38)
(20)

All of the instruments in IBRD’s investment portfolio are held for trading purposes. Within the investment portfolio,
IBRD holds highly rated fixed income instruments, 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 amount of unrealized mark-to-market gains and losses on the net
Investment–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
Unrealized mark-to-market gains (losses)aThree Months Ended
Six Months Ended
December 31,
December 31,
2020
2019
2020
2019

Reported as:
Type of instrument
Fixed income (including associatedderivatives)
EquityTotal

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

$
$

(10)
68
58

$
$

65
27
92

$
$

29
100
129

$
$

119
27
146

a. Amounts associated with each type of instrument include gains and losses on both derivative instruments and non-derivative
instruments.

NOTE G—RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS
IBRD makes net income allocation decisions on the basis of reported net income, adjusted to exclude unrealized markto-market gains and losses on non-trading portfolios, net, restricted income and Board of Governors-approved andother 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 earnedin the fiscal year ended June 30, 2020; an increase in General Reserve by $950 million and an increase in the Pension
Reserve by $62 million.
On August 24, 2020, IBRD’s Board of Governors approved a transfer of $20 million from Surplus to the IBRD Fundfor Innovative Global Public Goods Solutions (GPG Fund). The transfer was made on September 4, 2020.
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 for development
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.
Subsequent event:
On January 25, 2021, the Board of Governors approved a transfer of $331 million to IDA from Surplus, which wasmade on February 1, 2021.
Retained earnings comprised the following components:
Table G1: Retained earnings composition
In millions of U.S. dollars
Special reserve
General reserve
Pension reserve
Surplus
Cumulative fair value adjustments a
Unallocated net income
Restricted retained earnings
Other reserves b
Total

December 31, 2020$
293
30,387731
431(3,302)
1,426
54
294
$ 30,314

June 30, 2020$
293
29,437793
100(2,166)298(5)15$ 28,765

a. Unrealized mark-to-market gains or losses, net applicable to non-trading portfolios reported at fair value.
b. Comprised of non-functional currency translation gains/losses, the unutilized portion of the cumulative transfers to the GPG Fundand the cumulative effect related to the adoption of ASU 2016-13 (CECL).

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)47

NOTE H—PENSION AND OTHER POSTRETIREMENT BENEFITSIBRD, IFC and MIGA participate in the defined benefit Staff Retirement Plan (SRP), a Retired Staff Benefits Plan
(RSBP) and the 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
December 31, 2020
RSBP
PEBP

SRP
Benefit Cost
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized priorservice costs a
Amortization of unrecognized net
actuarial losses a
Net periodic pension cost
Of which:
IBRD’s share
IDA’s share

$

161
147
(241)

$

42
26
(40)

$ 27
14
-

5

-

1

Total
$

Six Months Ended
December 31, 2020
RSBP
PEBP

SRP

230
187
(281)

$

321
294
(483)

6

$

2

85
53
(81)

$

55
28
-

9

1

Total
$

461
375
(564)
12

$

77
145

$

3
36

15
$ 56

$

95
237

$

155
289

$

6
72

28
$ 112

$

189
473

$
$

70
75

$
$

17
19

$ 27
$ 29

$
$

114
123

$
$

137
152

$
$

34
38

$
$

$
$

224
249

53
59

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

Table H1.1
In millions of U.S. dollars
Three Months Ended
December 31, 2019
RSBP
PEBP

SRP
Benefit Cost
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized priorservice costs a
Amortization of unrecognized net
actuarial losses a
Net periodic pension cost
Of which:
IBRD’s share
IDA’s share

$

136
171
(256)

$

36
29
(42)

$ 24
19
-

4

1

1

Total
$

Six Months Ended
December 31, 2019
RSBP
PEBP

SRP

196
219
(298)

$

6

273
343
(512)

$

2

72
59
(85)

$

48
36
-

8

2

Total
$

393
438
(597)
12

$

23
75

$

27

20
$ 64

$

43
166

$

45
151

$

54

41
$ 127

$

86
332

$
$

34
41

$
$

12
15

$ 28
$ 36

$
$

74
92

$
$

68
83

$
$

24
30

$ 57
$ 70

$
$

149
183

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 line item.
The following table provides the amounts of IBRD’s pension service cost:
Table H2: Pension service cost
In millions of U.S. dollars

Service cost
Of which:
IBRD’s share a
IDA’s share

SRP
$ 161

Three Months Ended
December 31, 2020
RSBP
PEBP
$ 42
$ 27

$

$

78
83

20
22

$

13
14

Total
$ 230

SRP
$ 321

$ 111
119

$ 152
169

Six Months Ended
December 31, 2020
RSBP
PEBP
$ 85
$ 55
$

40
45

$

26
29

a. Included in Non-interest expense—Administrative line on the Condensed Statement of Income.

48

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

Total
$ 461
$ 218
243

Table H2.1:
In millions of U.S. dollars

Service cost
Of which:
IBRD’s share a
IDA’s share

SRP
$ 136

Three Months Ended
December 31, 2019
RSBP
PEBP
$ 36
$ 24

Total
$ 196

SRP
$ 273

$

$

$

$ 123
150

61
75

16
20

$

11
13

88
108

Six Months Ended
December 31, 2019
RSBP
PEBP
$ 72
$ 48
$

32
40

$

22
26

Total
$ 393
$ 177
216

a. Included in Non-interest expense—Administrative 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 (see Note
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

Administrative Services, net
Derivative Transactions a
Derivative assets, net
Derivative liabilities, net
Pension and Other
Postretirement Benefits
Investments

IDA
$ 219
44
(36)

December 31, 2020
MIGA
IFC
$
21 $
10
-

-

Total
$ 250

IDA
$ 271

44
(36)

53
(74)

June 30, 2020
IFC
MIGA
$
63
$ 13
-

-

$

Total
347
53
(74)

(615)
(556)
(21)
(1,192)
(620)
(477)
(18)
(1,115)
(159)
(159)
(141)
(141)
$ (388)$ (694) $(11) $ (1,093)$ (370)$ (555) $ (5)$ (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

Administrative servicesaDerivative transactions

Other assets
Derivative assets/liabilities – net

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.

Loans and Other Exposures
IBRD has a Local Currency Loan Facility Agreement with IFC, which is capped at $300 million. As of December 31,
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 their lending
capacities are limited, in return for exposure in countries where they have excess lending capacity. Under theagreement, 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 December 31, 2020, assets related
to IBRD’s right to be indemnified under this agreement amounted to $1 million ($1 million—June 30, 2020), whileliabilities related to IBRD’s obligation under this agreement amounted to $1 million ($1 million—June 30, 2020).
These include an accumulated provision for guarantee losses of less than $1 million as of December 31, 2020 and asof June 30, 2020).

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)49

Administrative Services
Expenses jointly incurred by IBRD and IDA are allocated based on an agreed cost-sharing methodology, and amounts
are settled quarterly. For the three and six months ended December 31, 2020, IBRD’s administrative expenses are netof the share of expenses allocated to IDA of $450 million and $905 million, respectively ($479 million and $933
million, respectively—three and six months ended December 31, 2019).
Revenue
Revenue jointly earned by IBRD and IDA is allocated based on an agreed revenue-sharing methodology and amounts
are settled quarterly. For the three and six months ended December 31, 2020, IBRD’s other revenue is net of revenue
allocated to IDA of $63 million and $120 million ($84 million and $150 million—three and six months ended
December 31, 2019), respectively, and is included in Revenue from externally funded activities on the Condensed
Statement of Income. This revenue also includes revenue from contracts with clients, who are not affiliated with IBRD
as follows:
Table I2: Revenue from contracts with clients
In millions of U.S. dollars

Trust fund fees

Three Months Ended December 31,
2020
2019
$
27
$
25

Other

28

Total
Of which:
IBRD's share
IDA's share

43

$

55

$

68

$

29
26

$

33
35

Six Months Ended December 31, Description
2020
2019
$
44
$
47
Administrative and trustee
services for trust funds
52
67
Reimbursable advisory
services and asset
management services
$
96
$
114
$

50
46

$

55
59

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 provide certain services for which it has received consideration in advance. Such considerations are presented ascontract liabilities and are subsequently recognized as revenue, when the related performance obligation 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
December 31, 2020
$
70
182

Receivables
Contract liabilities$

June 30, 2020
114
169

The amount of fee revenue associated with services provided to affiliated organizations that is included in Revenue
from externally funded activities on the Condensed Statement of Income, is 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 December 31,
2020
2019
$
21
$
17
2
1

Six Months Ended December 31,
2020
2019
$ 40
$
34
3
2

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.
50

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)Derivative Transactions
These relate to currency forward contracts entered into by IDA with IBRD acting as the intermediary with the market.
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 Otherliabilities on the IBRD’s Condensed Balance Sheet. 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, pension related items, and thecumulative effects of a change in accounting principle related to the implementation of U.S. GAAP requirements.
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
Six Months Ended December 31, 2020
Amounts
Net
reclassified
Changes
Changes
into net
during theperiodin AOCL
incomeBalance,
beginning of
the fiscal year
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 AOCL
$

(106)
1,214

$

712
(1,155)

$

(19)

$

Balance, end of
the period712(1,174)$606
40(6,745)

-

189

189

(6,556)(89)(5,726)

(443)

12
182

12
(261)

(77)
$ (5,987)$$$

Table J1.1:
In millions of U.S. dollars
Six Months Ended December 31, 2019
Amounts
Net
reclassified
Changes
Changes
into net
during thein AOCL
incomeperiodBalance,
beginning of
the fiscal year
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 AOCL
$

(18)
705

$

(90)
(157)

$

(7)

$

(90)
(164)

Balance, end of
the period
$

(108)
541

(3,678)-86

86(3,592)(112)(3,103)

(247)

12
91

12
(156)

(100)
(3,259)

$

$

$

$

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)51

NOTE K—OTHER FAIR VALUE DISCLOSURES
Valuation Methods and Assumptions
As of December 31, 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
There were no loans carried at fair value as of December 31, 2020 and June 30, 2020. IBRD’s loans 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 December 31, 2020, all of the financial instruments in
IBRD’s investment portfolio were classified as trading. These securities are carried and reported at fair value, or atface value or NAV, which approximates fair value. Where available, quoted market prices are used to determine thefair value of trading securities. Examples include most government and agency securities, mutual funds, exchangetraded equity securities and ABS 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 are used. Unless quoted
prices are available, time deposits are reported at face value, which approximates fair value, as they are short term innature.
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 issued by IBRD 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.
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 long-dated
interest rate volatilities.

52

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)Derivative instruments
Derivative contracts include currency forward contracts, TBA securities, swaptions, exchange traded options andfutures contracts, 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
the standard 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 incorporate significant
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 their respective
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)
Net loans outstanding
Derivative assets, net
Liabilities
Borrowings
Securities sold/lent under repurchaseagreements/securities lending agreements
and payable for cash collateral received
Derivative liabilities, net

December 31, 2020
Carrying Value
Fair Value

June 30, 2020
Carrying Value
Fair Value

$

$

2,005

$

2,005

1,870

$

1,870

94,479215,721
6,585

94,479223,454
6,585

84,161
202,158
3,744

84,161
209,613
3,744

267,900

267,906

243,240

243,247

35
879

36
1,473

36
1,473

35
879

As of December 31, 2020, IBRD’s signed loan commitments were $55.8 billion ($54.8 billion—June 30, 2020) andhad a fair value of $2.2 billion ($1.9 billion—June 30, 2020).
The following tables present IBRD’s fair value hierarchy for assets and liabilities measured at fair value on a recurring
basis. Note that the fair value of alternative investments and certain equities are calculated using NAV. As a result,these amounts are included in the respective asset class totals and not in the fair value hierarchy, in accordance withthe permitted practical expedient under U.S. GAAP.

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)53

Table K2: Fair value hierarchy of IBRD’s assets and liabilities
In millions of U.S. dollars
Fair Value Measurements on a Recurring Basis
December 31, 2020
Level 2
Level 3
Total

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 master netting
agreements e
Cash collateral received
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 c27,9191,900
48530,304
55

$

1
1

$

$

$

28,76831,8652,059
62,692
284

$

9,638
13,214
1
22,853

$

$

$

275
200
475

$

9,913
13,4142$ 23,329
13,582
3,162$ 6,585

$

$

-

$

262,350$5,550$ 267,900

-

25

-

25

-

6,515
7,609
1
14,125

213
73
286

6,728
7,682
1
$ 14,411

$

$

Less:
Amounts subject to legally enforceable master netting
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 $3,172 million relating to payable for cash collateral received.
e. Includes $53 million CVA.
f. Includes $3 million DVA.

54

$ 56,687
33,765
2,059
1,144
485
$ 94,140339

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)$

13,532879

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

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 andsecurities lent under securities lending
agreements d
Derivative Liabilities
Currency swaps b
Interest rate swaps
Other c19,3681,850
382
21,600
53

$

-

$

$

$

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

$

5,916
14,154
3
20,073

$

$

$

157
141
298

$ 48,449
30,982
3,012
942
382
$ 83,767
394
$

6,073
14,295
3$ 20,371
14,502
2,125$ 3,744

$

$

-

$

237,893$

5,347$ 243,240

-

9

-

9

-

7,277
8,207
2
15,486

310
163
473

7,587
8,370
2
$ 15,959$

Less:
Amounts subject to legally enforceable masternetting agreements f
Derivative Liabilities, net$$

14,486
1,473

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.
f. Includes $12 million DVA.

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, and unobservable
inputs. The significant unobservable inputs used in the fair value measurement of structured bonds and swaps arecorrelations and long-dated market 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. market 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 six months ended
December 31, 2020, and the fiscal year ended June 30, 2020, the interest rate volatilities for certain currencies wereextrapolated 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.

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

55

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
December 31,
2020

Fair Value atJune 30,
2020

Valuation
Technique

Borrowings$5,550$5,347

Discounted
Cash Flow

Derivative
asset/(liabilities)$189($175)

Discounted
Cash Flow

Unobservable input

Range (average),
December 31, 2020

Range (average),
June 30, 2020

Correlations-19% to 87% (14%)-55% to 76% (7%)

Interest rate
volatilities

18% to 49% (34%)

37% to 412% (183%)

Correlations-19% to 87% (14%)-55% to 76% (7%)

Interest rate
volatilities

18% to 49% (34%)

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 December 31,
2020
Level 3
Level 2
Borrowings
Transfer into (out of)Transfer (out of) into

$
$

-

$
$

Six Months Ended December
31, 2020
Level 2
Level 3

-

$
$

21
21

$
$

(21)
(21)

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

$

3
3

$

(3)
(3)

$

3
3

$

(3)
(3)

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

$

$

(2)
(2)
1

$

$

(3)

$

Total Derivative Transfers, net

3

2
2
(1)

$

$

$

Table K4.1
In millions of U.S. dollars
Three Months Ended December 31,
2019
Level 3
Level 2
Borrowings
Transfer into (out of)Transfer (out of) into$$

Six Months Ended December
31, 2019
Level 2
Level 3464
464

$ (464)$ (464)

$

466
(309)
$ 157

$ (466)309$ (157)

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

$

26
26

$ (26)
(26)

$

26
(1)
25

$

(26)
1
(25)

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

$

$

$

$

9
9
34

$

Total Derivative Transfers, net

26

(9)
(9)
(34)

56

$ (26)$IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)$

The following tables provides a summary of changes in the fair value of IBRD’s Level 3 borrowings and derivatives:
Table K5: Borrowings Level 3 changes
In millions of U.S. dollars
Three Months Ended December 31
2020
2019
Beginning of the period/fiscal year
IssuancesSettlements
Total realized/unrealized mark-tomarket losses (gains) in:
Net income
Other comprehensive income

$

5,266
132
(177)

$

5,387
295
(257)

216
113

Transfers to (from) Level 3, net
$

$

5,347
166
(443)

93
73

-

End of the period

Six Months Ended December 31
2020
2019

335
166

(464)

5,550

$

5,127

$

153
57

(21)
$

4,941
656
(523)

(157)

5,550

$

5,127

Table K6: Derivatives Level 3 changes
In millions of U.S. dollars
Three Months Ended December 31, 2020
Derivatives, Assets/(Liabilities)
Currency
Interest Rate
Swaps
Swaps
Total
Beginning of the period/fiscal year
IssuancesSettlements
Total realized/unrealized mark-tomarket gains in:
Net income
Other comprehensive income
Transfers to (from) Level 3, net
End of the period

$

$

(101)
4
(8)
135
34
(3)
61

$

$

40
2
10
73
3
128

$

$

(61)
6
2
208
37
(3)
189

Six Months Ended December 31, 2020
Derivatives, Assets/(Liabilities)
Currency Interest Rate
Swaps
Swaps
Total
$

$

(153)
3
(11)

$

(22)
2
5

$ (175)
5
(6)

174
49
(1)
61

138
5
$ 128

312
54
(1)
$ 189

Table K6.1:
In millions of U.S. dollars
Three Months Ended December 31, 2019
Derivatives, Assets/(Liabilities)
Currency
Interest Rate
Swaps
Swaps
Total
Beginning of the period/fiscal year
IssuancesSettlements
Total realized/unrealized mark-tomarket gains in:
Net income
Other comprehensive income
Transfers to (from) Level 3, net
End of the period

$

$

(58)
7
65
23
(26)
11

$

$

(13)
29
(4)
1
13

$

$

(58)
(13)
36
61
24
(26)
24

Six Months Ended December 31, 2019
Derivatives, Assets/(Liabilities)
Currency Interest Rate
Swaps
Swaps
Total
$

$

(62)
(4)
11

$ (120)(13)
118$ (182)
(17)
129

83
17
(34)
11

28
(*)
13

111
17
(34)
$ 24

$

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)57

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 K7: Unrealized gains or losses relating to IBRD’s Level 3 borrowings and derivatives
In millions of U.S. dollars
Three Months Ended December 31,
2020
2019
Reported as follows:
Borrowings
Net income aOther Comprehensive Income b
Derivatives
Net income aOther Comprehensive Income c

Six Months Ended December 31,
2020
2019

$

56
(111)

$

(36)
(42)

$

(29)
(164)

$

(125)
(25)

$

(64)
42

$

43
(3)

$

28
59

$

157
(24)

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 on functional currency and Net Change in Debit Valuation Adjustment(DVA) on fair value option elected liabilities, on the Statement of Comprehensive Income.
c. Amounts are included Currency translation adjustment on functional currency, on the Statement of Comprehensive Income.

Table K8: Borrowings fair value and contractual principal balance
In millions of U.S. dollars
December 31, 2020
June 30, 2020

Fair Value$ 267,900$ 243,240

Principal Amount Due
Upon Maturity$
260,694$
238,674$$

Difference
7,206
4,566

The following table provides information on the changes in fair value due to the change in IBRD’s own credit risk forfinancial liabilities measured under the fair value option, included in the Condensed Statement of Other
Comprehensive Income:Table K9: Changes in fair value due to IBRD’s own credit risk
In millions of U.S. dollars
Unrealized mark-to-market gains/(losses) due to DVA on fair value option electedliabilities
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
December 31, 2020
$
(550)
(8)
$
(558)

Six Months Ended
December 31, 2020$
(1,155)(19)$(1,174)Three Months Ended
December 31, 2019
$
(218)
(7)
$
(225)

Six Months Ended
December 31, 2019
$
(157)
(7)
$
(164)

Table K9.1
In millions of U.S. dollars
Unrealized mark-to-market gains/(losses) due to DVA on fair value option electedliabilities
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

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 K10: 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

58

December 31, 2020$

40

June 30, 2020
$

1,214

IBRD Condensed Quarterly Financial Statements: December 31, 2020 (Unaudited)Table K11: Unrealized mark-to-market gains or losses on investments-trading, and non-trading portfolios,net
In millions of U.S. dollars

Investments-Trading
Non trading portfolios, net
Loan derivatives—Note F
Other asset/liability management
derivatives, net
Borrowings, including derivatives—Notes E and F
Client operations derivatives
Total

Three Months Ended
December 31, 2020
Unrealized
gains (losses)
Unrealized
Realized
excluding
gains
gains
realized(losses)(losses)amounts a$ (89)
$
147
$ 58
1

$

1

$

453

453

(252)

(252)

276
12
489

277b
12
$ 490

Realized
gains(losses)$ (666)Six Months Ended
December 31, 2020
Unrealized
gains (losses)
excludingrealizedamounts a
$
795

1

$

1

$

Unrealized
gains(losses)
$ 129

757

757

(388)

(388)

452
14
835

453b
14
836

$

Table K11.1:
In millions of U.S. dollars

Investments-Trading
Non trading portfolios, net
Loan derivatives—Note F
Other asset/liability management
derivatives, net
Borrowings, including derivatives—Notes E and F
Client operations derivatives
Total

Three Months Ended
December 31, 2019
Unrealized
gains (losses)
Unrealized
Realized
excluding
gains
gains
realized(losses)(losses)amounts a
$ 235
$
(143)
$
92
6
$

6

$

Realized
gains(losses)$ 430

Six Months Ended
December 31, 2019
Unrealized
gains (losses)
excludingrealizedamounts a$(284)

Unrealized
gains(losses)
$
146

818

818

-

184

184

(349)

(349)

-

(205)

(205)

(44)
(2)
423

(38)b
(2)
429

7

65
(6)
38

72b
(6)
45

$

$

7

$

$

a. Adjusted to exclude amounts reclassified to realized gains (losses).
b. Includes $794 million of unrealized mark-to-market losses and $1,193 million of unrealized mark-to-market losses related toderivatives associated with borrowings for three and six months ended December 31, 2020, respectively (unrealized mark-tomarket losses of $1,943 million and $7 million—three and six months ended December 31, 2019, respectively).

NOTE L—CONTINGENCIESIn light of the COVID-19 pandemic, IBRD faces additional credit, market and operational risks. The duration of the
COVID-19 pandemic remains difficult to predict at this time, as are the extent and efficacy of economic interventions
by governments 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 this point
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 in various
jurisdictions. The outcome of any existing legal action, in which IBRD has been named as a defendant or codefendant,
as of and for the six months ended December 31, 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: December 31, 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 December 31, 2020, and the related condensed statements of income and comprehensive income for the three‐month and six‐month periods ended December 31, 2020 and 2019, and of changes in retained earnings and cash flows for the six‐month periods ended December 31, 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.

February 12, 2021

60