International Bank for Reconstruction andDevelopment

Management’s Discussion & Analysis
andFinancial Statements
June 30, 2021

Management’s Discussion and Analysis

Contents

Section I: Executive Summary

Summary Financial Results

4

Section II: Overview

Introduction
Presentation
Financial Business Model
Basis of Reporting

6
6
6
8

Section III: Financial Results

Summary of Financial Results
Total Assets
Net Income
Net Income Allocation

10
11
11
17

Section IV: Lending Activities

Net Lending Commitments and Gross Disbursements
Lending Categories
Currently Available Lending Products
Discontinued Lending Products
Waivers

20
21
22
24
24

Section V: Other Development Activities

Guarantees
GrantsExternally-Funded Activities

26
27
28

Section VI: Investment Activities

Liquid Asset Portfolio
Other Investments

31
32

Section VII: Borrowing Activities

Medium- and Long-Term Borrowings

35

Section VIII: Capital Activities

Capital Structure
Usable Equity

36
37

Section IX: Risk Management

Risk GovernanceRisk Oversight and Coverage
Management of IBRD’s Risks
Coronavirus Disease 2019 (COVID-19) Outbreak
Capital Adequacy
Credit Risk
Market Risk
Operational Risk

39
39
42
42
43
44
51
56

Section X: Contractual Obligations

Contractual Obligations

58

Section XI: Pension and Other Post-Retirement Benefits

GovernanceFunding and Investment Policies
Environmental, Social and Governance (ESG) Policies
Projected Benefit Obligation

59
59
60
60

Section XII: Critical Accounting Policies and the Use of
Estimates

Fair Value of Financial Instruments
Provision for Losses on Loans and Other Exposures
Pension and Other Post-Retirement Benefits

61
62
62

Section XIII: Governance and Controls

Business Conduct
General Governance
Executive Directors
Audit Committee
Auditor Independence
External Auditors
Senior Management Changes
Internal Control

63
63
63
64
65
65
65
65

Appendix

Glossary of Terms
Abbreviations and Acronyms
Eligible Borrowing Member Countries by Region
List of Tables, Figures and Boxes

66
67
68
68

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

1

Management’s Discussion and Analysis

This Management’s Discussion and Analysis (MD&A) discusses the financial results of the International Bank for
Reconstruction and Development (IBRD) for the fiscal year ended June 30, 2021 (FY21). IBRD undertakes noobligation to update any forward-looking statements. Certain reclassifications of prior years’ information have been
made to conform with the current year’s presentation. For discussion of IBRD’s financial results for the year ended
June 30, 2020 as compared to the year ended June 30, 2019, see Section III – Financial Results in IBRD’s MD&A
and Financial Statements for the fiscal year ended June 30, 2020. 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

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

Income Statement (Section III)
Board of Governors-approved and other transfers
Net income (loss)
Balance Sheet
Total assets
Net investment portfolio (Section VI)
Net loans outstanding (Section IV)
Borrowing portfolio c (Section VII)
Total equity
Non-GAAP Measures:
Allocable Income (Section III)
Allocable income
Allocated as follows:
General Reserve dInternational Development Association
SurplusUsable Equity f g (Section VIII)
Equity-to-loans ratio h (See Section IX)

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

2021

2017

$ 30,523
23,691
13,590$27,976
20,238
10,622$

23,191
20,182
10,091$

23,002
17,3895,638$

22,611
17,861
8,731

$

(411)
2,039

$

(340)
(42)

$

(338)
505

$

(178)
698

$

(497)
(237)

$ 317,301
85,831
218,799
253,656
48,078$296,804
82,485202,158
237,231
40,387$

283,031
81,127
192,752
228,763
42,115$

263,800
73,492
183,588
213,652
41,844$

258,648
71,667
177,422
207,144
39,798

$

$

1,381

$

1,190

$

1,161

$

795

1,248
874
274
100

$ 49,997
22.6%

950
431 e
$

47,138
22.8%

831
259
100
$

45,360
22.8%

913
248
$

43,518
22.9%

672
123
$

41,72022.8%

a. Amounts include guarantee commitments and guarantee facilities that have been approved by the Executive Directors (referred toas “the Board” in this document), and are net of full terminations and cancellations relating to commitments approved in the same
fiscal year.
b. Amounts include transactions with the International Finance Corporation (IFC) and loan origination fees.
c. Includes associated derivatives.
d. The June 30, 2021 amount represents the transfer to the General Reserve from FY21 net income, which was approved by the
Board on August [5], 2021.
e. On January 25, 2021, the Board of Governors approved a transfer of $331 million to IDA from Surplus, which was made on
February 1, 2021.
f. Excludes amounts associated with unrealized mark-to-market gains/losses on non-trading portfolios, net and related cumulativetranslation adjustments.
g. As defined in Table 28: Usable Equity. Usable Equity includes the transfer to the General Reserve from FY21 net income, which
was approved by the Board on August [5], 2021.
h. As defined in Table 29: Equity-to-Loans Ratio.

2

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section I: Executive Summary

Section I: Executive Summary
With its many years of experience and its depth of knowledge in the international development arena, IBRD plays a
key role in achieving the World Bank Group’s (WBG 1 ) goal of helping countries achieve better development
outcomes. IBRD contributes to both the WBG’s twin goals of ending extreme poverty and promoting sharedprosperity, and to the Forward Look2, by providing countries with loans, advisory services and analytical support.
IBRD and its affiliated organizations seek to help countries achieve improvements in growth, job creation, poverty
reduction, governance, the environment, climate adaptation and resilience, human capital, infrastructure and debt
transparency.
To meet its development goals, the WBG has been increasing its focus on country programs in order to improve
growth and development outcomes. The Bank’s 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 continues to be prioritized for countries atlower levels of income, and fragile and conflict-affected states. The new model also strengthens the focus on Africawith two Vice Presidencies, one focused on Western and Central Africa and the other on Eastern and Southern Africa.
In response to the global outbreak of the coronavirus disease (COVID-19) and to support global public goods, IBRD
has been working in solidarity with partners at global and country levels to support its borrowing countries. A
significant portion of the FY21 commitments supported COVID-19 related efforts. IBRD’s operational response
includes three stages: a) Relief stage that involves emergency response to the health threat, b) Restructuring stage that
focuses on strengthening health systems, restoring human capital, and restructuring of firms and sectors, and c)
Resilient recovery stage that entails new opportunities to build a more sustainable, inclusive and resilient future. Eachstage is structured through four thematic crisis response pillars: i) Saving lives, ii) Protecting the poor and vulnerable,iii) Ensuring sustainable business growth and job creation, and iv) Strengthening policies, institutions, and investments
for rebuilding better.

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; andimproving the business model.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

3

Section I: Executive Summary

Management’s Discussion and Analysis

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. In FY21, IBRD had allocable income of $1,248
million. On August [5], 2021, the Executive Directors (the Board), approved the retention of $874 million in the
General Reserve out of the allocable income for the fiscal year ended June 30, 2021.

Net Income and Allocable Income
IBRD had net income of $2,039 million for the fiscal year ended June 30, 2021, compared with a net loss of $42
million for the fiscal year ended June 30, 2020. The increase in FY21 was largely due to $1,218 million of net
unrealized mark-to-market gains on IBRD’s non-trading portfolios in FY21, primarily from derivatives in the loan
portfolio. In FY20, IBRD recorded unrealized mark-to-market losses of $1,137 million on IBRD’s non-trading
portfolios. Given IBRD’s intention to maintain its non-trading portfolio positions, unrealized mark-to-market gains
and losses are not included in IBRD’s allocable income.
Allocable income is the measure IBRD uses for making net income allocation decisions. IBRD’s FY21 allocable
income was $133 million lower than the $1,381 million for the fiscal year ended June 30, 2020. The decrease inallocable income was primarily driven by a higher loan loss provisioning charge of $147 million in FY21, comparedwith a loan loss provisioning charge of $23 million in FY20.
In millions of U.S dollars

Allocable income

Net Income/Loss

Unrealized gains/losses

2,500
1,500
500
-500
-1,500-2,500

FY17

FY18

FY19

FY20

FY21

Lending Operations
IBRD’s lending operations during the fiscal year ended June 30, 2021 provided $30.5 billion of net commitments and$13.6 billion of net loan disbursements. Net loan disbursements were the key driver of the $16.6 billion increase in
net loans outstanding, from $202.2 billion at the end of the fiscal year ended June 30, 2020, to $218.8 billion at theend of the fiscal year ended June 30, 2021.
In billions of U.S dollars

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

Jun 17 Jun 18 Jun 19 Jun 20 Jun 21

Net Loans outstanding

Disbursements

Net Commitments

0

250
200
Gross

150

100
Net
Jun 17 Jun 18 Jun 19 Jun 20 Jun 21

50
0

Jun 17 Jun 18 Jun 19 Jun 20 Jun 21

Net commitments were $2.5 billion higher compared with the same period in FY20 (Table 9), reflecting the strong
support IBRD has provided during the COVID pandemic, including $1.5 billion of newly approved financing for
vaccines as of June 30, 2021, benefiting 10 borrowing countries. The regions with the largest share of commitments
during FY21 were Latin America and the Caribbean with 31% and East Asia and Pacific with 22%.

4

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section I: Executive Summary

Net Investment Portfolio
IBRD’s investment portfolio increased by $3.3 billion, from $82.5 billion
as of June 30, 2020, to $85.8 billion as of June 30, 2021. The investments
remain concentrated in the upper end of the credit spectrum, with 72%
rated AA or above, reflecting IBRD’s objective of principal protection
and its preference for high-quality investments.

In billions of U.S dollars

Net Investment Portfolio

300
250
200
150
100
50
0

Jun 17 Jun 18 Jun 19 Jun 20 Jun 21

Borrowing Portfolio
IBRD raised net medium and long-term debt of $15.8 billion during FY21
(with new issuances of $67.5 billion), resulting in $16.5 billion increase in
the borrowings portfolio during the year, from $237.2 billion as of June 30,
2020, to $253.7 billion as of June 30, 2021. The funds raised financed
development lending operations and satisfied liquidity requirements. The
debt issuances were highly diversified in terms of investor types and location,with an average maturity of 8.1 years.

In billions of U.S dollars
300

Borrowing Portfolio

250
200
150
100
50
0

Jun 17 Jun 18 Jun 19 Jun 20 Jun 21

Usable Equity and Equity-to-Loans Ratio
IBRD’s usable equity increased by $2.9 billion, from $47.1 billion as of June30, 2020 to $50.0 billion as of June 30, 2021. In FY21, IBRD received $1.2
billion of paid-in capital under the General and Selective Capital Increases(GCI and SCI), bringing the cumulative amounts received to $2.8 billion,
37% of the total amount expected.
The Equity-to-Loans ratio was 22.6% as of June 30, 2021, marginally lower
compared with 22.8% as of June 30, 2020, as the increase in the loan andother exposures outpaced the increase in usable equity.

30

Equity to Loans ratio

20
10
0

Jun 17 Jun 18 Jun 19 Jun 20 Jun 21

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

5

Management’s Discussion and Analysis

Section II: Overview

Section II: Overview
Introduction
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 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 andlower-income countries to support sustainable development. By operating across a full range of country clients, IBRD
maintains a depth of development knowledge, uses its convening power to promote development and advance theglobal public goods agenda, and coordinates responses to regional and global challenges.
Member countries use IBRD’s technical advice and analysis and convening power to develop or implement better
policies, programs, and reforms that help sustain development over the long term. The products delivered range fromdevelopment data, to reports in key social economic and social issues at the local, country, regional and global levels.
The products also include knowledge-sharing workshops focused on local issues, to flagship events and fora to address
the most pressing global development challenges.

Presentation
This document provides management’s discussion and analysis of the financial condition and results of operations for
IBRD for the fiscal year ended June 30, 2021. At the end of this document there is a Glossary of Terms and a list of
Abbreviations and Acronyms.
Certain reclassifications of prior years’ information have been made to conform to the current year’s presentation. For
further details, see Note A: Summary of Significant Accounting and Related Policies in the Notes to the Financial
Statements for the year-ended June 30, 2021.

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 lower-income countries, long-term loans withmaturities of up to 35 years. Borrowers may customize their repayment terms to meet their debt management or projectneeds, and loans are offered on fixed and variable terms in multiple currencies. Effective April 1, 2021, IBRD’s
offering of loans on fixed spread terms has been suspended (see section IX: Risk Management). Borrowers havegenerally preferred loans denominated in U.S dollars and euros. IBRD also supports its borrowers by providing accessto risk management tools 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

6

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section II: Overview

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 below illustrates IBRD’s financial business model.
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 trading portfolios) with that of its
liabilities (borrowing portfolio), and to stabilize earnings on the portion of the loan portfolio funded by equity. See
Section IX: Risk Management for additional details on how IBRD uses derivatives.
Management believes that these risk management strategies, taken together, effectively manage market risk in IBRD’soperations from an economic perspective. However, these strategies entail the use of derivatives, which introduce
volatility in 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, provisions for losses on loans and other exposures 3 (LLP), as well as transfers
to Reserves, Surplus, and for other development purposes, including transfers to IDA.
In addition, other development activities generate noninterest 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, which relate primarily to Reimbursable Advisory Services (RAS), Externally Financed Outputs(EFO), and the Reserves Advisory Management Program (RAMP). Noninterest revenue from externally funded
activities provides additional capacity to support the development needs of client countries.

3

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

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

7

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

Equity

IDA, Other
transfers &Surplus

Allocable
Income

The financial results for FY21 continue to reflect the impact of the measures implemented in prior years to enhance
IBRD’s financial sustainability.
In 2018, the Board of Governors (the Governors) endorsed a capital package consisting of a series of policy andfinancial measures designed to enhance IBRD’s 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, 20182) new loan pricing measures, which became effective from July 1, 20183) an increase in the Single Borrower Limit (SBL) with differentiation based on per capita income4) continued efficiency measures and administrative simplification, and
5) 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.

Basis of Reporting
Audited 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 other derivatives arereported at fair 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
for deriving allocable income, as discussed below.

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 mark-8

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section II: Overview

to-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 8 for details of the adjustments to reported net income required
to calculate allocable income.
The volatility in IBRD’s reported net income is primarily driven by the unrealized mark-to-market gains and losseson the derivative instruments in IBRD’s non-trading portfolios: loans, borrowings, and other asset/liability
management (ALM). IBRD’s risk management strategy entails the use of derivatives to manage market risk. These
derivatives are primarily used to align the interest rate and currency bases of its assets and liabilities. IBRD has elected
not to designate any hedging relationships for accounting purposes. Rather, all derivative instruments are reported atfair value on the Balance Sheet, with changes in fair values accounted for through the Statement of Income.
In line with its financial risk management policies, for the non-trading portfolios, unrealized gains and losses from
instruments carried at fair value (borrowings and associated derivatives, and derivatives in the loan and other ALM
portfolios) are excluded from allocable income.
For the trading portfolio (investment portfolio), allocable income includes both realized and unrealized mark-tomarket gains and losses.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

9

Section III: Financial Results

Management’s Discussion and Analysis

Section III: Financial Results
The following section is a discussion of IBRD’s Results of Operations on a GAAP and Allocable Income basis, forthe fiscal year-ended June 30, 2021 compared with the fiscal year-ended June 30, 2020, as well as changes in its
financial position between June 30, 2021 and June 30, 2020.

Summary of Financial Results
Table 1: Condensed Statement of Income
In millions of U.S. dollars
For the fiscal year ended June 30,
Interest Revenue, net of Funding Costs
Loan interest revenue, net
Other ALM derivatives, net
Investment revenue, net
Net Interest Revenue
Provision for losses on loans and other exposures a
Net non-interest expenses (Table 5)
Net other revenue (Table 4)
Board of Governors-approved and other transfers
Non-functional currency translation adjustments gains, net b
Unrealized mark-to-market gains (losses) on non- trading
portfolios, net c
Net Income (Loss)

2021
$

$

$

2020

1,754
604
86
2,444
(147)
(1,395)
295
(411)
35
1,218

$

2,039

$

$

Impact on income(Decrease) Increase
(395)

2,149
161
104
2,414
(23)
(1,239)
226
(340)
57
(1,137)

(18)
(124)
(156)
(71)
(22)

51
411
(35)
1,248

69

2,355
48
71
22

3
340
(57)
1,137 (2,355)(1,218)
$

30

2,081

(42)

Adjustments to Reconcile Net Income (Loss) to Allocable Income
Pension d and other adjustments
Board of Governors-approved and other transfers
Non-functional currency translation adjustments gains, net b
Unrealized mark-to-market (gains) losses on non- trading
portfolios, net c
Allocable Income

443

$

1,381

(133)

a. Includes a reduction (expense) in the recoverable asset of less than $1 million for FY21 and $5 million for FY20. These amounts
relate to the change in the value of the risk coverage received (recoverable assets) associated with the MDB EEA transactions
and are included in other non-interest revenue on IBRD’s Statement of Income.
b. Translation adjustments relating to assets and liabilities denominated in non-functional currencies.
c. Adjusted to exclude amounts reclassified to realized gains (losses).
d. Adjustment to pension accounting expense to arrive at pension plan contributions. Pension plan contributions were $245 million
for FY21 and $229 million for FY20.

IBRD’s principal assets are its loans to member countries. These are financed by IBRD’s equity and borrowings fromthe capital markets.
Table 2: Condensed Balance Sheet
In millions of U.S. dollars
As of June 30,
Investments and due from banks
Net loans outstanding a
Derivative Assets, net
Other assets
Total Assets
Borrowings
Derivative Liabilities, net
Other liabilities
EquityTotal Liabilities and Equity

$

$

$

2021
90,251
218,799
3,355
4,896
317,301
260,076
1,222
7,925
48,078317,3012020
86,031
202,158
3,744
4,871$ 296,804
243,240
1,473
11,70440,387$ 296,804

Variance$a. The fair value of IBRD’s loans was $223,687 million as of June 30, 2021 ($209,613 million – June 30, 2020).

10

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section III: Financial Results

Total Assets
As of June 30, 2021, total assets grew by 7% compared with June 30, 2020. The growth was primarily due to theincrease in net loans outstanding resulting from positive net disbursements during the fiscal year.
The following is a discussion of the key drivers of IBRD’s financial performance, including a reconciliation between
IBRD’s reported net income and allocable income.

Net Income
IBRD’s net income was $2,039 million in FY21, compared with a net loss of $42 million in FY20. The increase in
net income in FY21 primarily reflects unrealized mark-to market gains on the loan-related derivatives, mainly driven
by the increase in interest rates in FY21 (see Table 1 and Notes to Financial Statements, Note L: Fair Value
Disclosures, Table L11).

Results from Lending activities
Loan Interest Revenue, net
Loans are funded by equity and borrowings raised in the capital markets. Under IBRD’s pricing policy, the lending
rates for all of IBRD’s loans are based on the underlying cost of the borrowings funding these loans. After the effectof related swaps (see Figure 23 and Figure 24), the loan and borrowing portfolios are based on variable interest rates,
and the portion of the loan portfolio funded by equity is therefore sensitive to changes in interest rates.
IBRD’s FY21 Loan interest revenue, net was $1,754 million, a decrease of $395 million compared with $2,149 million
in FY20. The decrease was mainly driven by the effect of the decreasing average interest rate environment on the
portion of the loan portfolio which is sensitive to interest rate movements between the two years. This was partially
offset by the higher lending volume during the period, as well as the impact of the pricing measures previously
adopted.
Other ALM derivatives moderate the impact of interest rate changes on the portion of the loan portfolio, which issensitive to interest rate movements, stabilizing the net interest revenue earned from these loans (see Figure 5). As
illustrated in Table 1, the combined effect of the increase in interest revenue from Other ALM derivatives, net of $443
million and the decrease in Loan interest revenue, net of $395 million from FY20 to FY21, was an overall increase of$48 million.

Loan Portfolio
As of June 30, 2021, IBRD’s net loans outstanding totaled $218.8 billion, $16.6 billion or 8% higher than June 30,
2020 (see Figure 3). The increase was mainly attributable to $13.6 billion of net loan disbursements in FY21, as wellas currency translation gains of $2.7 billion, primarily due to the 6.1% appreciation of the euro against the U.S. dollar
during the year.
Gross disbursements were $23.7 billion, 17% higher compared to FY20, primarily driven by a higher level of
disbursements for Development Policy Financing (DPF) operations (see Section IV).

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

11

Section III: Financial Results

Management’s Discussion and Analysis
Table 3: Net Loans Outstanding activity
In millions of U.S. dollars

Figure 3: Net Loans Outstanding$

Activity during the year:
Gross loan disbursements

23,691

Loan repayments(10,101)

Change in accumulated provision for loan losses

342aChange in deferred loan income(15)

Translation adjustments

2,724

Total activity$

250

202,158

16,641(In Billions of U.S. dollars)

Net Loans outstanding as of June 30, 2020

350

Loan interest revenue, net and Other ALM derivatives,
net combined

202

219

100
50

FY19

FY20

FY21

300

Loan - Weighted Average Return
before funding costs (after swaps)

250

2,000

200

1,500

100

Weighted Average
Funding Cost
(after swaps)

50

Derived Spread

150

1,000
500
0

FY21

Figure 5: Derived Spread
Basis
PointsLoan Interest Revenue, net

2,500

193

FY20

150

0

Net Loans outstanding as of June 30, 2021
$ 218,799
a. Includes a decrease of $465 million in the accumulated provision for loan
losses as of July 1, 2020 due to the adoption of ASU 2016-13 (CECL). See
Notes to Financial Statements, Note D: Loans and Other Exposures.

Figure 4: Loan Interest Revenue, net
In millions of U.S. dollars

200

FY19

FY17

FY18

FY19

FY20

FY21

0
Jun-17

Jun-18Jun-19Jun-20Jun-21Results from Investing activities
Net Investment Revenue
During FY21, interest revenue from investments, net of funding costs, was $86 million, compared with $104 million
during FY20. The lower net investment revenue was mainly due to the lower interest rate environment during theyear.

Investment Portfolio
IBRD’s investment portfolio consists mainly of the liquid asset portfolio. As of June 30, 2021, the net investment
portfolio totaled $85.8 billion, with $82.8 billion representing the liquid asset portfolio. This compares with $82.5
billion a year earlier, of which $79.9 billion represented the liquid asset portfolio (see Note C: Investments in theNotes to the Financial Statements). The increase in the liquid asset portfolio is primarily due to proceeds from new
debt issuances, partially offset by net loan disbursements during FY21 (see Section IX).

12IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section III: Financial Results

Figure 6: Net Investment Portfolio
In billions of U.S. dollars
100

Liquid asset portfolio

80

Other investments portfolio

2

2

3

79

80

83

FY19

FY20

FY21

60
40
20
0

Results from Borrowing activities
Borrowing Portfolio
As of June 30, 2021, the borrowing portfolio (including associated derivatives) totaled $253.7 billion, $16.5 billion
higher than June 30, 2020 (see Note E: Borrowings in the Notes to the Financial Statements). The increase wasprimarily due to net new medium and long-term debt issuances during the year.
In FY21, to fund its operations, IBRD raised medium-and long-term debt of $67.5 billion, $7.5 billion less than FY20
(see Table 24). The decrease in medium-and long-term debt issuances in FY21 is primarily due to lower debt servicing
and refinancing requirements.
Figure 7: Borrowing Portfolio (original maturities)
In billions of U.S. dollars
Medium-and long-term Borrowings
300
250

Short-term Borrowings
10

10

11

219

226

244

FY19

FY20

FY21

200
150
100
50
0

Net Other Revenue
Net other revenue includes certain non-interest sources of revenue. Table 4 provides details on the composition of net
other revenue; The increase of $69 million was mainly due to the higher asset return from the Post-Employment
Benefit Plan (PEBP) and Post-Retirement Contribution Reserve Fund (PCRF), partially offset by the lower impact
from the transactions associated with the Pandemic Emergency Financing Facility (PEF) in FY21, as the trades
matured in July 2021.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

13

Management’s Discussion and Analysis

Section III: Financial Results

Table 4: Net Other Revenue
In millions of U.S. dollars
For the fiscal year ended June 30,
Loan commitment fees$
Guarantee fees
Net Earnings from Post-Employment Benefit Plan (PEBP) and Post-Retirement
Contribution Reserve Fund (PCRF)
PEF and PAF a
OthersNet other revenue (Table 1)
$

2021
115
14

$

2020
115
15

$

Variance
(1)

168

17

151

(6)
4
295

53
26
226

(59)
(22)
69

$

$

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).

Expenses
Net Non-Interest Expenses
As shown in Table 5, IBRD’s net non-interest expenses are primarily comprised of administrative expenses, net ofrevenue 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 administrative expenses and revenue 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 5 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
1,500
1,400
1,300
1,200
1,100

1,000
900
800

FY17

FY18

FY19

FY20

FY21

The increase in net non-interest expenses in FY21 relative to FY20 was primarily due to: a) the increase in pension
costs driven by a decrease in the discount rate in FY20, which resulted in higher amortization of unrecognized actuarial
losses in FY21, and b) an increase in the share of costs allocated to IBRD. The increase in administrative expenses
was partially offset by a significant reduction in travel costs due to COVID-19.
IBRD monitors its net administrative expenses as a percentage of its loan spread revenue (Box 2) and certain fee
revenue, using an efficiency measure referred to as the Budget Anchor. In FY21, IBRD’s Budget Anchor was 66%, adecline of 8 percentage points compared with 74% in FY20. The decline reflects the increase in IBRD’s loan spreadrevenue during the year (see Figure 9 and Table 6 for details of the Budget Anchor components).

14

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section III: Financial Results

Table 5: Net Non-Interest Expenses
In millions of U.S. dollars
For the fiscal year ended June 30,
Administrative expenses
Staff costs
TravelConsultant fees and contractual services
Pension and other post-retirement benefits a
Communications and Technology
Premises and equipment
Other expenses

2021

Total administrative expenses b
Grant Making Facilities (See Section V)
Revenue from externally funded activities (See Section V)
Reimbursable revenue – IBRD executed trust funds
Reimbursable advisory services
Revenue - Trust fund administration
Restricted revenue (primarily externally financed outputs)
Revenue - Asset management services
Other revenue
Total Revenue from externally funded activities
Total Net Non-Interest Expenses (Table 1)

2020

Variance

$

1,006
13
473
452
63
123
23

$

957
112
443
308
55
130
18

$

$

2,153

$

2,023

$

$

49
(99)
31
142
8
(7)
6

18

18

130
-

(470)
(53)
(44)
(18)
(18)
(173)
(776)
1,395

(470)
(67)
(42)
(29)
(17)
(177)
(802)
1,239

14
(2)
11
(1)
4
26
156

$

$

a. Includes all components of pension costs. See Notes to Financial Statements, Note J: Pension and Other Post-Retirement
Benefits.
b. Includes expenses related to IBRD executed trust funds of $470 million for FY21 and FY20, respectively.
Table 6: Budget Anchor Ratio
In millions of U.S. dollars
For the fiscal year ended June 30,
Total net Non-Interest Expenses (From Table 5)
Pension adjustment (From Table 8) a
EFO adjustment a
Net administrative expenses – for Budget Anchor

$
$

2021
1,395
(207)
(6)
1,182

$
$

2020
1,239
(79)
6
1,166

Variance
156
(128)
(12)
$
16
$

Loan spread revenue, net
1,671
1,450
221
Loan commitment fees (From Table 4)
115
115
Guarantee fees (From Table 4)
14
15
(1)
Budget anchor revenue$ 1,800$ 1,580$220
Budget Anchor
66%
74%
a. These adjustments are made to arrive at net administrative expenses used for allocable income purposes. For more information
see Table 8 in Net Income Allocation section.
Figure 9: Budget Anchor
In millions of U.S. dollars
2,000

79%

80%
74%

1,500

66%

75%

1,000

70%

500

65%

-

FY19
Net administrative expenses

FY20
Budget anchor revenue

FY21

60%
Budget anchor ratio

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

15

Management’s Discussion and Analysis

Section III: Financial Results

Provision for losses on loans and other exposures
In FY21, IBRD recorded a provision of $147 million for losses on loans and other exposures under the Current
Expected Credit Losses (CECL) methodology (see section XII: Critical Accounting Policies and the Use of Estimates).
In FY20, under the previous GAAP methodology, the provision was $23 million. The increase in the FY21
provisioning requirement was largely due to the loss given default (“severity”), which under CECL is more sensitive
to interest rates as virtually the entire IBRD loans carry a variable interest rate. The impact in FY21 reflects theincrease in the implied forward interest rates during the year. The accumulated provision for losses on loans and otherexposures of $1,647 million as of June 30, 2021 was less than 1% of total exposures, largely unchanged comparedwith the prior year ($1,698 million as of June 30, 2020 and less than 1% of total exposures). See Notes to Financial
Statements, Note D: Loans and Other Exposures.

Board of Governors-approved and other transfers
In FY21, IBRD recorded expenses of $411 million for Board of Governors-approved and other transfers, whichprimarily relates to the transfer to IDA from FY20 allocable income (see Notes to the Financial Statements, Note G:
Retained Earnings, Allocations and Transfers).

Unrealized mark-to-market gains/losses on non-trading portfolios
The unrealized mark-to-market gains and losses mainly relate to the loan, borrowing, and other ALM portfolios. Since
these are non-trading portfolios, any unrealized mark-to-market gains and losses associated with these positions, areadjusted out of reported net income to arrive at allocable income. As a result, from a long-term financial sustainability
perspective, income allocations are broadly based on amounts that have been realized (except for the InvestmentsTrading portfolio, as previously discussed). For FY21, $1,218 million of net unrealized mark-to-market gains ($1,137
million net unrealized mark-to-market losses in FY20) were excluded from reported net income to arrive at allocable
income (see Table 1).
Table 7: Unrealized Mark-to-Market gains/losses on non-trading portfolios, net
In millions of U.S. dollars

Borrowings, including derivatives
Loan derivatives
Other ALM derivatives, net
Client operations portfolio
Total

For the fiscal year ended June 30, 2021
Unrealized gains
Realized gains(losses)a(losses)
$
140
$
14
$
2,415
(1,351)
14
$
1,218
$
14
$

Borrowings, including derivatives
Loan derivatives
Other ALM derivatives, net
Client operations portfolio
Total

For the fiscal year ended June 30, 2020
Unrealized gains
Realized gains(losses)a(losses)
$
(362)
$
146
$
(1,957)
(14)
1,204
(22)
63
$
(1,137)$
195$

a. Excludes amounts reclassified to realized mark-to-market gains (losses).

16

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Total
154
2,415
(1,351)
14
1,232

Total
(216)
(1,971)
1,204
41
(942)

Management’s Discussion and Analysis

Section III: Financial Results

Loan Portfolio
Loans are reported at amortized cost, whereas the derivatives which convert loans to variable-rate instruments arereported 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 evident in the reported net
income. Net income includes only the unrealized mark to market gains and losses on loan related derivatives, which
in FY21 was a gain of $2,415 million, primarily due to the increase in interest rates during the year. See Section IX:
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 theassociated bonds, except for changes in IBRD’s own credit, referred to as the Debit Valuation Adjustment (DVA)
which are recorded in Accumulated Other Comprehensive Loss (AOCL) as required by U.S. GAAP. In FY21, the
DVA represents $1,432 million of unrealized mark-to-market losses, resulting mainly from the tightening of IBRD’s
credit spreads relative to LIBOR during the year. As of June 30, 2021, IBRD’s Balance Sheet included a cumulative
DVA of $218 million loss reflected in AOCL, associated with the changes in its own credit for financial liabilities
measured under the fair value option (See Notes to the Financial Statements, Note L –Fair Value Disclosures).

Other ALM Portfolio
IBRD uses derivatives to stabilize its interest revenue from the portion of loans which is sensitive to interest rates.
The Other ALM portfolio consists of derivatives which convert variable rate cash flows to fixed rate cash flows. In
FY21, IBRD recorded unrealized mark to market losses of $1,351 million on this portfolio, primarily due to theincrease in interest rates during the year. As of June 30, 2021, the duration of this portfolio was 3.7 years, within the
Board established limit of 5 years.

Net Income Allocation
Net income allocation decisions are based on allocable income. Management recommends to the Board allocations
out of net income at the end of each fiscal year to augment reserves and support developmental activities. As illustrated
in Table 8, the key differences between allocable income and reported net income relate to unrealized mark-to-market
gains and losses on IBRD’s non-trading portfolios, and expenses related to Board of Governors-approved and othertransfers. All of the adjustments between reported income and net income are recommended by management andapproved by the Board.
Board of Governors-approved and other transfers
Board of Governors-approved and other transfers refer to the allocations recommended by the Board and approved by
the Governors, as part of the prior year’s net income allocation process and subsequent decisions on uses of surplus,
as well as on payments from restricted retained earnings.
Since these amounts primarily relate to allocations out of IBRD’s FY20 allocable income, Surplus, or restricted
retained earnings, they are excluded from FY21 reported net income in calculating FY21 allocable income.
Non-functional currency translation adjustment gains/losses
Translation gains and losses relating to non-functional currencies are reflected in reported net income. Since these are
unrealized gains/losses relate to asset/liability positions still held by IBRD, they are excluded from reported net income
to arrive at allocable income.
Unrealized mark-to-market gains/losses on non-trading portfolios
These mainly comprise unrealized mark-to-market gains and losses on the loan, borrowing, and other ALM portfolios
as discussed previously.
Pension, PEBP and PCRF adjustments
The Pension adjustment reflects the difference between the accounting expense, and IBRD’s cash contributions to thepension plans, PEBP, and PCRF. It also includes investment revenue earned on pension plan, PEBP, and PCRF assets.
The PCRF was established by the Board to stabilize contributions to the pension and post-retirement benefits plans.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

17

Management’s Discussion and Analysis

Section III: Financial Results

Management bases the income allocation decision on IBRD’s cash contributions to the pension plans, PEBP and
PCRF, rather than pension expenses. In addition, Management has designated the income from these assets to meetthe future needs of the pension plans. As a result, PEBP and PCRF investment revenues are excluded from allocable
income.
Table 8: Allocable Income
In millions of U.S. dollars
For the fiscal years ended June 30,
Net Income (Loss)
Adjustments to Reconcile Net Income (Loss) to Allocable Income:
Board of Governors-approved and other transfers
Non-functional currency translation adjustments gains, net a
Unrealized mark-to-market (gains) / losses on non-trading portfolios, net b
PensionPEBP and PCRF income
Other
Allocable Income
Recommended Allocations
General Reserve
SurplusTransfer to IDA
Total Allocations

$

2021
2,039

$

411
(35)
(1,218)
207
(168)
12
1,248

$

874
100
274
1,248

$

2020
(42)

$

340
(57)
1,137
79
(17)
(59)
1,381

$

950
431c
1,381

a. Translation adjustments relating to assets and liabilities denominated in non-functional currencies.
b. Adjusted to exclude amounts reclassified to realized gains (losses). See Table 7.
c. On January 25, 2021, the Board of Governors approved a transfer of $331 million to IDA from Surplus, which was made on
February 1, 2021.

Other Adjustments

45•

Under certain arrangements (such as Externally Financed Outputs), IBRD enters into agreements with donors
under which it receives grants to finance specified IBRD outputs or services. These funds may be utilized only
for the purposes specified in the agreements and are, therefore, considered restricted until IBRD has fulfilled
those purposes. Management excludes from allocable income amounts arising from these arrangements,
because IBRD has no discretion over the use of the related funds. In line with this, the expense is transferred torestricted retained earnings and in FY21, the net balance of these restricted funds decreased by $6 million.

•

The revenue (expense) associated with the right to receive reimbursement from the Financial Intermediary Fund(FIF) related to the PEF4 is excluded, as this is required for payment obligations relating to the pandemic
catastrophe bonds, and the pandemic catastrophe insurance; and therefore, it is not available for other uses. In
FY21, $1 million of expense was recognized in reported net income. Management recommended, and the Board
approved that this expense of $1 million be excluded from the reported net income to arrive at the FY21
allocable income. As of July 2020, all instruments associated with the PEF had matured.

•

The income recognized for the right to receive reimbursement from the FIF related to the PAF for Methane andClimate Change Mitigation5 is excluded, as this is required for the payout for the changes in market value on
put options under the PAF. Therefore, it is not available for other uses. In FY21, $5 million of expense wasrecognized in reported net income, and thus excluded to arrive at the FY21 allocable income. The change inthe market value of the put option is also excluded from reported net income to arrive at allocable income, aspart of the unrealized mark-to market gains/(losses) on non-trading portfolios.

The PEF was launched as a FIF, with the aim of establishing a fast-disbursing mechanism that can provide funding for response
efforts that help prevent low-frequency and high-severity outbreaks.
In FY16, IBRD issued put options for methane and climate change mitigation. The PAF is a climate finance model developed by
IBRD to stimulate investment in projects that reduce greenhouse gas emissions in developing countries. The PAF is a pay-forperformance mechanism which uses auctions to allocate public funds and attract private sector investment to projects that reduce
methane emissions by providing a medium-term guaranteed floor price on emission rights.

18

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section III: Financial Results

Income Allocation
Since 1964, IBRD has made transfers to IDA from its net income, upon approval by the Board of Governors. In FY17,
the Board approved a formula-based approach for determining IBRD’s transfers to IDA. The approach links transfers
to IBRD’s allocable income for the year, ensuring that most allocable income is retained to grow IBRD’s reserves. In
addition, as part of the commitment made under the 2018 capital package, the incremental revenue from the priceincrease implemented in July 2018 was excluded from the formula used to calculate IDA transfers out of FY21
allocable income and is fully retained in IBRD’s reserves.
IBRD’s strong support of IDA is reflected in the $16.1 billion of cumulative income transfers it has made since IDA’s
first replenishment.
Annual IDA transfer recommendations are still subject to approval by the Governors as part of the net income
allocation process in accordance with IBRD’s Articles. In making their decisions, Governors will continue to take theoverall financial standing of IBRD into consideration.
On August [5], 2021, the Board approved the allocation of $874 million to the General Reserve out of FY21’s
Allocable Income of $1,248 million. Based on the formula-based approach, the Board recommended to IBRD’s
Governors a transfer of $274 million to IDA and $100 million to Surplus.
Figure 10: FY21 Allocable Income and Income Allocation
In millions of U.S. dollars

Revenue

Loan Interest Revenue, net
1,754

Uses

LLP
147
0

Investment
Income 86

Allocable Income 1,248

Administrative Expenses,
net of Other Revenue
1,049
500

Other ALM, net
604

274
1,000

1,500
IDA Transfers

General Reserves 874
2,000Surplus 100
2,500

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

19

Section IV: Lending Activities

Management’s Discussion and Analysis

Section IV: Lending Activities
IBRD provides financing instruments and knowledge services to middle-income and creditworthy low-income
countries to reduce poverty and promote shared prosperity, while ensuring that social, environmental, and governanceconsiderations are taken into account. Country teams with an understanding of each country’s circumstances workwith clients to tailor the mix of instruments, products, and services.
Engagement with borrowing members is increasingly aligned with IBRD’s strategic priorities, including engagementthat supports global public goods such as climate, fragility and gender.
Projects and programs supported by IBRD are designed to achieve a positive social impact and undergo a rigorous
review and internal approval process, aimed at safeguarding equitable and sustainable economic growth, that includes
early screening to identify environmental and social impacts and designing mitigation actions.
Identifying and appraising a project, and approving and disbursing a loan, can often take several years. However,
IBRD has shortened the preparation and approval cycle for countries in emergency situations (e.g., natural disasters)
and in crises (e.g., food, fuel, and global economic crises).
Loan disbursements must meet the requirements set out in loan agreements. During implementation of IBRDsupported operations, IBRD’s staff review progress, monitor compliance with IBRD policies, and help resolve any
problems that may arise. The Independent Evaluation Group, an IBRD unit whose Director General reports to theBoard, evaluates the extent to which operations have met their development objectives.
All IBRD loans, are made to, or guaranteed by, member countries. IBRD may also make loans to IFC without any
guarantee. In most cases, IBRD’s Board approves each loan and guarantee after appraisal of a project by staff. Under
the Multiphase Programmatic Approach, the Board may approve an overall program framework, its financing
envelope and the first appraised phase, and then authorize Management to appraise and commit financing for later
program phases.
For FY22, eligible countries with 2020 per capita Gross National Income (GNI) of more than $1,205 are eligible for
new lending from IBRD.

Net Lending Commitments and Gross Disbursements
In FY21, IBRD had new net loan commitments through 125 operations, totaling $30.5 billion, which were higher by$2.5 billion (9%) compared to FY20, mainly driven by the increase in Program-for-Results (PforR) commitments(Figure 11).
Table 9: Net Commitments by Region
In millions of U.S. dollars
For the fiscal year ended June 30,
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

$

$

2021
1,525
500
6,753
4,559
9,464
3,976
3,746
30,523% of total
5% $
2
22
15
31
13
12
100% $* Denotes percentage less than 0.5%.

20

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

2020
1,716
9
4,770
5,699
6,798
3,419
5,565
27,976% of total
6% $
*
17
21
24
12
20
100% $

Variance
(191)
491
1,983
(1,140)2,666
557(1,819)2,547

Section IV: Lending Activities

Management’s Discussion and Analysis
Table 10: Gross Disbursements by Region
In millions of U.S. dollars
For the fiscal year ended June 30,
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

2021
325
132
4,439
3,625
8,741
2,764
3,665
23,691$$% of total
1%
1
19
15
37
12
15
100%

$

$

2020
932
155
4,679
3,100
5,799
2,415
3,158
20,238% of total
4%
1
23
15
29
12
16
100%

Variance
(607)
(23)
(240)
525
2,942
349
507
$
3,453
$

Lending Categories
IBRD’s lending is classified in three categories: investment project financing, development policy financing, andprogram-for-results (Figure 11).

Investment Project Financing (IPF)
IPF provides financing for a wide range of activities aimed at creating the physical and social infrastructure necessary
to reduce poverty and create sustainable development. IPF is usually disbursed over the long-term (roughly a 5 to 10year horizon). FY21 net commitments under this lending category were $14.5 billion, compared with $15.0 billion in
FY20.

Development Policy Financing (DPF)DPF aims to support borrowers in achieving sustainable development through a program of policy and institutional
actions. Examples of DPF projects include strengthening public financial management, improving the investment
climate, addressing bottlenecks to improve service delivery, and diversifying the economy. DPF supports reforms
through non-earmarked general budget financing. DPF provides fast-disbursing financing (roughly 1 to 3 years) tohelp borrowers address actual or anticipated financing requirements. FY21 net commitments under this lending
category were $10.8 billion, compared with $10.1 billion in FY20.

Program-for-Results (PforR)
PforR helps countries improve the design and implementation of their development programs and achieve specificresults by strengthening institutions and building capacity. PforR disburses when agreed results are achieved andverified. Results are identified and agreed upon during the loan preparation stage.
FY21 net commitments under this lending category were $5.2 billion compared with $2.9 billion in FY20.
Figure 11: Share of Lending Categories for Annual Net Commitments
Percent
100%

$23

$23

$23

$28

$31

9

15

11

10

17

75%

34

22

39

36

57

63

50

54

48

FY17

FY18

FY19

FY20

FY21

35

50%
25%
0%

Investment Project

Development Policy

Program-for-Results

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

21

Management’s Discussion and Analysis

Section IV: Lending Activities

Currently Available Lending Products
As of June 30, 2021, 85 member countries were eligible to borrow from IBRD. See Appendix for a list of eligible
countries.

IBRD Flexible Loans (IFLs)
IFLs allow borrowers to customize their repayment terms (i.e., grace period, repayment period, and amortization
profile) to meet their debt management or project needs. The IFL previously offered two types of loan terms: variablespread terms and fixed-spread terms. Effective April 1, 2021, in preparation for market reference rate transitions, theBoard 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 (see section IX: Risk Management). As ofJune 30, 2021, 70% of IBRD’s loans outstanding carried variable-spread terms and 30% had fixed-spread terms. See
Table 13 for details of loan terms for IFL loans.
IFLs include options to manage the currency and/or interest rate risk over the life of the loan. The outstanding balanceof loans, for which currency or interest rate conversions have been exercised was $38.8 billion as of June 30, 2021
and $32.3 billion as of June 30, 2020. IFLs may be denominated in the currency or currencies chosen by the borrower
if IBRD can efficiently intermediate in that currency. Using currency conversions, some borrowing member countries
have converted their IBRD loans into domestic currencies to reduce their foreign currency exposure for projects orprograms that do not generate foreign currency revenue. These local currency loans may carry fixed or variable-spread
terms. The balance of such loans outstanding was $3.5 billion as of June 30, 2021 and $2.9 billion as of June 30, 2020,
respectively. Box 2 below shows the components of the spread on IBRD’s IFLs and how these are determined.
Box 2: Components of Loan spread
Contractual lending spread
Maturity PremiumMarket Risk Premium
Funding Cost Margin

Subject to the Board’s periodic review
Set by Management

For fixed-spread IFLs, Management ensures that the funding cost margin and the market risk premium reflect theunderlying market conditions that are continuously evolving. These are communicated to the Board at least quarterly.
The ability to offer long-term financing distinguishes development banks from other sources of funding for member
countries. Since IBRD introduced maturity-based pricing in 2010, most borrowing countries have continued to chooseloans with the longest maturities which carry a higher maturity premium, highlighting the value of longer maturities
to borrowing countries. However, the FY21 increase in net commitments in the less than 8 years maturity group islargely attributable to the net commitments for fast disbursing loans, provided under the crisis funding (See Table 11).
Table 11: Net Commitments by Maturity
In millions of U.S. dollars
For the fiscal year ended June 30, 2021
Variable
Maturity
Fixed Spread
Total
Spread< 8 years$ 4,680$ 3,188$ 7,868
8-10 years
187
3,492
3,679
10-12 years
1,225
7,337
8,562
12-15 years
1,326
637
1,963
15-18 years
280
2,489
2,769
>18 years
663
5,014
5,677
Guarantee Commitments
5
Total Net Commitments $ 8,361$ 22,157$ 30,523

22

For the fiscal year ended June 30, 2020
Variable
Fixed Spread
Total
Spread
$
1,600
$
670
$ 2,270
1,568
3,640
5,208
408
3,366
3,774
1,215
1,744
2,959
403
2,441
2,844
5,497
4,541
10,038883$ 10,691$
16,402$ 27,976

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section IV: Lending Activities

Other Lending Products Currently Available
In addition to IFLs, IBRD offers loans with other features and terms (See Box 3).
Box 3: Other Lending Products Currently Available
Lending Product
Description

Loans with a Deferred
Drawdown Option$9.6 billion
outstanding as ofJune 30, 2021

Special Development
Policy Loans (SDPLs)
Nil as of June 30,
2021
Loan-Related
Derivatives
Loans outstanding
for which borrowers
have entered intocurrency or interest
rate derivativetransactions was$11.1 billion as ofJune 30, 2021
Loans to IFC
Nil as of June 30,
2021

The Development Policy Loan Deferred Drawdown Option (DPL DDO) gives borrowers the flexibility to
rapidly obtain the financing they require. For example, such funds could be needed owing to a shortfall
in resources caused by unfavorable economic events, such as declines in growth or unfavorable shifts
in commodity prices or terms of trade. The Catastrophe Risk DDO (CAT DDO) enables borrowers toaccess immediate funding to respond rapidly in the wake of a natural disaster. Under the DPL DDO,
borrowers may defer disbursement for up to three years, renewable for an additional three years. The
CAT DDO has a revolving feature and the three-year drawdown period may be renewed up to fourtimes, for a total maximum drawdown period of 15 years (Table 13). As of June 30, 2021, the amountof DDOs disbursed and outstanding was $9.6 billion (compared to $8.1 billion on June 30, 2020), andthe undisbursed amount of effective DDOs was Nil, compared to $1.8 billion a year earlier.
SDPLs support structural and social reforms by creditworthy borrowers that face a possible global
financial crisis or are already in a crisis and have extraordinary and urgent external financing needs. As
of June 30, 2021, the outstanding balance of such loans was Nil (compared to $11 million a year earlier).
IBRD made no new SDPL commitments in either FY21 or FY20.
IBRD assists its borrowers with access to better risk management tools by offering derivative
instruments, including currency and interest rate swaps and interest rate caps and collars, associatedwith their loans. These instruments may be executed either under a master derivatives agreement,
which substantially conforms to industry standards, or under individually negotiated agreements. Under
these arrangements, IBRD passes through the market cost of these instruments to its borrowers. Thebalance of loans outstanding for which borrowers had entered into currency or interest rate derivativetransactions under a master derivatives agreement with IBRD was $11.1 billion as of June 30, 2021,
compared with $11.2 billion a year earlier.

IBRD provides loans to IFC in connection with the release of a member's National Currency Paid-In
Capital (NCPIC) to IBRD. (See Section VIII for explanation of NCPIC).

Lending Terms Applicable to IBRD Products
Until the end of FY19, loans for all eligible members were subject to the same pricing. However, as part of the 2018
capital package, IBRD implemented a new pricing structure that classifies member countries into four pricing groups,
based on income and other factors, and relates the maturity premium to the exemptions, discounts or surcharges
applicable to each pricing group (See Table 12 below).
Table 12: Country Pricing Group and Maturity Premium (in basis points)
Country pricing group

Description

Maturity
Premium aA

Blends b, small states, countries in fragile and conflict-affected situations (FCS) and recent
IDA graduates. These countries are exempt from the maturity premium increase
regardless of their income levels.

0-50 cB

Countries below-GDI which do not qualify for an exemption listed in Group A.

0-70

C

Countries above-GDI, but below high-income status and which do not qualify for an
exemption listed in Group A.

0-90

D

Countries with high income status and which do not qualify for an exemption listed inGroup A.

5-115

a. Based on the weighted average maturity of the loanb. Countries eligible for IDA and IBRD loansc. Applicable to loans on pre-FY18 terms.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

23

Management’s Discussion and Analysis

Section IV: Lending Activities

Table 13: Loan Terms Available During Fiscal Year Ended June 30, 2021
Basis points, unless otherwise noted
IBRD Flexible Loan (IFL) a
Variable-spread Terms
Fixed-spread Terms b
Final maturity
35 years
35 years
Maximum weighted average maturity
20 years
20 years
Six-month variable rate
Six-month variable rate
Reference market rate
index
index
SpreadContractual lending spread
50
50
Maturity premium
0-115 c0-115 cMarket risk premium–
10-15 dActual funding spreadto variable rate index
Projected funding spread
Funding cost marginof IBRD borrowings in to six-month variable rate
the previous six-monthindex eperiodCharges
Front-end fee
25
25
Late service charge on principal payments
received after 30 days of due date f
50
50Commitment Fee g i
25
25Special Development
Policy Loans (SDPL)
5 to 10 years
7.5 years
Six-month variable rateindex
min.200
–
–
–

100
–
25

Development Policy Loan
Catastrophe Risk
Deferred Drawdown Option
Deferred Drawdown Option
Reference market rate
Six-month variable rate index
Six-month variable rate index
Contractual lending spread
IFL variable or fixed-spread in effect at the time of withdrawal
Front-end fee
25
50 h
Renewal fee–
25Stand-by fee
50 g–a. There is an implicit floor of zero on the overall interest rate in IBRD’s loans.
b. Effective April 1, 2021, IBRD suspended offering loans with fixed spread terms.
c. Based on the weighted average maturity of the loan and on country pricing group.
d. Based on the weighted average maturity of the loan.
e. Projected funding spread to variable rate index (e.g., London Interbank Offered Rate (LIBOR) was based on the weighted average
maturity of the loan.
f. See Box 7 in Section IX for a discussion of overdue payments.
g. Certain waivers of commitment / stand-by fees payable during the first year of financing for health-related COVID-19 operations
are approved under the Fast Track COVID-19 Facility.
h. For Cat-DDOs approved under the Fast Track COVID-19 Facility, the Front-End Fee is reduced to 25bps.
i. For operations approved under the Additional Financing to the COVID-19 Strategic Preparedness and Response Program (SPRP),
the commitment fee is waived for a period of up to 18 months starting from the date of approval of the relevant operation.

Discontinued Lending Products
IBRD’s loan portfolio includes lending products whose terms are no longer available for new commitments. These
products include currency pool loans and fixed-rate single-currency loans. As of June 30, 2021, loans outstanding of$489 million (0.2% of the portfolio) carried terms no longer offered, with final maturity in May 2026.

Waivers
Loan terms offered prior to September 28, 2007 included a partial waiver of interest and commitment charges on
eligible loans. For these loans, waivers are approved annually by the Board. For FY22, the Board has approved thesame waiver rates as in FY21 for all eligible borrowers with eligible loans. The foregone income in FY21 due topreviously approved waivers was $31 million (FY20: $37 million).
Table 14 and Figure 12 illustrates a breakdown of IBRD’s loans outstanding and undisbursed balances by loan terms,
as well as loans outstanding by currency composition. The interest and currency profile of loans outstanding after theuse of derivatives for risk management purposes is discussed under Market Risk in Section IX.

24

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Section IV: Lending Activities

Management’s Discussion and Analysis

Table 14: Loans outstanding by interest rate structure, excluding derivatives
In millions of U.S. dollars, except for ratios
June 30, 2021
Of which
Product terms%%% of Total
Product terms
reference
rate isFixed Spread
Loans

30.0

Variable Spread
Loans

70.0

Total

100%

Fixed

50.1

15

Variable

49.9

15

Fixed

2.9

2

Variable

97.1

68
100%

Fixed Spread
Loans

28.4

Variable Spread
Loans

71.6

Total

100%

Figure 12: Loan Portfolio
In millions of U.S. dollars
Figure 12a. Undisbursed Balances by Loan Terms
In millions of U.S. dollars, except for ratios
June 30, 2021
Fixed Spread
terms, 27%

June 30, 2020
Of which%reference
rate is% of Total

Fixed

47.2

13

Variable

52.8

15

Fixed

2.9

2

Variable

97.1

70
100%

June 30, 2020
Fixed Spread
terms, 28%$74,441$69,816
Variable
Spreadterms, 73%

Figure 12b. Loans Outstanding by Currency
In millions of U.S. dollars, except for ratios
June 30, 2021
Euro, 19%%

Other, 2%

U.S. Dollars, 79%

Variable
Spreadterms, 72%

June 30, 2020
Euro, 19%

Other, 2%

U.S. Dollars, 79%

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

25

Management’s Discussion and Analysis

Section V: Other Development Activities

Section V: Other Development Activities
IBRD continues to deliver value to its client countries through its knowledge services, convening power, and capacity
to implement solutions that address global issues where coordinated action is critical.
IBRD also assists clients with designing financial products and structuring transactions to help mobilize resources fordevelopment projects and mitigate the financial effects of market volatility and disasters.
Other financial products and services provided to borrowing member countries, and to affiliated and non-affiliatedorganizations, include financial guarantees, grants, externally-funded activities (described below), and advisory
services and analytics.

Guarantees
IBRD’s exposure on its guarantees was $6.7 billion as of June 30, 2021 compared to $6.9 billion as of June 30, 2020(see Table 15). Exposure is measured by discounting each guaranteed amount from its next call date.
IBRD offers project-based and policy-based guarantees for priority projects and programs in member countries.
Project-based guarantees are provided to mobilize private financing for projects; they are also used to mitigate
projects’ payment- and performance-related risks. Policy-based guarantees are provided to mobilize private financing
for sovereigns or sub- sovereigns. IBRD’s guarantees are partial and are intended to provide only the coverage
necessary to obtain the required private financing, considering country, market and, if appropriate, project
circumstances. All guarantees require a sovereign counter-guarantee and indemnity, comparable to the requirement ofa sovereign guarantee for IBRD lending to sub-sovereign and non-sovereign borrowers (see Box 4). The Corporate
Risk Guarantee Committee will inform the use of the guarantee instrument.
Box 4: Types of Guarantees Provided by IBRD
Guarantee
Description
Two types of project-based guarantees are offered:1.

Loan guarantees: these cover loan-related debt service defaults caused by the government’s
failure to meet specific payment and/or performance obligations arising from contract, law or
regulation, in relation to a project. Loan guarantees include coverage for debt service defaults on:(i) commercial debt, normally for a private sector project where the cause of debt service default
is specifically covered by IBRD’s guarantee; and, (ii) a specific portion of commercial debt
irrespective of the cause of such default, normally for a public-sector project.

2.

Payment guarantees: These cover payment default on non-loan related government payment
obligations to private entities and foreign public entities arising from contract, law or regulation.

Project-based
guarantees

Policy-based
guarantees

These cover debt service default, irrespective of the cause of such default, on a specific portion ofcommercial debt owed by national or sub national government and associated with the supported
government’s program of policy and institutional actions.

Guarantees forenclave operations

IBRD extends guarantees for projects in IDA-only member countries that (i) are expected to generatelarge economic benefits with significant developmental impact in the member country; and (ii) cannot
be fully financed out of the country’s own resources, IDA resources, or other concessional financing.
Those projects are known as enclave operations. The provision of IBRD support to enclave operations
is subject to credit enhancement features that adequately mitigate IBRD’s credit risk.

Table 15: Guarantees Exposure
In million U.S. dollars
As of June 30,
Guarantees (project, policy and enclave)
Exposure Exchange Agreements
Total

26

$
$

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

2021
3,079
3,640
6,719

$
$

2020
3,264
3,651
6,915

Section V: Other Development Activities

Management’s Discussion and Analysis

Table 16: Pricing for IBRD Project-Based and Policy-Based Guarantees

Basis Points
Charges
FY21
FY20
Front-end fee
25
25
Processing fee a b
5050
Initiation fee c b
1515Standby fee
25
25
Guarantee fee d50-16550-165a. Determined on a case by case basis. In exceptional cases, projects can be charged over 50 bps of the guarantee amount.
b. Not applicable for public projects.
c. The initiation fee is 15 basis points of the guaranteed amount or $100,000, whichever is greater.
d. Based on the weighted average maturity of the guarantee and country pricing group.

In addition, IBRD has entered into the following arrangements, which are treated as financial guarantees under U.S.
GAAP:•

Advance Market Commitment (AMC): AMC is a multilateral initiative to accelerate the creation of a market
and sustainable production capacity for pneumococcal vaccines for developing countries. IBRD provides afinancial platform for AMC by holding donor-pledged assets as an intermediary agent and passing them on to
the Global Alliance for Vaccines and Immunization (GAVI) when appropriate conditions are met. Moreover,should a donor fail to pay, or delay paying any amounts due, IBRD has committed to pay from its own funds
any amounts due and payable by the donor, to the extent there is a shortfall in total donor funds received. The
amount of the exposure is discussed under the guarantee program (see Notes to Financial Statements, Note I:Management of External Funds and Other Services).

•

Exposure Exchange Agreements (EEA): IBRD has an exposure exchange agreement outstanding with MIGA
under which IBRD and MIGA exchanged selected exposures through reciprocal guarantees, with each divesting
itself of exposure in countries where their lending capacities are limited, in return for exposure in countries
where they had excess lending capacity.
IBRD also has an EEA with the African Development Bank (AfDB) and Inter-American Development Bank(IADB), an MDB EEA. Under this EEA, each MDB exchanged credit risk exposure of a reference portfolio
supported by underlying loans to borrowing member countries. For each MDB, EEAs through diversification
benefits, help reduce credit risk at the portfolio level; improve the risk-weighted capital ratios especially byaddressing exposure concentration concerns; and create lending headroom for individual borrowing countries
where MDBs may be constrained. The EEA involved the receipt of a guarantee and the provision of a guarantee
against nonpayment in the reference portfolio by each MDB to the other. The guarantee received and theguarantee provided are two separate transactions: (a) a receipt of an asset for the right to be indemnified, andreceive risk coverage (recoverable asset) and (b) the provision of a financial guarantee, respectively (see Notes
to the Financial Statements, Note D: Loans and Other Exposures).

•

Other guarantee arrangements: As of June 30, 2021, IBRD had received guarantees totaling $1,544 million($1,544 million for FY20). These guarantees serve as a credit enhancement which increase IBRD’s lending
capacity in certain countries.

Table 17: Exposure Exchange Agreements
In millions of U.S. dollars
As of June 30,
Exposure Exchange Agreement
MIGA
IADB
AfDB
Total notional

Guarantee
Received
$
$

31
2,021
1,588
3,640

2021

$
$

Guarantee
Provided
31
2,021
1,588
3,640

Guarantee
Received
$
$

42
2,021
1,588
3,651

2020

$
$

Guarantee
Provided
42
2,021
1,588
3,651

GrantsGrant-Making Facilities (GMFs) are complementary to IBRD’s work. IBRD deployed $18 million under this program,in each of FY21 and FY20. These amounts are reflected in contributions to special programs on IBRD’s Statement of
Income, after IDA’s share is determined in accordance with the cost sharing ratio.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

27

Management’s Discussion and Analysis

Section V: Other Development Activities

Externally-Funded Activities
Mobilization of external funds from third-party partners includes Trust Funds. Additional external funds include
reimbursable funds and revenues from fee-based services to member countries, which are related to RAS, EFOs, andother financial products and services, including RAMP.

Trust Fund Activity
Trust Funds are a part of IBRD’s resource envelope, affording IBRD with resources and flexibility to provide
development solutions that serve member recipients and donors alike. Trust Funded partnerships often serve as aplatform for IBRD and its partners to access WBG’s diverse technical and financial resources, and achieve
development goals whose complexity, scale, and scope exceed any individual partner’s capabilities. IBRD’s roles
and responsibilities in managing trust funds depend on the type of fund, outlined as follows:•

IBRD-Executed Trust Funds (BETFs): IBRD, alone or jointly with one or more of its affiliated organizations,manages the funds and implements the activities financed. These trust funds support IBRD’s work program.
IBRD disbursed $470 million in FY21 ($470 million in FY20) of trust fund program funds.

•

Recipient-Executed Trust Funds (RETFs): Funds are provided to a third party, normally in the form of project
grant financing, and are supervised by IBRD.

Financial Intermediary Funds (FIFs): IBRD, as trustee, administrator, or treasury manager, offers specificadministrative or financial services with a limited operational role. Arrangements include the administration ofdebt service trust funds, fiscal agency funds and other more specialized limited fund management roles.
IBRD uses a cost recovery framework for Trust Funds. Key features of the framework include:••

Ensuring IBRD increases the recovery of costs incurred for trust fund activities.

• Simplifying and standardizing the fee structure for all types of trust funds.
Management is implementing measures to better integrate planning, support sustainability and enhance alignment ofExternal Funds with mission priorities through greater use of umbrella trust fund programs, increased cost recovery,
and new budgetary measures to manage External Funds usage.
During FY 21 IBRD’s share of revenue and fees from trust fund administration was $44 million ($42 million in FY20)(see Notes to Financial Statements, Note I: Management of External Funds and Other Services).

Reimbursable Advisory Services (RAS)
While most of IBRD’s advisory and analytical work is financed by its own budget or donor contributions (e.g., TrustFunds), clients may also pay for services. IBRD offers technical assistance and other advisory services to its member
countries, in connection with, and independent of, lending operations. Available services include, for example,
assigning qualified professionals to survey developmental opportunities in member countries; analyzing member
countries fiscal, economic, and developmental environments; helping members devise coordinated development
programs; and improving their asset and liability management techniques. In FY21, IBRD earned revenue of $53
million ($67 million in FY20) from RAS.

Externally Financed Outputs (EFOs)
IBRD offers donors the ability to contribute to specific projects and programs. EFO contributions are recorded as
restricted revenue when received because they are for contractually specified purposes. Restrictions are released once
the funds are used for the purposes specified by donors. In FY21, IBRD had $18 million of restricted revenue,compared with $29 million in FY20.

Other Financial Products and Services
Managing Financial Risks for Clients
IBRD helps member countries build resilience by facilitating access to risk management solutions to mitigate thefinancial effects of currency, interest rate, and commodity price volatility, disasters, and extreme weather events.

28

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section V: Other Development Activities

Box 5 below lists some financial solutions and disaster risk financing instruments IBRD offers:
Box 5: Financing Instruments
Hedging Transactions

Disaster Risk Financing

Interest Rate
Currency
Commodity Price

Catastrophe Derivatives and Bonds
Insurance & Reinsurance
Regional Pooling Facilities

IBRD also intermediates the following risk management transactions for clients:•

Affiliated Organization: To assist IDA with its asset/liability management IBRD executed currency forward
contracts on its behalf.

Unaffiliated Organization: To assist the International Finance Facility for Immunization (IFFIm) with its
asset/liability management strategy, IBRD executes currency and interest rate swaps on its behalf. In addition,
IBRD, as Treasury Manager, is a counterparty to IFFIm and enters into offsetting swaps with market
counterparties. During FY21, IBRD executed currency swaps with notional amounts of $2.1 billion under thisagreement.
(See Risk Management, Section IX, for a detailed discussion of IBRD’s risk mitigation of these derivativetransactions).
•

Asset Management
The Reserves Advisory and Management Program (RAMP) provides services that build clients’ capacity to support
the sound management of their official sector assets. Clients include central banks, sovereign wealth funds, national
pension funds, and supranational organizations. RAMP helps clients to upgrade their asset management capabilities,
including portfolio and risk management, operational infrastructure, and human resources capacity. Under most ofthese arrangements, IBRD is responsible for managing a portion of the institution’s assets and, in return, receives a
fee based on the average value of the portfolio managed (see Table 18). The fees earned are used to provide training
and capacity-building services. In addition to RAMP, IBRD invests and manages investments on behalf of IDA,
MIGA, and trust funds; those investments are not included in IBRD’s assets.
Table 18: RAMP – Assets and Revenues
In millions of U.S. dollars
As of June 30,

2021

Assets managed under RAMP$

Revenue from RAMP

$

2020

27,873$26,001

17$

15

As noted in the discussion of Trust Fund Activities above, IBRD, alone or jointly with one or more of its affiliatedorganizations, administers on donors’ behalf funds restricted for specific uses. This administration is governed byagreements with donors, who include members, their agencies and other entities. These funds are held in trust andare not included on IBRD’s Balance Sheet, except for $552 million of undisbursed third-party contributions made to
IBRD-executed trust funds, which are recognized on the Balance Sheet. The cash and investment assets held in trustby IBRD as administrator and trustee totaled $31.3 billion in FY21, of which $93 million ($72 million in FY20) relates
to IBRD’s own contributions to these trust funds (Table 19).
Table 19: Cash and Investment Assets Held in Trust
In millions of U.S dollars
As of June 30,
IBRD-executed
Jointly executed with affiliated organizations
Recipient-executed
Financial intermediary funds
Execution not yet assigned a
Total fiduciary assets

$

$

2021
263
1,025
3,082
19,757
7,187
31,314

$

$

2020
280
944
2,712
19,0846,434
29,454a.These represent assets held in trust for which the determination as to the type of execution is yet to be finalized.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

29

Management’s Discussion and Analysis

Section V: Other Development Activities

Other Financing Solutions
From time to time IBRD leverages its debt issuance platform for other financing support for clients and otherdevelopment organizations with complementary objectives. For example, in FY21 IBRD issued a $100 million 5year bond which supports IBRD’s ongoing sustainable development activities and transferred an amount equal to 50
percent of the proceeds to support the United Nations Children’s Fund (UNICEF), providing financing to UNICEF
during a critical period. UNICEF is responsible for repaying their portion of the bond issuance to IBRD.

30

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Section VI: Investment Activities

Management’s Discussion and Analysis

Section VI: Investment Activities
IBRD’s investment portfolio consists mainly of the liquid asset portfolio. As of June 30, 2021, the net investment
portfolio totaled $85.8 billion with $82.8 billion representing the liquid asset portfolio. This compares with $82.5
billion a year earlier, of which $79.9 billion represented the liquid asset portfolio (see Note C: Investments in theNotes to the Financial Statements). The increased level of liquidity reflects the higher projected debt service and loan
disbursements for the coming fiscal year.

Liquid Asset Portfolio
Funds raised through IBRD’s borrowing activities that have not yet been deployed for lending, are held in the liquid
asset portfolio to provide liquidity for IBRD’s operations. The portfolio is managed with the goal of ensuring sufficient
cash flows to meet all IBRD’s financial commitments. While it seeks a reasonable return on this portfolio, IBRD
restricts its liquid assets to high-quality investments, consistent with its investment objective of prioritizing principal
protection over yield. Liquid assets are managed conservatively and are primarily held against disruptions in IBRD’s
access to capital markets.
IBRD’s liquid assets, are held mainly in highly rated, fixed-income instruments (see Box 8: Eligibility Criteria for
IBRD's Investments) and include the following:• Government and agency obligations•

Time deposits and other unconditional obligations of banks and financial institutions•

Asset-backed securities (including agency mortgage-backed securities)•

Currency, interest rate and other risk management derivatives•

Exchange-traded options and futures

Figure 13: Liquid Asset Portfolio by Asset Class
In millions of U.S. dollars, except for ratios

June 30, 2021

June 30, 2020
Asset-backed
Securities & Others
5%

Asset-backed
Securities & Others
4%$82,751
Time
Deposits
40%

Government andagency obligations
56%

Time
Deposits
37%$79,908
Government andagencyobligations
58%

IBRD keeps liquidity volumes above a Prudential Minimum which is defined as 80% of the twelve-month Target
Liquidity Level. The twelve- month Target Liquidity Level is calculated before the end of each fiscal year based on
Management’s estimates of projected net loan disbursements approved at the time of projection and twelve months ofdebt-service for the upcoming fiscal year. This twelve-month estimate becomes the target for the upcoming fiscal year
and the Prudential Minimum is 80% of this target (see Section IX for details of how IBRD manages liquidity risk).
The liquid asset portfolio is composed largely of assets denominated in, or swapped into, U.S. dollars, with net
exposure to short-term interest rates after derivatives. The portfolio has an average duration of less than three months,
and the debt funding these liquid assets has a similar currency and duration profile. This is a direct result of IBRD’s
exchange-rate and interest-rate-risk-management policies (see Section IX), combined with appropriate investment
guidelines (see Box 8).

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

31

Management’s Discussion and Analysis

Section VI: Investment Activities

The maturity profile of IBRD’s liquid asset portfolio reflects a high degree of liquidity. As of June 30, 2021, $65.5
billion (approximately 79% of total volume) was due to mature within six months, of which $29.8 billion was expected
to mature within one month.
The liquid asset portfolio is held in three sub-portfolios: Stable, Operational, and Discretionary, each may havedifferent risk profiles and performance guidelines (see Table 20).
•

Stable portfolio is mainly an investment portfolio holding all or a portion of the Prudential Minimum level ofliquidity, set at the start of each fiscal year.

•

Operational portfolio is used to meet IBRD’s day-to-day cash flow requirements.

•

Discretionary portfolio gives IBRD the flexibility to execute its borrowing program and can be used to tap
attractive market opportunities. Additional portions of the Prudential Minimum may also be held in thisportfolio.

Table 20: Liquid Asset Portfolio Composition
In millions of U.S. dollars, except ratios which are in percentages
As of June 30,
Liquid asset portfolio
StableOperational
Discretionary
Total

$

$

Table 21: Liquid Asset Portfolio - Average Balances and Returns
In millions of U.S. dollars, except rates which are in percentages
Liquid asset portfolio
StableOperational
Discretionary
Total

$
$

2021

%

57,143
17,5028,106
82,751

69%
21
10
100%

Average Balances
2021
2020
56,842 $20,026
7,892
84,760 $53,83912,572
9,395
75,806

$

$

2020

%

54,38819,938
5,582
79,908

68%
25
7
100%

Financial Returns %
2021
2020
0.44%
0.03
0.31
0.33%

2.01%
1.58
2.09
1.93%

During FY21, IBRD earned a return of 0.33% on its liquid asset portfolio, compared to 1.93% last year. The lower
return in FY21 primarily reflects the lower interest rates during the year.
In addition to monitoring gross investment returns relative to their benchmarks, IBRD also monitors overall earnings
from the investment portfolio, net of funding costs. In FY21, IBRD earned $86 million of investment revenue, net offunding costs, as discussed in Section III.

Other Investments
In addition to the liquid asset portfolio, the investment portfolio also includes holdings related to AMC, PEBP, PCRF,
and the Local Currency Market Development program (LCMD, see Notes to Financial Statements Note C:
Investments for additional details). Table 22 below summarizes the net carrying value of other investments (see Notes
to Financial Statements, Note I: Management of External Funds and Other Services for additional details on AMC):
Table 22: Net Carrying Value of Other Investments
In millions of U.S. dollars
As of June 30,
AMC
PEBP
PCRF
LCMD
Total

32

2021
$

$

10
2,476
555
39
3,080

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

2020
$

$

239
1,847
450
41
2,577

Management’s Discussion and Analysis

Section VII: Borrowing Activities

Section VII: Borrowing Activities
IBRD has been issuing bonds in the international capital markets since 1947. The proceeds of these bonds support
IBRD’s lending operations which are aimed at promoting sustainable development for IBRD’s borrowing member
countries.
IBRD borrows at attractive rates underpinned by its strong financial profile and shareholder support that together are
the basis for its triple-A credit rating. As a result of its financial strength and triple-A credit rating, IBRD is recognized
as a premier borrower and its bonds and notes are viewed as a high credit quality investment in the global capital
markets.
IBRD uses the proceeds to finance development activities in creditworthy middle-income and low-income countries
eligible to borrow from IBRD at market-based rates. Funding raised in any given year is used for IBRD’s operations,
including loan disbursements, replacement of maturing debt, and prefunding for lending activities. IBRD determines
its funding requirements based on a three-year rolling horizon and funds about one-third of the projected amount in
the current fiscal year.
As discussed in Section II, IBRD uses currency and interest rate derivatives in connection with its borrowings for
asset and liability management purposes. New medium- and long-term funding is swapped into variable-rate U.S.
dollar instruments, with conversion to other currencies carried out subsequently. This is in accordance with loan
funding requirements, and so that IBRD can minimize interest rate and currency risk. IBRD also uses derivatives tomanage the re-pricing risks between loans and borrowings. Further discussion on how IBRD manages this risk is
included in the Risk Management Section, Section IX.
In FY21, IBRD raised a total of $67.5 billion of medium- and long-term debt (Table 24). IBRD issues short-term debt
(maturing in one year or less), and medium- and long-term debt (with a maturity greater than one year). From time totime, IBRD exercises the call option in its callable bond issues; it may also repurchase its debt to meet other operationalor strategic needs such as providing liquidity to its investors (Table 24).
As of June 30, 2021, the borrowing portfolio totaled $253.7 billion, $16.5 billion higher than June 30, 2020 (see Note
E: Borrowings in the Notes to the Financial Statements). The increase was primarily due to net new medium and longterm debt issuances during the year (Table 24).
Figure 14: Effect of Derivatives on Currency Composition of the Borrowing Portfolio–June 30, 2021

Borrowings excluding derivatives

Borrowings Including derivatives
Euro
13%

Euro
13%

US Dollar
61%

Others26%

US Dollar
87%* Denotes percentage less than 0.5%.

As of June 30, 2021, IBRD’s total borrowing portfolio, after the effects of derivatives, carried variable rates, with aweighted average cost of 0.1% (0.9% as of June 30, 2020). The decrease in the weighted average cost from the prioryear reflects the decrease in the short-term market interest rates during the year. This also resulted in a decrease in
IBRD’s weighted average loan rates, which are also based on IBRD’s funding cost. IBRD’s lending spread wastherefore not impacted by the decrease in short-term interest rates (Figure 5).

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

33

Management’s Discussion and Analysis

Section VII: Borrowing Activities

Short-Term Borrowings
Table 23 summarizes IBRD’s short-term borrowings, which mainly include discount notes, securities lent or soldunder securities lending and repurchase agreements, and other short-term borrowings.

Discount Notes
IBRD’s short-term borrowings consist mainly of discount notes issued in U.S. dollars. These borrowings have aweighted average maturity of approximately 127 days. As of June 30, 2021, the outstanding balance of discount notes
was $10.0 billion, $1.0 billion lower compared with a year earlier.

Securities Lent or Sold under Repurchase Agreements
These short-term borrowings are secured mainly by highly-rated collateral in the form of securities, including
government-issued debt, and have an average maturity of less than 30 days.

Other Short-Term Borrowings
Other short-term borrowings have maturities of one year or less. The outstanding balance as of June 30, 2021 was$199 million, an increase of $175 million compared to last year ($24 million in FY20).
Table 23: Short-Term Borrowings
In millions of U.S. dollars, except rates which are in percentages
As of June 30,
Discount notes a
Balance at year-end
Average daily balance during the fiscal year
Maximum month-end balance
Weighted-average rate at the end of fiscal year
Weighted-average rate during the fiscal year
Securities lent or sold under repurchase agreements b
Balance at year-end
Average monthly balance during the fiscal year
Maximum month-end balance
Weighted-average rate at the end of fiscal year
Weighted-average rate during the fiscal year
Other short-term borrowings a
Balance at year-end
Average daily balance during the fiscal year
Maximum month-end balance
Weighted-average rate at the end of the fiscal year
Weighted-average rate during the fiscal year

2021

2019

$
$
$

10,022
10,392
11,344
0.07%
0.16%

$
$
$

$
11,009$13,224$
17,0650.39%
1.59%

10,204
10,556
12,189
2.44%
2.37%

$
$
$

0.00%
0.00%

$
$
$

$
$
53
$
632
0.00%
1.71%

0.00%
0.00%

$
$
$

199
177
199
0.11%
0.17%

$
$
$

$
24
$
36
$
71
0.25%
1.82%

200
210
273
2.34%
2.32%

a. At amortized cost which approximates fair value.
b. Excludes securities related to PEBP.

34

2020

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Section VII: Borrowing Activities

Management’s Discussion and Analysis

Medium- and Long-Term Borrowings
In FY21, medium- and long-term debt raised directly by IBRD in the capital markets amounted to $67.5 billion withan average maturity to first call of 8.1 years (Table 24). The decrease in medium-and-long-term debt issuances in
FY21 is primarily due to lower debt servicing and refinancing requirements. IBRD called and repurchased a lower
volume of debt in FY21, compared with FY20.
Table 24: Funding Operations Indicators
In millions of U.S. dollars, except maturities which are in years
For the fiscal year ended June 30,
Issuances aMedium- and long-term funding raised
Average maturity to first call date
Average maturity to contractual final maturity

2021

Maturities
Medium- and long-term funding matured
Average maturity of debt matured
Called/Repurchased
Medium- and long-term funding called/repurchased

2020

$

67,4718.1
8.8$

75,0065.3
6.7$

41,281
5.0$

40,4374.0$

11,321$

26,095Due After 5
years

Total

a. Expected life of IBRD’s bonds are generally between first call date and the contractual final maturity.
Table 25: Maturity Profile of Medium and Long-Term Debt
In millions of U.S. dollars
Less than 1
year
Medium and Long-Term Debt $35,0191 to 2 years$

29,652 $2 to 3years

As of June 30, 2021
3 to 4years

28,319 $34,367 $4 to 5years
28,210 $94,288 $249,855

As shown below, 68% of IBRD’s medium-and long-term borrowings issued during the year are in U.S. dollars:
Figure 15: Medium- and Long-Term Borrowings Raised by Currency during the year, Excluding Derivatives
June 30, 2021

June 30, 2020

Others20%

Others24%

Euro 12%US Dollar
68%

Euro
14%

US Dollar
62%

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

35

Section VIII: Capital Activities

Management’s Discussion and Analysis

Section VIII: Capital Activities
Capital Structure
Principal Shareholders and Voting PowerAs of June 30, 2021, IBRD had 189 member countries, with the top six accounting for 40% of the total voting power(Figure 16). The percentage of votes held by members rated AA and above by at least two major rating agencies was
37% (Figure 17).
The United States is IBRD’s largest shareholder, with 16% of total voting power. Accordingly, it also has the largest
share of IBRD’s uncalled capital, $46,363 million, or 17% of total uncalled capital.

Subscribed Capital
Total subscribed capital is comprised of paid-in capital and uncalled subscribed capital. See Statement of Subscriptions
to Capital Stock and Voting Power in IBRD’s Financial Statements for balances by country.
Figure 16: Voting Power of Top Six Members as of June 30, 2021

United States

Figure 17: Percentage of Votes held by Member
Countries, as of June 30, 2021

15.77%

Japan
China

5.03%

Germany

4.23%

France

3.91%

United Kingdom

3.91%
0%

5%

10%

AA &
Above
37%

Below
AA, 63%

7.41%

15%

20%

25%

Table 26: Breakdown of IBRD Subscribed Capital
In millions of U.S. dollars, except ratios which are in percentages
As of June 30,
Subscribed capital
Uncalled Subscribed capital
Paid-in capital
Total subscribed capital

%
94%
6
100%

2021
$
$

278,612
19,244
297,8562020$$

269,968
18,034
288,002

Variance
$
$

8,644
1,210
9,854

Uncalled Subscribed Capital
The total uncalled subscribed capital may be called only when required to meet IBRD’s obligations for funds borrowed
or loans guaranteed and is, thus, not available for use by IBRD in making loans. Of this amount, $40,327 million wasrestricted pursuant to resolutions of the Governors (though such conditions are not required by IBRD’s Articles).
While these resolutions are not legally binding on future Governors, they do record an understanding among membersthat this amount will not be called for use by IBRD in its lending activities or for administrative purposes.
No call has ever been made on IBRD’s capital. Any such calls are required to be uniform, but the obligations of
IBRD’s members to make payment on such calls are independent of one another. If the amount received on a call isinsufficient to meet the obligations of IBRD for which the call is made, IBRD has the right to make further calls until
the amounts received are sufficient to meet such obligations. On any such call or calls, however, no member is required
to pay more than the unpaid balance of its capital subscription.
Under the Bretton Woods Agreements Act and other U.S. legislation, the Secretary of the U.S. Treasury is permitted
to pay approximately $7,663 million of the uncalled portion of the subscription of the United States, if called for use
by IBRD, without need for further congressional action.

36

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section VIII: Capital Activities

The balance of the uncalled portion of the U.S. subscription, $38,700 million, has been authorized but not appropriatedby the U.S. Congress. Further action by the U.S. Congress is required to enable the Secretary of the Treasury to pay
any portion of this balance. The General Counsel of the U.S. Treasury has rendered an opinion that the entire uncalled
portion of the U.S. subscription is an obligation backed by the full faith and credit of the U.S., notwithstanding thatcongressional appropriations have not been obtained with respect to certain portions of the subscription.

Capital Increases
In October 2018, the Governors approved a new GCI and SCI as part of a capital package endorsed by the Governors
in April 2018 that includes institutional and financial reforms designed to ensure long-term financial sustainability.
The capital increases will result in additional subscribed capital of up to $60.1 billion, with $7.5 billion of paid-in
capital and $52.6 billion of callable capital.

Paid-In Capital
Paid-in capital has two components:• The U.S. dollar portion, which is freely available for use by IBRD.
•

National Currency Paid-In Capital (NCPIC) portion, usage of which is subject to certain restrictions under
IBRD’s Articles and is subject to Maintenance-Of-Value (MOV) requirements. For additional details see theNotes to the Financial Statements, Note A: Summary of Significant Accounting and Related Policies.

Usable Paid-in Capital
Usable paid-in capital represents the portion of paid-in capital that is available to support IBRD’s risk bearing capacity
and includes all U.S. dollar paid-in capital, as well as NCPIC for which use restrictions have been lifted (referred toas released NCPIC). The adjustments made to paid-in capital to arrive at usable paid-in capital are provided in Table
27.
The $1,295 million increase in usable paid-in capital between FY20 and FY21 was primarily due to the receipt of$884 million for GCI and $326 million for SCI during FY21.
Table 27: Usable Paid-In Capital
In millions of U.S dollars
As of June 30,
Paid-in Capital$
Adjustment on released NCPIC for net deferred MOV (receivable) payable a
Adjustments for unreleased NCPIC:
Restricted cash
Demand notes
MOV receivable
MOV payable
Total Adjustments for unreleased NCPIC
Usable paid-in capital$

2021
19,244
67
(60)
(332)
(343)
7
(728)
18,583$$2020
18,034
(14)
(65)
(373)
(299)
5
(732)
17,288$

Variance
1,210
81

$

5
41
(44)
2
4
1,295

a. The MOV on released NCPIC is considered to be deferred.

Usable Equity
Usable equity represents the amount of equity that is available to support IBRD’s lending operations. Usable equity
is central to the three frameworks IBRD uses to manage its capital adequacy, credit risk, and equity earnings. Theseframeworks, described in Section IX, are:•Strategic Capital Adequacy Framework•

Credit Risk and Loan Loss Provisioning Framework• Other ALM Framework
Usable equity consists of usable paid-in capital, and elements of retained earnings and reserves (see Table 28). The
components of retained earnings and reserves included in usable equity are as follows:
Special Reserve: Amount set aside pursuant to IBRD’s Articles, held in liquid form and to be used only for meeting
IBRD’s liabilities on its borrowings and guarantees;

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

37

Section VIII: Capital Activities

Management’s Discussion and Analysis

General Reserve: Consists of earnings from prior fiscal years which the Board has approved for retention in IBRD’s
equity. On August [5], 2021, the Board approved the transfer of $874 million to the General Reserve from FY21 net
income, and a one-time transfer of $203 million from Other reserves to the General reserve, which represents the
cumulative effect of adopting ASU 2016-13 (CECL) on July 1, 2020;
Cumulative Translation Adjustments: Comprise translation adjustments that arise upon revaluing currency balances
to U.S. dollars for reporting purposes. IBRD’s functional currencies are U.S. dollar and euro and changes incumulative translation adjustments only relate to translation adjustments on euro-denominated balances. Translation
adjustments associated with non-functional currencies are reflected in other adjustments in Table 28. Usable equity
excludes cumulative translation adjustments associated with unrealized mark-to-market gains/losses on non-trading
portfolios;
Other Adjustments: These adjustments relate to the income earned on PEBP assets before FY11, currency translation
adjustments on non-functional currencies and a one-time transfer of $203 million from Other reserves to the Generalreserve, which represents the cumulative effect of adopting ASU 2016-13 (CECL) on July 1, 2020. These also reflect
the measure of the funded status of the pension plans which is based on the funding methodology used by the Pension
Finance Committee to determine sustainable funding levels for the pension plans.
The increase in usable equity in FY21, primarily reflects the increase in reserve retention out of the FY21 allocable
income and the increase in usable paid-in capital.
Table 28: Usable Equity
In millions of U.S. dollars
As of June 30,
Usable paid-in capitalSpecial reserve
General reserve a
Cumulative translation adjustment
Other adjustments
Equity (usable equity)

2021

2020

Due toActivities

Total

$

18,583
293
31,464
(268)
(75)

$

17,288293
30,387
(737)
(93)

$

1,295
1,077
469
18

$

49,997$

47,138

$

2,859

$

1,216
1,077
-

Variance
Due to Translation
Adjustment
$

79
469
18

$
2,293 $
566$
a. Includes transfer to the General Reserve, which for FY21 (FY20) was approved by the Board on August [5], 2021 (August 7,2020). The FY21 General Reserve also includes a one-time transfer of $203 million from Other reserves to the General reserve,
which represents the cumulative effect of adopting ASU 2016-13 (CECL) on July 1, 2020.

38

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section IX: Risk Management

Section IX: 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 model” (Figure 18) where:•

Business units are responsible for directly managing risks in their respective functional areas;•

The Vice President and WBG Chief Risk Officer (CRO) provides direction, challenge, and oversight overfinancial and operational risk activities; and•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.
Figure 18: Financial and Operational Risk Management StructureInternal Audit

3rd LineCRO

2 LineRisk Oversight

Financial Risk

Risk Coverage

Operational Risk

Business Units

Risk Owners

Risk Processnd

Identify

AssessRespond

st

1 LineMonitor &ReportRisk Oversight and Coverage
Financial and Operational Risk Management
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.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

39

Management’s Discussion and Analysis

Section IX: Risk Management

The following three departments report directly to the CRO:
Credit Risk Department• Identifies, measures, monitors, and manages country credit risk faced by
IBRD. By agreement with the Board, the individual country credit risk
ratings are not shared with the Board and are not made public.
• Assesses loan portfolio risk, determines the adequacy of provisions for losses
on loans and other exposures, and monitors borrowers that are vulnerable tocrises in the near term. These reviews are taken into account in determining
the overall country programs and lending operations, and they are includedin the assessment of IBRD’s capital adequacy.
• Reviews proposed new financial products for any implications for country
credit risk.

Market and Counterparty Risk
Department• Responsible for market, liquidity, and counterparty credit risk oversight,
assessment, and reporting. It does these in coordination with IBRD’s
financial managers who are responsible for the day-to-day execution of
trades for the liquid asset and derivative portfolios, within applicable policy
and guideline limits.
• Ensure effective oversight, including: (i) maintaining sound credit
assessments, (ii) addressing transaction and product risk issues, (iii)
providing an independent review function, (iv) monitoring market andcounterparty risk in the investment, borrowing and client operation
portfolios, and (v) implementing the model risk governance framework. It
also provides reports to the Audit Committee and the Board on the extent andnature of risks, risk management, and oversight.

Operational Risk Department• Provides direction and oversight for operational risk activities by business
function.
• (i) Administers the Operational Risk Committee (ORC) for IBRD, (ii)
implements the operational risk management framework which is alignedwith Basel principles and provides direction to business unit partners toensure consistent application, (iii) assists and guides business units in
identifying and prioritizing significant operational risks and enabling
monitoring and reporting of risks through suitable metrics (or risk
indicators), (iv) helps identify emerging risks and trends through monitoringof internal and external risk events, (v) supports risk response and mitigating
actions, and prepares a corporate Operational Risk Report for review anddiscussion by the ORC.
• Responsible for business continuity management, enterprise risk
management functions and corporate insurance.

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.

40

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section IX: Risk Management

Figure 19 depicts IBRD’s management risk committee structure for financial and operational risks.
Figure 19: Risk Committee Structure for Financial and Operational Risks

Financial Risk

FRC
Finance and Risk Committee
Chair: MDCFO

ALCOAsset and Liability Management
Committee
Chair: MDCFO

Operational Risk
ERCEnterprise Risk Committee
Chair: MDCAO

NBC

ORC

New Business Committee

Operational Risk Committee
Chair: CRO

Financial Risk Committees:
The Finance and Risk Committee (FRC), a Vice President level committee, provides a high-level governancestructure for decisions that may have financial risks. The FRC was created under the authority of the Managing
Director and WBG Chief Financial Officer (MDCFO) to approve, clear, or discuss: (a) risk policy and procedure
documents related to financial integrity, income sustainability and balance sheet strength, and (b) issues and new
business initiatives with policy implications related to IBRD’s financial risks, including country credit, market,
counterparty, liquidity and model risks; and operational risks related to the finance business functions. The FRC helps
to integrate individual components of finance and risk management activities by building on mechanisms andprocesses already in place and provides a forum for discussing and communicating significant risk related issues. The
FRC meets regularly to discuss the financial performance, new products and services, and risk management of IBRD.
New Business Committee (NBC) is a standing subcommittee of the FRC. The NBC provides advice, guidance andrecommendations to the FRC, by performing due diligence over new financial products or services to ensure thatManagement has a full understanding of the rationale, costs, risks and rewards of the product or service being
considered.
Asset Liability Management Committee (ALCO), a Vice President-level committee chaired by the MDCFO
provides a high-level forum to ensure prudent balance sheet management of IBRD by: a) monitoring its financial
positions and Asset-Liability Management (ALM) activities for compliance with its respective guidelines, policies
and procedures, including borrowing and investment activities; b) identifying and providing recommendations on
emerging ALM issues for IBRD, as well as those related to capital, balance-sheet planning, and financial sustainability
and c) serving as reviewing and recommending body for ongoing decisions as part of implementing the ALM policies
and procedures of IBRD, including those that impact lending rates and net income.

Operational Risk Committees:
The Enterprise Risk Committee (ERC) is a corporate committee that has oversight over operational and nonfinancial risks across IBRD. Chaired by the Managing Director and Chief Administrative Officer (MDCAO), it
consists of a Vice President level committee to review and discuss enterprise risk matters. Specifically, the Committee
has a governance role over risk matters relating to corporate security, business continuity and IT security.
Operational Risk Committee (ORC) is the main governance committee for operational risk and provides a mechanism
for an integrated review and response across IBRD units on operational risks associated with people, processes, andsystems, including business continuity, and recognizing that business units remain responsible for managing
operational risks. The Committee’s key responsibilities include monitoring significant operational risk matters andevents on a quarterly basis to ensure that appropriate risk-response measures are taken and reviewing and concludingon IBRD’s overall operational risk profile. The ORC is chaired by the CRO and escalates significant risks/decisions
to the FRC and ERC.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

41

Management’s Discussion and Analysis

Section IX: Risk Management

Box 6: Summary of IBRD's Specific Risk Categories
Types of Risk

How the Risk is Managed

Credit Risk
Country Credit Risk

IBRD’s credit-risk-bearing capacity and individual country exposure limits

Counterparty Credit Risk

Counterparty credit limits and collateral

Market Risk
Interest Rate Risk

Interest rate derivatives to match the sensitivity of assets and liabilities

Exchange Rate Risk

Currency derivatives to match the currency composition of assets and liabilities

Liquidity Risk

Prudential minimum liquidity level

Operational Risk

Risk assessment and monitoring of key risk indicators and internal and external
operational risk events

Management of IBRD’s Risks
IBRD assumes financial risks 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 financially sustainable manner.
IBRD manages credit, market and operational risks for its financial activities which include lending, borrowing andinvesting (Box 6). 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, and liquidity risks. IBRD’s operational risk management framework is based upon astructured and uniform approach to identify, assess and monitor key operational risks across business units.

Coronavirus Disease 2019 (COVID-19) Outbreak
The 2019 outbreak of COVID-19 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 initial economic slowdown.
Governments and central banks 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.
As of June 30, 2021, IBRD had sufficient resources to meet its liquidity requirements and continues to have access tothe capital markets, despite market volatility. The liquid asset portfolio was 122% of the Target Liquidity Level. 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.
IBRD’s capital adequacy, as indicated by Equity-to-Loans ratio, remains stable, despite increased market volatility
since the COVID-19 outbreak (Figure 20).
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 many IBRD offices throughout the world, in line with IBRD’s Business Continuity
Procedure. In addition, IBRD has adopted other prudent measures to ensure the health and safety of its employees,
including imposing travel restrictions and holding public events in virtual format.

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Management’s Discussion and Analysis

Section IX: Risk Management

While the duration of the COVID-19 pandemic and its effects remain difficult to predict at this time, IBRD hascontinued to respond to demand and operate its core business functions effectively by utilizing technology for remote
work, and by leveraging 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 maintain plans to respond as the situation
evolves. While our offices around the world are in different operating statuses based on local conditions, IBRD has
started the process for a gradual reopening of offices for certain locations, including its headquarters in Washington
D.C.

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.
The Board monitors IBRD’s capital adequacy within a Strategic Capital Adequacy Framework, using the equity-toloans ratio as a key indicator of IBRD’s capital adequacy. The framework seeks to ensure that IBRD’s capital isaligned with the financial risk associated with its loan portfolio as well as other exposures over a medium-term capitalplanning horizon. Under this framework, IBRD evaluates its capital adequacy as measured by stress tests and an
appropriate minimum level for the long-term equity-to-loans ratio. For FY21, the outcome of the stress tests was
satisfactory.
Figure 20: Equity-to-Loans Ratio
26%
23%
20%
17%
Jun-17

policy minimum
Jun-18Jun-19Jun-20Jun-21

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

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Management’s Discussion and Analysis

Section IX: Risk Management

Table 29: Equity-to-Loans Ratio
In millions of U.S. dollars
Variance
As of June 30,

2021

2020

Usable paid-in capitalSpecial reserve
General reserve a
Cumulative translation adjustment b
Other adjustments
Equity (usable equity)$ 18,583
293
31,464(268)(75)$ 49,997$

Loans exposure
Present value of guarantees
Effective but undisbursed DDOs
Relevant accumulated provisions c
Deferred loan income
Other exposures
Loans (total exposure)$ 220,564
3,079(1,630)(495)(723)$ 220,795$

Equity-to-Loans Ratio

22.6%

$

$

Due toActivities

Due toTranslation
Adjustment

1,295
1,077
469
18
2,859

$

1,216
1,077
2,293

$

16,333(185)(1,834)39(21)
414,336$

13,591(285)(1,834)56(15)
411,517$

Total

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

$

$

$

$

$

$

$

79
469
18
566
2,742
100
(17)
(6)
2,819

22.8%

a. Includes transfer to the General Reserve, which for FY21 (FY20) was approved by the Board on August [5], 2021 (August 7, 2020).
FY21 General Reserve also includes a one-time transfer of $203 million from Other reserves to the General reserve, which
represents the cumulative effect of adopting ASU 2016-13 (CECL) on July 1, 2020.
b. Excludes cumulative translation amounts associated with the unrealized mark-to-market gains/losses on non-trading portfolios,net.
c. Includes the accumulated provision on signed loans commitments beginning July 1, 2020, upon the adoption the ASU 2016-13(CECL).

IBRD’s equity-to-loans ratio decreased slightly to 22.6% as of June 30, 2021, compared with 22.8% as of June 30,
2020, and remained above the 20% minimum threshold level (Table 29). The slight decline was due to the increase of
approximately $11.5 billion in total exposure, offset by the receipt of $1.2 billion of capital subscription payments andthe retention of $0.9 billion in the General Reserve out of FY21 allocable income.
Under IBRD’s currency management policy, to minimize exchange rate risk in a multicurrency business, IBRD
matches its borrowing obligations in any one currency (after derivatives activities) with assets in the same currency.
In addition, IBRD’s policy is to minimize the exchange rate sensitivity of its capital adequacy as measured by theequity-to-loans ratio. It implements this policy by periodically undertaking currency conversions to align the currencycomposition of its equity with that of its outstanding loans, across major currencies.

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’s mandate is to take only sovereign credit risk in its lending activities. Within country credit risk, three distinct
types of risks can be identified: idiosyncratic risk, correlation risk, and concentration risk. Idiosyncratic risk is the riskof an individual borrowing country’s exposure falling into nonaccrual status for country-specific reasons (such aspolicy slippage or political instability). Correlation risk is the risk that exposure to two or more borrowing countries
will fall into nonaccrual in response to common global or regional economic, political, or financial developments.
Concentration risk is the risk resulting from having a large portion of exposure outstanding which, if the exposure fell
into nonaccrual, would result in IBRD’s financial health being excessively impaired. Concentration risk needs to beevaluated both on a stand-alone basis (exposure of one borrowing country) and when taking into account correlation
when more than one borrowing country is affected by a common event, such that when combined, IBRD’s exposure
to a common risk is elevated.

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Management’s Discussion and Analysis

Section IX: Risk Management

To estimate idiosyncratic risk and stand-alone concentration risk, the Credit Risk Department looks at IBRD’s
exposure to each borrowing country and each borrowing country’s expected default to IBRD as captured in its credit
rating. Credit ratings and default probabilities reflect country economic, financial and political circumstances, andalso consider Environmental, Social and Governance (ESG) risk factors. For correlation risk, the Credit Risk
Department models the potential common factors that could impact borrowing countries simultaneously. The
existence of correlation increases the likelihood of large nonaccrual events, as most of these nonaccrual events involvethe joint default of two or more obligors in the portfolio.
IBRD manages country credit risk by using individual country exposure limits and takes into account factors such as
population size and the economic situation of 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.

Portfolio Concentration Risk
Portfolio concentration risk, which arises when a small group of borrowing countries account for a large share of loans
outstanding, is a key concern for IBRD. It is carefully managed for each borrowing country, in part, through an
exposure limit for the aggregate balance of loans outstanding, the present value of guarantees, and the undisbursed
portion of Deferred Drawdown Options (DDOs) that have become effective, among other potential exposures. Under
current guidelines, IBRD’s exposure to a single borrowing country is restricted to the lower of an Equitable Access
Limit (EAL) or the Single Borrower Limit (SBL).

Equitable Access Limit
The EAL is equal to 10% of IBRD’s Statutory Lending Limit (SLL). Under IBRD’s Articles, as applied, total loans
outstanding, including participations in loans and callable guarantees, may not exceed the sum of unimpaired
subscribed capital, reserves and surplus, referred to as the SLL. The SLL seeks to ensure that sufficient resources areavailable to meet IBRD's obligations to bondholders in the highly unlikely event of substantial and historically
unprecedented losses on IBRD's loans. At June 30, 2021, the SLL totaled $328.6 billion, of which the outstandingloans and callable guarantees totaled $223.6 billion, or 68.1% of the SLL. The EAL was $32.9 billion, as of June 30,
2021.

Single Borrower Limit
The SBL amount is established, in part, by assessing its impact on overall portfolio risk relative to equity. The SBL
caps the maximum exposure to IBRD’s most creditworthy and largest borrowing countries in terms of population andeconomic size. The SBL framework reflects a dual-SBL system, with the SBL for countries above the Graduation
Discussion Income (GDI) threshold set lower than the SBL for countries below GDI. GDI is the level of GNI per
capita of a member country above which graduation from IBRD starts being discussed. The GDI threshold was $7,065
as of July 1, 2020. Under the dual-SBL system, the SBL for FY21 was $23.5 billion for highly creditworthy countries
below the GDI and $20.5 billion for highly creditworthy countries above the GDI. On August 5, 2021, the Board
approved FY22 SBL limits of $24.9 billion and $21.2 billion, respectively. The SBL framework also contains a 50basis point surcharge (SBL surcharge) payable on the incremental exposure in excess of the SBL surcharge threshold(defined as $2.5 billion below the SBL for the respective GDI group). In the event that a borrowing country eligible
for one of the limits set under the SBL framework is downgraded to the high-risk category, management may
determine that the borrowing country continue to be eligible for borrowing at the currently applicable limit, but theborrowing country would not be eligible for any future increases in the SBL approved by the Board. During FY21,
there were 2 countries below-GDI and 2 countries above-GDI, which have their exposure limits set at the applicable
SBLs. For all other countries, the individual country exposure limits were set below the relevant SBL. In the context
of IBRD’s overall response to the impact of the COVID 19 crisis, on June 17, 2021, the Board approved temporary
relief from the SBL surcharge by excluding all financings approved between May 20, 2021 and the end of FY22 for
purposes of calculating whether a country’s exposure exceeds the SBL surcharge threshold. Operations excluded fromthe SBL surcharge calculation will continue to count towards SBL compliance.
As of June 30, 2021, the ten countries with the highest exposures accounted for about 61% of IBRD’s total exposure(Figure 21: Country Exposures as of June 30, 2021). IBRD’s largest exposure to a single borrowing country was $17.7
billion on June 30, 2021. Monitoring these exposures relative to the limit, however, requires consideration of therepayment profiles of existing loans, as well as disbursement profiles and projected new loans and guarantees.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

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Section IX: Risk Management

Management’s Discussion and Analysis

Sustainable Annual Lending Limit (SALL)
The “Financial Sustainability Framework” (FSF) requires IBRD to align its annual lending levels to its long-termsustainable capacity, while retaining flexibility to respond to crises by maintaining a crisis buffer.
The SALL is the maximum annual commitment level sustainable, in real terms, for 10 years in line with IBRD’s
capital adequacy framework and the Statutory Lending Limit set out in IBRD’s Articles, as determined bymanagement. Under the FSF, the Board annually approves a crisis buffer. The crisis buffer-adjusted sustainable annual
lending limit (SALL-Adj) serves as the upper bound for regular lending in the next year. For the fiscal year ending
June 30, 2021, the Board had approved a crisis buffer of $10 billion and a SALL-Adj of $25 billion. On June 24, 2021,
the Board approved a crisis buffer of $5 billion for FY22 (plus carryover from underutilization of the FY21 crisis
buffer), resulting in a SALL-Adj of $28 billion for FY22. Based on the final outcome for FY21 resulting in a carryoverof $4.5 billion from the FY21 crisis buffer, the applicable FY22 lending ceiling is $37.5 billion.
Figure 21: Country Exposures as of June 30, 2021
In billions of U.S. dollars

Top Ten Country Exposures

India
Indonesia
MexicoChina
BrazilColombia
Egypt
TurkeyPhilippines
Argentina

17.7
17.5
15.7
15.6
15.3

13.3
11.6
11.3
9.1
8.3
0

2

4

6

8

10

12

14

16

18

20

Credit-Risk-Bearing Capacity
Management uses risk models to estimate the size of a potential nonaccrual shock that IBRD could face over the next
three years at a given confidence level. The model-estimated nonaccrual shock is a single measure of the credit qualityof the portfolio that combines the following:•

IBRD’s country-credit-risk ratings and their associated expected risk of default;•

Covariance risks;•

The loan portfolio’s distribution across risk rating categories; and• The exposure concentration.
The shock estimated by this risk model is used in IBRD’s capital adequacy testing to determine the impact of potential
nonaccrual events on equity and income earning capacity.

Expected Losses, Overdue Payments, and Non-Performing Loans
The loan loss provision is calculated by taking into account IBRD’s total estimated exposure, the Expected Default
Frequency (EDF), i.e. probability of default, and the assumed loss in the event of default. Expected losses inherent in
the loan portfolio attributable to country credit risk are covered by the accumulated provision for losses on loans andother exposures, while unexpected losses owing to country credit risk are covered by equity (see Notes to the Financial
Statements, Note A: Summary of Significant Accounting and Related Policies and Note D: Loans and Other
Exposures).
When a borrower fails to make payments due to IBRD on any principal, interest, or other charges, IBRD may suspend
disbursements immediately on all loans to that borrower. IBRD’s current practice is to exercise this option using a
graduated approach (Box 7). These practices also apply to member countries eligible to borrow from both IBRD and
IDA, and whose payments on IDA loans may become overdue. It is IBRD’s practice not to reschedule interest or
principal payments on its loans or participate in debt rescheduling agreements with respect to its loans. As of June 30,
2021, there were no principal or interest amounts on loans in accrual status, that were overdue by more than threemonths.

46

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Management’s Discussion and Analysis

Section IX: Risk Management

As of June 30, 2021, 0.2% of IBRD’s loans were in nonaccrual status and all related to Zimbabwe. The exposure to
Zimbabwe was $432 million as of June 30, 2021, compared with $433 million as of June 30, 2020. IBRD received apayment of $1.5 million from Zimbabwe in FY21 (FY20: $1.5 million).
Box 7: Treatment of Overdue Payments
Where the borrower is the member country, no new loans to the member country, or to any other borrower in the
country, will be presented to the Board for approval, nor will any previously approved loan be signed, until payments
for all amounts 30 days overdue or longer have been received. Where the borrower is not the member country, no
new loans to that borrower will be signed or approved. In either case, the borrower will lose its eligibility for any
Overdue by waiver of interest charges in effect at that time for loans signed before May 16, 2007, and those loans signed
30 days
between May 16, 2007, and September 27, 2007, if the borrowers elected not to convert the terms of their loans
to the pricing terms effective September 27, 2007. For loans with the pricing terms applicable from May 16, 2007,
an overdue interest penalty will be charged at a rate of 50 basis points on the overdue principal. In addition, if an
overdue amount remains unpaid for a period of 30 days, then the borrower will pay a higher interest rate (LIBOR+ fixed spread) plus 50 basis points on the overdue principal amount until the overdue amount is fully paid.

Overdue by
45 daysIn addition to the provisions cited above for payments overdue by 30 days, to avoid proceeding further on the
notification process leading to suspension of disbursements, the country as borrower or guarantor and all
borrowers in the country must pay not only all payments overdue by 30 days or more, but also all payments due
regardless of the number of days since they have fallen due. Where the borrower is not the member country, no
new loans to, or guaranteed by, the member country, will be signed or approved. Additionally, all borrowers in the
country will lose eligibility for any waivers of interest in effect at the time.

Overdue by
60 daysIn addition to the suspension of approval for new loans and signing of previously approved loans, disbursementson all loans to, or guaranteed by, the member country are suspended until all overdue amounts are paid. This
policy applies even when the borrower is not the member country. Under exceptional circumstances,disbursements can be made to a member country upon the Board’s approval.

Overdue by
more thansix months

All loans made to, or guaranteed by, a member of IBRD are placed in nonaccrual status, unless IBRD determinesthat the overdue amount will be collected in the immediate future. Unpaid interest and other charges not yet paid
on loans outstanding are deducted from the income for the current period. To the extent that these payments arereceived, they are included in income. At the time of arrears clearance, if collectability risk is considered to beparticularly high, the member’s exposures may not automatically emerge from nonaccrual status. In such
instances, a decision is made on the restoration of accrual status on a case-by-case basis; in certain cases, thisdecision may be deferred until after a suitable period of payment performance has passed.

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

Commercial Counterparty Credit Risk
This is the risk that counterparties fail to meet their payment obligations under the terms of the contract or otherfinancial instruments. Effective management of counterparty credit risk is vital to the success of IBRD’s funding,investment, and asset/liability management activities. The monitoring and management of these risks is continuous as
the market environment evolves.
IBRD mitigates the counterparty credit risk from its investment and derivative holdings through the credit approval
process, the use of collateral agreements and risk limits, and other monitoring procedures. The credit approval process
involves evaluating counterparty and product-specific creditworthiness, assigning internal credit ratings and limits,and determining the risk profile of specific transactions. Credit limits are set and monitored throughout the year.
Counterparty exposure is updated daily, considering the current market values of assets held, estimates of potential
future movements of exposure for derivative instruments, and related counterparty collateral agreements, wherecollateral posting requirements are based on thresholds driven by public credit ratings. Collateral held includes cash
and highly rated liquid investment securities. Commercial credit risk management includes ESG related assessmentsin the approval and monitoring of higher exposure counterparties for the liquid asset portfolio and for derivative
counterparties. In addition, third-party ESG scores of the liquid asset portfolio and derivative exposures aremonitored.
IBRD’s liquid asset investment portfolio consists mostly of sovereign government bonds, debt instruments issued bysovereign government agencies, and bank time deposits. More than half of these investments are with issuers andcounterparties rated triple-A and AA (Table 30).

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

47

Management’s Discussion and Analysis

Section IX: Risk Management

Derivative Instruments
In the normal course of its business, IBRD enters into various derivative instruments to manage foreign exchange andinterest rate risks. These derivatives are used mainly to meet the financial needs of IBRD borrowers and to manage
the institution’s exposure to fluctuations in interest and exchange rates. These transactions are conducted with otherfinancial institutions and, by their nature, entail commercial counterparty credit risk.
While the volume of derivative activity can be measured by the contracted notional value of derivatives, notional
value is not an accurate measure of credit or market risk. IBRD uses the estimated replacement cost of the derivative
instrument, or potential future exposure to measure counterparty credit risk with these trading partners.
Under IBRD’s collateral arrangements, IBRD receives collateral when mark-to-market exposure is greater than theratings based collateral threshold. As of June 30, 2021, IBRD had received collateral of cash and securities totaling$4.4 billion.
IBRD is not required to post collateral under its derivative agreements as long as it maintains a triple-A credit rating.
(For the contractual value, notional amounts, related credit risk exposure amounts, and the amount IBRD would be
required to post in the event of a downgrade, see Notes to Financial Statements, Note F: Derivative Instruments).

Investment Securities
The Board-approved General Investment Authorization provides the basic authority for IBRD to invest its liquid
assets. Furthermore, all investment activities are conducted in accordance with a more detailed set of Investment
Guidelines. The Investment Guidelines are approved by the MDCFO and implemented by the Treasurer. These
Investment Guidelines set out detailed trading and operational rules, including which instruments are eligible forinvestment, and establish risk parameters relative to benchmarks. These include an overall consultative loss limit andduration deviation, specifying concentration limits on counterparties and instrument classes, as well as clear lines of
responsibility for risk monitoring and compliance. Credit risk is controlled by applying eligibility criteria (Box 8).
The overall market risk of the investment portfolio is subject to a consultative loss limit to reflect a level of tolerance
for the risk of underperforming the benchmark in any fiscal year. IBRD has procedures in place to monitor
performance against this limit and potential risks, and it takes appropriate actions if the limit is reached. All
investments are subject to additional conditions specified by the Chief Risk Officer, as deemed necessary.
IBRD’s exposure to futures and options and resale agreements is marginal. For futures and options, IBRD generally
closes out open positions prior to expiration. Futures are settled on a daily basis. In addition, IBRD monitors the fairvalue of resale securities received and, if necessary, closes out transactions and enters into new repriced transactions.
Management has broadened its universe of investment assets in an effort to achieve greater diversification in theportfolio and better risk-adjusted investment performance. This exposure is monitored by the Market and Counterparty
Risk Department.

48

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Section IX: Risk Management

Management’s Discussion and Analysis
Box 8: Eligibility Criteria for IBRD's Investments a
Instrument Securities
Sovereigns
Agencies
Corporates and asset-backed
securities

Description
IBRD may only invest in obligations issued or unconditionally guaranteed by governmentsof member countries with a minimum credit rating of AA-. However, no rating is required if
government obligations are denominated in the national currency of the issuer.
IBRD may invest only in obligations issued by an agency or instrumentality of a governmentof a member country, a multilateral organization, or any other official entity (other than thegovernment of a member country), with a minimum credit rating of AA-.
IBRD may only invest in securities with a triple-A credit rating.

IBRD may only invest in time deposits issued or guaranteed by financial institutions, whose
senior debt securities are rated at least A-.
IBRD may only invest in short-term borrowings (less than 190 days) from commercial banks,Commercial Paper
corporates, and financial institutions with at least two Prime-1 ratings.
Securities lending, and borrowing,
IBRD may engage in securities lending against adequate collateral, repurchases andrepurchases, resales, and reverse
reverse repurchases, against adequate margin protection, of the securities described under
repurchases
the sovereigns, agencies, and corporates and asset-backed security categories.
IBRD may engage in collateralized forward transactions, such as swap, repurchase, resale,securities lending, or equivalent transactions that involve certain underlying assets not
Collateral Assets
independently eligible for investment. In each case, adequate margin protection needs tobe received.
a. All investments are subject to approval by the Market and Counterparty Risk Department and must appear on the “Approved
List” created by the department.
b. Time deposits include certificates of deposit, bankers’ acceptances, and other obligations issued or unconditionally guaranteedby banks or other financial institutions.
Time deposits b

Commercial Counterparty Credit Risk Exposure
As a result of IBRD’s use of 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) (Table 30).
Table 30: Commercial Credit Exposure, Net of Collateral Held, by Counterparty Rating
In millions of U.S. dollars
As of June 30, 2021
Investments
Net Swap
Counterparty Rating a
Sovereigns
Non-Sovereigns
ExposureAAA$
25,186$
10,136$
AA
2,828
23,525628
A
12,188
11,999191
BBB
56
BB or lower/unrated
40
8
Total
$
40,242$45,724$
819

Total
Exposure$
35,322
26,981
24,37856
48$
86,785

% of
Total
41%
31
28
*
*
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$
35,899Non-Sovereigns$
14,06923,2269,245
38
5$46,583

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 to the extent that 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%.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

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Management’s Discussion and Analysis

Section IX: Risk Management

IBRD’s overall commercial counterparty credit exposure, net of collateral held, was $86.8 billion as of June 30, 2021.
As shown on Table 30, the credit quality of IBRD’s portfolio remains concentrated in the upper end of the credit
spectrum, with 72% of the portfolio rated AA or above and the remaining portfolio primarily rated A. The A rated
counterparties primarily consisted of sovereigns and financial institutions (limited to short-term deposits and swaps).

Non-Commercial Counterparty Credit Risk
In addition to its derivative transactions with commercial counterparties, IBRD offers derivative-intermediation andother services to borrowing member countries, as well as to affiliated and non-affiliated organizations, to help meettheir development needs or to carry out their development mandates:•

Borrowing Member Countries: Currency and interest rate swap transactions are executed between IBRD and
its borrowers under master derivative agreements. As of June 30, 2021, the notional amounts and net fair value
exposures under these agreements were $10.6 billion and $1.2 billion, respectively. Expected losses inherent
in these exposures due to country credit risk are incorporated in the fair value of these instruments.

•

Affiliated Organizations: Derivative contracts are executed between IBRD and IDA, under an agreement
allowing IBRD to intermediate derivative contracts on behalf of IDA. As of June 30, 2021, the notional amountunder this agreement was $0.8 billion. As of June 30, 2021, IBRD had exposure of $8 million to IDA. Under
its derivative agreement with IBRD, IDA is not required to post collateral as long as it maintains liquidity
holdings at pre-determined levels. As of June 30, 2021, IDA was not required to post any collateral with IBRD.

•

Non-Affiliated Organizations: IBRD has a master derivatives agreement with IFFIm, under which severaltransactions have been executed. As of June 30, 2021, the notional amounts and net fair value exposures under
this agreement were $3.8 billion and $0.3 billion, respectively. IBRD has the right to call for collateral above
an agreed specified threshold. As of June 30, 2021, IBRD had not exercised this right, but it reserves the rightunder the existing terms of the agreement. 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 net financial obligations of IFFIm less cash and liquid assets, as apercent of the net present value of IFFIm's financial assets.

Credit and Debit Valuation Adjustments
Most outstanding derivative positions are transacted over the counter and therefore valued using internally developed
valuation models. For commercial and non-commercial counterparties where IBRD has a net exposure (net receivable
position), IBRD calculates a Credit Valuation Adjustment (CVA) to reflect credit risk. For net derivative positions
with commercial and non-commercial counterparties where IBRD is in a net payable position, IBRD calculates a
Debit Valuation Adjustment (DVA) to reflect its own credit risk.
The CVA is calculated using the fair value of the derivative contracts, net of collateral received under credit support
agreements, and the probability of counterparty default based on the Credit Default Swaps (CDS) spread and, whereapplicable, proxy CDS spreads. IBRD does not currently hedge this exposure. The DVA calculation is generally
consistent with the CVA methodology and incorporates IBRD’s own credit spread as observed through the CDS
market. As of June 30, 2021, IBRD recorded a CVA on its Balance Sheet of $18 million, and a DVA of $21 million.

Effect of Changes in Credit Spreads
The sensitivity of IBRD’s portfolios to changes in credit spreads is shown in Table 31, where the amount represents
the dollar change in fair value which corresponds to a one basis point parallel upward shift in credit spreads.
•

Investments: IBRD purchases investment-grade securities for its liquid asset portfolio. Credit risk is controlled
through appropriate eligibility criteria (see Box 8). The overall risk of the investment portfolio is also
constrained by a consultative loss limit. In line with these risk management strategies, the potential effect ofdefault risk on IBRD’s investment portfolio is therefore small. The effect of credit changes on the market valueof the investment portfolio is also relatively limited; a one-basis-point change in the credit spreads of theinvestment assets would have an estimated impact of $3 million on the market value of the portfolio.

•

Borrowings: IBRD had $1,377 million of unrealized mark-to-market losses due to the change in own credit
relative to LIBOR in FY21. As shown in Table 31, the dollar value change corresponding to a one basis-point
upward parallel shift in credit spreads (IBRD’s own credit relative to LIBOR) is $115 million of unrealized
mark-to-market gains.

50

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section IX: Risk Management•

Loans. IBRD’s fair value model represents a hypothetical exit price of the loan portfolio. It incorporates CDS
spreads as an indicator of the credit risk for each borrower, after adjusting recovery levels to incorporate IBRD’s
institutional experience and assumptions. These assumptions are reviewed annually. The dollar value change
corresponding to a one-basis-point parallel rise in CDS rates on the loan portfolio is $2 million of unrealized
mark-to-market losses. IBRD does not hedge its sovereign credit exposure but Management assesses its credit
risk through a proprietary loan-loss provisioning model. Loan-loss provision represents the expected losses
inherent in its accrual and nonaccrual portfolios. As discussed earlier, IBRD’s country credit risk is managedby using individual country exposure limits and by monitoring its credit-risk-bearing capacity.

•

Derivatives. IBRD uses derivatives to manage exposures to currency and interest rate risks in its investment,
loan, other ALM and borrowing portfolios. It is therefore exposed to commercial counterparty credit risk onthese instruments. This risk is managed through:o Stringent selection of commercial derivative counterparties,o Daily marking-to-market of derivative positions, ando Use of collateral and collateral thresholds for all commercial counterparties.

Table 31: Effect of Credit on IBRD’s Portfolios
In millions of U.S. dollars
As of June 30, 2021
Borrowing portfolio
Loan portfolio b
Other ALM portfolio
Investment portfolio
Total gains

Credit Effect on Portfolio
Sensitivity a
$
115
(2)
(*)
(3)
$
110

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 (Figures 23-24).
On a fair value basis, if interest rates increase by one basis point, IBRD would experience an unrealized mark-tomarket loss of $14 million as of June 30, 2021 (see Table 32).
• Investment Trading Portfolio: After the effects of derivatives, the duration of the investment trading portfolio
is less than three months. As a result, the portfolio has a low sensitivity to changes in interest rates, resulting insmall fair value adjustments to income.
•

Loan and Borrowing Portfolios: In line with IBRD’s financial risk management strategies, the sensitivity of
IBRD’s loan and borrowing portfolios to changes in interest rates is relatively small. As noted earlier, IBRD
intends to maintain its positions for these portfolios and thus manages these instruments on a cash flow basis.
The resulting net unrealized mark-to-market gains and losses on these portfolios, associated with the small
sensitivity to interest rates, are therefore not expected to be realized.

•

Other ALM Portfolio: At the end of FY21, a one basis-point increase in interest rates would result in unrealized
mark-to-market losses of $16 million on the other ALM portfolio (unrealized mark-to-market losses of $14
million at the end FY20).

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

51

Section IX: Risk Management

Management’s Discussion and Analysis

Table 32: Effect of Interest Rates on IBRD’s Portfolios
In millions of U.S. dollars
Interest Rate Effect on
Portfolio

As of June 30, 2021
Borrowing portfolio
Loan portfolio b
Other ALM portfolio
Investment portfolio
Total losses

Sensitivity a
6
(3)
(16)
(1)
(14)

$

$

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

Figure 22 provides a further breakdown of how the use of derivatives affects the overall sensitivity of the borrowing,loan, other ALM and investment portfolios. It illustrates the extent to which each portfolio is economically hedged.
For example, for the borrowing portfolio, a one basis point increase in interest rates would result in net unrealized
mark-to-market gains of $115 million on the bonds. These would be significantly offset by the $109 million of net
unrealized mark-to-market losses on the related swaps, resulting in net unrealized mark-to-market gains of $6 million
for the portfolio. Loan sensitivities are illustrative as loans are carried at amortized cost on the Balance Sheet.
Figure 22: Sensitivity to Interest Rates
Dollar change in fair value corresponding to a one-basis-point upward parallel shift in interest rates.
In millions of U.S. dollars
Borrowing Portfolio

FY21
FY20

Loan Portfolio

Swaps Bonds
0
-109
115
-83
88

-120 -80 -40

040

80 120

Other ALM

Loans Swaps
FY21
FY20

-38
-48

Investments

Swaps

35
31

-60-40-20 0 20 40 60

Investment Portfolio

-16
-14
-20

-10

-1.0

FY21
FY20
0

10

-1.0
20

FY21
FY20

-20.0 -10.0 0.0 10.0 20.0

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. The
discontinuance of LIBOR and the transition to alternative reference rates also presents a significant risk to IBRD’s
activities, which is discussed later in this section.
Figure 23: Effect of Derivatives on Interest Rate Structure of the Borrowing Portfolio - June 30, 2021
In millions of U.S. dollars, except for ratios

Borrowing Portfolio excluding Derivatives

Borrowing Portfolio Including Derivatives

Variable
12%

Fixed
88%

a. Excludes discount notes.
* Denotes percentage less than 0.5%.

52

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Fixed
*

Variable100%

Management’s Discussion and Analysis

Section IX: Risk Management

Figure 24: Effect of Derivatives on Interest Rate Structure of the Loan Portfolio - June 30, 2021
In millions of U.S. dollars, except for ratios
Loans Excluding Derivatives

Loans Including Derivatives
Fixed
*

Fixed
15%

Variable85%

Variable100%* Denotes percentage less than 0.5%.

Alignment of Assets and Liabilities – IBRD borrows in multiple currency and interest rate bases worldwide and lends
the proceeds of those borrowings to eligible member countries. IBRD offers its borrowers the option of convertingthe currency and interest rate bases on their loans where there is a liquid swap market, thereby enabling them to selectloan terms that are best suited to their circumstances. Such options meet borrowers’ preferences and help mitigate
their currency and interest rate risk. In the absence of active risk management, IBRD would be exposed to substantial
market risk and asset-liability management imbalances. To address such imbalances, IBRD uses derivatives to swap
its payment obligations on bonds to a currency and interest rate basis that is aligned with its loan portfolio. Likewise,
when a borrower exercises a conversion option on a loan to change its currency or interest rate basis, IBRD uses
derivatives to convert its exposure back to a currency and interest rate basis, that is aligned with its loan portfolio.
Thus, IBRD’s payment obligations on its borrowings are aligned with its loans funded by such borrowings – generally,
after the effect of derivatives, IBRD primarily pays U.S. dollar, short-term variable rates on its borrowings, andreceives U.S. dollar, short-term variable rates on its loans. Figure 25 below illustrates the use of derivatives in the loan
and borrowing portfolios:
Figure 25: Use of Derivatives for Loans and Borrowings
Market Debt

Non US
Currencies

After Derivatives
Currency
Swaps

In multiple
interest ratebases or fixedcoupon rate

In US dollars andeuros (reflecting
borrowers’
preferences)
LIBOR-based
floating rate

Interest Rate
Swaps

Loans
Currency
Swaps

Interest Rate
Swaps

In multiple
currencies ofborrowers’
preference

In multiple
interest ratebases or fixedcoupon rate

Derivatives are also used to manage market risk in the liquidity portfolio. In line with its development mandate, IBRD
maintains a large liquidity balance to ensure that it can make payments on its borrowing obligations and loan
disbursements, even in the event of severe market disruptions. Pending disbursement, the liquidity portfolio is invested
on a global basis in multiple currencies and interest rates. Derivatives are also used to align the currency and durationof investments with the debt funding the liquidity portfolio. Figure 26 below illustrates the use of derivatives in theliquidity portfolio:
Figure 26: Use of Derivatives for Investments

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

53

Management’s Discussion and Analysis

Section IX: Risk Management

Other ALM – Given most loans carry variable rates, for the portion of loans that are funded by equity, loan interest
revenue, if left unmanaged, would be highly sensitive to fluctuations in short-term interest rates. The equity-to-loans
ratio of 22.6% indicates the portion of loans funded by equity. To manage this exposure, Management has put in placea framework with the primary goal of stabilizing this revenue. Under this framework, IBRD uses derivatives to convert
the variable rate cash flows on loans funded by equity back to fixed rate cash flows, thereby stabilizing loan interest
revenue over time. See Figure 27 below.
Figure 27: Use of Derivatives for Other ALM

Low Interest Rate Environment
Loans to borrowing countries:
Under IBRD’s loan agreements, interest is required to be paid by borrowers to IBRD, and not vice versa; 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 Box 8). Low and negative 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 floating basis. In FY21, despite the lowinterest rate environment, IBRD was able to generate a positive return, net of funding costs on its liquid asset portfolio(see Table 1).
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.

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 loans pricing, both of which canbe changed at Management’s discretion (see Table 13):
• Projected funding cost: Management’s best estimate of average funding costs over the life of the loan.
• Risk premium: A charge for the risk that actual funding costs are higher than projected Liquid Asset Portfolio
Spread Exposure.

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 rates swaps to reduce sizable timing mismatches.

54

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section IX: Risk Management

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. In March 2021, the FCA confirmed that all the LIBOR settings will either cease to beprovided by any administrator or no longer be representative, as follows:••

All sterling, euro, Swiss franc and Japanese yen LIBOR settings, and the 1-week and 2-month USD LIBOR
settings, will cease immediately following publication on December 31, 2021.
All remaining USD LIBOR settings, including the 6-month USD LIBOR used as the reference rate for IBRD
loans, will cease immediately following its publication on June 30, 2023.

Despite the extension of the publication of certain USD LIBOR rates to June 30, 2023, the regulators’ guidance
remains that LIBOR should not be used for new contracts after 2021. In consideration of the regulatory guidance andin preparations for the global markets’ transition away from LIBOR, IBRD has taken important steps to facilitate asmooth and orderly transition of its financial instruments effected by alternative reference rates.
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. IBRD is actively working through thistransition 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 abenchmark. In FY20, the Board endorsed an omnibus amendment process with borrowers for loan agreements toaddress 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 and equivalence for any replaced reference rate.
The contract amendments will enable similar treatment to all loans by bringing the fallback provisions related tochanges in the reference rate in the General Conditions into conformity with the revised General Conditions ofDecember 2018. The new language permits IBRD to transition the interest rate to alternative reference rates when asuitable alternative is available, and it is appropriate to do so. To date, IBRD has made significant progress in securing
counter-signature of the omnibus amendments from borrowers. IBRD is also using pre-existing provisions in loan
agreements to implement these changes.
In addition, as the market undergoes fundamental changes due to the transition to alternative reference rates, as partof its interest rate risk management, on January 26, 2021, the Board 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. An existing feature to permit fixing of the reference rate in loans with variablespread terms remains available.
In July, 2021, the Board approved offering new loans with new alternative reference rates and ceasing to offer LIBOR
based loans effective January 1, 2022; and the switch-over of existing loans beginning in January 2022 for all variablespread and non-USD fixed spread loans and beginning in July 2023 for the remaining USD fixed spread loans (seeTable 14). Careful consideration was given to the regulatory guidance, relevant provisions in IBRD’s General
Conditions and loan agreements, asset liability management (ALM) needs, as well as borrower implications. As aresult of the different characteristics of the new market reference rates and LIBOR, and the implications of a staggered
LIBOR cessation timetable, there will be changes to the current loan processes including billing and cost-pass throughcomputation methodologies used for lending rates. IBRD will continue to work with key stakeholders, includinginternal subject matter experts, senior management, borrowers, industry groups and other market participants, tomitigate potential financial and operational risks to which IBRD is exposed and to ensure an orderly transition to thealternative reference rates. IBRD is managing the transition prudently and in a cost-effective manner.

Exchange Rate Risk
IBRD mainly holds its assets and liabilities 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. IBRD’s functional currencies
are the U.S. dollar and euro. Currency translation adjustments relating to euro-denominated balances are reflected inother comprehensive income, a component of equity. Currency translation adjustments relating to non-euro
denominated balances (non-functional currencies) are reported in the Statement of Income. While IBRD’s equity

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

55

Section IX: Risk Management

Management’s Discussion and Analysis

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 risk, IBRD matches its borrowing obligations in any one currency (after derivative activities)
with assets in the same currency (Figure 28). 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 better absorb unexpected losses from arrears on loan repayments, regardless of exchange
movements. As a result, exchange rate movements during the year generally do not have an impact on the overall
equity-to-loans ratio.
Figure 28: Currency Composition of Loan and Borrowing Portfolios as of June 30, 2021
Loans outstanding (including Derivatives)
Others1%

Borrowings funding loans (including Derivatives)

Euro
19%

Euro
18%

Others1%

U.S. Dollars
80%

U.S. Dollars
81%

Liquidity Risk
Liquidity risk arises in the general funding of IBRD’s activities and in managing its financial position. It includes therisk of IBRD being unable to fund its portfolio of assets at appropriate maturities and rates, and the risk of being
unable to liquidate a position in a timely manner at a reasonable price.
Under IBRD’s liquidity management guidelines, aggregate liquid asset holdings are kept at or above a specified
Prudential Minimum to safeguard against cash flow interruptions.
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
33).
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.
Table 33: Liquidity Levels
Effective for FY21

In billions of U.S. dollars% of Target Liquidity Level

Target Liquidity Level$ 68.0

Guideline Maximum Liquidity Level

102.0

150%

Prudential Minimum Liquidity Level

54.4

80%

$ 82.8122%

Liquid Asset Portfolio as of June 30, 2021

The FY22 Target Liquidity Level is set at $57 billion, $11 billion lower than FY21 Target Liquidity Level due tolower projected debt service for FY22.

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.

56

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Management’s Discussion and Analysis

Section IX: Risk Management

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.

Cybersecurity Risk Management
IBRD’s operations rely on the secure processing, storage and transmission of confidential and other information incomputer systems and networks. As is the case for financial institutions generally, cybersecurity risk continues to besignificant for IBRD due to the evolving sophistication and complexity of the cyber threat landscape. These risks areunavoidable and IBRD seeks to manage them on a cost-effective basis consistent with its risk appetite.
To protect the security of its computer systems, software, networks and other technology assets, IBRD has developed
a cybersecurity risk management program, consisting of cybersecurity policies, procedures, compliance and awarenessprograms. IBRD deploys a multi-layered approach for cybersecurity risk management to help prevent and detectmalicious activity, both from within the organization and from external sources. In managing emerging cyber threatssuch as malware including ransomware, denial of service and phishing attacks, IBRD strives to adapt its technical andprocess-level controls and raise the level of user awareness to mitigate the risk.
IBRD periodically assesses the maturity and effectiveness of its cyber defenses through risk mitigation techniques,
including but not limited to, targeted testing, internal and external audits, incident response desktop exercises andindustry benchmarking.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

57

Management’s Discussion and Analysis

Section X: Contractual Obligations

Section X: Contractual Obligations
In conducting its business, IBRD takes on contractual obligations that may require future payments. These include
borrowings, operating leases, contractual purchases, capital expenditures, and other long-term liabilities. Table 34
shows IBRD’s contractual obligations for the next five years and thereafter; it excludes the following obligations
reflected on IBRD’s balance sheet: undisbursed loans, amounts payable for currency and interest rate swaps, amounts
payable for investment securities purchased, guarantees, and cash received under agency arrangements.
•

Borrowings: IBRD issues debt in the form of securities to private and governmental buyers.

•

Operating Leases: IBRD leases real estate and equipment under lease agreements for varying periods.
Operating lease expenditures represents future cash payments for real estate-related obligations and equipment,
based on contractual amounts.

•

Contractual Purchases: IBRD is a party to various obligations to purchase products and services, which arepurchase commitments in the ordinary course of business.

Other Long-Term Liabilities: IBRD provides a variety of benefits to its employees. As some of these benefits
are of a long-term nature, IBRD records the associated liability on its balance sheet. The obligations payable
represents expected benefit payments as well as contributions to the pension plans. These include future service
and pay accruals for current staff and new staff projections for the next 10 years.
Operating leases, contractual purchases and capital expenditures, and other long-term obligations, include obligations
shared with IDA, IFC, and MIGA under cost-sharing and service arrangements. These arrangements reflect the WBG
strategy of maximizing synergies, to best leverage resources for development (see Notes to Financial Statements, Note
H for Transactions with Affiliated Organizations).
•

Table 34: Contractual Obligations
In millions of U.S. dollars
Due in 1
year or Less
Borrowings (at fair value)
Operating leases
Contractual purchases
Other long-term liabilities
Total

58

$

$

45,24061
36633
45,970$$Due after 1
Year up to 3
Years
57,97187
65
140
58,263As of June 30, 2021
Due after 3
Years up to 5
Years$
62,57788
92$
62,757

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

Due After
5 years$$

94,2881,220
173
95,681

Total$ 260,076
1,456
101
1,038
$ 262,671

Management’s Discussion and Analysis

Section XI: Pension and Other Post-Retirement Benefits

Section XI: Pension and Other Post-Retirement Benefits
Governance
IBRD participates, along with IFC and MIGA, in pension and post-retirement benefit plans. The Staff Retirement Plan
(SRP), Retired Staff Benefits Plan (RSBP), and PEBP (collectively called the “Plans”) are defined benefit plans andcover substantially all WBG employees, retirees and their beneficiaries. Costs, assets, and liabilities associated with
the Plans are allocated among IBRD, IFC, and MIGA, based on their employees' respective participation in the Plans.
Costs allocated to IBRD are subsequently shared with IDA, based on an agreed cost-sharing ratio (see Notes toFinancial Statements, Note J: Pension and Other Post-Retirement Benefits).
The benefits of the Plans at retirement are determined pursuant to the Plan Documents adopted by the Board (PlanDocument). IBRD has a contractual obligation to make benefit payments to the Plans’ beneficiaries. The governancemechanism of the Plans, including the funding and investment policies described here, are designed to support thisobjective.
There are two committees that govern the Plans. From a governance standpoint, both committees are independent of
IBRD and the Board.
•

The Pension Finance Committee (PFC), which is responsible for the financial management of the Plans andis supported by the Pension Finance Administrator.

•

The Pension Benefits Administration Committee (PBAC), which is responsible for the administration of thebenefits of the Plans.

Contributions to the SRP and RSBP are irrevocable, with assets held in separate trusts, and the PEBP assets are includedin IBRD's investment portfolio. IBRD acts as trustee for the Plans and the assets are used for the exclusive benefit of
the participants and their beneficiaries. The objective of the Plans is to accumulate sufficient assets to meet future
pension benefit obligations. As of June 30, 2021, IBRD and IDA’s share of the assets amounted to $30.4 billion (seeTable 35). This represents the accumulated contributions paid into the plans net of benefit payments, together with theaccumulated value of investment earnings, net of related expenses.

Funding and Investment Policies
The key policies underpinning the financial management of the Plans, including the determination of WBG
contributions and the investment of Plan assets, are the funding and investment policies. The objective of these policies
is to ensure that the Plans have sufficient assets to meet benefit payments over the long term. The funding policy, as
approved by the PFC, establishes the rules that determine the WBG’s contributions. The policy seeks to fund the Plans
in a consistent and timely manner, while at the same time avoiding excessive volatility in WBG contributions. The
funding policy determines how much the WBG must contribute annually to sustain and ensure the accumulation of
sufficient assets over time to meet the expected benefit payments. Under the Plan Document, the PFC determines the
WBG contribution based on actuarial valuations. IBRD is required to make the contribution determined by the PFC.
In FY21, the WBG’s rate for contributions to the Plans was 27.82% of net salaries.
The Projected Benefit Obligation (PBO) is derived from AA-rated corporate bonds, as required by U.S. GAAP. The
selection of this rate as the basis for the discount rate is to establish a liability equivalent to an amount that if invested
in high-quality fixed income securities would match the benefit payment stream. While this measure is based on an
objective, observable market rate, it does not necessarily reflect the realized or expected returns of the Plan which
depend on how the Plans are managed and invested. The PBO for funding purposes is discounted using a 3.5% real
discount rate since the funding strategy for the Plans is based on a target of 3.5% real return on investments. This rate
constitutes the long-term return objective for the Plan’s assets, referred to as the Long-Term Real Return Objective(LTRRO), which Management has followed since the year ended June 30, 1999 and recently reaffirmed under the
strategic asset allocation review in April 2021. If the return on pension assets is 3.5% in real terms and contributions
are made at the actuarially required rates (which reflect the long- term cost of the plan benefit), the Plan benefits will
be funded over time.
The assets of the Plans are diversified across a variety of asset classes, with the objective of achieving returns consistent
with the LTRRO over the long term without taking undue risks. The returns on investments for the Plans have met or
exceeded the LTRRO on a consistent basis in the long term as well as in recent years. The PFC periodically reviews

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

59

Management’s Discussion and Analysis

Section XI: Pension and Other Post-Retirement Benefits

the LTRRO for realism and appropriateness. See Notes to Financial Statements, Note J: Pension and Other PostRetirement Benefits for asset allocation, expected return on Plan assets and assumptions used to determine the PBO.

Environmental, Social and Governance (ESG) Policies
The Plan has a long-standing ESG policy that reflects the latest developments in and understanding of responsible
investments and ESG integration. The ESG policy is based on a principled and pragmatic approach in accordance withand subject to the fiduciary standard applicable to the administration and investment of Plan assets. The Plan’s ESG
policy states that consideration of ESG factors, including but not limited to environmental practices, worker safety
and health standards, and corporate governance, can add value to the investment process and affect assessment of therisk and return characteristics of investments.

Projected Benefit Obligation
Given that pension plan liabilities can be defined and measured in different ways, it is possible to have different
funded status measures for the same plans. The most widely used and publicly disclosed measure of pension plan
liabilities is the PBO measure required under U.S. GAAP. It reflects the present value of all retirement benefits earned
by participants (adjusted for assumed inflation) as of a given date, including projected salary increases to retirement.
Therefore, the PBO measure is an appropriate metric for assessing the ability of the Plans to cover expected benefits
as of a certain date. The underlying actuarial assumptions used to determine the PBO, accumulated benefit obligations,and funded status associated with the Plans are based on financial market interest rates, experience, and Management's
best estimate of future benefit changes, economic conditions and earnings from plan assets.
Table 35: Funded Status of the Plans
In millions U.S. dollars

PBO
Plan assets
Net position

$
$
$

SRP
(24,728)
24,408
(320)

$
$
$

As of June 30, 2021
RSBP
PEBP
(4,235)$(2,339)
4,145
$
1,806
(90)
$
(533)

$
$
$

IBRD's funded status

PBO
Plan assets
Net position

Total(31,302)30,359
(943)
(451)

$
$
$

SRP
(23,536)
19,266(4,270)$$$

As of June 30, 2020
RSBP
PEBP
(3,997)$(2,167)
3,195
$
1,353
(802)
$
(814)

IBRD's funded status

$
$
$

Total
(29,700)
23,814(5,886)(2,731)The discount rate used to convert future obligations into today’s dollars is derived from high-grade, AA-rated
corporate bond yields as required by U.S. GAAP. The decrease in the underfunded status of the portion of the pension
plans for IBRD and IDA from $5.9 billion as of June 30, 2020 to $0.9 billion as of June 30, 2021, net of PEBP assets,
primarily reflects the increase in the value of the Plan Assets due to higher asset returns. As the Plans are managedwith a long-term horizon, results over shorter time periods may be impacted positively or negatively by market
fluctuations.

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Management’s Discussion and Analysis

Section XII: Critical Accounting Policies and the Use of Estimates

Section XII: Critical Accounting Policies and the Use of Estimates
IBRD’s significant accounting policies, as well as estimates made by Management, are integral to its financial
reporting. While all of these policies require a certain level of judgment and estimates, significant policies requireManagement to make highly difficult, complex, and subjective judgments as these relate to matters inherently
uncertain and susceptible to change. Note A to the financial statements contains a summary of IBRD’s significant
accounting policies including a discussion of recently issued accounting pronouncements.

Fair Value of Financial Instruments
The fair values of financial instruments are based on a three-level hierarchy. For financial instruments classified as
Level 1 or 2, less judgment is applied in arriving at fair value measures as the inputs are based on observable market
data. For financial instruments classified as Level 3, unobservable inputs are used. These require Management to makeimportant assumptions and judgments in determining fair value measures. Investments measured at net asset value pershare (or its equivalent) are not classified in the fair value hierarchy.
Most of IBRD’s financial instruments which are recorded at fair value are classified as Levels 1 and 2. Table 36
presents the summary of the fair value of financial instruments recorded at fair value on a recurring basis, and theamounts measured using significant Level 3 inputs. IBRD’s level 3 instruments are mainly structured bonds andrelated swaps held in the borrowing portfolio; these use market observable inputs and unobservable inputs such ascorrelations and interest rate volatilities. There were no Level 3 instruments in IBRD’s investment or loan portfolios
as of June 30, 2021. As of June 30, 2021, all of IBRD’s loans were carried at amortized cost.
Table 36: Fair Value Level 3 Summary
In millions U.S. dollars
For the fiscal year ended June 30,

2021

Total Assets at fair value
As a percentage of total assets

$

616
0.58%

$

Total
Balance
106,654

Total Liabilities at fair value
As a percentage of total liabilities

$

4,877
1.78%

$

273,487

Level 3

2020
$

298
0.29%

$

Total
Balance
104,532

$

5,820
2.25%

$

259,235

Level 3

IBRD reviews the methodology, inputs, and assumptions on a quarterly basis to assess the appropriateness of the fairvalue hierarchy classification of each financial instrument.
Some financial instruments are valued using pricing models. The valuation group, which is independent of treasury
and risk management functions, reviews all financial instrument models affecting financial reporting through fairvalue and assesses model appropriateness and consistency. The review looks at whether the models accurately reflect
the characteristics of the transaction and its risks, the suitability and convergence properties of numerical algorithms,
the reliability of data sources, the consistency of the treatment with models for similar products, and sensitivity to
input parameters and assumptions that cannot be priced from the market.
Reviews are conducted of new and/or changed models, as well as previously validated models, to assess whether any
changes in the product or market may have affected the model’s continued validity and whether any theoretical orcompetitive developments may require reassessment of the model’s adequacy.
The financial models used for input to IBRD’s financial statements are subject to both internal and periodic externalverification and review by qualified personnel.
In cases where Management relies on instrument valuations supplied by external pricing vendors, procedures are inplace to validate the appropriateness of the models used, as well as the inputs applied in determining those values.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

61

Management’s Discussion and Analysis

Section XII: Critical Accounting Policies and the Use of Estimates

Provision for Losses on Loans and Other Exposures
On July 1, 2020, IBRD adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) which
introduces a new approach to credit loss measurement - the Current Expected Credit Losses (CECL) methodology andrequires additional disclosures. See Notes to the Financial Statements, Note A – Summary of Significant Accounting
and Related Policies.
For IBRD, the primary changes, compared to the previous approach under U.S. GAAP, were to evaluate estimatedexposures over the life of the instrument, to incorporate undisbursed loan commitments in the measure of exposure,and to incorporate estimations of future market conditions for a reasonable and supportable forecast period along withhistorical experience. The overall provision for expected losses is the sum of the computed annual losses, taking into
account borrower risk ratings and associated expected default frequencies, estimates of exposure, and severity of loss
given default.
For loans carried at fair value, if any, the credit risk assessment is a determinant of fair value.
The determination of a borrower's risk rating is based on complex variables such as: political risk, external debt andliquidity, fiscal policy and the public debt burden, balance of payments risks, economic structure and growth prospects,
monetary and exchange rate policy, and financial sector risks and corporate sector debt and other vulnerabilities.
Additionally, estimations of disbursements and repayments of exposures are made, as well as estimations of futureinterest cash flows based on forward looking market variables.
IBRD periodically reviews these variables and reassesses the adequacy of the accumulated provision accordingly.
Actual losses may differ from expected losses owing to unforeseen changes in any of the variables affecting thecreditworthiness or estimates inherent in the exposure measurements of borrowers.
The Credit Risk Committee monitors aspects of country credit risk, in particular, reviewing the provision for losses
on loans and guarantees taking into account, among other factors, any changes in exposure, risk ratings of borrowing
member countries, or changes between the accrual and nonaccrual portfolios.
The accumulated provision for loan losses is reported separately in the balance sheet as a reduction from IBRD’s totalloans outstanding. The accumulated provision for losses on loan commitments and other exposures is included inaccounts payable and miscellaneous liabilities. Increases or decreases in the accumulated provision for losses on loans
and other exposures are reported in the Statement of Income as a provision for losses on loans and other exposures(see Notes to Financial Statements: Note A: Summary of Significant Accounting and Related Policies and Note D:
Loans and Other Exposures).

Pension and Other Post-Retirement Benefits
The underlying actuarial assumptions used to determine the PBO, accumulated benefit obligations, and funded status
associated with IBRD pension and other post-retirement benefit plans are based on financial market interest rates,
experience, and Management's best estimate of future benefit changes and economic conditions. All costs, assets andliabilities associated with these 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 anagreed cost-sharing ratio. IDA, IFC and MIGA reimburse IBRD for their proportionate share of any contributions
made to these plans by IBRD. Contributions to the plans are calculated as a percentage of salary (see Notes to Financial
Statements, Note J: Pension and Other Post-Retirement Benefits).

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Management’s Discussion and Analysis

Section XIII: Governance and Controls

Section XIII: Governance and Controls
Figure 29: Governance Structure

Business Conduct
The WBG promotes a positive work environment in which staff members understand their ethical obligations to theinstitution. In support of this commitment, the institution has in place a Code of Conduct. The WBG has both an
Ethics Help Line and a Fraud and Corruption hotline. A third-party service offers many methods of worldwide
communication. Reporting channels include telephone, mail, email, or confidential submission through a website.
IBRD has in place procedures for receiving, retaining, and handling recommendations and concerns relating tobusiness conduct identified during the accounting, internal control, and auditing processes.
WBG staff rules clarify and codify the staff’s obligations in reporting suspected fraud, corruption, or other misconductthat may threaten the operations or governance of the WBG. These rules also offer protection from retaliation.

General Governance
IBRD’s decision-making structure consists of the Board of Governors, Executive Directors, the President,
Management, and staff. The Board of Governors is the highest decision-making authority. Governors are appointed
by their member governments for a five-year term, which is renewable. The Board of Governors may delegate
authority to the Executive Directors to exercise any of its powers, except for certain powers enumerated in IBRD’s
Articles. IBRD has its own policies and frameworks that are carried out by staff that share responsibilities over both
IBRD and IDA.

Executive Directors
In accordance with IBRD’s Articles, Executive Directors are appointed or elected every two years by their member
governments. The Board currently has 25 Executive Directors, who represent all 189 member countries. Executive
Directors are neither officers nor staff of IBRD. The President is the only member of the Board from management,
and he serves as a non-voting member and as Chairman of the Board.
The Board is required to consider proposals made by the President on IBRD loans, grants and guarantees and on otherpolicies that affect its general operations. The Board is also responsible for presenting to the Governors, at the Annual
Meetings, audited accounts, an administrative budget, and an annual report on operations and policies and othermatters.
The Board and its committees are in continuous session based in Washington DC, as business requires. Eachcommittee's terms of reference establish its respective roles and responsibilities. As committees do not vote on issues,
their role is primarily to serve the Board in discharging its responsibilities.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

63

Management’s Discussion and Analysis

Section XIII: Governance and Controls

The committees are made up of eight members and function under their respective stipulated terms of reference. These
committees are as follows:
•
•
•
•
•

Audit Committee - assists the Board in overseeing IBRD’s finances, accounting, risk management and internal
controls (see further explanation below).
Budget Committee - assists the Board in approving the World Bank’s budget and in overseeing the preparationand execution of IBRD’s business plans. The committee provides guidance to management on strategic
directions of IBRD.
Committee on Development Effectiveness - supports the Board in assessing IBRD’s development
effectiveness, providing guidance on strategic directions of IBRD, monitoring the quality and results ofoperations.
Committee on Governance and Executive Directors’ Administrative Matters - assists the Board on issues
related to the governance of IBRD, the Board’s own effectiveness, and the administrative policy applicable to
Executive Directors’ offices.
Human Resources Committee - strengthens the efficiency and effectiveness of the Board in discharging its
oversight responsibility on the World Bank’s human resources strategy, policies and practices, and theiralignment with the business needs of the organization.

Audit Committee
Membership
The Audit Committee consists of eight Executive Directors. Membership in the Committee is determined by the
Board, based on nominations by the Chairman of the Board, following informal consultation with Executive Directors.

Key Responsibilities
The Audit Committee is appointed by the Board for the primary purpose of assisting the Board in overseeing IBRD’s
finances, accounting, risk management, internal controls and institutional integrity. Specific responsibilities include:•

Oversight of the integrity of IBRD’s financial statements.

•

Appointment, qualifications, independence and performance of the External Auditor.

•

Performance of the Group Internal Audit.

•

Adequacy and effectiveness of financial and accounting policies and internal controls’ and the mechanisms todeter, prevent and penalize fraud and corruption in IBRD operations and corporate procurement.

•

Effective management of financial, fiduciary and compliance risks in IBRD.

• Oversight of the institutional arrangements and processes for risk management across IBRD.
In carrying out its role, the Audit Committee discusses financial issues and policies that affect IBRD’s financial
position and capital adequacy with Management, external auditors, and internal auditors. It recommends the annual
audited financial statements for approval to the Board. The Audit Committee monitors and reviews developments incorporate governance and its own role on an ongoing basis.

Executive Sessions
Under the Audit Committee's terms of reference, it may convene in executive session at any time, without
Management’s presence. The Audit Committee meets separately in executive session with the external and internal
auditors.

Access to Resources and to Management
Throughout the year, the Audit Committee receives a large volume of information to enable it to carry out its duties
and meets both formally and informally throughout the year to discuss relevant matters. It has complete access toManagement, and reviews and discusses with Management topics considered in its terms of reference.
The Audit Committee has the authority to seek advice and assistance from outside legal, accounting, or other advisors
as it deems necessary.

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Management’s Discussion and Analysis

Section XIII: Governance and Controls

Auditor Independence
The appointment of the external auditor for IBRD is governed by a set of Board-approved principles. These include:•

Limits on the external auditor’s provision of non-audit-related services•

Requiring all audit-related services to be pre-approved on a case-by-case basis by the Board, uponrecommendation of the Audit Committee, and•Renewal of the external audit contract every five years, with a limit of two consecutive terms and mandatory
rotation thereafter.

In FY17, the Board approved amendments to the policy on the appointment of an external auditor which came into
effect for the FY19 audit period. The primary amendments now permit the external auditor to provide non-prohibited
non-audit related services subject to monetary limits. Broadly, the list of prohibited non-audit services include thosethat would put the external auditor in the roles typically performed by management and in a position of auditing theirown work, such as accounting services, internal audit services, and provision of investment advice. The total nonaudit services fees over the term of the relevant external audit contract shall not exceed 70 percent of the audit fees
over the same period.
Communication between the external auditor and the Audit Committee is ongoing and carried out as often as deemednecessary by either party. The Audit Committee meets periodically with the external auditor and individual committee
members have independent access to the external auditor. IBRD’s external auditors also follow the communication
requirements, with the Audit Committees set out under generally accepted auditing standards in the United States.

External Auditors
The external auditor is appointed to a five-year term, with a limit of two consecutive terms, and is subject to annual
reappointment based on the recommendation of the Audit Committee and approval of a resolution by the Board.
Following a mandatory rebidding of the external audit contract, IBRD’s Board approved the appointment of Deloitte& Touche LLP as IBRD’s external auditor for a five-year term commencing FY19, subject to annual reappointment.

Senior Management Changes
There were no Senior Management changes during the year.

Internal Control
Internal Control Over Financial Reporting
Each fiscal year, Management evaluates the internal controls over financial reporting to determine whether any
changes made in these controls during the fiscal year materially affect, or would be reasonably likely to materiallyaffect, IBRD’s internal control over financial reporting. The internal control framework promulgated by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO), “Internal Control - Integrated
Framework (2013)” provides guidance for designing, implementing and conducting internal control and assessing its
effectiveness. IBRD uses the 2013 COSO framework to assess the effectiveness of the internal control over financial
reporting. As of June 30, 2021, management maintained effective internal control over financial reporting. See“Management’s report regarding effectiveness of Internal Control over Financial Reporting” on page 72.
IBRD’s internal control over financial reporting was audited by Deloitte & Touche LLP, and their report expresses anunqualified opinion on the effectiveness of IBRD’s internal control over financial reporting as of June 30, 2021. See
Independent Auditor’s Report on page 74.

Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed is gathered andcommunicated to Management as appropriate, to allow timely decisions regarding required disclosure by IBRD.
Management conducted an evaluation of the effectiveness of such controls and procedures and the President and the
MDCFO have concluded that these controls and procedures were effective as of June 30, 2021.

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

65

Management’s Discussion and Analysis

Appendix

Appendix
Glossary of Terms
Articles: IBRD’s Articles of Agreement
Below GDI Country: Country whose Gross National Income per capita is below the Graduation Discussion Income as publishedin the Per Capita Income Guidelines for Operational Purposes.
Board: The Executive Directors as established by IBRD’s Articles of Agreement.
Budget Anchor: Measure that IBRD uses to monitor the coverage of its net administrative expenses by its loan spread revenue.
Capital Adequacy: A measure of IBRD’s ability to withstand unexpected shocks and is based on the amount of IBRD’s usable
equity expressed as a percentage of its loans and other related exposures.
Credit Default Swaps (CDS): A derivative contract that provides protection against deteriorating credit quality and allows one
party to receive payment in the event of a default or specified credit event by a third party.
Credit Valuation Adjustment (CVA): The CVA represents the counterparty credit risk exposure and is reflected in the fair valueof derivative instruments.
Debit Valuation Adjustment (DVA): Debit Valuation Adjustment on Fair Value Option (FVO) Elected Liabilities that
corresponds to the change in fair value of the liability presented under the FVO that relate to the instrument specific credit risk(“own-credit risk”).
Duration: Provides an indication of the sensitivity of underlying yield to changes in interest rates.
Equity-to-Loans Ratio: The Board monitors IBRD’s capital adequacy within a Strategic Capital Adequacy Framework, using
the equity-to-loans ratio as a key indicator of IBRD’s capital adequacy. For details on the ratio, see Table 29.
Loan Spread Revenue, Net: The spread between loan returns and associated debt cost, assuming loans are fully funded by debt.
Lower-Middle-Income Countries: For FY21, income groups are classified according to 2019 gross national income (GNI) per
capita. For lower-middle-income countries, the GNI range was $1,036 to $4,045.
Maintenance of Value (MOV): Under IBRD’s Articles, members are required to maintain the value of their subscriptions ofnational currency paid-in, which is subject to certain restrictions. MOV is determined by measuring the foreign exchange value ofa member’s national currency against the standard of value of IBRD’s capital based on the 1974 SDR.
Lending Operations: Total projects from a fiscal year based on project approval date as of June 30 of the fiscal year.
Net Commitments: Commitments net of full terminations and cancellations approved in the same fiscal year and include guarantee
commitments and guarantee facilities that have been approved by the Executive Directors.
Net Loan Disbursements: Loan disbursements net of repayments and prepayments.
Prudential Minimum: The minimum amount of liquidity that IBRD is required to hold and is defined as 80% of the Target
Liquidity Level.
Sustainable Annual Lending Limit (SALL): The level of lending that can be sustained in real terms over 10 years.
Strategic Capital Adequacy Framework: Evaluates IBRD’s capital adequacy as measured by stress tests and an appropriate
minimum level for the long-term equity-to-loans ratio. The equity-to-loans ratio provides a background framework in the context
of annual net income allocation decisions, as well as in the assessment of the initiatives for the use of capital. The framework has
been approved by the Board.
Single Borrower Limit (SBL): The maximum authorized exposure to IBRD’s most creditworthy and largest borrowing countries
in terms of population and economic size.
Statutory Lending Limit (SLL): Under IBRD’s Articles, as applied, the total amount outstanding of loans, participations in loans,and callable guarantees may not exceed the sum of unimpaired subscribed capital, reserves and surplus.
Target Liquidity Level (TLL): The twelve- month Target Liquidity Level is calculated before the end of each fiscal year basedon Management’s estimates of projected net loan disbursements approved at the time of projection and twelve months of debtservice for the upcoming fiscal year. This twelve-month estimate becomes the target for the upcoming fiscal year.
U.S. GAAP: Accounting principles generally accepted in the United States of America.
World Bank: The World Bank consists of IBRD and IDA.
World Bank Group (WBG): The World Bank Group consists of IBRD, IDA, IFC, MIGA, and ICSID.

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Management’s Discussion and Analysis

AppendixAbbreviations and Acronyms
AFDB: African Development Bank

IFLs: IBRD Flexible Loans

AMC: Advance Market Commitment for Vaccines against
Pneumococcal Diseases

IPF: Investment Project Financing

AOCI: Accumulated Other Comprehensive Income
BETF: IBRD-Executed Trust Funds

LIBID: London Interbank Bid Rate
LIBOR: London Interbank Offered Rate
LLP: Loan Loss Provision

BOG: Board of Governors
COSO: Committee of Sponsoring Organizations of theTreadway Commission
CCSAs: Cross-Cutting Solution Areas
CDS: Credit Default Swaps

LTRRO: Long-Term Real Return Objective
MDB: Multilateral Development BankMDCAO: Managing Director and World Bank Group Chief
Administrative Officer

CVA: Credit Valuation Adjustment

MDCFO: Managing Director and World Bank Group
Chief Financial Officer

CRO: Vice President and WBG Chief Risk Officer

MDCOO: Managing Director and Chief Operating Officer

DDO: Deferred Drawdown Option

MIGA: Multilateral Investment Guarantee Agency

DPF: Development Project Financing

MOV: Maintenance-Of-Value

DTCs: Developing and Transitional Countries

NBC: New Business Committee

DVA: Debit Valuation Adjustment

NCPIC: National Currency Paid-in Capital
ORC: Operational Risk Committee

EAL: Equitable Access Limit

PAF: Pilot Auction Facility for Methane and Climate
Change Mitigation

EDF: Expected default frequency
EEA: Exposure Exchange Agreement

PEF: Pandemic Emergency Financing Facility

EFOs: Externally Financed Outputs

PBAC: Pension Benefits Administration Committee

ESG: Environmental, Social and Governance
FASB: Financial Accounting Standards Board
FIFs: Financial Intermediary Funds

PBO: Pension Benefit Obligation
PCRF: Post Retirement Contribution Reserve FundPEBP: Post-Employment Benefit Plan

FRC: Finance and Risk Committee
GAVI: Global Alliance for Vaccines and Immunization

PFC: Pension Finance Committee

GCI: General Capital Increase

PforR: Program-for-Results

GDI: Graduation Discussion Income

RAS: Reimbursable Advisory Services

GNI: Gross National Income

RAMP: Reserves Advisory Management Program

GMFs: Grant-Making Facilities

RETF: Recipient-Executed Trust Funds

GPs: Global Practices

RSBP: Retired Staff Benefits Plan

IADB: Inter‐American Development Bank
IBRD: International Bank for Reconstruction andDevelopment
ICSID: International Centre for Settlement of Investment
Disputes

SALL: Sustainable Annual Lending Limit
SCI: Selective Capital Increase
SDPL: Special Development Policy Loans
SBL: Single Borrower Limit

IFC: International Finance Corporation

SLL: Statutory Lending Limit

IDA: International Development Association

SRP: Staff Retirement Plan

IFFIm: International Finance Facility for Immunization

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

67

Management’s Discussion and Analysis

Appendix

Eligible Borrowing Member Countries by Region
RegionCountries

Eastern and Southern Africa

Angola, Botswana, Eswatini, Kenya*, Mauritius, Namibia, Seychelles, South Africa, Zimbabwe*

Western and Central Africa

Cabo Verde*, Cameroon*, Republic of Congo*, Equatorial Guinea, Gabon, Nigeria*

East Asia and Pacific

China, Fiji*, Indonesia, Malaysia, Mongolia, Nauru, Palau, Papua New Guinea*, Philippines,
Thailand, Timor-Leste*, Vietnam

Europe and Central Asia

Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Georgia,
Kazakhstan, North Macedonia, Moldova, Montenegro, Poland, Romania, Russian Federation,
Serbia, Turkey, Turkmenistan, Ukraine, Uzbekistan*

Latin America and Caribbean

Argentina, Antigua and Barbuda, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica*,
Dominican Republic, Ecuador, El Salvador, Grenada*, Guatemala, Jamaica, Mexico, Panama,Paraguay, Peru, St. Kitts and Nevis, St. Lucia*, St. Vincent and the Grenadines*, Suriname,
Trinidad and Tobago, Uruguay, Venezuela

Middle East and North Africa

Algeria, Arab Republic of Egypt, Islamic Republic of Iran, Iraq, Jordan, Lebanon, Libya, Morocco,
TunisiaSouth Asia

India, Pakistan*, and Sri Lanka* Blend countries eligible for IDA and IBRD loans.

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: Net Other Revenue
Table 5: Net Non-Interest Expenses
Table 6: Budget Anchor Ratio
Table 7: Unrealized Mark-to-Market gains/losses on non-trading portfolios, net
Table 8: Allocable Income
Table 9: Net Commitments by Region
Table 10: Gross Disbursements by Region
Table 11: Net Commitments by Maturity
Table 12: Country Pricing Group and Maturity Premium (in basis points)
Table 13: Loan Terms Available During Fiscal Year Ended June 30, 2021
Table 14: Loans outstanding by interest rate structure, excluding derivatives
Table 15: Guarantees Exposure
Table 16: Pricing for IBRD Project-Based and Policy-Based Guarantees
Table 17: Exposure Exchange Agreements
Table 18: RAMP – Assets and Revenues
Table 19: Cash and Investment Assets Held in Trust
Table 20: Liquid Asset Portfolio Composition
Table 21: Liquid Asset Portfolio - Average Balances and Returns
Table 22: Net Carrying Value of Other Investments
Table 23: Short-Term Borrowings
Table 24: Funding Operations Indicators
Table 25: Maturity Profile of Medium and Long-Term Debt
Table 26: Breakdown of IBRD Subscribed Capital
Table 27: Usable Paid-In Capital
Table 28: Usable Equity
Table 29: Equity-to-Loans Ratio
Table 30: Commercial Credit Exposure, Net of Collateral Held, by Counterparty Rating
Table 31: Effect of Credit on IBRD’s Portfolios
Table 32: Effect of Interest Rates on IBRD’s Portfolios
Table 33: Liquidity Levels
Table 34: Contractual Obligations
Table 35: Funded Status of the Plans
Table 36: Fair Value Level 3 Summary

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10
10
12
14
15
15
16
18
20
21
22
23
24
25
26
27
27
29
29
32
32
32
34
35
35
36
37
38
44
49
51
52
56
58
60
61

Management’s Discussion and Analysis

Appendix

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: Derived Spread
Figure 6: Net Investment Portfolio
Figure 7: Borrowing Portfolio (original maturities)
Figure 8: Net Non-Interest Expenses
Figure 9: Budget Anchor
Figure 10: FY21 Allocable Income and Income Allocation
Figure 11: Share of Lending Categories for Annual Net Commitments
Figure 12: Loan Portfolio
Figure 13: Liquid Asset Portfolio by Asset Class
Figure 14: Effect of Derivatives on Currency Composition of the Borrowing Portfolio–June 30, 2021
Figure 15: Medium- and Long-Term Borrowings Raised by Currency during the year, Excluding Derivatives
Figure 16: Voting Power of Top Six Members as of June 30, 2021
Figure 17: Percentage of Votes held by Member Countries, as of June 30, 2021
Figure 18: Financial and Operational Risk Management Structure
Figure 19: Risk Committee Structure for Financial and Operational Risks
Figure 20: Equity-to-Loans Ratio
Figure 21: Country Exposures as of June 30, 2021
Figure 22: Sensitivity to Interest Rates
Figure 23: Effect of Derivatives on Interest Rate Structure of the Borrowing Portfolio - June 30, 2021
Figure 24: Effect of Derivatives on Interest Rate Structure of the Loan Portfolio - June 30, 2021
Figure 25: Use of Derivatives for Loans and Borrowings
Figure 26: Use of Derivatives for Investments
Figure 27: Use of Derivatives for Other ALM
Figure 28: Currency Composition of Loan and Borrowing Portfolios as of June 30, 2021
Figure 29: Governance Structure

Boxes

Box 1: Selected Financial Data
Box 2: Components of Loan spread
Box 3: Other Lending Products Currently Available
Box 4: Types of Guarantees Provided by IBRD
Box 5: Financing Instruments
Box 6: Summary of IBRD's Specific Risk Categories
Box 7: Treatment of Overdue Payments
Box 8: Eligibility Criteria for IBRD's Investments a

IBRD MANAGEMENT’S DISCUSSION AND ANALYSIS: JUNE 30, 2021

7
8
12
12
12
13
13
14
15
19
21
25
31
33
35
36
36
39
41
43
46
52
52
53
53
53
54
56
63

2
22
23
26
29
42
47
49

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Appendix

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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTFINANCIAL STATEMENTS AND INTERNAL CONTROL REPORTS
JUNE 30, 2021
Management’s Report Regarding Effectiveness of Internal Control Over Financial Reporting72

Independent Auditors’ Report on Effectiveness of Internal Control Over Financial Reporting74

Independent Auditors’ Report
Balance Sheet

76

78

Statement of Income

80

Statement of Comprehensive Income

81Statement of Changes in Retained Earnings
Statement of Cash Flows81

82

Supplemental Information
Summary Statement of Loans

84

Statement of Subscriptions to Capital Stock and Voting Power
Notes to Financial Statements

86

90

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

71

MANAGEMENT’S REPORT REGARDING EFFECTIVENESS OF
INTERNAL CONTROL OVER EXTERNAL FINANCIAL REPORTING

Management’s Report Regarding Effectiveness ofInternal Control over Financial Reporting
August 6, 2021

The management of the International Bank for Reconstruction and Development (IBRD) is
responsible for the preparation, integrity, and fair presentation of its published financial statements.
The financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America and include amounts based on informed judgments andestimates made by management.
The financial statements have been audited by an independent audit firm, which was given
unrestricted access to all financial records and related data, including minutes of all meetings ofthe Executive Directors and their Committees. Management believes that all representations madeto the independent auditors during their audit of IBRD’s financial statements and audit of its
internal control over financial reporting were valid and appropriate. The independent auditors’
reports accompany the audited financial statements.
Management is responsible for establishing and maintaining effective internal control overfinancial reporting for financial statement presentations in conformity with accounting principles
generally accepted in the United States of America. Management maintains a comprehensive
system of controls intended to ensure that transactions are executed in accordance withmanagement’s authorization, assets are safeguarded, and financial records are reliable. The system
of internal control contains monitoring mechanisms, and actions are taken to correct deficiencies
identified. Management believes that internal control over financial reporting supports theintegrity and reliability of the external financial statements.
There are inherent limitations in the effectiveness of any internal control, including the possibilityof human error and the circumvention or overriding of controls. Accordingly, even effective
internal controls can provide only reasonable assurance with respect to financial statement
preparation. Further, because of changes in conditions, the effectiveness of internal controls mayvary over time.
IBRD assessed its internal control over financial reporting for financial statement presentation in
conformity with accounting principles generally accepted in the United States of America as ofJune 30, 2021. This assessment was based on the criteria for effective internal control overfinancial reporting described in the Internal Control-Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. Based upon thisassessment, management believes that IBRD maintained effective internal control over financial
reporting presented in conformity with accounting principles generally accepted in the UnitedStates of America as of June 30, 2021. The independent audit firm that audited the financial

72 IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

statements has issued an Independent Auditors Report which expresses an opinion on IBRD’s
internal control over financial reporting.
The Executive Directors of IBRD have appointed an Audit Committee responsible for monitoring
the accounting practices and internal controls of IBRD. The Audit Committee is comprised
entirely of Executive Directors who are independent of IBRD’s management. The Audit
Committee is responsible for recommending to the Executive Directors the selection of
independent auditors. It meets periodically with management, the independent auditors, and theinternal auditors to ensure that they are carrying out their responsibilities. The Audit Committee
is responsible for performing an oversight role by reviewing and monitoring the financial,accounting and auditing procedures of IBRD in addition to reviewing IBRD’s financial reports.
The independent auditors and the internal auditors have full and free access to the Audit
Committee, with or without the presence of management, to discuss the adequacy of internal
control over financial reporting and any other matters which they believe should be brought to theattention of the Audit Committee.

________________________David Malpass
President_______________________
Anshula Kant
Managing Director and World Bank Group Chief Financial Officer________________________
Jorge Familiar Calderon
Vice President and World Bank Group Controller

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021 73

INDEPENDENT AUDITORS’ REPORT ON MANAGEMENT’S ASSERTIONREGARDING EFFECTIVENESS OF INTERNAL CONTROL OVERFINANCIAL REPORTING
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' REPORT
President and Board of Executive Directors
International Bank for Reconstruction and Development:
We have audited the internal control over financial reporting of the International Bank for Reconstruction andDevelopment ("IBRD") as of June 30, 2021, based on the criteria established in the Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Management’s Responsibility for Internal Control over Financial Reporting
Management is responsible for designing, implementing, and maintaining effective internal control over financial
reporting, and for its assessment about the effectiveness of internal control over financial reporting, included in theaccompanying Management’s Report Regarding Effectiveness of Internal Control Over Financial Reporting.
Auditors’ Responsibility
Our responsibility is to express an opinion on IBRD’s internal control over financial reporting based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects.
An audit of internal control over financial reporting involves performing procedures to obtain audit evidence about
whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including theassessment of the risks that a material weakness exists. An audit includes obtaining an understanding of internal
control over financial reporting and testing and evaluating the design and operating effectiveness of internal control
over financial reporting based on the assessed risk.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Definition and Inherent Limitations of Internal Control over Financial Reporting
An entity’s internal control over financial reporting is a process effected by those charged with governance,
management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliablefinancial statements in accordance with accounting principles generally accepted in the United States of America. An
entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles generally accepted in the United Statesof America, and that receipts and expenditures of the entity are being made only in accordance with authorizationsof management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or
timely detection and correction, of unauthorized acquisition, use, or disposition of the entity's assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct,
misstatements. Also, projections of any assessment of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.
74

Opinion
In our opinion, IBRD maintained, in all material respects, effective internal control over financial reporting as of June30, 2021 based on the criteria established in the Internal Control — Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission.
Report on Financial Statements
We have also audited, in accordance with auditing standards generally accepted in the United States of America, thefinancial statements as of and for the year ended June 30, 2021 of IBRD, and our report dated August 6, 2021
expressed an unmodified opinion on those financial statements.

August 6, 2021

75

INDEPENDENT AUDITORS’ 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’ REPORT
President and Board of Executive Directors
International Bank for Reconstruction and Development:
We have audited the accompanying financial statements of the International Bank for Reconstruction andDevelopment ("IBRD"), which comprise the balance sheets as of June 30, 2021 and 2020, and the related statements
of income, comprehensive income, changes in retained earnings, and cash flows for each of the three years in the
period ended June 30, 2021, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordancewith accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our
audits in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to IBRD’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of IBRD as of June 30, 2021 and 2020, and the results of their operations and their cash flows for each of
the three years in the period ended June 30, 2021 in accordance with accounting principles generally accepted in
the United States of America.

76

Change in Accounting Principle
As described in Note A to the financial statements, IBRD changed its method of accounting for the accumulated
provision for loan losses and other exposures on July 1, 2020, due to the adoption of Accounting Standards Update
No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments.
Report on Supplementary Information
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The
summary statement of loans and the statement of subscriptions to capital stock and voting power as of June 30,
2021 ("supplementary information") listed in the table of contents are presented for the purpose of additional
analysis and are not a required part of the financial statements. This supplementary information is the responsibilityof IBRD's management and was derived from and relates directly to the underlying accounting and other records
used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in
our audits of the financial statements and certain additional procedures, including comparing and reconciling suchinformation directly to the underlying accounting and other records used to prepare the financial statements or to
the financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America. In our opinion, such information is fairly stated in all material
respects in relation to the financial statements as a whole.
Report on Internal Control over Financial Reporting
We have also audited, in accordance with auditing standards generally accepted in the United States of America,
IBRD's internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated August 6, 2021 expressed an unmodified opinion on IBRD's internal control over financial
reporting.

August 6, 2021

77

BALANCE SHEET

June 30, 2021 and June 30, 2020
Expressed in millions of U.S. dollars
2021

2020

AssetsDue from banks—Notes C and L
Unrestricted cash
Restricted cash
Investments-Trading (including securities transferred under repurchase or
securities lending agreements of $24 million—June 30, 2021; $8 million—
June 30, 2020)—Notes C and L
Securities purchased under resale agreements—Notes C and L
Derivative assets, net—Notes C, F and L

$

2,240

$

1,748

107

122

2,347

1,870

87,566

83,767

338

394

3,355

3,744

200

93

Other receivables
Receivable from investment securities traded—Note C
Accrued income on loans

994

1,358

1,194

1,451

295,005

274,047

Loans outstanding (Summary Statement of Loans, Notes D, H and L)
Total loans
Less undisbursed balance (including signed loan commitments of$59,837 million — June 30, 2021, and $54,834 million —June 30,
2020)(74,441)(69,816)

220,564204,231(1,270)(1,599)

(495)

(474)

218,799

202,158

Premises and equipment, net

1,775

1,734

Miscellaneous—Notes E, H and I

1,927

1,686

3,702

3,420

$ 317,301$ 296,804

Loans outstanding
Less:
Accumulated provision for loan losses
Deferred loan income
Net loans outstanding
Other assets

Total assets

78

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

2021

2020

$ 260,076$ 243,240

Liabilities
Borrowings—Notes E and L
Securities sold under repurchase agreements, securities lent under
securities lending agreements, and payable for cash collateral
received—Notes C and L

62

36

1,222

1,473

521

265

Liabilities under retirement benefits plans—Notes J and K

2,749

7,239

Accounts payable and miscellaneous liabilities—Notes D, H and I

4,593

4,164

Derivative liabilities, net—Notes C, F and L
Other liabilities
Payable for investment securities purchased—Note C

Total liabilities

7,863

11,668269,223

256,417EquityCapital stock (Statement of Subscriptions to Capital Stock and Voting
Power, Note B)
Authorized capital (2,783,873 shares—June 30, 2021, andJune 30, 2020)
Subscribed capital (2,469,065 shares—June 30, 2021, and 2,387,388
shares—June 30, 2020)

297,856

288,002

Less uncalled portion of subscriptions(278,612)(269,968)

19,244

18,034

Nonnegotiable, noninterest-bearing demand obligations on accountof subscribed capital

Paid-in capital

(332)

(373)

Receivable amounts to maintain value of currency holdings—Note B

(343)

(299)

Deferred amounts to maintain value of currency holdings—Note B

67

(14)

Retained earnings (Statement of Changes in Retained Earnings andNote G)

31,00728,765

Accumulated other comprehensive loss—Note K(1,565)(5,726)

Total equity
Total liabilities and equity

48,07840,387$ 317,301$ 296,804

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

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

79

STATEMENT OF INCOME

For the fiscal years ended June 30, 2021, June 30, 2020 and June 30, 2019
Expressed in millions of U.S. dollars
2021Interest revenue
Loans, net—Note D
Other asset/liability management derivatives, net—Notes F and L
Investments-Trading, net—Notes C
Other, net

$

2,213
604
211
(2)

2020
$

4,537
161
1,270
(116)

2019
$

5,170
(57)
1,478
(26)

Borrowing expenses, net—Note E(662)(3,754)(4,778)Interest revenue, net of borrowing expenses

2,364

2,098

1,787

Provision for losses on loans and other exposures—Note D

(146)

(18)

(50)

Non-interest revenue
Revenue from externally funded activities—Notes H and I
Commitment charges—Note D
Other, net—Note I
Total

776
115
36
927

802
115
56
973

908
107
35
1,050

(2,142)(2,080)(2,119)Pension—Note A and J

(11)

57

62

Contributions to special programs

(18)

(18)

(18)

(22)
(2,193)(22)(2,063)(23)(2,098)

(411)

(340)

(338)

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

35

57

(30)

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

231

193

450

Loan derivatives—Notes D, F and L

2,415(1,971)(1,485)

Other asset/liability management derivatives, net—Notes F and L(1,351)

1,204

1,084

154

(216)

120

Non-interest expenses
Administrative—Notes H, I and J

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

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

Borrowings, including derivatives—Notes E, F and L
Client operations derivatives —Note L
Total
Net income (loss)

$

14

41

15

1,232

(942)

(266)

2,039

$

(42)

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

80

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021$

505

STATEMENT OF COMPREHENSIVE INCOME

For the fiscal years ended June 30, 2021, June 30, 2020 and June 30, 2019
Expressed in millions of U.S. dollars
Net income (loss)
Other comprehensive income (loss)—Note K
Reclassification to net income:
Derivatives and hedging transition adjustment
Net actuarial gains (losses) on benefit plans
Prior service credit on benefit plans, net
Net Change in Debit Valuation Adjustment on fairvalue option elected liabilities—Note L
Currency translation adjustment on functional
currency
Total other comprehensive income (loss)
Total comprehensive income (loss)

$

$

2021
2,039

2020
(42)

$

$

2019
505

5,105
23

(3,067)23

2(1,255)24(1,432)

509

550

465
4,161
6,200

(88)
(2,623)(2,665)

$

(157)
(836)
(331)

$

2019
28,457$(155)
28,302505
28,807$

STATEMENT OF CHANGES IN RETAINED EARNINGSFor the fiscal years ended June 30, 2021, June 30, 2020 and June 30, 2019
Expressed in millions of U.S. dollars$

2021
28,765

Cumulative effect of a change in accounting principle—Notes A,
D, G and J
Adjusted retained earnings at the beginning of the fiscal year
Net income (loss) for the fiscal year
Retained earnings at the end of the fiscal year$

203
28,9682,039
31,007Retained earnings at the beginning of the fiscal year$

2020
28,807$28,807(42)
28,765The Notes to Financial Statements are an integral part of these Statements.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

81

STATEMENT OF CASH FLOWSFor the fiscal years ended June 30, 2021, June 30, 2020 and June 30, 2019
Expressed in millions of U.S. dollars
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
Other financing activities, net
Net cash provided by financing activities
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash (used in)provided by operating activities:
Unrealized mark-to-market (gains) losses on non-trading portfolios,
net
Non-functional currency translation adjustment (gains) losses, net
Depreciation and amortization
Provision for losses on loans and other exposures
Changes in:
Investments-Trading
Net investment securities purchased/traded
Net derivatives-investments
Net securities purchased/sold under resale/repurchaseagreements and payable for cash collateral received
Accrued income on loans
Miscellaneous assets
Accrued interest on borrowings
Accounts payable and miscellaneous liabilities
Net cash (used in) provided by operating activities

2021

2020

2019

$ (23,651)
10,020
81
24
64
(175)

$ (20,193)
9,365
251
15
69
(241)

$ (20,143)
9,688
403
16
53
(146)

(13,637)(10,734)(10,129)

67,365(51,692)

75,055(64,982)

53,987(36,110)

21,93722,722(23,126)
1,202

16,293(11,609)(5,077)(1,229)973
2(2,071)605(1)15,32910,617

16,017

2,039

(42)

505

(1,232)
(35)
94
146

942
(57)

266
30

896
18

897
50

(2,359)137(1,406)(2,711)230
532(8,885)
(49)
1,199

1,171
449
(239)
(811)
761

1,602
403
(470)
(952)
718

267
(296)
25
(133)
518

(1,285)

1,109(5,606)(20,469)(2,270)
(758)
1,210
6

Effect of exchange rate changes on unrestricted and restricted cash

70

(17)

(6)

Net increase (decrease) in unrestricted and restricted cash
Unrestricted and restricted cash at the beginning of the fiscal year

477
1,870

975
895

276
619

$ 2,347$ 1,870

Unrestricted and restricted cash at the end of the fiscal year

82

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021$

895

Expressed in millions of U.S. dollars
Supplemental disclosure(Decrease) increase in ending balances resulting fromexchange rate fluctuations
Loans outstanding
Investment portfolio
Borrowing portfolio
Capitalized loan origination fees included in total loans
Interest paid on borrowing portfolio

2021

2020

2019

$ 2,742277(1,971)39
1,488$ (1,178)
126
(274)
45
4,616

$ (893)
(18)
(632)
39
4,640

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

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

83

SUMMARY STATEMENT OF LOANS
June 30, 2021

Expressed in millions of U.S. dollars

Borrower or guarantor
Albania b
Angola a
Antigua and Barbuda
Argentina
Armenia b
Azerbaijan
Bahamas, The
Barbados
Belarus
BelizeBolivia, Plurinational State of a
Bosnia and Herzegovina b
Botswana aBrazil b
Bulgaria
Cabo Verde, Republic of
Cameroon
Chile aChina bColombia a
Congo, Republic of
Costa Rica a
Cote d'Ivoire
Croatia
Dominican Republic a
Ecuador a
Egypt, Arab Republic of b
El Salvador
Eswatini
Fiji
Gabon aGeorgia b
GrenadaGuatemalaIndia bIndonesia b
Iran, Islamic Republic of
Iraq bJamaica
Jordan b
Kazakhstan
Kenya
KosovoLebanonMauritius
MexicoMoldova
Mongolia
Montenegro b
MoroccoNigeria a
North Macedonia b
Pakistan b
Panama a
Papua New Guinea
Paraguay
Peru
Philippines
Poland84

Total loans a,b
$
1,135
3,342
4
10,894
1,007
1,907
100
124
1,578
39
1,017
910
645
18,516
638
44
756
158
22,206
13,642
163
1,871
195
2,176
1,464
3,561
14,381
1,532
189
152
865
1,759
16
2,486
29,301
23,523
105
4,552
1,168
4,667
4,889
510
141
1,323
174
17,736234
134
311
10,472
1,000
1,001
5,168
1,549
36
1,113
5,321
11,895
7,619

Undisbursed balanceLoansapproved but
Signed loan
not yet signed
commitment c
$
$
200
500
1,558
1,162
1,879
165
65
146
607
2
459
210
250
171
647
2,539
463
20
1,323
5,134
100
598
58
300
264
98
618
43
242
869
2,678
770
5
98
43
203
578
6
670
97
2,082
9,114
1,200
3,857
1,229
10
75
840
659
1,379
211
766
1,095
988
118
100
2
91
999
1,527
500
89
44
324
3,331
85
30
265
418
1,386
980
1,757
292

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Loans
Outstanding
$
935
1,284
4
7,853
842
1,696
100
124
971
37
558
700
224
15,330
638
44
293
138
15,74912,944
105
1,307
97
1,558
1,179
2,692
11,703
762
86
109
662
1,181
10
1,719
18,105
18,466
105
3,323
1,083
3,168
3,510
299
141
557
174
15,653
116
32
220
7,946
411
633
1,837
1,464
6
848
3,517
9,158
7,327

Percentage of
total loans
outstanding d0.42 %
0.58
*
3.56
0.38
0.77
0.05
0.06
0.44
0.02
0.25
0.32
0.10
6.95
0.29
0.02
0.13
0.06
7.14
5.87
0.05
0.59
0.04
0.71
0.53
1.22
5.31
0.35
0.04
0.05
0.30
0.54
*
0.78
8.21
8.37
0.05
1.51
0.49
1.44
1.59
0.14
0.06
0.25
0.08
7.10
0.05
0.01
0.10
3.60
0.19
0.29
0.83
0.66
*
0.38
1.59
4.15
3.32

SUMMARY STATEMENT OF LOANS (continued)
June 30, 2021

Expressed in millions of U.S. dollars

Borrower or guarantor
Romania b
Russian Federation
Serbia b
Seychelles
South Africa a
Sri Lanka
St. Lucia
SurinameThailand
Timor-Leste
Trinidad and Tobago aTunisia
Turkey b
Turkmenistan
Ukraine b
Uruguay
Uzbekistan
VietnamZimbabwe
Total-June 30, 2021

Total loans a,b
6,634
225
3,350
102
2,452
964
3
58
792
15
20
5,116
16,409
20
7,857
1,510
2,526
3,106
432
$
295,005$

Undisbursed balanceLoansapproved but
not yetSigned loansignedcommitments c
$
$
1,401
22
776
33
355
350
246
53
20
1,052
394
4,474
20
377
1,365
314
649
100
759
$
14,604$
59,837Loans
Outstanding
$
5,233
203
2,574
69
2,097
368
3
5
792
15
4,064
11,541
6,115
1,196
1,877
2,247
432
$
220,564

Percentage of
total loans
outstanding d
2.37 %
0.09
1.17
0.03
0.95
0.17
*
*
0.36
0.01
*
1.84
5.23
*
2.77
0.54
0.85
1.02
0.20
100 %

Notes
a. Indicates a country for which a guarantee is provided under an Exposure Exchange Agreement (EEA) with a multilateraldevelopment organization (see Note D—Loans and Other Exposures). The amount of the guarantees is not included in the figuresof the Statement above.
b. Indicates a country for which a guarantee has been received, under an EEA with a multilateral development organization or fromanother guarantee provider (see Note D—Loans and Other Exposures). The effect of the guarantee is not included in the figures of
the Statement above.
c. Loan agreements totaling $8,992 million ($3,064 million—June 30, 2020) have been signed, but the loans are noteffective and disbursements do not start until the borrowers and/or guarantors take certain actions and furnish documents.
d. May differ from the calculated figures or sum of individual figures shown due to rounding.
* Indicates amount less than $0.5 million or 0.005 percent

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

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

85

STATEMENT OF SUBSCRIPTIONS TO
CAPITAL STOCK AND VOTING POWER
June 30, 2021

Expressed in millions of U.S. dollars

MemberSharesAfghanistan
506
Albania
1,187
Algeria
12,706
Angola4,068
Antigua and Barbuda
659
Argentina
26,387
Armenia
1,765
Australia c
34,576Austria c
18,143
Azerbaijan
2,497
Bahamas, The
1,357
Bahrain
1,523
Bangladesh
6,907
Barbados
948
Belarus4,547
Belgium c
38,586
Belize
586
Benin
1,399
Bhutan680
Bolivia, Plurinational State of
2,705
Bosnia and Herzegovina
887
Botswana
916
Brazil
53,509Brunei Darussalam
2,373
Bulgaria
6,608
Burkina Faso
1,260
Burundi1,043
Cabo Verde, Republic of729
Cambodia
493
Cameroon
2,202
Canada c
70,455Central African Republic
975
Chad
975
Chile
10,013
China
130,671
Colombia
9,730
Comoros
369
Congo, Democratic Republic Of
3,416
Congo, Republic of
1,051
Costa Rica
1,230
Cote d'Ivoire
4,080
Croatia
3,093
Cyprus
1,851
Czech Republic c
8,578
Denmark c
19,277
Djibouti
801
Dominica
644
Dominican Republic
2,651
Ecuador
3,828
Egypt, Arab Republic of
10,68286

Percentage
of total b
0.02 %
0.05
0.51
0.16
0.03
1.07
0.07
1.40
0.73
0.10
0.05
0.06
0.28
0.04
0.18
1.56
0.02
0.06
0.03
0.11
0.04
0.04
2.17
0.10
0.27
0.05
0.04
0.03
0.02
0.09
2.85
0.04
0.04
0.41
5.29
0.39
0.01
0.14
0.04
0.05
0.17
0.13
0.07
0.35
0.78
0.03
0.03
0.11
0.16
0.43

Subscriptions
Total
amounts b
$
61.0
143.2
1,532.8
490.7
79.5
3,183.2
212.9
4,171.1
2,188.7
301.2
163.7
183.7
833.2
114.4
548.5
4,654.8
70.7
168.8
82.0
326.3
107.0
110.5
6,455.1
286.3
797.2
152.0
125.8
87.9
59.5
265.6
8,499.3
117.6
117.6
1,207.9
15,763.5
1,173.8
44.5
412.1
126.8
148.4
492.2
373.1
223.3
1,034.8
2,325.5
96.6
77.7
319.8
461.8
1,288.6

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Voting Power
Amounts
paid in a,b
$
5.1
5.4
101.7
28.8
2.3
191.6
10.2
276.9
157.4
15.3
7.5
9.9
54.4
4.5
34.6
297.4
1.8
7.9
2.0
16.8
8.8
5.4
386.8
15.2
46.6
5.8
4.6
2.3
4.6
12.4
619.5
3.9
3.9
71.9
1,042.9
69.7
1.0
31.0
4.3
9.9
30.4
25.0
11.2
67.7
155.3
2.8
2.2
17.2
24.1
76.8

Amountssubject to call
a, b

$

55.9
137.8
1,431.1
461.9
77.2
2,991.5
202.7
3,894.2
2,031.3
286.0
156.2
173.9
778.8
109.9
513.9
4,357.4
68.9
160.9
80.0
309.5
98.2
105.1
6,068.3
271.1
750.5
146.2
121.3
85.7
54.9
253.3
7,879.8
113.8
113.8
1,136.0
14,720.6
1,104.1
43.5
381.1
122.4
138.4
461.8
348.2
212.1
967.1
2,170.2
93.8
75.4
302.6
437.7
1,211.8

Number of
votes
1,274
1,955
13,474
4,836
1,427
27,1552,533
35,344
18,911
3,265
2,125
2,291
7,675
1,716
5,315
39,354
1,354
2,167
1,448
3,473
1,655
1,684
54,277
3,141
7,376
2,028
1,811
1,497
1,261
2,970
71,223
1,743
1,743
10,781
131,439
10,498
1,137
4,184
1,819
1,998
4,848
3,861
2,619
9,346
20,045
1,569
1,412
3,419
4,596
11,450Percentage
of total b
0.05 %
0.07
0.52
0.18
0.05
1.04
0.10
1.35
0.72
0.12
0.08
0.09
0.29
0.07
0.20
1.51
0.05
0.08
0.06
0.13
0.06
0.06
2.08
0.12
0.28
0.08
0.07
0.06
0.05
0.11
2.72
0.07
0.07
0.41
5.03
0.40
0.04
0.16
0.07
0.08
0.19
0.15
0.10
0.36
0.77
0.06
0.05
0.13
0.18
0.44

STATEMENT OF SUBSCRIPTIONS TO
CAPITAL STOCK AND VOTING POWER (continued)
June 30, 2021

Expressed in millions of U.S. dollars
MemberEl Salvador
Equatorial Guinea
Eritrea
Estonia
Eswatini
Ethiopia
Fiji
Finland c
France c
Gabon
Gambia, The
Georgia
Germany c
Ghana
Greece c
GrenadaGuatemalaGuineaGuinea-Bissau
GuyanaHaiti
Honduras
Hungary c
Iceland c
India
Indonesia
Iran, Islamic Republic of
Iraq
Ireland c
IsraelItaly cJamaicaJapan cJordanKazakhstan
Kenya
Kiribati
Korea, Republic of c
Kosovo, Republic of
KuwaitKyrgyz Republic
Lao People's Democratic
Republic
LatviaLebanonLesothoLiberia
Libya
Lithuania
Luxembourg cMadagascar

Shares
330
715
593
1,272
499
1,470
1,251
12,010101,328
987
777
2,275
109,776
2,202
4,057
673
2,001
1,864
613
1,526
1,550
641
11,624
1,858
79,07324,197
34,963
3,875
8,437
6,019
65,305
3,361
192,977
2,337
4,573
3,435
680
40,627
1,262
19,432
1,107

Subscriptions
Percentage
Total amounts
Amounts
Amounts subjectbof total b
paid in a,b
to call a, b
0.01 % $39.8 $
3.1 $
36.7
0.03
86.3
2.7
83.5
0.02
71.5
1.8
69.7
0.05
153.4
7.8
145.7
0.02
60.2
2.0
58.2
0.06
177.3
8.3
169.1
0.05
150.9
6.7
144.2
0.49
1,448.8
91.7
1,357.2
4.10
12,223.7
842.9
11,380.8
0.04
119.1
5.1
113.9
0.03
93.7
2.7
91.0
0.09
274.4
12.7
261.7
4.45
13,242.8
913.3
12,329.6
0.09
265.6
16.1
249.5
0.16
489.4
33.8
455.6
0.03
81.2
2.4
78.8
0.08
241.4
12.4
229.0
0.08
224.9
9.9
214.9
0.02
73.9
1.4
72.5
0.06
184.1
7.7
176.4
0.06
187.0
7.8
179.2
0.03
77.3
2.3
75.0
0.47
1,402.3
92.6
1,309.6
0.08
224.1
12.6
211.6
3.20
9,539.0646.0
8,893.0
0.98
2,919.0
183.7
2,735.3
1.42
4,217.8
254.3
3,963.4
0.16
467.5
33.0
434.5
0.34
1,017.8
65.3
952.5
0.24
726.1
42.4
683.7
2.64
7,878.1
515.9
7,362.1
0.14
405.5
23.5
382.0
7.82
23,279.8
1,585.3
21,694.5
0.09
281.9
16.5
265.4
0.19
551.7
31.3
520.4
0.14
414.4
21.1
393.2
0.03
82.0
1.9
80.1
1.65
4,901.0
318.0
4,583.0
0.05
152.2
7.3
144.9
0.79
2,344.2
141.0
2,203.2
0.04
133.5
5.7
127.9

Voting Power
Number ofPercentage of
votes
total b1,098
0.04 %
1,483
0.06
1,361
0.05
2,040
0.08
1,267
0.05
2,238
0.09
2,019
0.08
12,7780.49
102,096
3.91
1,755
0.07
1,545
0.06
3,043
0.12
110,544
4.23
2,970
0.11
4,825
0.18
1,441
0.06
2,769
0.11
2,632
0.10
1,381
0.05
2,294
0.09
2,318
0.09
1,409
0.05
12,392
0.47
2,626
0.10
79,841
3.05
24,9650.95
35,731
1.37
4,643
0.18
9,205
0.35
6,787
0.26
66,073
2.53
4,129
0.16
193,745
7.41
3,105
0.12
5,341
0.20
4,203
0.16
1,448
0.06
41,395
1.58
2,030
0.08
20,200
0.77
1,875
0.07

272

0.01

32.8

2.2

30.6

1,040

0.04

1,808
1,062
945
606
9,935
2,141
2,806
2,281

0.07
0.04
0.04
0.02
0.40
0.09
0.11
0.09

218.1
128.1
114.0
73.1
1,198.5
258.3
338.5
275.2

11.4
6.3
3.8
3.6
72.1
15.4
22.1
14.6

206.7
121.8
110.2
69.5
1,126.4
242.9
316.4
260.6

2,576
1,830
1,713
1,374
10,703
2,909
3,574
3,049

0.10
0.07
0.07
0.05
0.41
0.11
0.14
0.12

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

87

STATEMENT OF SUBSCRIPTIONS TO
CAPITAL STOCK AND VOTING POWER (continued)
June 30, 2021

Expressed in millions of U.S. dollars
Subscriptions
MemberMalawiMalaysia
Maldives
Mali
Malta
Marshall Islands
Mauritania
Mauritius
MexicoMicronesia, Federated States Of
Moldova
Mongolia
Montenegro
MoroccoMozambique
MyanmarNamibia
Nauru
Nepal
Netherlands c
New Zealand c
Nicaragua
Niger
Nigeria
North Macedonia
Norway c
Oman
Pakistan
Palau
PanamaPapua New Guinea
Paraguay
Peru
Philippines
Poland c
Portugal c
Qatar
Romania
Russian Federation
RwandaSt. Kitts and Nevis
St. Lucia
St. Vincent and the Grenadines
Samoa
San Marino
Sao Tome and Principe
Saudi Arabia
SenegalSerbiaSeychelles

88

Shares
1,722
10,447
469
2,035
1,361
469
1,308
1,614
40,119
479
1,984
680
922
7,546
1,332
3,465
1,930
586
1,466
50,798
10,136873
1,233
19,417590
15,0801,978
12,487
16
891
1,864
1,766
8,691
9,903
18,801
7,511
1,389
7,201
66,505
1,502
275
699
387
820
595
705
66,505
2,942
3,710
263

Percentage
Total amountsbof total b
0.07 % $207.7
0.42
1,260.3
0.02
56.6
0.08
245.5
0.06
164.2
0.02
56.6
0.05
157.8
0.07
194.7
1.62
4,839.8
0.02
57.8
0.08
239.3
0.03
82.0
0.04
111.2
0.31
910.3
0.05
160.7
0.14
418.0
0.08
232.8
0.02
70.7
0.06
176.9
2.06
6,128.0
0.41
1,222.8
0.04
105.3
0.05
148.7
0.79
2,342.4
0.02
71.2
0.61
1,819.2
0.08
238.6
0.51
1,506.4
*
1.9
0.04
107.5
0.08
224.9
0.07
213.0
0.35
1,048.4
0.40
1,194.6
0.76
2,268.1
0.30
906.1
0.06
167.6
0.29
868.7
2.69
8,022.8
0.06
181.2
0.01
33.2
0.03
84.3
0.02
46.7
0.03
98.9
0.02
71.8
0.03
85.0
2.69
8,022.8
0.12
354.9
0.15
447.6
0.01
31.7

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Amounts
paid in a,b
$
10.2
75.4
0.9
14.1
7.5
0.9
6.1
9.9
291.1
1.0
10.7
3.3
5.4
58.9
6.8
21.4
11.7
2.4
7.7
421.1
76.8
3.4
5.6
168.0
4.8
121.2
12.1
96.1
0.2
6.9
9.9
9.3
71.1
71.0
150.6
53.3
11.1
56.5
483.5
7.5
0.3
2.6
1.6
3.2
2.5
2.2
484.6
17.5
28.9
0.2

Amountssubject to call
a, b

$

197.5
1,184.8
55.7
231.4
156.7
55.7
151.7
184.8
4,548.6
56.8
228.7
78.7
105.8
851.4
153.9
396.6
221.1
68.3
169.1
5,707.0
1,145.9
101.9
143.1
2,174.3
66.3
1,698.0226.5
1,410.2
1.8
100.6
214.9
203.7
977.3
1,123.6
2,117.5
852.7
156.5
812.2
7,539.3
173.7
32.9
81.7
45.1
95.7
69.3
82.9
7,538.2
337.4
418.7
31.6

Voting Power
Number of Percentage of
votes
total b2,490
0.10 %
11,215
0.43
1,237
0.05
2,803
0.11
2,129
0.08
1,237
0.05
2,076
0.08
2,382
0.09
40,887
1.56
1,247
0.05
2,752
0.11
1,448
0.06
1,690
0.06
8,314
0.32
2,100
0.08
4,233
0.16
2,698
0.10
1,354
0.05
2,234
0.09
51,566
1.97
10,904
0.42
1,641
0.06
2,001
0.08
20,185
0.77
1,358
0.05
15,848
0.61
2,746
0.11
13,255
0.51
784
0.03
1,659
0.06
2,632
0.10
2,534
0.10
9,459
0.36
10,671
0.41
19,569
0.75
8,279
0.32
2,157
0.08
7,969
0.30
67,273
2.57
2,270
0.09
1,043
0.04
1,467
0.06
1,155
0.04
1,588
0.06
1,363
0.05
1,473
0.06
67,273
2.57
3,710
0.14
4,478
0.17
1,031
0.04

STATEMENT OF SUBSCRIPTIONS TO
CAPITAL STOCK AND VOTING POWER (continued)
June 30, 2021

Expressed in millions of U.S. dollars
Subscriptions
Percentage
Amountsof total b
Total amounts b
paid in a,b
0.04 %
$
125.8
$
4.6
0.27
795.6
55.9
0.18
542.9
36.3
0.08
229.8
15.9
0.03
87.9
2.3
0.03
76.2
3.3
0.74
2,200.7
134.7
0.06
173.4
8.6
2.04
6,061.4
419.6
0.22
655.7
38.2
0.08
239.9
15.5
0.02
49.7
2.0
0.89
2,649.3
174.9
1.50
4,457.6
293.2
0.10
295.8
14.0
0.05
145.2
5.3
0.05
156.2
10.0
0.48
1,417.9
89.0
0.03
90.8
3.1
0.06
192.8
8.1
0.03
92.4
3.1
0.14
407.3
22.8
0.07
213.2
13.8
1.14
3,399.6
204.5
0.03
75.6
3.6
0.02
55.6
1.5
0.04
121.2
7.8
0.56
1,678.0
100.5
0.24
726.5
52.9
4.10
12,223.7
862.1
16.67
49,639.9
3,276.5
0.14
429.8
24.0
0.14
419.3
21.4
0.03
92.3
3.1
0.82
2,456.2
150.8

Amounts subject
to call a, b
$
121.2
739.7
506.6
213.9
85.6
72.9
2,066.0
164.8
5,641.9
617.4
224.5
47.7
2,474.4
4,164.4
281.8
139.9
146.2
1,328.9
87.8
184.7
89.3
384.5
199.3
3,195.1
72.0
54.1
113.4
1,577.5
673.5
11,361.6
46,363.3
405.8
397.9
89.2
2,305.5

Voting Power
Number of Percentage
votes
of total b
1,811
0.07 %
7,363
0.28
5,268
0.20
2,673
0.10
1,497
0.06
1,400
0.05
19,011
0.73
2,205
0.08
51,014
1.95
6,203
0.24
2,757
0.11
1,180
0.05
22,7290.87
37,719
1.44
3,220
0.12
1,972
0.08
2,063
0.08
12,522
0.48
1,521
0.06
2,366
0.09
1,534
0.06
4,144
0.16
2,535
0.10
28,949
1.11
1,395
0.05
1,229
0.05
1,773
0.07
14,678
0.56
6,790
0.26
102,096
3.91
412,256
15.77
4,331
0.17
4,244
0.16
1,533
0.06
21,1290.81

MemberSharesSierra Leone
1,043
Singapore
6,595
Slovak Republic c
4,500
Slovenia c
1,905
Solomon Islands
729
Somalia632
South Africa
18,243
South Sudan
1,437
Spain c50,246
Sri Lanka
5,435
Sudan
1,989
Suriname
412
Sweden c
21,961
Switzerland c
36,951
Syrian Arab Republic
2,452
Tajikistan
1,204
Tanzania
1,295
Thailand
11,754
Timor-Leste
753
Togo
1,598
Tonga
766
Trinidad and Tobago
3,376
Tunisia
1,767
Turkey28,181
Turkmenistan
627
Tuvalu461
Uganda1,005
Ukraine13,910
United Arab Emirates
6,022
United Kingdom c
101,328c
United States
411,488
Uruguay
3,563
Uzbekistan
3,476
Vanuatu
765
Venezuela, Republica
20,361
Bolivariana de
Vietnam
4,173
0.17
503.4
31.3
472.1
4,941
0.19
Yemen, Republic of
2,212
0.09
266.8
14.0
252.8
2,980
0.11
Zambia
3,878
0.16
467.8
25.9
441.9
4,646
0.18
Zimbabwe
3,575
0.14
431.3
22.4
408.9
4,343
0.17
Total - June 30, 2021 2,469,065
100%$
297,856$ 19,244$
278,6122,614,217
100%
Total - June 30, 2020 2,387,388
100%$
288,002$ 18,034$
269,968
2,527,626
NOTES
a. See Notes to Financial Statements, Note B—Capital Stock, Maintenance of Value, and Membership.
b. May differ from the calculated figures or sum of individual figures shown due to rounding.
c. A member of the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD).
* Indicates amount less than $0.5 million or 0.005 percent

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

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

89

NOTES TO FINANCIAL STATEMENTSPURPOSE AND AFFILIATED ORGANIZATIONSThe International Bank for Reconstruction and Development (IBRD) is an international organization which commenced
operations in 1946. The principal purpose of IBRD is to promote sustainable economic development and reduce poverty
in its member countries, primarily by providing loans, guarantees and related technical assistance for specific projects andfor programs of economic reform in developing member countries. The activities of IBRD are complemented by those of
three affiliated organizations, the International Development Association (IDA), the International Finance Corporation(IFC), and the Multilateral Investment Guarantee Agency (MIGA). Each of these organizations is legally and financiallyindependent from IBRD, with separate assets and liabilities, and IBRD is not liable for their respective obligations.
Transactions with these affiliated organizations are disclosed in the notes that follow.
IBRD is immune from taxation pursuant to Article VII, Section 9, Immunities from Taxation, of IBRD’s Articles ofAgreement.
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIESIBRD’s financial statements are prepared in conformity with accounting principles generally accepted in the United Statesof America (U.S. GAAP).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Dueto the inherent uncertainty involved in making these estimates, actual results could differ from these estimates. Significant
judgment has been used in the valuation of certain financial instruments, the determination of the adequacy of theaccumulated provisions for losses on loans and other exposures, the determination of net periodic cost from pension andother postretirement benefits plans, and the present value of projected benefit obligations.
On August 5, 2021, the Executive Directors approved these financial statements for issue.
Certain reclassifications of the prior year’s information have been made to conform with the current year’s presentation.

Translation of Currencies: IBRD’s financial statements are expressed in terms of U.S. dollars for the purpose ofsummarizing IBRD’s financial position and the results of its operations. IBRD’s functional currencies are the U.S. dollar
and euro.
Assets and liabilities are translated at market exchange rates in effect at the end of the reporting period. Revenue andexpenses are translated at either the market exchange rates in effect on the dates on which they are recognized or at an
average of the market exchange rates in effect during each month. Translation adjustments relating to non-functional
currencies are reflected in the Statement of Income, while translation adjustments for assets and liabilities denominated ineuro are reflected in the Statement of Comprehensive Income.

Valuation of Capital Stock: In the Articles of Agreement, the capital stock of IBRD is expressed in terms of “U.S.

dollars of the weight and fineness in effect on July 1, 1944” (“1944 dollars”). Following the abolition of gold as a common
denominator of the monetary system and the repeal of the provision of the U.S. law defining the par value of the U.S.
dollar in terms of gold, the pre-existing basis for translating 1944 dollars into current dollars or into any other currency
was eliminated. The Executive Directors of IBRD have decided, until such time as the relevant provisions of the Articles
of Agreement are amended, that the words “U.S. dollars of the weight and fineness in effect on July 1, 1944” in Article II,
Section 2(a) of the Articles of Agreement of IBRD are interpreted to mean the Special Drawing Right (SDR) introducedby the International Monetary Fund, as valued in terms of U.S. dollars immediately before the introduction of the basket
method of valuing the SDR on July 1, 1974, such value being $1.20635 for one SDR (“1974 SDR”).

Maintenance of Value: Article II, Section 9 of the Articles of Agreement provides for maintenance of value (MOV),at the time of subscription, of national currencies paid-in, which are subject to certain restrictions. MOV is determined bymeasuring the foreign exchange value of a member’s national currency against the standard of value of IBRD’s capital
based on the 1974 SDR. MOV receivable relates to amounts due from members on account of movements in exchange
rates from the date of initial subscription, resulting in the reduction in the value of their paid-in capital denominated innational currencies. Members are required to make payments to IBRD if their currencies depreciate significantly relative
to the standard of value. These amounts may be settled either in cash or a non-negotiable, non-interest bearing note, whichis due on demand. Certain notes are due on demand only after IBRD's callable subscribed capital has been entirely called
pursuant to Article IV, Section 2 (a) of the Articles of Agreement. Furthermore, the Executive Directors have adopted apolicy of reimbursing members whose national currencies appreciate significantly in terms of the standard of value.
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IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

MOV is deferred when the restriction of national currencies paid-in is lifted and these currencies are being used in IBRD’soperations and/or are being invested, swapped, or loaned to members by IBRD or through IFC. Once these restrictedcurrencies are no longer being used in operations, the related MOV is no longer deferred, but rather, becomes due on thesame terms as other MOV obligations.
All MOV receivable balances are shown as components of Equity, under Receivable amounts to maintain value ofcurrency holdings. All MOV payable balances are included in Other liabilities-Accounts payable and miscellaneous
liabilities on the Balance Sheet. The net receivable or payable MOV amounts relating to national currencies used in IBRD's
lending and investing operations are also included as a component of Equity under Deferred amounts to maintain value ofcurrency holdings.

Withdrawal of Membership: Under IBRD’s Articles of Agreement, in the event a member withdraws from IBRD, thewithdrawing member is entitled to receive the value of its shares payable to the extent the member does not have any
outstanding obligations to IBRD. IBRD’s Articles of Agreement also state that the former member has continuing
obligations to IBRD after withdrawal. Specifically, the former member remains fully liable for its entire capitalsubscription, including both the previously paid-in portion and the callable portion, so long as any part of the loans orguarantees contracted before it ceased to be a member are outstanding.

Transfers Approved by the Board of Governors: In accordance with IBRD’s Articles of Agreement, as interpretedby the Executive Directors, the Board of Governors may exercise its reserved power to approve transfers to other entities
for development purposes. When unconditional, these transfers, which are included in the Board of Governors-approved
and other transfers line in the Statement of Income, are reported as expenses upon approval. If conditional, these transfers
are expensed when the conditions specified for the use by the beneficiaries have been met. The transfers are funded fromthe immediately preceding fiscal year’s Net Income, Surplus, Restricted Retained Earnings or Other Reserves.

Retained Earnings: Retained Earnings consist of allocated amounts (Special Reserve, General Reserve, Pension

Reserve, Surplus, Cumulative Fair Value Adjustments, Restricted Retained Earnings, Other Reserves) and Unallocated
Net Income (Loss).
The Special Reserve consists of loan commissions set aside pursuant to Article IV, Section 6 of the Articles of Agreement,
which are to be held in liquid assets. These assets may be used only for the purpose of meeting liabilities of IBRD on its
borrowings and guarantees in the event of defaults on loans made, participated in, or guaranteed by IBRD. The Special
Reserve assets are included under Investments-Trading, and comprise obligations of the United States Government, its
agencies, and other official entities. The allocation of such commissions to the Special Reserve was discontinued in 1964
with respect to subsequent loans and no further additions are being made to it.
The General Reserve consists of earnings from prior fiscal years which, in the judgment of the Executive Directors, should
be retained in IBRD’s operations.
The Pension Reserve consists of the difference between the cumulative actual funding of the Staff Retirement Plan andTrust (SRP) and other postretirement benefits plans, and the cumulative accounting income or expense for these plans,from prior fiscal years. This reserve is reduced when pension accounting expenses exceed the actual funding of theseplans. In addition, the Pension Reserve also includes investment revenue earned on the Post-Employment Benefits Plan(PEBP) portfolio as well as Post Retirement Contribution Reserve Fund (PCRF), which is used to stabilize IBRD’s
contributions to the pension plan.
Surplus consists of earnings from prior fiscal years which are retained by IBRD until a further decision is made on theirdisposition.
Cumulative Fair Value Adjustments consist of the cumulative effect of the adoption of the Financial Accounting Standards
Board’s (FASB’s) fair value guidance relating to prior fiscal years, the reclassification and amortization of the transition
adjustments, and the unrealized gains or losses on non-trading portfolios.
Restricted Retained Earnings consists of contributions or revenue from prior years which are contractually restricted as totheir purpose.
Unallocated Net Income (Loss) consists of the current fiscal year’s net income (loss) adjusted for Board of Governorsapproved and other transfers made during the year.
Other Reserves consist of allocations from Surplus and non-functional currency translation adjustment gains/losses fromprior fiscal years. Allocations from Surplus are retained by IBRD until the conditions specified for the use by thebeneficiaries have been met.

Loans and Other Exposures: All of IBRD’s loans are made to or guaranteed by countries that are members of IBRD,
except for loans made to IFC. The majority of IBRD’s loans have repayment obligations based on specific currencies.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

91

IBRD also holds multicurrency loans which have repayment obligations in various currencies determined on the basis ofa currency pooling system. Other exposures comprise signed commitments (including deferred drawdown options (DDOs)
that are effective, and irrevocable commitments), exposures to member countries’ derivatives and guarantees.
Loans are carried at amortized cost. Commitment charges on the undisbursed balance of loans are recognized in revenue
as earned. Any loan origination fees incorporated in the terms of a loan are deferred and recognized over the life of theloan as an adjustment of the yield. The unamortized balance of loan origination fees is included as a reduction of the Loansoutstanding on the Balance Sheet, and the loan origination fee amortization is included in Interest revenue from Loans,net in the Statement of Income. Accrued interest is presented in the balance sheet line item Other receivables - Accrued
income on loans.
It is IBRD’s practice not to reschedule interest or principal payments on its loans or participate in debt reschedulingagreements with respect to its loans. Should modifications be made to the terms of existing loans, IBRD would perform
an evaluation to determine the required accounting treatment, including whether the modification would result in theaffected loans being accounted for as trouble debt restructuring, new loan, or as a continuation of the existing loan.
It is the policy of IBRD to place into nonaccrual status all loans and other exposures (exposures) made to or guaranteed
by a member of IBRD if principal, interest, or other charges with respect to any such exposures are overdue by more thansix months, unless IBRD’s management determines that the overdue amount will be collected in the immediate future. In
addition, if loans and other exposures made by IDA to a member government are placed in nonaccrual status, all loans andother exposures made to, or guaranteed by, that member government will also be placed in nonaccrual status by IBRD.
On the date a member’s exposures are placed into nonaccrual status, unpaid interest and other charges accrued on
exposures to the member are deducted from the revenue of the current period per IBRD’s policy.
Interest and other charges on nonaccruing exposures are included in revenue only to the extent that payments have been
received by IBRD. If collectability risk is considered to be particularly high at the time of arrears clearance, the member’s
exposures may not automatically emerge from nonaccrual status. In such instances, a decision on the restoration of accrual
status is made on a case-by-case basis and in certain cases that decision may be deferred until a suitable period of payment
performance has passed.

Loan Commitments: Undisbursed loans relate to operations approved by the Executive Directors, for which
disbursements are yet to be made. IBRD records a provision for expected losses on undisbursed loan commitments
including Deferred Drawdown Options (DDOs), when signed by both parties. The signature of the loan agreement is abinding event that prevents IBRD from unconditionally withdrawing from the agreement.

Guarantees: Financial guarantees are commitments issued by IBRD to guarantee payment by a member country (thedebtor) to a third party in the event that a member government (or a government-owned entity) fails to perform its
contractual obligations to a third party.
Guarantees are regarded as outstanding when the underlying financial obligation of the debtor is incurred, and called whena guaranteed party demands payment under the guarantee. IBRD would be required to perform under its guarantees if thepayments guaranteed were not made by the debtor and the guaranteed party called the guarantee by demanding payment
from IBRD in accordance with the terms of the guarantee. In the event that a guarantee of a member country is called,
IBRD has the contractual right to require payment from the member country.
IBRD records the fair value of the obligation to stand ready in Other Liabilities - Accounts payable and miscellaneous
liabilities, and a corresponding fees receivable asset in the Other Receivables - Accrued income on loans line on IBRD’s
Balance Sheet. Upfront guarantee fees received are deferred and amortized over the life of the guarantee.

Accumulated Provision for Losses on Loans and Other Exposures: Management determines the appropriate

level of accumulated provisions for losses on exposures, which reflects the expected losses inherent in IBRD’s exposures.
Loans
Loan exposures are disaggregated into two groups: exposures in accrual status and exposures in nonaccrual status. In eachgroup, a credit risk rating is then assigned to exposures for each borrower.
The total exposure for provisioning is the current exposure and the estimated future exposure, taking into account expecteddisbursements and repayments over the life of the instruments. The expected credit losses related to loans and otherexposures are calculated over the life of the instruments based on the annual estimated exposures, the expected default
frequency (probability of default to IBRD) and the estimated loss given default. The provision for expected losses is thesum of the expected annual losses over the life of the instruments.
For countries in accrual status, these exposures are grouped in pools of borrowers with a similar risk rating. The
determination of a borrower’s ratings is based on various factors (see Note D—Loans and other exposures). Each risk
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IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

rating is mapped to an expected default frequency using IBRD's credit migration matrix, based on historical observationsof credit ratings at the beginning and at the end of each year.
Expected losses on loan exposures comprise estimates of potential losses arising from the economic loss due to delays inreceiving payments. The estimated loss given default is determined at each balance sheet date, based on IBRD’s historicalexperience, as well as parameters adjusted for current conditions during the reasonable and supportable forecast period of
IBRD. The loss given default is based on the borrower’s eligibility, namely: IBRD, Blend (IBRD and IDA) and IDA, withthe highest loss given default associated with IDA eligibility. The borrower’s eligibility is assessed at least annually. The
main factors used to determine the loss given default are the estimated length of delays in receiving loan payments, andthe effective interest rate of the exposure. As the majority of IBRD’s loans carry a variable interest rate, the loss severity
is impacted by the changes in forward looking market interest rates.
For the calculation of expected credit losses, IBRD applies a three-year reasonable and supportable forecast period,
representing the most reliable and available economic data during this period. IBRD also applies a ten-year straight-line
reversion to the mean to reflect the historical pattern of rating migration to the mean of its loan portfolio.
This methodology is also applied to countries with exposures in nonaccrual status, although the expected default frequency
is equal to one. At times, to reflect certain distinguishing circumstances of a particular nonaccrual situation, different input
assumptions may be used for a specific country.
All exposures for countries in nonaccrual status are individually assessed. It is IBRD’s practice not to write off loans. All
contractual obligations associated with exposures in nonaccrual status have eventually been cleared, and borrowers haveemerged from nonaccrual status. To date, no loans have been written off.
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 is reassessed at least annually.
When IBRD receives a third-party guarantee in the form of a credit enhancement that is embedded in the loan agreementwith the borrower, it considers the benefit of the credit enhancement in the loan loss provisioning credit risk assessment.
Loan Commitments
IBRD records the expected credit losses on loan commitments based on the projected disbursements of signed loan
commitments (adjusted by cancellations based on historical experience), the probability of default and loss given default.
The provision is included in Other liabilities - Accounts payable and miscellaneous liabilities on the Balance Sheet.
Guarantees
IBRD records a contingent liability for the expected losses related to guarantees over the projected life of the instruments,
which is determined based on the estimated exposure at default, multiplied by the corresponding loss given default andexpected default probability for the projected life of the guarantee. This provision, as well as the unamortized balance ofthe deferred guarantee fees, and the unamortized balance of the obligation to stand ready, are included in Other Liabilities- Accounts payable and miscellaneous liabilities on the Balance Sheet.
Exposure Exchange Agreements (EEAs)
IBRD executes EEAs with various organizations. While these agreements are not legally considered guarantees, in IBRD’s
financial statements they are recognized as financial guarantees as they meet the accounting criteria for financial
guarantees. Under an EEA, each party exchanges credit risk exposure of a portfolio supported by underlying loans toborrowers, by providing and receiving guarantees from each other, for the amounts specified. The guarantee provided andthe guarantee received are two separate transactions; namely (a) the provision of a financial guarantee, and (b) the receipt
of an asset. There is generally no exchange of cash between the organizations for these transactions.
For a guarantee provided under an EEA, IBRD records a liability equivalent to the fair value of the obligation to standready. This liability is included in Other liabilities - Accounts payable and miscellaneous liabilities on the Balance Sheetand is amortized over the life of the EEA. IBRD also records a liability, and corresponding expense, in recognition of therisk coverage provided (provision). The value of this liability reflects the credit quality of the underlying loans in theportfolio and changes over the life of the EEA as the credit quality of these loans changes.
For a guarantee received under an EEA, IBRD records an asset equivalent to the fair value of the right to be indemnified.
This asset is included in Other assets – Miscellaneous on the Balance Sheet and is amortized over the life of the EEA.
IBRD also records an asset, and corresponding income, in recognition of the risk coverage received (recoverable asset).
The value of this asset reflects the credit quality of the underlying loans in the portfolio and changes over the life of the
EEA contract as the credit quality of these loans changes.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

93

Segment Reporting: Based on an evaluation of IBRD’s operations, Management has determined that IBRD has only
one reportable segment since financial results are reviewed and resource allocation decisions are made at the entity level.

Statement of Cash Flows: For the purpose of IBRD's Statement of Cash Flows, cash is defined as the amount ofUnrestricted cash and Restricted cash under the Due from banks line on the Balance Sheet.

Restricted Cash: This includes amounts which have been received from members as part of their capital subscriptions,as well as from donors and other sources, which are restricted for specified purposes. For capital subscriptions, a portionof these subscriptions have been paid to IBRD in the national currencies of the members. These amounts are usable by
IBRD in its lending and investing operations, only with the consent of the respective members, and for administrative
expenses incurred in national currencies.

Investments: 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 June 30, 2021, all of the financial instruments
in IBRD’s investment portfolio were classified as trading. These securities are carried and reported at fair value, or at facevalue or net asset value (NAV), which approximate fair value.
Where available, quoted market prices are used to determine the fair value of trading securities. These include most
government and agency securities, futures contracts, exchange-traded equity securities, Asset-backed Securities (ABS),
Mortgage-backed Securities (MBS) and To-Be-Announced (TBA) securities. For instruments for which market quotations
are not available, fair values are determined using model-based valuation techniques, whether internally-generated orvendor-supplied, that include the discounted cash flow method using observable market inputs such as yield curves, credit
spreads, and conditional prepayment rates. Where applicable, unobservable inputs such as conditional 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 in nature. The first-in first-out method is used to determine the costof securities sold in computing the realized gains and losses on these instruments. Derivative instruments used in liquidity
management are not designated as hedging instruments for accounting purposes.
Interest revenue is included in the Investments-Trading, net line in the Statement of Income. Unrealized gains and losses
for investment securities and related financial instruments held in the trading portfolio are included in the Unrealized
mark-to-market gains (losses) on Investments-Trading portfolio, net line in the Statement of Income. Realized gains andlosses on trading securities are recognized in the Statement of Income when securities are sold.
IBRD may require collateral in the form of approved liquid securities from individual counterparties or cash, under legal
agreements that provide for collateralization, in order to mitigate its credit exposure to these counterparties. For collateral
received in the form of cash from counterparties, IBRD invests the amounts received and records the investment and acorresponding obligation to return the cash. Collateral received in the form of liquid securities is only recorded on IBRD's
Balance Sheet to the extent that it has been transferred under securities lending agreements in return for cash.

Securities Purchased Under Resale Agreements, Securities Lent Under Securities Lending Agreements andSecurities Sold Under Repurchase Agreements and Payable for Cash Collateral Received: Securities purchased

under resale agreements, securities lent under securities lending agreements, securities sold under repurchase agreements
and payable for cash collateral received are reported at face value which approximates fair value, as they are short term innature. IBRD receives securities purchased under resale agreements, monitors the fair value of the securities and, if
necessary, closes out transactions and enters into new repriced transactions. The securities transferred to counterparties
under repurchase and security lending arrangements and the securities transferred to IBRD under resale agreements havenot met the accounting criteria for treatment as a sale. Therefore, securities transferred under repurchase agreements andsecurity lending arrangements are retained as assets on the Balance Sheet, and securities received under resale agreements
are not recorded on the Balance Sheet. Securities lent under securities lending agreements and sold under securities
repurchase agreements as well as securities purchased under resale agreements are presented on a gross basis which isconsistent with the manner in which these instruments are settled. The interest earned from securities purchased underresale agreements is included in Investments–Trading, net in the Statement of Income. The interest expense pertaining to
the securities sold under repurchase agreements and security lending arrangements, is included in the Borrowing expenses,
net line in the Statement of Income.

Nonnegotiable, Noninterest-bearing Demand Obligations on Account of Subscribed Capital: All demandobligations are held in bank accounts which bear IBRD’s name and are carried and reported at face value as a reduction
to equity. Payments on some of these instruments are due to IBRD upon demand. Others are due to IBRD on demand, but
only after the IBRD’s callable subscribed capital has been entirely called pursuant to Article IV, Section 2 (a) of the
Articles of Agreement.

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IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Premises and Equipment: Premises and equipment, including leasehold improvements, and information technology

assets are carried at cost less accumulated depreciation and amortization. IBRD computes depreciation and amortization
using the straight-line method over the estimated useful lives of the owned assets, which range between two and fifty
years. For leasehold improvements, depreciation is computed over the lesser of the remaining term of the leased facilityor the estimated economic life of the improvement.
Maintenance and repairs are charged to expense as incurred, while major improvements are capitalized and amortized overthe estimated useful life.

Lessee Arrangements: IBRD’s lessee arrangements are mostly real estate operating leases. Under these arrangements,

IBRD records right-of-use assets and lease liabilities at lease commencement. Right-of-use assets are reported in Other
assets - Premises and equipment, net and the related lease liabilities are reported in Other liabilities - Accounts payable
and miscellaneous liabilities. IBRD has elected to account for the lease and non-lease components together as a single
lease component. At lease commencement, lease liabilities are recognized based on the present value of the remaining
lease payments and discounted using IBRD’s incremental borrowing rate. All leases are recorded on the Balance Sheet
except short-term leases with an initial term of 12 months or less. Lease expense, including that for short-term leases, isrecognized on a straight-line basis over the lease term and is recorded in Administrative expenses in the Statement of
Income.

Borrowings: To ensure funds are available for lending and liquidity purposes, IBRD borrows in the international capital
markets, offering its securities (discount notes, vanilla and structured bonds) to private and governmental buyers. IBRD
issues debt instruments of varying maturities denominated in various currencies with both fixed and variable interest rates.

IBRD has elected the fair value option for all borrowings. All changes in fair value are recognized in the related Unrealized
mark-to-market gains and losses on non-trading portfolios, net, line in the Statement of Income, except for changes in thefair value related to IBRD’s own credit risk, which are reported in Other Comprehensive Income (OCI) as a Debit
Valuation Adjustment (DVA). The DVA on fair value option elected liabilities is measured by revaluing each liability todetermine the changes in fair value of that liability arising from changes in IBRD’s cost of funding relative to LIBOR (theLondon inter-bank offered rate).
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.
For the purpose of the Statement of Cash Flows, the short-term borrowings, if any, which have original maturities lessthan 90 days, are presented on a net basis. By contrast, short-term borrowings with original maturities greater than 90 days
and up to one year are presented on a gross basis.
Interest expense relating to all debt instruments in IBRD’s borrowing portfolio is measured on an effective yield basis andis reported as part of Borrowing expenses, net in the Statement of Income.
Amortization of discounts and premiums is recorded using the effective interest method and it is included in the Borrowing
expenses, net line in the Statement of Income.

Accounting for Derivatives: 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 accounted
for through the Statement of Income.
The presentation of derivative instruments on IBRD’s Balance Sheet reflects the netting of derivative asset and liability
positions and the related cash collateral received from the counterparty, when a legally enforceable master netting
agreement exists, and the other conditions set out in ASC Topic 210-20, Balance Sheet—Offsetting, are met. In addition,in the Notes to the financial statements, unless stated differently, derivatives are presented on a net basis by instrument.
A master netting agreement is an industry standard agreement with a counterparty that permits multiple transactions
governed by that agreement to be terminated or accelerated and settled through a single payment in a single currency inthe event of a default (e.g., bankruptcy, failure to make a required payment or transfer security or deliver collateral whendue). Obligations under master netting agreements are often secured by collateral posted under an industry standard credit
support annex to the master netting agreement. Upon default by the counterparty, the collateral agreement grants an entity
the right to set-off any amounts payable by the counterparty against any posted collateral.
IBRD uses derivative instruments in its investment trading portfolio to manage interest rate and currency risks. These
derivatives are carried and reported at fair value. Interest revenue/expenses are reflected as part of Interest revenue, while
unrealized mark-to-market gains and losses on these derivatives are reflected as part of the Unrealized mark-to-market
gains (losses) in Investments-Trading, net line in the Statement of Income.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

95

IBRD also uses derivatives in its loan, borrowing and asset/liability management activities. It also offers derivativeintermediation services to clients. In the loan and borrowing portfolios, derivatives are used to modify the interest rate
and/or currency characteristics of these portfolios. The interest component of these derivatives is recognized as an
adjustment to the related loan revenue and borrowing costs over the life of the derivative contracts and is included in therelated Interest revenue/expenses lines in the Statement of Income. Changes in fair values of these derivatives areaccounted for through the Statement of Income as Unrealized mark-to-market gains and losses in non-trading portfolios,net.
For the purpose of the Statement of Cash Flows, IBRD has elected to report the cash flows associated with the derivative
instruments that are used to economically hedge its loans, investments and borrowings, in a manner consistent with thepresentation of the related loan, investment and borrowing cash flows.
Derivative contracts include currency forward contracts, TBA securities, swaptions, exchange traded options and futurescontracts, currency swaps and interest rate swaps. Currency swaps and interest rate swaps are either plain vanilla or
structured. Currency forward contracts and plain vanilla currency and interest rate swaps are valued using the discounted
cash flow methods using observable market 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 bondvaluations are used. Where applicable, the models also incorporate significant unobservable inputs such as correlations
and long-dated interest rate volatilities.
Most outstanding derivative positions are transacted over-the-counter and therefore valued using internally developed
valuation models. For commercial and non-commercial counterparties where IBRD has a net receivable position, IBRD
calculates a Credit Valuation Adjustment (CVA) to reflect credit risk. For net derivative positions with commercial andnon-commercial counterparties where IBRD is in a net payable position, IBRD calculates a DVA to reflect its own credit
risk. The CVA is calculated using the fair value of the derivative contracts, net of collateral received under credit support
agreements, and the probability of counterparty default based on the CDS spread and, where applicable, proxy CDS
spreads. The DVA calculation is generally consistent with the CVA methodology and incorporates IBRD’s own credit
spread as observed through the CDS market.

Valuation of Financial Instruments: IBRD has an established and documented process for determining fair values.

Fair value is based upon quoted market prices for the same or similar securities, where available. Financial instruments
for which quoted market prices are not readily available are valued based on discounted cash flow models and otherestablished valuation models. These models primarily use market-based or independently-sourced market parameters suchas yield curves, interest rates, volatilities, foreign exchange rates and credit curves, and may incorporate unobservable
inputs, some of which may be significant. Selection of these inputs may involve some judgment. In instances where
Management relies on instrument valuations supplied by external pricing vendors, there are procedures in place to validate
the appropriateness of the models used as well as inputs applied in determining those values. The fair value of certain
instruments is calculated using NAV as a practical expedient. To ensure that the valuations are appropriate whereinternally-developed models are used, IBRD has various controls in place, which include both internal and periodic
external verification and review. As of June 30, 2021, and June 30, 2020, IBRD had no financial assets or liabilities
measured at fair value on a non-recurring basis.

Fair Value Hierarchy: Financial instruments are categorized based on the priority of the inputs to the valuation

technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or
liabilities (Level 1), the next highest priority to observable market-based inputs or inputs that are corroborated by market
data (Level 2) and the lowest priority to unobservable inputs that are not corroborated by market data (Level 3).
Financial assets and liabilities recorded at fair value on the Balance Sheet are categorized based on the inputs to thevaluation techniques as follows:
Level 1: Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities
in active markets.
Level 2: Financial assets and liabilities whose values are based on quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or pricing models
for which all significant inputs are observable, either directly or indirectly for substantially the full term of theasset or liability.
Level 3: Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs thatare both unobservable and significant to the overall fair value measurement.
IBRD’s policy is to recognize transfers in and transfers out of levels as of the end of the reporting period in which theyoccur.
96

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Investments measured at NAV (or its equivalent) are not classified in the fair value hierarchy.

Accounting for Grant Expenses: IBRD recognizes an expense for unconditional grants, such as Contributions toSpecial Programs and most Board of Governors-approved and other transfers, upon approval. IBRD recognizes an expense
for conditional grants when the conditions specified for use by the beneficiaries have been met.

Trust Funds: To the extent that IBRD acts as an agent for, or controls IBRD-executed trust funds, assets held on behalfof specified beneficiaries are recorded on IBRD’s Balance Sheet, along with corresponding liabilities. Amounts disbursed
from these trust funds are recorded as expenses with corresponding amounts recognized as revenues. For Recipientexecuted trust funds, since IBRD acts as a trustee, no assets or liabilities relating to these activities are recorded on the
Balance Sheet. In some trust funds, execution is split between Recipient-executed and IBRD-executed portions. Decisions
on assignment of funding resources between the two types of execution may be made on an ongoing basis, therefore, theexecution of a portion of these available resources may not yet be assigned.
IBRD also acts as a financial intermediary to provide specific administrative or financial services with a limited fiduciaryor operational role. These arrangements, referred to as Financial Intermediary Funds, include, for example, administrationof debt service trust funds, financial intermediation and other more specialized limited fund management roles. For thesearrangements, funds are held and disbursed in accordance with instructions from donors or, in some cases, an external
governance structure or a body operating on behalf of donors. For Financial Intermediary Funds, since IBRD acts as atrustee, no assets or liabilities relating to these activities are recorded on the Balance Sheet.

Accounting and Reporting Developments
Accounting standards evaluated:
In January 2021, the FASB issued ASU 2021-01 - Reference Rate Reform (Topic 848): Scope. The ASU permits entities
to elect certain optional expedients and exceptions when accounting for derivative contracts affected by certain changes
in the interest rates used in computations affected by reference rate reform activities. IBRD adopted the standard
prospectively effective March 31, 2021, as permitted by the ASU, and the adoption did not have a material impact on thefinancial statements.
In March 2020, the FASB issued ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects ofReference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to the
US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden of the expectedmarket transition from LIBOR and other interbank offered rates. To be eligible for the optional expedients, modificationsof contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows must be
related to replacement of a reference rate. The relief is temporary and is only available through December 31, 2022. IBRD
will apply the standard consistently to contractual amendments made to all applicable floating rate instruments indexed to
IBOR (inter-bank offered rate) rates. IBRD adopted the standard effective June 30, 2020 and the adoption did not have amaterial impact on the financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework –Changes to the Disclosure Requirements for Fair Value Measurement, which amends certain disclosure requirements of
ASC 820. The guidance became effective for IBRD on July 1, 2020. The adoption of this ASU had no material impact
on IBRD’s financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 35040): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service
Contract, which amends ASC 350-40. The guidance became effective for IBRD on July 1, 2020. The adoption of this ASU
had no material impact on IBRD’s financial statements.
In 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 became effective for IBRD for the annual financial statements for the fiscal year ending
June 30, 2021. The adoption of this ASU had no material impact on IBRD’s financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments (CECL ASU). The ASU and its subsequent amendments introduce a new model for theaccounting of credit losses on loans and other financial assets measured at amortized cost. The CECL model, requires anentity 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 FINANCIAL STATEMENTS: JUNE 30, 2021

97

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 inclusionof 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.

Accumulated provision related to:Loans outstanding
Signed loan commitments
Other exposures
Total impact on accumulated provision
Recoverable asset relating to guarantees
received under EEAs
Retained earnings

Location on the Balance
Sheet
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)
28,968NOTE B—CAPITAL STOCK, MAINTENANCE OF VALUE, AND MEMBERSHIPThe following table provides a summary of the 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 June 30, 2021

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

Subscribed shares
2,320,659
66,7292,387,388
81,6772,469,065

The following table provides a summary of the changes in subscribed capital, uncalled portion of subscriptions, and paidin 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 June 30, 2021

Subscribed capital$
279,953
8,049
288,0029,854$
297,856$$

Uncalled portionof subscriptions(262,892)(7,076)(269,968)(8,644)(278,612)

Paid-in capital$
17,061
973
18,034
1,210$
19,244The uncalled portion of subscriptions is subject to call only when required to meet the obligations incurred by IBRD as aresult 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. As ofJune 30, 2021, the cumulative subscription payments received under the 2018 capital increases was $2.8 billion.

98

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Amounts to Maintain the Value of Currency Holdings
The following table summarizes the amounts to MOV classified as components of equity:
Table B3: MOV balances
In millions of U.S. dollars

MOV receivable
Net Deferred MOV payable
Deferred demand obligations
Deferred MOV payable/(receivable)

June 30, 2021
$

(343)

$

197
(130)
67

June 30, 2020
$

(299)

$

116
(130)
(14)

NOTE C—INVESTMENTS
As of June 30, 2021, IBRD’s investments include the liquid asset portfolio, the Post Employment Benefit Plan (PEBP),
the Post Retirement Contribution Reserve Fund (PCRF), holdings relating to the Advance Market Commitment for
Pneumococcal Vaccines Initiative (AMC) and the Local Currency Market Development (LCMD) investments. LCMD
investments are sovereign bonds denominated in the local currencies of less developed markets, and funded by borrowings
in the same currency with matching volume, payment and maturity characteristics.
Investments held by IBRD are designated as trading and reported at fair value, or at face value, which approximates fairvalue. As of June 30, 2021, Investments were primarily comprised of government and agency obligations, and time
deposits (56% and 40% respectively), with all the instruments being classified as Level 1 or Level 2 within the fair value
hierarchy. As of June 30, 2021, the largest holdings of investments from a single counterparty were Japanese Government
instruments (11%) and U.S. Treasuries (9%).
A summary of IBRD’s Investments-Trading is as follows:
Table C1: Investments – Trading composition
In millions of U.S. dollars

June 30, 2021
June 30, 2020
Government and agency obligations$ 48,630$
48,449Time deposits
35,46030,982
Asset-backed Securities (ABS)
1,710
3,012
a
Alternative investments
1,352
942
Equity securities a
414
382
Total Investments - Trading$ 87,566$
83,767
a. Related to PEBP holdings. Alternative investments are comprised of investments in hedge funds, private equity funds, private credit
funds and real estate funds, at net asset value (NAV).

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

99

IBRD manages its investments on a net portfolio basis. The following table summarizes IBRD’s net portfolio position:
Table C2: Net investment portfolio position
In millions of U.S. dollars

Investments-Trading
Securities purchased under resale agreements
Securities sold under repurchase agreements, securities lent under
securities lending agreements, and payable for cash collateral
received a
Derivative assets
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 portfolio b
Receivable from investment securities traded and other assets
Payable for investment securities purchased c
Net investment portfolio$

June 30, 2021
87,566338$$

June 30, 2020
83,767394(3,333)(2,161)

485
16
501

169
51
3
223

(417)
(561)
(1)
(979)
2,037
400
(699)
85,831

(625)
(328)
(2)
(955)
1,430
193
(406)
82,485$a. Includes $3,308 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 Balance Sheet.
c. This amount includes $178 million of liabilities related to PCRF payable, which is included in Other liabilities – Accounts payable
and miscellaneous liabilities on the Balance Sheet ($141 million—June 30, 2020), and $98 million of liabilities related to short sales($162 million—June 30, 2020).

The composition of IBRD’s net investment portfolio was as follows:
Table C3: Net investment portfolio composition
In millions of U.S. dollars
Net investment portfolio
Liquid asset portfolio
PEBP holdings
PCRF holdings
AMC holdings
LCMD investments
Total

June 30, 2021$$

82,751
2,476
555
10
39
85,831

June 30, 2020$$

79,908
1,847
450
239
41
82,485

IBRD uses derivative instruments to manage the associated currency and interest rate risk in the portfolio. For details
regarding these instruments, see Note F—Derivative Instruments. After considering the effects of these derivatives,
IBRD’s investment portfolio is predominantly denominated in U.S. dollars.
Commercial Credit Risk
For the purpose of risk management, IBRD is party to a variety of financial transactions, certain of which involve elementsof credit risk. Credit risk exposure represents the maximum potential loss due to possible non-performance by 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 as well 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 for transactions
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 tomitigate its credit exposure.
IBRD has entered into master derivative agreements, which contain legally enforceable close-out netting provisions. These
agreements may further reduce the gross credit risk exposure related to the swaps. Credit risk with financial assets subject
to a master derivatives arrangement is further reduced under these agreements to the extent that payments 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
100

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

may, therefore, change substantially within a short period of time following the balance sheet date. For more information
on netting and offsetting provisions see note F—Derivative Instruments.
The following is a summary of the collateral received by IBRD related to swap transactions:
Table C4: Collateral received
In millions of U.S. dollars

Collateral received
Cash
Securities
Total collateral received
Collateral permitted to be repledged
Amount of collateral repledged
Amount of cash collateral invested

June 30, 2021

June 30, 2020

$

$

$
$

3,308
1,083
4,391
4,391
1,492

$
$

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
secured borrowing and reverse repurchases (resales) of government and agency obligations, corporate securities, ABS andMBS. These transactions have been conducted under legally enforceable master netting 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 June 30, 2021, and June 30, 2020, there
were no amounts which could potentially be offset as a result of legally enforceable master netting arrangements.
Securities lending and repurchase agreements expose IBRD to several risks, including counterparty risk, reinvestment
risk, and risk of a collateral gap (increase or decrease in the fair value of collateral pledged). IBRD has procedures in place
to ensure that trading activity and balances under these agreements are below predefined counterparty and maturity limits,and to actively manage net counterparty exposure, after collateral, through daily mark-to-market. Whenever the collateralpledged by IBRD related to its borrowings under repurchase agreements and securities lending agreements declines invalue, 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 the treatment
as a sale have not been met. Counterparties are permitted to repledge these securities until the repurchase date.
As of June 30, 2021, 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. There were no replacement trades entered into in anticipation of maturing trades of a similar
amount (Nil— June 30, 2020). As of June 30, 2021 and June 30, 2020, the remaining contractual maturity of these
agreements were overnight and continuous. The securities transferred were mainly comprised of government and agency
obligations and equity securities.
In the case of resale agreements, IBRD receives collateral in the form of liquid securities and is permitted to repledge thesesecurities. While these transactions are legally considered to be true purchases and sales, the securities received are notrecorded on IBRD’s Balance Sheet as the accounting criteria for treatment as a sale have not been met. As of June 30,
2021 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 $340 million ($396 million—June 30, 2020). As of June30, 2021, and June 30, 2020, none of these securities had been transferred under repurchase or security lending agreements.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

101

NOTE D—LOANS AND OTHER EXPOSURESIBRD’s loans and other exposures (collectively “exposures”) are generally made to, or guaranteed by, member countriesof IBRD. In addition, IBRD may also make loans to the IFC, an affiliated organization, without any guarantee. As of June30, 2021, all IBRD’s loans were reported at amortized cost.
IBRD’s loan portfolio includes loans with multicurrency terms, single currency pool terms, variable spread terms andfixed spread terms. At June 30, 2021, only loans with variable spread terms (including special development policy loans),
were available for new commitments. Effective April 1, 2021, IBRD suspended the offering of loans on fixed spread
terms.
As of June 30, 2021, 85% of IBRD’s loans carried variable interest rates. IBRD uses derivative instruments to manage thecurrency risk as well as repricing risk between its loans and borrowings. After the effects of these derivatives, the loan
portfolio carried variable interest rates, with a weighted average interest rate of 0.84% as of June 30, 2021 (1.65%—June
30, 2020). For details regarding derivatives used in the loan portfolio see Note F—Derivative Instruments.
The majority of IBRD’s loans outstanding are denominated in U.S. dollars (79%) and euro (19%).
IBRD excludes the interest receivable balance from the amortized cost basis and from the related disclosures as permitted
by U.S. GAAP. As of June 30, 2021, accrued interest receivable on loans of $668 million is included in Other Receivables– Accrued income on loans in the Balance Sheet.
As of June 30, 2021, only 0.2% of IBRD’s loans were in nonaccrual status and related to one borrower. The total
accumulated provision for losses on loans in 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 or high-risk
classes.
A summary of IBRD’s loans outstanding by currency and by interest rate characteristics (fixed or variable) is as follows:
Table D1: Loans outstanding currency and interest rate structure
In millions of U.S. dollars, except as otherwise noted

Multicurrency terms a
Weighted average rate (%) b
Average Maturity (years)

June 30, 2021
Euro
Japanese Yen
U.S. dollars
OthersLoans Outstanding
Fixed
Variable Fixed Variable Fixed Variable Fixed Variable
Fixed
Variable
Total
$
20 $
8 $ 19 $
5 $
35 $
402 $
- $
- $
74 $
415 $
489
2.78
6.38 2.78
6.38
7.13
6.11
4.83
6.12
5.92
2.62
- 2.62
1.30
2.00
0.30

Variable-spread terms$
Weighted average rate (%) b
Average Maturity (years)

6 $ 20,506 $
0.51
0.16
1.12
8.20

- $
-

317 $
0.58
7.96

- $ 130,449 $
0.95
8.73

- $ 2,651 $
8.42
7.71

6 $ 153,923 $ 153,929
0.51
0.97
0.97
1.12
8.64
8.64

Fixed-spread terms$ 12,917 $ 8,440 $2 $ 1,105 $ 19,670 $ 23,113 $ 482 $ 417 $ 33,071 $ 33,075 $ 66,146
Weighted average rate (%) b2.10
0.34 2.30
0.44
3.40
1.26 7.84
3.56
2.96
1.03
1.99
Average maturity (years)
11.77
7.58 0.96
6.81
8.59
10.69 9.06
8.44
9.84
9.74
9.79
Loans Outstanding$ 12,943 $ 28,954 $ 21 $ 1,427 $ 19,705 $ 153,964 $ 482 $ 3,068 $ 33,151 $ 187,413 $ 220,564
Weighted average rate (%) b2.10
0.22 2.72
0.49
3.40
1.01 7.84
7.76
2.96
0.99
1.29
Average Maturity (years)
11.75
8.02 2.42
7.04
8.58
9.00 9.06
7.81
9.82
8.82
8.97
Loans Outstanding$ 220,564
Less accumulated provision for loan losses and deferred loan income
1,765
Net loans outstanding$ 218,799

102

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Table D1.1

In millions of U.S. dollars, except as otherwise noted
Euro
Japanese Yen
Fixed Variable Fixed Variable
Multicurrency terms a$
24 $Weighted average rate (%) b
2.78
Average Maturity (years)
3.12

June 30, 2020
U.S. dollars
OthersLoans Outstanding
Fixed
Variable Fixed Variable Fixed
Variable

7 $ 19 $5 $6.42 2.78
6.42- 3.12
-

- $
-

84 $
4.58
2.47

- $ 2,045 $
9.13
8.75

8$
0.51
1.62

145,720 $ 145,728
1.68
1.68
9.10
9.10

7,365 $
4 $ 1,160 $ 17,693 $ 21,817 $ 509 $ 353 $ 27,309 $0.56 2.29
0.50
3.60
1.98
7.88
5.06
3.27
7.66 1.35
7.64
8.35
10.62
9.57
8.78
9.57

30,695 $ 58,004
1.62
2.40
9.77
9.68

Loans Outstanding$ 9,135 $ 29,032 $ 23 $ 1,200 $ 17,734 $ 144,200 $ 509 $ 2,398 $ 27,401 $Weighted average rate (%) b2.37
0.43 2.69
0.53
3.61
1.82
7.88
8.53
3.27
Average Maturity (years)
11.92
8.72 2.81
7.47
8.33
9.31
9.57
8.75
9.55
Loans Outstanding
Less accumulated provision for loan losses and deferred loan income
Net loans outstanding

176,830 $ 204,231
1.68
1.89
9.20
9.24
$ 204,231
2,073$ 202,158

Variable-spread terms$
8 $ 21,660 $Weighted average rate (%) b
0.51
0.39
Average Maturity (years)
1.62
9.09
Fixed-spread terms$ 9,103 $Weighted average rate (%) b
2.37
Average maturity (years)
11.95

41 $
6.52
1.77

- $
35 $
0.72
3.00

403 $
6.22
-

- $ 121,980 $
1.78
9.11

- $
-

Total

415 $
6.23
-

499
5.95
0.42

a. Variable rates for multicurrency loans are based on the weighted average cost of allocated debt.
b. Excludes effects of any waivers of loan interest.

The maturity structure of IBRD’s loans is as follows:
Table D2: Loans maturity structure
In millions of U.S. dollars
Terms/Rate TypeMulticurrency terms
Fixed
Variable
Variable-spread terms
Fixed
Variable
Fixed-spread terms
Fixed
Variable
All Loans
Fixed
Variable
Total loans outstanding

July 1, 2021 throughJune 30, 2022
$

29
415

July 1, 2022 throughJune 30, 2026

June 30,2021
July 1, 2026 throughJune 30, 2031

$

$

45
-

-

Thereafter
$

-

Total
$

74
415

3
9,841

3
37,62851,75054,704

6
153,923

1,562
1,519

7,153
8,591

8,194
8,808

16,162
14,15733,07133,075

1,594
11,775$ 13,369

7,201
46,219$ 53,420

8,194
60,558$ 68,752

16,162
68,861$ 85,023

33,151
187,413$ 220,564

Thereafter

Total

Table D2.1

In millions of U.S. dollars
Terms/Rate TypeMulticurrency terms
Fixed
Variable
Variable-spread terms
Fixed
Variable
Fixed-spread terms
Fixed
Variable
All Loans
Fixed
Variable
Total loans outstanding

July 1, 2020 throughJune 30, 2021
$

29
415

July 1, 2021 throughJune 30, 2025

June 30, 2020
July 1, 2025 throughJune 30, 2030

$

$

44
-

11
-

$

-

$

84
415

3
6,567

5
36,32746,86855,9588
145,720

1,554
1,699

5,747
7,875

6,519
7,857

13,48913,26427,30930,695

1,586
8,681$ 10,267

5,796
44,202$ 49,998

6,530
54,725$ 61,255

13,48969,222$ 82,711

27,401
176,830$ 204,231

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

103

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 analysis. 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 payments risks,
economic structure and growth prospects, monetary and exchange rate policy, financial sector risks, and corporate sector
debt and vulnerabilities. The analysis also takes into account Environmental, Social, and Governance (ESG) factors. For
the purpose of analyzing the risk characteristics of IBRD’s exposures, these exposures are grouped into three classes inaccordance with assigned borrower risk ratings, which relate to the likelihood 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. Country risk ratings are groupedin pools of borrowers with similar credit 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 oncea year, or more frequently, if circumstances warrant, to determine the appropriate ratings.
An assessment was also performed to determine whether a qualitative adjustment of the loan loss provision was needed
as of June 30, 2021, particularly in consideration of the COVID-19 pandemic. Management concluded that a qualitative
adjustment beyond the regular application of IBRD’s loan loss provision framework was not warranted.
The following tables provides an aging analysis of the loan portfolio:
Table D3: 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

61-90

91-180June 30, 2021
Over 180
Total Past Due

$ $ -

$ $ -

$

$

46-60

61-90

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

$

$

$

$

$

-

432
$ 432

$

$

432
432

Current

Total

24,22993,530102,373
220,132$ 220,132$ 24,229
93,530102,373
220,132432$ 220,564

Current

Total$

Table D3.1

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
$

$

-

$

-

$

-

$

-

$

433
433

$

$

433
433

$

23,42490,71989,655
203,798$ 203,798$

23,42490,71989,655
203,798433$ 204,231

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

104

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

The table below discloses the outstanding balances of IBRD’s loan portfolio as of June 30, 2021, classified by the year
the loan agreement was signed.
Table D4: Loan portfolio vintage disclosure
In millions of U.S. dollars

Fiscal Year of Origination

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

2021

2020

$

$

5,477
4,034
9,511

$ 9,511

2019

2018

June 30,2021

2017

Prior
Years

CAT DDOs CAT DDOs
Loans
Disbursed Converted outstandingandto Term
as of June
RevolvingLoans
30, 2021

109 $
702 $
237
6,040
3,171
4,074
5,701
6,682
6,310
11,85010,555
10,621$ 1,831 $ 21,350 $
4,101
68,674
8,438
70,221
14,370160,245

726
504
1,230

$ 11,850 $ 10,555 $ 10,621

432$ 14,370 $ 160,677 $

1,230

$

$

1,267
483
1,750

$ 24,229
93,530102,373
220,1321,750

432$ 220,564

The amount of Catastrophe Deferred Drawdown Option (CAT DDOs) converted to term loans during the fiscal year ended
June 30, 2021 is $282 million.
Accumulated Provision for Losses on Loans and Other Exposures
Management determines the appropriate level of accumulated provisions for losses, which reflects the expected losses
inherent in IBRD’s exposures.
The balance of accumulated provision as of July 1, 2020 decreased by the $214 million transition adjustment recorded
upon adoption of CECL on that date. The transition adjustment corresponds to the difference between the accumulated
provision calculated under the “incurred loss” model and the CECL model.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

105

Changes to the Accumulated provision for losses on loans and other exposures are summarized below:
Table D5: Accumulated provision
In millions of U.S. dollars

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
the fiscal year
Composed of accumulated
provision for losses on:
Loans in accrual status
Loans in nonaccrual status
Total
Loans, end of the fiscal year:
Loans in accrual status
Loans in nonaccrual status
Total

June 30,2021
Loans
Loan
outstanding commitments
Other a$1,599 $
(465)

298

1,134
123
13

298
25
3
326

$

Total

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

1,484
146
17

51

$ 1,647$

June 30, 2020
Other a1,574 $
-

114
-

1,574
32
(7)

114
(14)
(1)

$

1,599 $

99

1,383
216
1,599

$

1,270

$

1,054
216
1,270

$

$ 220,132432$ 220,564

$

$

$

$

Loans
outstanding

$

$

Total
$

1,688
1,688
18
(8)

$

1,698

203,798433
204,231

a. Provision does not include recoverable asset relating to Guarantees received under the EEAs (for more details see Guarantees
section).

Accumulated Provision for Losses on:
Loans outstanding
Loan commitments and other exposures(excluding exposures to member countries’
derivatives)

Balance Sheet

Reported as follows

Statement of Income

Accumulated provision for loans
lossesProvision for losses on loans and otherexposures

Other liabilities

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 June 30, 2021, 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 as of andfor the stated fiscal years:
Table D6: Loans in nonaccrual status
In millions of U.S. dollars

Recorded investment in nonaccrual loans a
Accumulated provision for loan losses on nonaccrual loans
Average recorded investment in nonaccrual loans for the fiscal year
Overdue amounts of nonaccrual loans:
Principal
Interest and charges
a. A loan loss provision has been recorded against each of the loans in nonaccrual status.

106

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

June 30, 2021
$ 432
216
433
1,042
432
610

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

Table D6.1

In millions of U.S. dollars
Interest revenue not recognized as a result of loans being in nonaccrual status

2021
$ 27

2020
$ 28

2019
$ 33

During the fiscal years ended June 30, 2021 and June 30, 2020, no loans were placed into nonaccrual status or restored to
accrual status.
In addition, during the fiscal year ended June 30, 2021, less than $1 million interest revenue was recognized on loans in
nonaccrual status (less than $1 million—June 30, 2020 and less than $1 million—June 30, 2019).
Guarantees
Guarantees of $6,705 million were outstanding at June 30, 2021 ($6,898 million—June 30, 2020). This amount represents
the maximum potential amount of undiscounted future payments that IBRD could be required to make under theseguarantees, and is not included in the Balance Sheet. These guarantees have original maturities ranging between 6 and 21
years, and expire in decreasing amounts through 2042.
At June 30, 2021, liabilities related to IBRD's obligations under guarantees of $397 million ($463 million—June 30, 2020),
have been included in Other liabilities - Accounts payable and miscellaneous liabilities on the Balance sheet. These include
the accumulated provision for guarantee losses of $50 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 fiscal years ended June 30, 2021 and June 30, 2020, no guarantees provided by IBRD were called.
IBRD participates in Exposure Exchange Agreements (EEA) which are recognized as financial guarantees in the financial
statements. Information on the location and amounts associated with the EEAs executed with Multilateral Investment
Guarantee Agency (MIGA), African Development Bank (AfDB) and Inter-American Development Bank (IADB) included
on the Balance Sheet and in the Statement of Income is presented in the following table:
Table D7: Amounts associated with EEA
In millions of U.S. dollars

Guarantees provided a,b
Guarantees received c

Notional
amount$ 3,640(3,640)$-June 30, 2021
(Stand(Accumulated
readyprovision)
obligation) Recoverable
Asset
asset
$ (190)
$
(20)
190
17
$
$
(3)

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

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

Location on
Balance Sheet
Other liabilities
Other assets

a. For the fiscal year ended June 30, 2021, Provisions for losses on loans and other exposures line in the Statement of Income includes
less than $1 million of release of provision relating to Guarantees provided ($3 million of provision —June 30,2020). 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 fiscal year ended June 30, 2021, Non-interest revenue—Other, net, line in the Statement of Income includes less than $1
million of reduction in recoverable asset relating to Guarantees received ($5 million of reduction in recoverable asset —June 30,2020).
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 guarantees provided are included in guarantees outstanding of $6,705
million, obligations under guarantees of $397 million and accumulated provision for guarantee losses of $50 million, respectively($6,898 million, $463 million and $98 million, respectively—June 30, 2020).

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 annuallyby the Executive Directors of IBRD. As part of the COVID-19 Strategic Preparedness and Response Program, theExecutive 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 waiver of 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.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

107

The foregone income resulting from waivers of loan charges, is summarized in the following table:
Table D8: Waivers of loan charges
In millions of U.S. dollars
2021
23
3
5
$
31

Interest waivers
Commitment charge waivers
Front-end fee waivers
Total

2020
31
6
$
37

$

2019
42
7
$
49

$

$

Concentration Risk

Loan revenue comprises interest, commitment fees, loan origination fees and prepayment premiums, net of waivers. For
the fiscal year ended June 30, 2021, there was no country that contributed more than 10% of the total loan revenue.
Information about IBRD’s loan revenue and associated loans outstanding by geographic region is presented in thefollowing table:
Table D9: Loan revenue and associated outstanding loan balances
In millions of U.S. dollars

RegionLatin America and the Caribbean
Europe and Central Asia
East Asia and PacificMiddle East and North Africa
South Asia
Eastern and Southern Africa b
Western and Central Africa b
Total

Loan Revenue a
$
1,191
472
620
402
228
223
32
$
3,168

2021

Loans Outstanding$ 68,525
48,012
46,57430,86820,3094,665
1,611$ 220,564

Loan Revenue a
$
1,803
751
1,196
661
459
238
31
$
5,139

2020

Loans Outstanding$ 61,757
45,52944,65628,641
18,0984,117
1,433$ 204,231

a. Does not include interest expenses, net of $840 million from loan related derivatives ($487 million—June 30, 2020). Includes
commitment charges of $115 million ($115 million—June 30, 2020).
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 bebased on, for example, exchange rates or market interest rates.
Borrowings issued by IBRD are reported at fair value. As of June 30, 2021, 98% of the instruments in the portfolio wereclassified as Level 2, within the fair value hierarchy. In addition, most of these instruments were denominated in U.S.
dollars and euro (61% and 13%, respectively).
IBRD uses derivative contracts to manage the currency risk as well as the interest rate risk between its loans andborrowings. For details regarding the derivatives used, see Note F—Derivative Instruments. After the effect of thesederivatives, the borrowing portfolio carried variable interest rates, with a weighted average cost of 0.12% as of June 30,
2021 (0.90% as of June 30, 2020).
The following table summarizes IBRD’s borrowing portfolio after derivatives:
Table E1: Borrowings after derivatives
In millions of U.S. dollars
Borrowings a
Currency swaps, net
Interest rate swaps, net

June 30, 2021
$ 260,076(2,913)(3,507)$ 253,656

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

a. There were no unsettled borrowings as of June 30, 2021 ($3 million—June 30, 2020, representing a non-cash financing
activity, for which the related receivable is included in Other assets - Miscellaneous on the Balance Sheet).

For the fiscal year ended June 30, 2021, Borrowing expenses, net in the Statement of Income of $662 million ($3,754
million—June 30, 2020) include $3,323 million of interest revenue, net related to derivatives associated with the
Borrowing portfolio ($1,183 million—June 30, 2020).

108

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

The following table provides a summary of the interest rate characteristics of IBRD’s borrowings:
Table E2: Interest rate composition of Borrowings
In millions of U.S. dollars, except as otherwise noted
Fixed
Variable
Borrowings b
Fair Value Adjustment
Borrowings at fair value

WAC a (%)
1.61 %
0.59
1.49 %

June 30, 2021
$ 224,850
31,784$ 256,634
3,442$ 260,076

June 30, 2020
$ 195,956
38,118$ 234,074
9,166$ 243,240

WAC a (%)
1.84
1.58
1.80 %

a. WAC refers to weighted average cost.
b. At amortized cost.

The currency composition of IBRD’s borrowing portfolio before derivatives was as follows:
Table E3: Currency composition of Borrowings (before derivatives)

June 30, 2021
60.8
%
13.3
25.9
100.0
%

U.S. Dollar
Euro
OthersJune 30, 2020
63.2
11.8
25.0
100.0

%
%

The maturity structure of IBRD’s borrowings outstanding was as follows:
Table E4: Maturity structure of Borrowings
In millions of U.S. dollars
Less than 1 year
Between
1-2 years
2-3 years
3-4 years
4-5 years
Thereafter$June 30, 2021
45,240June 30, 2020$
51,412$

29,652
28,31934,36728,21094,288260,076

35,11824,271
25,54537,41569,479243,240$

IBRD’s borrowings have original maturities ranging from 35 days to 50 years, with the final maturity in 2064.
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
Risk management purposes:

Derivative instruments used

Investments

Currency swaps, currency forward
contracts, interest rate swaps, options,swaptions and futures contracts, TBA
securities

Loans

Currency swaps and interest rate swaps

Borrowings

Currency swaps and interest rate swaps

Other asset/liability
management derivatives
Other purposes:
Client operations

Currency swaps and interest rate swaps
Currency swaps, currency forward
contracts, and interest rate swaps

Purpose / Risk being managed

Manage currency and interest rate risks 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
equityAssist clients in managing risks

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

109

Under client operations, derivative intermediation services are provided to the following:
Borrowing Countries: Currency and interest rate swap transactions are executed between IBRD and its borrowers undermaster derivatives agreements.
Non-Affiliated Organizations: IBRD has a master derivatives agreement with the International Finance Facility for
Immunisation (IFFIm), under which several transactions have been executed.
Affiliated Organizations: Derivative contracts are executed between IBRD and IDA, under an agreement allowing IBRD
to intermediate derivative contracts on behalf of IDA.
The derivatives in the related tables of Note F are presented on a net basis by instrument. A reconciliation to the Balance
Sheet presentation is shown in table F1.
Offsetting assets and liabilities
IBRD enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements with
substantially all of its derivative counterparties. These legally enforceable master netting agreements give IBRD the rightto liquidate securities held as collateral and to offset receivables and payables with the same counterparty, in the event ofdefault by the counterparty.
The following tables summarize the gross and net derivative positions by instrument type. Instruments that are in a net
asset position are included in the Derivative Assets columns and instruments that are in a net liability position are includedin the Derivative Liabilities columns. The gross columns represent the fair value of the instrument leg that is in an asset
or liability postion that are then netted with the other leg of the instrument in the gross offset columns. The effects of themaster netting agreements are applied on a aggregate basis to the total derivative asset and liability positions and arepresented net of any cash collateral received on the Balance Sheet in accordance with ASC 815 – Derivatives and Hedging.
The net derivative asset positions in the tables below have been further reduced by any securities received as collateral todisclose IBRD’s net exposure on its derivative asset positions.
Table F1: Derivative assets and liabilities before and after netting adjustments
In millions of U.S. dollars

June 30, 2021
Location on the Balance Sheet
Derivative Assets

Derivative Liabilities

Gross Amounts Net Amounts
Gross Amounts
OffsetPresented
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

23,893
98,836
122,729$$(13,832)(90,147)(103,979)$$

10,061
8,689
18,750 d
12,124 eGross Amounts
OffsetNet Amounts
Presented

$

$

$

$

26,57744,1732
70,752$(18,206)(39,196)(1)(57,403)

$

8,371
4,977
1
13,349 d
12,127 f

3,271
3,355
1,012
$

2,343

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 $18 million CVA.
f. Includes $21 million DVA.

110

Gross Amounts

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

1,222

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

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

June 30, 2020
Location on the Balance Sheet

Derivative Assets
Gross Amounts Net Amounts
Gross Amounts
OffsetPresented$
22,129$(7,834)$
14,29561,415(55,342)
6,073
3
3
$
83,547$(63,176)$
20,371 d

Derivative Liabilities
Gross Amounts Net Amounts
Gross Amounts
OffsetPresented$
21,381$(13,011)$
8,370
79,079(71,492)
7,587
3
(1)
2
$
100,463$(84,504)$
15,959 d

14,502 e

14,486 f

2,125
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.

The following table provides information about the credit risk exposures of IBRD’s derivative instruments by portfolio,
before the effects of master netting arrangements and collateral:
Table F2: Credit risk exposure of the derivative instruments
In millions of U.S. dollars

Interest rate
swaps

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

$

$

16
645
1,227
6,529
1,644
10,061

June 30, 2021
Currency swaps(including currency
Other aforward contracts)
$
485
$
782
648
6,774
$
8,689
$

Total
-

$

$

501
1,427
1,875
13,303
1,644
18,750In millions of U.S. dollars

June 30, 2020
Currency swaps
Portfolio(including currency
Other aTotal
forward contracts)
Investments
$
51
$
169
$
3
$
223
Loans
42
1,134
1,176
Client operations
1,722
769
2,491
Borrowings
9,498
4,001
13,499Other asset/liability management derivatives
2,982
2,982
Total Exposure$
14,295
$
6,073
$
3
$
20,371a. Includes swaptions, exchange traded options and futures contracts and TBA securities. 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.
Interest rate
swaps

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 June 30, 2021, the notional amounts of IBRD’s derivative contracts outstanding were as follows: interest
rate contracts $452,450 million ($474,644 million at June 30, 2020), currency swaps $136,467 million ($127,276 million
at June 30, 2020), long positions of other derivatives $186 million ($362 million at June 30, 2020), and short positions ofother derivatives $75 million ($56 million at June 30, 2020).

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

111

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
as of June 30, 2021 was $1,078 million ($1,138 million—June 30, 2020). IBRD has not posted any collateral with thesecounterparties due to its triple-A credit rating.
If the credit-risk related contingent features underlying these agreements were triggered to the extent that IBRD would be
required to post collateral as of June 30, 2021, the amount of collateral that would need to be posted would be $209 million($156 million—June 30, 2020). Subsequent triggers of contingent features would require posting of additional collateral,
up to a maximum of $1,078 million as of June 30, 2021 ($1,138 million—June 30, 2020). In contrast, IBRD received
collateral totaling $4,391 million as of June 30, 2021 ($3,163 million—June 30, 2020) in relation to swap transactions (seeNote C—Investments).
The following table provides information on the amount of unrealized mark-to-market gains and losses on the non-trading
derivatives and their location in the 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

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

Unrealized mark-to-market (losses) gains
2021
2020
2019
(4,228)
$
3,914
$
4,951

$

(1,702)(5,930)

$

838
4,752

$

849
5,800

All of the instruments in IBRD's investment portfolio are held for trading purposes. Within the investment portfolio, IBRD
holds highly rated fixed income securities, equity securities as well as derivatives. The trading portfolio is primarily 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 in the Statement of Income:Table F4: Unrealized mark-to-market gains and losses on net investment-trading portfolio
In millions of U.S. dollars

Type of instrument
Fixed income (including associatedderivatives)
Equity b
Total

Unrealized mark-to-market gains (losses)a
2021
2020
2019

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

$
$

60
171
231

$
$

189
4
193

$
$

429
21
450

a. Amounts associated with each type of instrument include gains and losses on both derivative instruments and non-derivative
instruments.
b. Related to PEBP holdings.

112

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

NOTE G—RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS
The changes in the components of Retained Earnings are summarized below:
Table G1: Retained Earnings composition
In millions of U.S. dollars
SpecialReserve
As of June 30, 2018$

Cumulative effect of change inaccounting principle
As of July 1, 2018

Cumulative Unallocated Restricted
Fair Value Net Income Retained
Other
Adjustments (Loss) a
Earnings c reserves dGeneralReserve c

PensionReserve c

Surplus293

27,693810

216(1,467)

875

37

-

-

-

-

-

(155)

-

-

-

(155)

Total
$

28,457

293

27,693810

216(1,622)

875

37

-

28,302

Net income allocation a

-

913

(22)

-

(266)

(627)

3

-

-

Board of Governors-approved
transfers funded from
Surplus and other transfers b

-

-

-

(90)

-

90

-

-

-

Net income for the year

-

-

-

-

-

505

-

-

505

As of June 30, 2019

293

28,606787

126(1,888)

843

40

-

28,807

Net income allocation a

-

831

6

100

(278)

(584)

(45)

(30)

-

Board of Governors-approved
transfers funded from
Surplus and other transfers b

-

-

-

(126)

-

81

-

45

-

Net income for the year

-

-

-

-

-

(42)

-

-

(42)

293

29,437793

100(2,166)

298

(5)

15

28,765

As of June 30, 2020
Cumulative effect of change inaccounting principle

-

-

-

-

-

-

-

203

203

293

29,437793

100(2,166)

298

(5)

218

28,968Net income allocation a c

-

950

(62)

100

(1,137)

33

59

57

-

Board of Governors-approved
transfers funded from
Surplus and other transfers b

-

-

-

(100)

-

80

-

20

-

Net income for the year

-

-

-

-

-

2,039

-

-

2,039

293 $

30,387 $

731 $

100 $

As of July 1, 2020

As of June 30, 2021$

(3,303)$2,450 $

54

$

295

$

31,007a. Amounts retained as Surplus from the allocation of net income are approved by the Board of Governors.
b. A concurrent transfer is made from Surplus to Unallocated Net Income (Loss) for all transfers reported on the Statement of Income andauthorized to be funded from Surplus.
c. May differ from the sum of individual figures due to rounding.
d. Comprised of non-functional currency translation gains/losses, the unutilized portion of the transfer to the GPG Fund and the cumulative
effect related to the adoption of ASU 2016-13 (CECL) on July 1, 2020.

IBRD makes net income allocation decisions on the basis of reported net income, adjusted to exclude unrealized mark-tomarket gains and losses on non-trading portfolios, net, restricted income and Board of Governors-approved and othertransfers, non-functional currency translation adjustments and after considering the allocation to the pension reserve.
On August 6, 2020, IBRD’s Executive Directors approved the following adjustments and allocations relating to the net
income earned in the fiscal year ended June 30, 2020, to arrive at allocable income for that fiscal year:•$1,137 million increase in the Cumulative Fair Value Adjustments, for the Unrealized mark-to-market losses on
non-trading portfolios (this excludes realized amounts).

•

Add back $340 million related to Board of Governors-approved transfers approved in the fiscal year ended June30, 2020, to reported Net Income to arrive at allocable income. These transfers relate to income earned in priorfiscal years.

•$950 million increase in the General Reserve.

•$62 million decrease in the Pension Reserve.

•$57 million increase in Other reserves, for net non-functional currency translation adjustment.

On August 24, 2020, IBRD’s Board of Governors approved a transfer of $20 million from Surplus to the IBRD Fund forInnovative Global Public Goods Solutions (GPG Fund). The transfer was made on September 4, 2020, resulting in a
IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

113

reduction in Surplus and an increase in Other reserves. These funds will be expensed, and Other reserves reduced, whenutilized by the GPG fund. As of June 30, 2021, no funds have been utilized out of the cumulative transfers of $65 million
and therefore, no expense has been recognized in the Statement of Income.
On October 7, 2020, IBRD’s Board of Governors approved a transfer of $80 million from Surplus to the Trust Fund for
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.
On January 25, 2021, the Board of Governors approved a transfer of $331 million to IDA from Surplus, which was madeon February 1, 2021.
Board of Governors-approved and other transfers that were expensed during the stated fiscal years are included in thefollowing table:
Table G2: Board of Governors-approved and other transfers expensed
In millions of U.S. dollars
Transfers funded from:
Unallocated Net Income:
IDA
Surplus:
Trust fund for Gaza and West Bank
Total

2021

2020

2019

$

331

$

259

$

248

$

80
411

$

81
340

$

90
338

There were no amounts payable for the transfers approved by the Board of Governors at June 30, 2021, and atJune 30, 2020.
NOTE H—TRANSACTIONS WITH AFFILIATED ORGANIZATIONSIBRD transacts with affiliated organizations by providing loans, administrative and derivative intermediation services, aswell 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 H1: IBRD’s receivables and payables with affiliated organizations
In millions of U.S. dollars

June 30, 2021
June 30, 2020
IDA
IFC
MIGA
Total
IDA
IFC
MIGA
Total
Administrative Services, net $ 268
$ 36
$ 13
$ 317
$
271 $
63 $
13
$
347
Derivative Transactions a
Derivative assets, net
27
27
53
53
Derivative liabilities, net
(19)
(19)
(74)
(74)
Pension and Other
Postretirement Benefits
(572)
(645)
(25)
(1,242)
(620)
(477)
(18)
(1,115)Investments
(178)
(178)
(141)
(141)
Total
$ (296)$ (787)$ (12)$ (1,095) $ (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) balances these affiliated organizations are reported on the Balance Sheet as follows:
Receivables / Payables related to:Reported as:

Loans

Loans outstanding

Administrative servicesaOther assets

Derivative transactions

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 Accounts payable and miscellaneous liabilities on the Balance Sheet.

114

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Loans and Other Exposures
IBRD has a Local Currency Loan Facility Agreement with IFC, which is capped at $300 million. As of June 30, 2021 andJune 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 under which
IBRD and MIGA exchange 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 the agreement, IBRD and
MIGA have each exchanged $120 million of notional exposure as follows: MIGA assumes IBRD's loan principal andinterest exposure in exchange for IBRD's assumption of principal and interest exposure of MIGA under its Non-Honoringof Sovereign Financial Obligation agreement. As of June 30, 2021, assets related to IBRD’s right to be indemnified under
this agreement amounted to $1 million ($1 million—June 30, 2020), while liabilities related to IBRD’s obligation under
this agreement amounted to $1 million ($1 million—June 30, 2020). These include an accumulated provision for guarantee
losses of less than $1 million as of June 30, 2021 (less than $1 million—June 30, 2020).
Administrative Services
Expenses jointly incurred by IBRD and IDA are allocated based on an agreed cost-sharing methodology, and amounts aresettled quarterly. For the fiscal year ended June 30, 2021, IBRD’s administrative expenses are net of the share of expenses
allocated to IDA of $1,873 million ($1,824 million—fiscal year ended June 30, 2020, and $1,795 million—fiscal year
ended June 30, 2019).
Revenue
Revenue jointly earned by IBRD and IDA is allocated based on an agreed revenue-sharing methodology, and amounts aresettled quarterly. For the fiscal year ended June 30, 2021, IBRD’s other revenue is net of revenue allocated to IDA of $261
million ($316 million—fiscal year ended June 30, 2020, and $316 million—fiscal year ended June 30, 2019), and isincluded in Revenue from externally funded activities in the Statement of Income. This revenue also includes revenue
from contracts with clients, who are not affiliated with IBRD as follows:
Table H2: Revenue from contracts with clients
In millions of U.S. dollars

Trust fund fees
Reimbursable advisory services
Asset management services

$

2021

$

Of which:
IBRD's share
IDA's share

$

82
98
28
208

$

112
96

$

2020

$

83
132
30
245

$

125
120

$

$

2019

90
115
27
232
113
119

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 toprovide certain services for which it has received consideration in advance. Such considerations are presented as contract
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 H3: Receivables and contract liabilities related to revenue from contract with clients
In millions of U.S. dollars
Receivables
Contract liabilities

June 30, 2021
79
196

$

$

June 30, 2020
114
169

The amount of fee revenue associated with services provided to affiliated organizations is included in Revenue fromexternally funded activities in the Statement of Income, as follows:
Table H4: Fee revenue from affiliated organizations
In millions of U.S. dollars
Fees charged to IFC
Fees charged to MIGA

$

2021
89
6

$

2020
83
5

$

2019
74
5

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

115

Pension and Other Postretirement Benefits
The payable to IDA represents IDA’s net share of prepaid cost 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 a part of the investment portfolio.
For Pension and Other Postretirement Benefits-related disclosures see Note J—Pension and Other Postretirement Benefits.
Derivative Transactions
These relate to currency forward contracts entered into for 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 Balance Sheet. The corresponding payable to IFC is included in the amount payable forinvestment securities purchased - on IBRD’s Balance Sheet. As a result, there is no impact on IBRD’s investments net
asset value from these transactions.
NOTE I—MANAGEMENT OF EXTERNAL FUNDS AND OTHER SERVICES
Trust Funds
IBRD, alone or jointly with one or more of its affiliated organizations, administers on behalf of donors, including members,
their agencies and other entities, funds restricted for specific uses in accordance with administration agreements withdonors. Specified uses could include co-financing of IBRD lending projects, debt reduction operations, technicalassistance including feasibility studies and project preparation, global and regional programs, and research and training
programs. These funds are held in trust with IBRD and/or IDA, and are held in a separate investment portfolio which is
not commingled with IBRD and/or IDA funds.
Trust fund execution may be carried out in one of two ways: Recipient-executed or IBRD-executed.
Recipient-executed trust funds involve activities carried out by a recipient third-party executing agency. IBRD enters into
agreements with and disburses funds to those recipients, who then exercise spending authority to meet the objectives andcomply with terms stipulated in the agreements.
IBRD-executed trust funds involve IBRD execution of activities as described in relevant administration agreements withdonors, which define the terms and conditions for use of the funds. Spending authority is exercised by IBRD, under theterms of the administration agreements. The executing agency services provided by IBRD vary and include for example,
activity preparation, analytical and advisory activities and project-related activities, including procurement of goods andservices.
The following table summarizes the expenses pertaining to IBRD-executed trust funds:
Table I1: Expenses pertaining to IBRD-executed trust funds
In millions of U.S. dollars

IBRD-executed trust fund expenses

$

2021
470

$

2020
470

$

2019
603

These amounts are included in Administrative expenses and the corresponding revenue is included in Revenue fromexternally funded activities in the Statement of Income. Administrative expenses primarily relate to staff costs, travel andconsultant fees.
The following table summarizes all undisbursed contributions made by third party donors to IBRD-executed trust funds,
recognized on the Balance Sheet:
Table I2: Undisbursed contributions by third party donors to IBRD-executed trust funds
In millions of U.S. dollars

IBRD-executed trust funds

$

2021
552

2020
$ 534

These amounts are included in Other assets - Miscellaneous and the corresponding liabilities are included in Otherliabilities – Accounts payable and miscellaneous liabilities on the Balance Sheet.

116

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Revenues
IBRD’s revenues for the administration of trust fund operations were as follows:
Table I3: Trust fund administration revenues
In millions of U.S. dollars
Revenues

$

2021
44

$

2020
42

$

2019
44

These amounts are included in Revenue from externally funded activities in the Statement of Income.
Revenue collected from donor contributions for trust fund administation fees, but not yet earned by IBRD totaling $95
million at June 30, 2021 ($66 million—June 30, 2020) is included in Other assets - Miscellaneous and in Other liabilities– Accounts payable and miscellaneous liabilities, correspondingly, on the Balance Sheet.
Investment Management Services
IBRD offers treasury and investment management services to affiliated and non-affiliated organizations.
In addition, IBRD offers asset management and technical advisory services to central banks of member countries, under
the Reserves Advisory and Management Program, for capacity building and other development purposes, and receives a
fee for these services.
During the fiscal year ended June 30, 2021, IBRD fee revenue from investment management activities totaled $19 million($17 million –June 30, 2020 and $15 million – June 30, 2019) and is included in Revenue from externally funded activities
in the Statement of Income.
Other Services
In June 2009, donors to AMC provided IBRD with commitments to give $1.5 billion through December 2020, with the
GAVI Alliance (GAVI) as the named beneficiary. The assets will be drawn down by GAVI in accordance with the termsof the AMC, which require that the funds be used to make payments for qualifying vaccines. Should a donor fail to pay,
IBRD has committed to pay the shortfall. For this commitment, IBRD charges an annual 30 basis point premium on
outstanding grant payments not yet paid by AMC donors.
As of June 30, 2021, the undisbursed balance of contributions received from AMC donors amounted to $10 million ($236
million—June 30, 2020). Amounts held in investments relating to AMC, including investment income, totaled $10 million($239 million—as of June 30, 2020) and are included in IBRD’s investment holdings. The payables under the AMC
program are included in Other liabilities - Accounts payable and miscellaneous liabilities. As of June 30, 2021, there wasno fee revenue from these arrangements ($1 million—June 30, 2020 and $2 million—June 30, 2019, included in noninterest revenue – Other, net). As of June 30, 2021, there were no receivables from AMC donors (Nil-June 30, 2020) and
IBRD no longer has an obligation to pay in the event of a donor default.
NOTE J—PENSION AND OTHER POSTRETIREMENT BENEFITSIBRD, IFC and MIGA participate in the defined benefit Staff Retirement Plan (SRP), a Retired Staff Benefits Plan (RSBP)
and PEBP that cover substantially all of their staff members.
The SRP provides pension benefits and includes a cash balance plan. The RSBP provides certain health and life insurance
benefits to eligible retirees. The PEBP provides certain pension benefits administered outside the SRP.
IBRD uses a June 30th measurement date for its pension and other postretirement benefit plans.
All costs, assets and liabilities associated with these plans are allocated between IBRD, IFC, and MIGA based upon theiremployees’ respective participation in the plans. Costs allocated to IBRD are then shared between IBRD and IDA basedon an agreed cost-sharing methodology. IDA, IFC and MIGA reimburse IBRD for their proportionate share of any
contributions made to these plans by IBRD. Contributions to the plans are calculated as a percentage of salary.
As of June 30, 2021, the SRP and RSBP were underfunded by $320 million and $90 million, respectively. The PEBP,
after reflecting IBRD and IDA’s share of assets which are included in the IBRD’s investment portfolio ($1,806 million),
was underfunded by $533 million.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

117

The following table summarizes the benefit costs associated with the SRP, RSBP, and PEBP for IBRD and IDA:
Table J1: Pension Plan benefit costs
In millions of U.S. dollars
Service cost
Interest cost
Expected return on plan
assetsAmortization of
unrecognized priorservice costs a
Amortization of
unrecognized net
actuarial losses a
Net periodic pension
costof which:
IBRD’s share
IDA’s share

2021
$ 642
588

SRP
2020
$
547
687

2019
$
471
733

RSBP
2021
2020
$ 170 $ 143
107
118

2019
$ 124
120

2021
$ 111
56

PEBP
2020
$
97
71

(967)

(1,024)(1,009)

(162)

(169)

(161)

-

-

-

3

3

3

17

17

18

3

3

3

311

90

21

12

-

-

55

82

65

$

2019
86
71

$

577

$

303

$

219

$ 144 $

109

$

101

$

225

$

253

$

225

$

276
301

$

140
163

$

99
120

$

51
58

$

45
56

$

107
118

$

117
136

$

102
123

69 $
75

2021

Net periodic pension cost (all three plans combined)
IBRD’s share
IDA’s share

$

2020

452 $
494

2019

308 $
357

246
299

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

IDA’s share of benefit costs is included as a payable to/receivable from IDA in Other liabilities – Accounts payable andmiscellaneous liabilities on the Balance Sheet (see Note H—Transactions with Affiliated Organizations).
The components of net periodic pension cost, other than the service cost component, are included in the Non-interest
expenses – Pension line item in the Statement of Income. The service cost component is included in the line item Noninterest expenses – Administrative expenses.
The following table provides the amounts of IBRD’s pension service cost:
Table J2: Pension service cost
In millions of U.S. dollars

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

RSBP
$

170

$

111

$

923

$

307
335

$

81
89

$

53
58

$

441
482

RSBP

PEBP

Total

547

$

143

$

97

$

787

$

254
293

$

66
77

$

45
52

$

365
422

SRP

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

2020

$

In millions of U.S. dollars

118

Total

642

SRP

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

PEBP

$

In millions of U.S. dollars

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

2021

RSBP

2019

PEBP

Total

$

471

$

124

$

86

$

681

$

213
258

$

56
68

$

39
47

$

308
373

The following table summarizes the Projected Benefit Obligations (PBO), fair value of plan assets, and funded status
associated with the SRP, RSBP, and PEBP for IBRD and IDA. The SRP and RSBP assets are held in separate trusts andthe PEBP assets are included in IBRD's investment portfolio. The assets of the PEBP are mostly invested in fixed income,equity instruments and alternative investments.
Table J3: PBO, funded status and accumulated benefit obligations
In millions of U.S. dollars

Projected Benefit Obligations
Beginning of year
Service cost
Interest cost
Participant contributions
Benefits paid
Actuarial loss (gain)
End of year
Fair value of plan assets
Beginning of year
Participant contributions
Actual return on assets
Employer contributions
Benefits paid
End of year
Funded Status a
Accumulated Benefit
Obligations

2021

SRP

2020

$ 23,536
642
588
160
(743)
545
24,728$ 20,587
547
687
165
(766)
2,316
23,536

19,266
160
5,507
218
(743)
24,408$(320)

19,180
165
480
207
(766)
19,266$ (4,270)$ 23,127$ 21,937

2021
$

RSBP

3,997
170
107
28
(91)
24
4,235

2020
$

3,401
143
118
28
(93)
400
3,997

$

3,195
28
955
58
(91)
4,145
(90)

3,104
28
99
57
(93)
3,195
(802)

$

$

4,235

$ 3,997

2021
$

PEBP

2,167
111
56
4
(35)
36
2,339

2020
$

2,102
97
71
14
(25)
(92)
2,167

$ (2,339)$ (2,167)

$

$

2,087

1,899

a. Funded status is included in Other liabilities – Liabilities under retirement benefits plans, on the Balance Sheet.

During the fiscal years ended June 30, 2021 and June 30, 2020, there were no amendments made to the retirement benefit
plans.
The following tables present the amounts included in Accumulated Other Comprehensive Loss relating to Pension andOther Postretirement Benefits:
Table J4: Amounts included in Accumulated Other Comprehensive Loss at June 30, 2021
In millions of U.S. dollars

Net actuarial loss (gain)
Prior service cost
Net amount recognized in Accumulated Other Comprehensive Loss

SRP
1,281
12
$ 1,293
$

RSBP
(263)
42
$
(221)
$

PEBP
$ 622
12
$ 634

Total
1,640
66
$ 1,706$

Table J4.1: Amounts included in Accumulated Other Comprehensive Loss at June 30, 2020
In millions of U.S. dollars

Net actuarial loss
Prior service cost
Net amount recognized in Accumulated Other Comprehensive Loss

SRP
5,588
14
$
5,602
$

RSBP
517
60
$
577
$

PEBP
$ 640
15
$ 655

Total
6,745
89
$
6,834
$

Assumptions
The actuarial assumptions used are based on financial market interest rates, inflation expectations, past experience, andManagement’s best estimate of future benefit changes and economic conditions. Changes in these assumptions will impact
future benefit costs and obligations.
The expected long-term rate of return for the SRP assets is a weighted average of the expected long-term (10 years ormore) returns for the various asset classes, weighted by the portfolio allocation. Asset class returns are developed using aforward-looking building block approach and are not strictly based on historical returns. Equity returns are generally
developed as the sum of expected inflation, expected real earnings growth and expected long-term dividend yield. Bond
returns are generally developed as the sum of expected inflation, real bond yield, duration-adjusted change in yields andrisk premium/spread (as appropriate). Other asset class returns are derived from their relationship to equity and bondmarkets. The expected long-term rate of return for the RSBP is computed using procedures similar to those used for the
SRP. The discount rate used in determining the benefit obligation is selected by reference to the year-end yield of AA
corporate bonds.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

119Actuarial gains and losses occur when actual results are different from expected results. Amortization of these
unrecognized gains and losses will be included in income if, at the beginning of the fiscal year, they exceed 10 percent of
the greater of the projected benefit obligation or the market-related value of plan assets. If required, the unrecognized gains
and losses are amortized over the expected average remaining service lives of the employee group.
The following tables present the weighted-average assumptions used in determining the projected benefit obligations
and the net periodic pension costs:
Table J5: Weighted average assumptions used to determine projected benefit obligations
In percent, except years

Discount rate
Rate of compensation increase
Health care growth rates-at end of fiscal year
Ultimate health care growth rate
Year in which ultimate rate is reachedInterest crediting rate

SRP
2021

2020

2.70
4.80

2.60
4.60

4.90

4.60

RSBP
2021

2020

2.80

2.70

5.40
3.90
2031
n.a

5.40
3.70
2031
n.a

PEBP
2021

2020

2.80
4.80

2.60
4.60

4.90

4.60

Table J6: Weighted average assumptions used to determine net periodic pension cost
In percent, except years

Discount rate
Expected return on plan assets
Rate of compensation increase
Health care growth rates-at end of fiscal year
Ultimate health care growth rate
Year in which ultimate rate is reachedInterest crediting rate

2021

SRP
2020

2019

2021

RSBP
2020

2019

2021

PEBP
2020

2019

2.60
5.10
4.60

3.40
5.40
4.90

4.10
5.70
5.50

2.70
5.10

3.50
5.50

4.10
5.70

2.60

3.50

4.10

4.60

4.90

5.50

5.40
3.70
2031
n.a

6.20
3.90
2030
n.a

6.00
4.20
2030
n.a

4.60

4.90

5.20

4.60

4.90

5.20

The medical cost trend rate can significantly affect the reported postretirement benefit income or costs and benefit
obligations for the RSBP. For the fiscal year ended June 30, 2021, the actuarial loss was primarily due to a decrease in thereal discount rates, whereas the nominal discount rates increased due to an increase in expected inflation. For the fiscal
year-ended June 30, 2020, the actuarial loss was primarily the result of a decrease in the discount rates.
Investment Strategy
The investment policies establish the framework for investment of the plan assets based on long-term investment
objectives and the trade-offs inherent in seeking adequate investment returns within acceptable risk parameters. A key
component of the investment policy is to establish a Strategic Asset Allocation (SAA) representing the policy portfolio(i.e., policy mix of assets) around which the SRP and RSBP (the Plans) are invested. The SAA is derived using a mix ofquantitative analysis that incorporates expected returns and volatilities by asset class as well as correlations across theasset classes, and qualitative considerations such as the liquidity needs of the Plans. The SAA for the Plans is reviewed indetail and reset about every three to five years, with more frequent reviews and changes if and as needed based on market
conditions.
The key long-term objective is to generate asset performance that is reasonable in relation to the growth rate of theunderlying liabilities and the assumed sponsor contribution rates, without taking undue risks. Given the relatively long
investment horizons of the SRP and RSBP, and the relatively modest liquidity needs over the short-term to pay benefits
and meet other cash requirements, the focus of the investment strategy is on generating sustainable long-term investment
returns through a globally diversified set of strategies including fixed income, public and private equity and real assets. In
the first half of the fiscal year ending June 30, 2021, following the onset of the global pandemic, the Pension FinanceCommittee (PFC) re-assessed the assumptions underlying the SAA and reaffirmed the appropriateness of the Long-Term
Real Return Objective within the current risk tolerance parameters. The review of the SAA was completed and approvedin April 2021 with an effective date of June 1, 2021. The new SAAs slightly reduced the Fixed Income and Cash policy
allocation from 23% percent to 20% and increased the policy allocation to Credit Strategy and Market Neutral Hedge
Funds by 1% and 2% percent, respectively. The changes do not materially alter the risk profile of the portfolio but are
expected to slightly increase the efficiency of the allocation.

120

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

The following table presents the policy asset allocation and the actual asset allocations by asset category for the SRP and
RSBP:
Table J7: Policy and actual asset allocations
Asset class
Fixed income and CashCredit Strategy
Public equity
Private equity
Market neutral hedge funds
Real assets a
Other b
Total

Policy allocation
2021 (%)
20
6
31
20
10
13
100

SRP
Actual Allocation (%)
2021
2020
20
19
7
7
25
29
26
21
9
10
12
13
1
1
100
100

Policy allocation
2021 (%)
20
6
31
20
10
13
100

RSBP
Actual Allocation (%)
2021
2020
21
20
6
6
23
27
28
24
8
9
13
13
1
1
100
100

a. Includes public and private real estate, infrastructure and timber.
b. Includes authorized investments that are outside the policy allocations primarily in hedge funds.

Significant Concentrations of Risk in Plan Assets
The assets of the SRP and RSBP are diversified across a variety of asset classes. Investments in these asset classes arefurther diversified across funds, managers, strategies, geographies and sectors, to limit the impact of any individual
investment. In spite of such level of diversification, equity market risk remains the primary source of the overall return
volatility of the Plans. As of June 30, 2021, the largest exposure to a single counterparty was 8% and 6% of the plan assets
in SRP and RSBP, respectively (8% and 6%, respectively—June 30, 2020).
Risk Management Practices
Managing investment risk is an integral part of managing the assets of the Plans. Asset diversification is central to theoverall investment strategy and risk management approach for the Plans. Absolute risk indicators such as the overall return
volatility and drawdown of the Plans are the primary measures used to define the risk tolerance level and establish theoverall level of investment risk. In addition, the level of active risk (defined as the annualized standard deviation of
portfolio returns relative to those of the policy portfolio) is closely monitored and managed on an ongoing basis.
Market risk is regularly monitored at the absolute level, as well as at the relative levels with respect to the investment
policy, manager benchmarks, and liabilities of the Plans. Stress tests are performed periodically using relevant market
scenarios to assess the impact of extreme market events.
Monitoring performance (at both manager and asset class levels) against benchmarks, and compliance with investment
guidelines, are carried out on a regular basis which provides helpful information for assessing the impact on the portfolios
caused by market risk factors. Risk management for different asset classes is tailored to their specific characteristics andis an integral part of the external managers’ due diligence and monitoring processes.
Credit risk is monitored on a regular basis and assessed for possible credit event impacts. The liquidity position of thePlans is analyzed at regular intervals and periodically tested using various stress scenarios to ensure that the Plans havesufficient liquidity to meet all cash flow requirements. In addition, the long-term cash flow needs of the Plans are
considered during the SAA exercise and are one of the main drivers in determining maximum allocation to the illiquid
investment vehicles. The Plans mitigate operational risk by maintaining a system of internal controls along with otherchecks and balances at various levels.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

121

Fair Value Measurements and Disclosures
All plan assets are measured at fair value on a recurring basis. The following table presents the fair value hierarchy ofmajor categories of plan assets:
Table J8: Plan assets fair value hierarchy
In millions of U.S. dollars

Debt securities
Discount notes and time deposits
Securities purchased under resaleagreements
Government and agency securities
Corporate and convertible bonds
ABS
MBS
Total debt securities
Equity securities
StocksMutual funds
Real estate investment trusts (REITs)
Total equity securities
Other funds at NAV a
Commingled funds
Private equity funds
Private credit
Real estate funds (including
infrastructure and timber)Hedge funds
Total other funds
Derivative assets/liabilities
Other assets/liabilities, net b
Total assets

Level 1SRP
Level 2
Level 3

$

$

20

8

$

-

June 30, 2021
Total
$

28

Level 1RSBP
Level 2
Level 3

$

$

7

$

-

$

10

231
3,220
3,471

173
605
164
272
1,222

-

231
3,393
605
164
272
4,693

39
631
677

36
108
31
47
225

-

39
667
108
31
47
902

2,761
2
222
2,985

-

-

2,761
2
222
2,985

426
33
459

-

-

426
33
459

-

-

-

3,571
6,366
1,604

-

-

-

534
1,163
258

2
$ 6,4582$ 1,224

-

2,700
2,247
16,4884238$ 24,408$ 1,136

225

-

488
324
2,767
17
$ 4,145$$

a. Investments measured at fair value using NAV have not been included under the fair value hierarchy.
b. Includes receivables and payables carried at amounts that approximate fair value.

122

3

Total

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

$

J8.1

In millions of U.S. dollars
Level 1

Debt securities
Discount notes and time deposits$
4
Securities purchased under resaleagreements
68
Government and agency securities
2,016
Corporate and convertible bonds
ABS
MBS
Total debt securities
2,088
Equity securities
Stocks2,955
Mutual funds
19
Real estate investment trusts (REITs)
160
Total equity securities
3,134
Other funds at NAV a
Commingled funds
Private equity funds
Private credit
Real estate funds (including
infrastructure and timber)Hedge funds
Total other funds
Derivative assets/liabilities
4
Other assets/liabilities, net b
Total assets$ 5,226

June 30, 2020

SRP
Level 2
Level 3
$

54

$

-

Total
$

58

Level 1RSBP
Level 2
Level 3

$

$

1

11

$

-

Total
$

12

310
510
152
348
1,374

-

68
2,326
510
152
348
3,462

12
368
381

60
86
26
60
243

-

12
428
86
26
60
624

-

-

2,955
19
160
3,134

475
3
26
504

-

-

475
3
26
504

-

-

2,710
4,127
1,255

-

-

-

400
748
201

-

2,215
2,220
12,527(4)147$ 19,266

885

(1)
242 $

-

388
320
2,057
(1)
11
$ 3,195(8)$ 1,366 $$$a. Investments measured at fair value using NAV have not been included under the fair value hierarchy.
b. Includes receivables and payables carried at amounts that approximate fair value.

Valuation Methods and Assumptions
The following are general descriptions of asset categories, as well as the valuation methodologies and inputs used todetermine the fair value of each major category of Plan assets. It is important to note that the investment amounts in theasset categories shown in the table above may be different from the asset category allocation shown in the Investment
Strategy section of the note. Asset classes in the table above are grouped by the characteristics of the investments held.
The asset class break-down in the Investment Strategy section is based on Management’s view of the economic exposures
after considering the impact of derivatives and certain trading strategies.
Debt securities
Debt securities include discount notes, time deposits, securities purchased under resale agreements, U.S. treasuries andagencies, debt obligations of foreign governments, sub-sovereigns and debt obligations in corporations of domestic andforeign issuers. Debt securities also include investments in ABS such as collateralized mortgage obligations and MBS.
These securities are valued by independent pricing vendors at quoted market prices for the same or similar securities,
where available. If quoted market prices are not available, fair values are based on discounted cash flow models using
market-based parameters such as yield curves, interest rates, volatilities, foreign exchange rates and credit curves. Somedebt securities can be valued using techniques which require significant unobservable inputs. The selection of these inputs
may involve some judgment. Management believes its estimates of fair value are reasonable given its processes for
obtaining securities prices from multiple independent third-party vendors, ensuring that valuation models are reviewed
and validated, and applying its approach consistently from period to period. Unless quoted prices are available, money
market instruments and securities purchased under resale agreements are reported at face value which approximates fairvalue.
Equity securities
Equity securities (including REITs) represent investments in entities in various industries and countries. Investments inpublic equity listed on securities exchanges are valued at the last reported sale price on the last business day of the fiscal
year.
Commingled funds
Commingled funds are typically collective investment vehicles, such as trusts that are reported at NAV as provided by theinvestment manager or sponsor of the fund based on the valuation of underlying investments.
IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

123

Private equity funds
Private equity funds include investments primarily in leveraged buyouts, growth capital, distressed investments andventure capital funds across North America, Europe and Asia in a variety of sectors. Many of these funds are in theinvestment phase of their life cycle. Private Equity investments do not have a readily determinable fair value and arereported at NAV provided by the fund managers, taking into consideration the latest audited financial statements of thefunds.
Private credit funds
Private credit funds include investments primarily in direct lending and opportunistic credit funds. Direct lending funds
provide private financing to performing medium-size companies primarily owned by private equity sponsors.
Opportunistic credit strategies (including distressed debt and multi-strategy funds) have flexible mandates to invest acrossboth public and private markets globally. Private credit investments do not have a readily determinable fair value and arereported at NAV provided by the fund managers, taking into consideration the latest audited financial statements of thefunds.
Real estate funds (including infrastructure)
Real estate funds include investments in core real estate, non-core real estate investments (such as debt, value add, andopportunistic equity investments) and infrastructure. Real estate investments do not have a readily determinable fair value
and are reported at NAV provided by the fund managers, taking into consideration the latest audited financial statementsof the funds.
Hedge funds
Hedge fund investments include those seeking to maximize absolute returns using a broad range of strategies to enhance
returns and provide additional diversification. Hedge Funds include investments in equity, event driven, fixed income,multi strategy and macro relative value strategies. These investments do not have a readily determinable fair value and arereported at NAV provided by external managers or fund administrators (based on the valuations of underlying investments)
monthly, taking into consideration the latest audited financial statements of the funds.
Investments in hedge funds and commingled funds can typically be redeemed at NAV within the near term while
investments in private equity and most real estate are inherently long term and illiquid in nature with a quarter lag inreporting by the fund managers. Since the reporting of those asset classes is done with a lag, management estimates are
based on the latest available information considering underlying market fundamentals and significant events through thebalance sheet date.
Investment in derivatives
Investment in derivatives such as equity or bond futures, TBA securities, swaps, options and currency forwards are used
to achieve a variety of objectives that include hedging interest rates and currency risks, gaining desired market exposureof a security, an index or currency exposure and rebalancing the portfolio. Over-the-counter derivatives are reported using
valuations based on discounted cash flow methods incorporating observable market inputs.
Estimated Future Benefit Payments
The following table shows the benefit payments expected to be paid in each of the next five years and subsequent five
years. The expected benefit payments are based on the same assumptions used to measure the benefit obligation:
Table J9: Expected benefit payments
In millions of U.S. dollars

July 1, 2021 - June 30, 2022
July 1, 2022 - June 30, 2023
July 1, 2023 - June 30, 2024
July 1, 2024 - June 30, 2025
July 1, 2025 - June 30, 2026
July 1, 2026 - June 30, 2031

124

$

SRP
986
997
1,022
1,051
1,080
5,912

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

$

RSBP
84
92
99
106
113
678

$

PEBP
62
63
67
71
75
458

Expected Contributions
IBRD’s contribution to the SRP and RSBP varies from year to year, as determined by the PFC, which bases its judgmenton the results of annual actuarial valuations of the assets and liabilities of the SRP and RSBP. The best estimate of theamount of contributions expected to be paid to the SRP and RSBP by IBRD and IDA during the fiscal year beginning July
1, 2021 is $185 million and $44 million, respectively.
NOTE K—ACCUMULATED OTHER COMPREHENSIVE LOSS
Comprehensive income consists of net income and other gains and losses affecting equity that, under U.S. GAAP, areexcluded from net income. Other comprehensive income (loss) comprises currency translation adjustments on assets andliabilities denominated in euro; DVA on fair value elected liabilities; the cumulative effects of a change in accounting
principle related to the implementation of U.S. GAAP requirements; and pension-related items. These items are presented
in the Statement of Comprehensive Income.
The following tables present the changes in Accumulated Other Comprehensive Loss (AOCL):
Table K1: AOCL changes
In millions of U.S. dollars

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

Balance,
beginning of
the fiscal year
$

(106)
1,214

Changesin AOCL

2021
Amounts
reclassified into
net income

Net Changes
during theperiodBalance, end of
the period

$

$

$

$

(6,745)(89)(5,726)$465(1,377)

(55)

4,727
3,815

$

465
(1,432)

378a
23a
346

$

359
(218)

5,105
23
4,161

$

(1,640)(66)(1,565)$

Table K1.1:
In millions of U.S. dollars

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

Balance,
beginning of
the fiscal year
$

$

(18)
705

Changesin AOCL

2020
Amounts
reclassified into
net income

Net Changes
during theperiodBalance, end of
the period

$

$

$

$

(88)
538

(29)

(88)
509

(106)
1,214

(3,678)(3,239)172a(3,067)(6,745)(112)(3,103)$ (2,789)

23
166

23
$ (2,623)(89)$ (5,726)a$Table K1.2:

In millions of U.S. dollars
Balance,
beginningof the fiscal Cumulativeyear
adjustment
Cumulative Translation Adjustment$
139 $DVA on Fair Value option elected liabilities
155
Unrecognized Net Actuarial (Losses)
Gains on Benefit Plans(2,423)
Unrecognized Prior Service (Costs)
Credits on Benefit Plans
(136)
Other
(2)
Total AOCL
$ (2,422) $
155

2019
Adjusted
beginning Changes inbalance
AOCL$
139$ (157)155
551$

Amounts
reclassified
to netincome$(1)

Net
Changes
Balance,during the end of theperiodperiod$(157) $
(18)
550
705

(2,423)(1,341)

86a

(136)
(2)
(2,267) $

(947)

24a
2
111 $

(1,255)(3,678)242(836) $

(112)
(3,103)

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

125$

a. See Note J—Pension and Other Post Retirement Benefits.

NOTE L—FAIR VALUE DISCLOSURES
Valuation Methods and Assumptions
As of June 30, 2021 and June 30, 2020, IBRD had no assets or liabilities measured at fair value on a non-recurring basis.
Due from Banks
The carrying amount of unrestricted and restricted currencies is considered a reasonable estimate of the fair value of these
positions.
Loans and Loan commitments
There were no loans carried at fair value as of June 30, 2021 and June 30, 2020. IBRD’s loans and loan commitments
would be classified as Level 3 within the fair value hierarchy.
Summarized below are the techniques applied in determining the fair values of IBRD’s financial instruments.
Investment securities
Investment securities are classified based on management’s intention on the date of purchase, their nature, and IBRD’s
policies governing the level and use of such investments. As of June 30, 2021, all of the financial instruments in IBRD’s
investment portfolio were classified as trading. These securities are carried and reported at fair value, or at face value or
NAV, which approximates fair value. Where available, quoted market prices are used to determine the fair value of trading
securities. Examples include most government and agency securities, mutual funds, exchange-traded equity securities andABS 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
observable market inputs such as yield curves, credit spreads, and conditional prepayment rates. Where applicable,
unobservable inputs such as conditional 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 observable market inputs such as yield curves, foreign exchange rates, basis spreads and funding spreads. Whereavailable, 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 isgenerally derived using the discounted cash flow method based on estimated future pay-offs determined by applicablemodels 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 the specific structure.
These models incorporate observable market 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 incorporatesignificant unobservable inputs such as correlations and long-dated interest rate volatilities. Generally, the movements incorrelations are considered to be independent of movements in long-dated interest rate volatilities.
Derivative instruments
Derivative contracts include currency forward contracts, TBA securities, swaptions, exchange traded options and futurescontracts, currency swaps and interest rate swaps. Currency swaps and interest rate swaps are either plain vanilla or
structured. Currency forward contracts and plain vanilla currency and interest rate swaps are valued using the standard
discounted cash flow methods using observable market 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 tointerest rates, foreign exchange rates, and equity indices, valuation models and inputs similar to the ones applicable tostructured bonds valuation are used. Where applicable, the models also incorporate significant unobservable inputs suchas correlations and long-dated interest rate volatilities.
126

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

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 fairvalue 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 L1: 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
Miscellaneous assets
Liabilities
Borrowings
Securities sold/lent under repurchaseagreements/securities lending agreements andpayable for cash collateral received
Derivative liabilities, net

June 30, 2021
Carrying Value
Fair Value

June 30, 2020
Carrying Value
Fair Value

$

$

2,347

$

2,347

1,870

$

1,870

87,904
218,799
3,355
50

87,904
223,687
3,355
50

84,161
202,158
3,744-

84,161
209,6133,744-

260,076

260,076

243,240

243,247

62
1,222

62
1,222

36
1,473

36
1,473

As of June 30, 2021, IBRD’s signed loan commitments were $59.8 billion ($54.8 billion—June 30, 2020) and had a fairvalue of $2.6 billion ($1.9 billion—June 30, 2020).

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

127

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 is calculated using NAV. As a result, theseamounts are included in the respective asset class totals and not in the fair value hierarchy, in accordance with the permitted
practical expedient under U.S. GAAP.
Table L2: Fair value hierarchy of IBRD’s assets and liabilities
In millions of U.S. dollars

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

Fair Value Measurements on a Recurring Basis
June 30, 2021
Level 2
Level 3

Level 1$$$

21,325839
414
22,578
63

$

-

$

$

$

27,30534,621
1,710
63,636
275

$

8,314
9,820
18,134

$

$
$

$

$

375
241
616

$

$

$

-

$

255,482

$

$

$

50
$

4,594

$

48,63035,460
1,710
1,352
414
87,566338
8,689
10,061
18,75012,124
3,271
3,355
50
260,076

-

25

-

25

1
1

4,756
8,309
13,065

221
62
283

$

4,977
8,371
1
13,349$12,127
1,222$$

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 futures contracts and TBA securities.
d. Excludes $3,308 million relating to payable for cash collateral received.
e. Includes $18 million CVA.
f. Includes $21 million DVA.

128

-

Total

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

Table L2.1

In millions of U.S. dollars

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

Fair Value Measurements on a Recurring Basis
June 30, 2020
Level 2
Level 3

Level 1
$

$

$

$

$

19,3681,850
382
21,600
53

$

-

$

-

$

$

$

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

$

5,916
14,154
3
20,073$

237,893

$
$

$

$

-

$

157
141
298

$

5,347

$

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

$

6,073
14,295
3
20,371$

14,502
2,125
3,744

$

243,240

-

9

-

9

-

7,277
8,207
2
15,486

310
163
473

$

7,587
8,370
2
15,959$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 futures 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., interest rates and foreign exchange rates), an increase incorrelation generally results in an increase in the fair value of the instrument. The magnitude and direction of the fair value
adjustment will 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, an increasein volatility will generally result in an increase in the fair value. In general, the volatility used to price the option depends
on the maturity of the underlying instrument and the option strike price. In the fiscal years ended June 30, 2021, and June30, 2020, the interest rate volatilities for certain currencies were extrapolated for certain tenors and, thus, are considered
an unobservable input.
In certain instances, particularly for instruments with coupon or repayment terms linked to catastrophic events,
management relies on instrument valuations supplied by external pricing vendors.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

129

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% of IBRD’s borrowings.
Table L3: Level 3 Borrowings and derivatives valuation technique and quantitative information regarding thesignificant unobservable inputs:
In millions of U.S. dollars
Fair Value atPortfolio
June 30, 2021

Fair Value atJune 30, 2020

Valuation
Technique

Borrowings$4,594$5,347

Discounted
Cash Flow

Derivative
assets/(liabilities)$333$(175)

Discounted
Cash Flow

Unobservable input
Correlations
Interest rate
volatilities
Correlations
Interest rate
volatilities

Range (average),
June 30, 2021
-14% to 92% (13%)

Range (average),
June 30, 2020
-55% to 76% (7%)

52% to 54% (53%)

37% to 412% (183%)-14% to 92% (13%)-55% to 76% (7%)

52% to 54% (53%)

37% to 412% (183%)

The table below provides the details of inter-level transfers between Level 2 and Level 3 that are due to changes inobservable inputs.
Table L4: Borrowings and derivatives inter level transfers
In millions of U.S. dollars

Level 2

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

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

June 30, 2021
Level 3

63
63

$

$

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

99$

Total Derivative Transfers, net$$

Level 2

(63)
(63)

$

$

(9)
(9)

(11)
(11)

$

(2)

$

$

June 30, 2020

Level 3

466
(309)
157

$

$

26
(1)
25

$

(26)
1
(25)

11
11

$

9
9

$

(9)
(9)

2

$

34

$

(34)

$

$

(466)
309
(157)

The following table provides a summary of changes in the fair value of IBRD’s Level 3 borrowings and derivatives:
Table L5: Borrowings Level 3 changes
In millions of U.S. dollars

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

130

$

$

June 30, 2021
5,347
409
(1,695)
512
84
(63)
4,594

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021$$

June 30, 2020
4,941
1,541
(953)
72
(97)
(157)
5,347

Table L6: Derivatives Level 3 changes
In millions of U.S. dollars

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

June 30, 2021
Derivatives, Assets/(Liabilities)
Currency
Interest
Swaps
Rate Swaps
Total$ (153)$ (22)$ (175)
2
1
3
(23)
(2)
(25)

$

318
8
2
154

$

198
4
179

$

June 30, 2020
Derivatives, Assets/(Liabilities)
Currency
Interest Rate
Swaps
Swaps
Total
$ (62)$ (120)$ (182)
(6)
(79)
(85)
14
44
58

516
12
2
333

(52)
(13)
(34)
$ (153)

$

133
(22)

81
(13)
(34)
$ (175)

Information on the unrealized gains or losses included in the Statement of Income and Statement of Comprehensive income
relating to IBRD’s Level 3 borrowings and derivatives that are still held at the reporting dates, is presented in the following
table:
Table L7: Unrealized gains or losses relating to IBRD’s Level 3 borrowings and derivatives
In millions of U.S. dollars

2021

Reported as follows:
Borrowings
Net income (loss)a
Other comprehensive incomeb
Derivatives
Net income (loss)a
Other comprehensive incomec

$

$

(449)
(92)
446
25

2020
$

$

2019

(35)
129

$

14
46

91
(41)

$
$

28
27

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

Table L8: Borrowings fair value and contractual principal balance
In millions of U.S. dollars
June 30, 2021
June 30, 2020

Principal Amount Due
Upon Maturity$
260,277$
238,674

Fair Value$ 260,076$ 243,240$$

Difference
(201)
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 Statement of Comprehensive Income:Table L9: Changes in fair value due to IBRD’s own credit risk

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

June 30, 2021$
(1,377)(55)$(1,432)June 30, 2020
$
538
(29)
$
509

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

131

The following table provides information on the cumulative changes in fair value due to the change in IBRD’s own-credit
risk for financial liabilities measured under the fair value option, as well as where those amounts are included on the
Balance Sheet:
Table L10: 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- (loss) gain
Reported as follows:
Accumulated other comprehensive loss

June 30, 2021
$

(218)

June 30, 2020
$

1,214

Table L11: Unrealized mark-to-market gains or losses on investments-trading, and non-trading portfolios, net
In millions of U.S. dollars

$

(672)

Fiscal Year Ended June 30, 2021
Unrealized gains (losses)
excluding realized
amounts a
$
903

$

14
14

2,415
(1,351)
140
14
1,218

Realized gains(losses)
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 non-trading portfolios, net
In millions of U.S. dollars$

517

Fiscal Year Ended June 30, 2020
Unrealized gains (losses)
excluding realized
amounts a
$
(324)

$

(14)
146
63
195

(1,957)
1,204
(362)
(22)
(1,137)

Realized gains(losses)
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 non-trading portfolios, net
In millions of U.S. dollars
Realized gains(losses)
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 non-trading portfolios, net$$ 1,197

$

1
11
12

$

Unrealized gains(losses)
$

231

$

2,415
(1,351)
154
14
1,232

b

Unrealized gains(losses)$

193$(1,971)
1,204
(216)
41
(942)

b

Fiscal Year Ended June 30, 2019
Unrealized gains (losses)
excluding realized
amounts a$(747)

Unrealized gains(losses)$450(1,486)
1,084
109
15
(278)

$

(1,485)
1,084
120
15
(266)

$

b

a. Adjusted to exclude amounts reclassified to realized gains (losses).
b. Includes $7,209 million of unrealized mark-to-market losses related to derivatives associated with borrowings (unrealized mark-tomarket gains of $5,478 million—June 30, 2020 and unrealized mark-to-market gains of $6,186 million—June 30, 2019).

132

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

NOTE M—CONTINGENCIESIn light of the COVID-19 pandemic, IBRD faces additional credit, market and operational risks. The duration of the COVID19 pandemic is difficult to predict at this time, as are the extent and efficacy of economic interventions by governments andcentral 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 continues 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 co-defendant, asof and for the fiscal year ended June 30, 2021, is not expected to have a material adverse effect on IBRD's financial position,
results of operations or cash flows.

IBRD FINANCIAL STATEMENTS: JUNE 30, 2021

133