International Bank for Reconstruction andDevelopment

Management’s Discussion & Analysis
andCondensed Quarterly Financial Statements
September 30, 2021
(Unaudited)Management’s Discussion and Analysis

International Bank for Reconstruction and Development(IBRD)
Management’s Discussion and Analysis
September 30, 2021
Contents
Section I: Executive Summary

Summary Financial Results

4

Section II: Overview

Financial Business Model
Basis of Reporting

6
8

Section III: Financial Results

Summary of Financial Results
Net Income

910

Section IV: Risk Management

Risk GovernanceManagement of IBRD’s Risks

15
15

Section V: Governance

Senior Management Changes

25

List of Tables, Figures and Box

List of Tables, Figures and Box
TablesFigures
Box

26
26
26
26

IBRD Management’s Discussion and Analysis: September 30, 2021

1

Management’s Discussion and Analysis

Section I: Executive Summary

This Management’s Discussion and Analysis (MD&A) reflects the results of the International Bank for Reconstruction
and Development’s (IBRD’s) financial performance for the three months ended September 30, 2021 (FY22 YTD).
This document should be read in conjunction with IBRD’s Financial Statements and MD&A for the fiscal year ended
June 30, 2021 (FY21). IBRD undertakes no obligation to update any forward-looking statements. Certain
reclassifications of prior years’ information have been made to conform with the current year’s presentation. For
information relating to IBRD’s development operations’ results and corporate performance, refer to the World Bank
Corporate Scorecard and Sustainability Review.

Box 1: Selected Financial Data
In millions of U.S. dollars, except ratios which are in percentages

As of and for the three months ended
September 30,
2021
2020
Lending Highlights (Section III)Net commitments a
Gross disbursements
Net disbursements
Income Statement (Section III)
Board of Governors-approved andother transfers
Net income (loss)
Balance Sheet
Total assets
Net investment portfolio (Section III)Net loans outstanding (Section III)
Borrowing portfolio b (Section III)
Total equity
Non-GAAP Measures
Allocable Income (Section III)
Usable Equity c, d (Section IV)
Equity-to-loans Ratio d (Section IV)

$

$

2,557
6,235
3,750

$

-

$

658

As of and for the fiscal year
ended June 30,
2021

3,121
7,437
5,161

$

-

$

676

30,523
23,691
13,590
(411)
2,039

$

314,279
81,166
221,166
252,70248,196$306,305
82,601
209,528
243,390
41,345$317,301
85,831
218,799
253,656
48,078$257
49,811
22.3%

$

339
47,922
22.6%

$

1,248
49,997
22.6%

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. Includes associated derivatives.
c. Excludes amounts associated with unrealized mark-to-market gains/losses on non-trading portfolios, net and related cumulativetranslation adjustments.
d. Ratio is computed using usable equity and excludes the respective periods’ income. Full fiscal year usable equity includes
proposed transfer to the General Reserve.

2

IBRD Management’s Discussion and Analysis: September 30, 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 the WBG’s twin goals of ending extreme poverty and promoting shared prosperity,and to the Forward Look2, by providing countries with loans, advisory services and analytical support.
IBRD and its affiliated organizations seek to help countries achieve improvements in growth, job creation, poverty
reduction, governance, the environment, climate adaptation and resilience, human capital, infrastructure and debt
transparency. To meet its development goals, the WBG has been increasing its focus on country programs in order toimprove growth and development outcomes. Further, in response to the global outbreak of the coronavirus disease(COVID-19) and to support global public goods, IBRD continues to work in solidarity with partners at global andcountry levels to support its borrowing countries.

1

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

2

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

IBRD Management’s Discussion and Analysis: September 30, 2021

3

Management’s Discussion and Analysis

Section I: Executive Summary

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

Net Income and Allocable Income
IBRD recorded net income of $658 million for the first three months of FY22, compared with a net income of $676
million during the same period in FY21. The decrease in net income was primarily due to higher provision for losses
on loans and other exposures and lower net investment revenue. While total unrealized mark-to-market gains on the
non-trading portfolios were fairly similar in FY22 YTD compared to FY21 YTD, mark-to-market movements havehistorically introduced volatility to IBRD’s net income. Given IBRD’s intention to maintain its non-trading portfolio
positions to maturity, unrealized mark-to-market gains and losses are not included in IBRD’s allocable income.
Allocable income is the income measure IBRD uses for making net income allocation decisions. During the first threemonths of FY22, allocable income was $257 million, a decrease of $82 million from the same period in FY21. The
decrease was primarily due to a higher provision for losses on loans and other exposures during the first three months
of FY22 as compared with the same period in FY21 (see Section III and Section IV).
In millions of U.S dollars – YTD

Net Income/Loss
1,500

Unrealized Gains/Losses

Allocable Income

1,000
500
0
-500
-1,000-1,500
FY18

FY19

FY20

FY21

FY22

Lending Operations
IBRD’s lending operations during the first three months of FY22 resulted in $2.6 billion of net commitments and $6.2
billion of gross loan disbursements. Positive net disbursements of $3.8 billion was the key driver of the increase in net
loans outstanding from $218.8 billion as of June 30, 2021 to $221.2 billion as of September 30, 2021.
In billions of U.S dollars
Disbursements YTD

Net Commitments YTD
10

10

8

8

6

6

4

4

2

2

0

0

-2

-2

FY18

FY19

FY20

FY21

FY22

Gross

Net Loans outstanding

Net

250
200
150

100
50
0

FY18

FY19

FY20

FY21

FY22

Jun 18 Jun 19 Jun 20 Jun 21 Sep 21

Net commitments were $0.6 billion lower compared with the same period in FY21 (see Table 5). FY22 YTD
commitments included support for COVID-19 related efforts, with $0.9 billion of financing for vaccines. The regionswith the largest share of commitments in the first three months of FY22 were Latin America and the Caribbean with
42%, and South Asia with 31%.

4

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section I: Executive Summary

Net Investment Portfolio
IBRD’s net investment portfolio decreased by $4.6 billion, from$85.8 billion as of June 30, 2021 to $81.2 billion as of September 30,
2021. The decrease in the portfolio was primarily due to net loan
disbursements during the period. The investments remain
concentrated in the upper end of the credit spectrum, with 71% rated
AA or above (see Table 9), reflecting IBRD’s objective of principal
protection and its preference for high-quality investments.

In billions of U.S. dollars
Net Investment Portfolio
150
100
50
0
Jun 18 Jun 19 Jun 20 Jun 21 Sep 21

Borrowing Portfolio
As of September 30, 2021, the borrowing portfolio was $252.7
billion, $1.0 billion lower than June 30, 2021. The decrease wasmainly due to currency translation adjustments. The funds raised
financed development and lending operations and satisfied liquidity
requirements.

In billions of U.S. dollars
Borrowings Portfolio
300
250
200
150
100
50
0

Jun 18 Jun 19 Jun 20 Jun 21 Sep 21

Usable Equity and Equity-to-Loans Ratio
IBRD’s usable equity decreased by $0.2 billion compared with June30, 2021. During the first three months of FY22, IBRD received $92
million of paid-in capital subscribed under the 2018 General andSelective Capital Increases (GCI and SCI), bringing the cumulative
amounts received to $2.9 billion, 38.0% of the total amount expected
over the subscription period.
The Equity-to-Loans ratio was 22.3% as of September 30, 2021,
marginally lower compared with 22.6% as of June 30, 2021. The
decrease was primarily due to higher loan exposures during theperiod.

Ratio in percentages
Equity to Loans Ratio
40%

Equity to Loans Ratio
Policy Minimum

30%
20%
10%
0%
Jun 18 Jun 19 Jun 20 Jun 21 Sep 21

IBRD Management’s Discussion and Analysis: September 30, 2021

5

Management’s Discussion and Analysis

Section: II Overview

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

Financial Business Model
IBRD’s objective is not to maximize profits, but to earn adequate income to ensure that it has the long-term financial
capacity necessary to support its development activities. IBRD seeks to generate sufficient revenue to finance its
operations as well as to be able to set aside funds in reserves to strengthen its financial position. It also seeks to provide
support to IDA and trust funds via income transfers for other developmental purposes.
IBRD’s financial strength rests on the support it receives from its shareholders, and on its array of financial policies
and practices. Shareholder support for IBRD is reflected in the capital backing it continues to receive from its members
and in the record of its borrowing member countries in meeting their debt service obligations to IBRD. Sound financial
and risk management policies and practices have enabled IBRD to maintain adequate capital, diversify its funding
sources, hold a portfolio of liquid investments to meet its financial commitments, and limit its risks, including credit
and market risks.
IBRD offers its borrowers, in middle income and creditworthy low-income countries, long-term loans with maturities
up to 35 years. Borrowers may customize their repayment terms to meet their debt management or project needs, andloans are offered on fixed and variable spread terms in multiple currencies. Effective April 1, 2021, IBRD’s offeringof loans on fixed spread terms has been suspended. Borrowers have generally preferred loans denominated in U.S.
dollars and euros. IBRD also supports its borrowers by providing access to risk management products such asderivative instruments, including currency and interest rate swaps and interest rate caps and collars.
To meet its development goals, it is important for IBRD to intermediate funds for lending from the international capital
markets. IBRD’s loans are financed through its equity, and from borrowings raised in the capital markets. IBRD is
rated triple-A by the major rating agencies and its bonds are viewed as high-quality securities by investors. IBRD’s
funding strategy is aimed at achieving the best long-term value on a sustainable basis for its borrowing members. This
strategy has enabled IBRD to borrow at favorable market terms and pass the savings on to its borrowing members.
IBRD’s annual funding volumes vary from year to year, and funds raised are used to finance IBRD’s development
projects and programs in member countries. Funds not deployed for lending are maintained in IBRD’s investment
portfolio to supply liquidity for its operations. Figure 1 illustrates IBRD’s financial business model.

6

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section: II Overview

Figure 1: IBRD’s Financial Business Model

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

Financial Performance
IBRD’s primary sources of revenue are from loans and investments, both net of funding costs (see Figure 2). Theserevenues cover administrative expenses, provision for losses on loans and other exposures3 (LLP), as well as transfers
to Reserves, Surplus, and for other development purposes including transfers to IDA.
In addition, other development activities generate non-interest revenue that is classified as Revenue from externally
funded activities. These external funds include trust funds, reimbursable funds and revenues from fee-based services
to member countries. Non-interest revenue from externally funded activities provides additional capacity to support
the development needs of client countries.
In 2018, the Board of Governors (the Governors) endorsed a capital package, which included a capital increase of up
to $7.5 billion in paid in capital, along with a series of policy and financial measures designed to enhance IBRD’s
equity, lending capacity, and its ability to fund priorities that meet shareholder goals while also ensuring its long-term
financial sustainability.

3

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

IBRD Management’s Discussion and Analysis: September 30, 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
Allocable
IncomeEquity

IDA, Other
transfers &Surplus

Basis of Reporting
IBRD’s financial statements conform with accounting principles generally accepted in the United States of America(U.S. GAAP). All financial instruments in the investment and borrowing portfolios and all derivatives are reported atfair value, with changes in fair value reported in the Statement of Income, except for changes in IBRD’s own credit,
which are reflected in Other Comprehensive Income. IBRD’s loans are reported at amortized cost, except for loans
with embedded derivatives, if any, which are reported at fair value. Management uses net income as the basis forderiving allocable income, as discussed below.

Allocable Income
IBRD’s Articles of Agreement (the Articles) require that the Governors determine the allocation of income at the endof every fiscal year. Allocable income, which is a non-GAAP financial measure, is an internal management measurethat reflects income available for allocation. IBRD defines allocable income as net income after certain adjustments,that are approved by the Board at the end of every fiscal year. These adjustments primarily relate to unrealized markto-market gains and losses associated with its non-trading portfolios, as well as the expenses for Board of Governorsapproved and other transfers, which primarily relate to the allocation of the prior year’s net income.
See Financial Results Section (Section III) and Table 1, for details of the adjustments to reported net income required
to calculate allocable income.
The volatility in IBRD’s net income is usually driven by the unrealized mark-to-market gains and losses on thederivative instruments in IBRD’s non-trading portfolios: loans, borrowings, and other asset/liability management(ALM). IBRD’s risk management strategy entails the use of derivatives to manage market risk. These derivatives areprimarily used to align the interest rate and currency bases of its assets and liabilities. IBRD has elected not to designate
any hedging relationships for accounting purposes. Rather, all derivative instruments are reported at fair value on the
Balance Sheet, with changes in fair values reflected in the Statement of Income.
In line with its financial risk management policies, for the non-trading portfolios, unrealized gains and losses from
instruments carried at fair value (borrowing portfolio, and derivatives in the loans and Other ALM portfolios) areexcluded from allocable income.
For the trading portfolio (investment portfolio), allocable income includes both realized and unrealized mark-tomarket gains and losses.

8

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section III: Financial Results

Section III: Financial Results
Summary of Financial Results
The following is a discussion of the key drivers of IBRD’s financial performance, including a reconciliation between
IBRD’s net income and allocable income.
Table 1: Condensed Statement of Income
In millions of U.S. dollars

Impact on income

For the three months ended September 30,
Interest revenue, net of funding costs
Loan interest revenue, net
Other ALM derivatives, net
Investment revenue, net a
Net interest revenue
Provision for losses on loans and other exposures
Net non-interest expenses (Table 7)
Net other revenue (Table 6)
Non-functional currency translation adjustments, net b
Unrealized mark-to-market gains on non-trading portfolios, net c
Net income
Adjustments to reconcile net income to allocable income:Pension d and other adjustments
Non-functional currency translation adjustments, net b
Unrealized mark-to-market gains on non-trading portfolios, net c
Allocable income

2021
$

$

442
166
(1)
607
(71)
(301)
53
16
354
658

$

(31)
(16)
(354)
257

$

2020
$

$

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

$

20
(11)
(346)
339

$

Decrease / Increasea. Includes unrealized mark-to-market losses on the Investments-Trading portfolio of $5 million (unrealized mark-to-market gains of$38 million for FY21 YTD), and excludes Post-Employment Benefit Plan (PEBP) unrealized mark-to-market gains of $15 million($33 million for FY21 YTD) reported in Net other revenue (Table 6).
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 $61 million for
FY22 YTD, and $57 million for FY21 YTD.

IBRD’s principal assets are its loans to member countries. These are financed by IBRD’s equity and borrowings fromthe capital markets.
As of September 30, 2021, total assets decreased by 1% from June 30, 2021. The decrease was primarily driven by
the decrease in investments and due from banks.
Table 2: Condensed Balance Sheet
In millions of U.S. dollars
As ofInvestments 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

September 30, 2021$

June 30, 2021

84,396
221,166

$

2,687
6,030
$

314,279$

255,530
2,061
8,492
48,196314,279

90,251
218,799
3,355
4,896

$

317,301$

260,076
1,222
7,925
48,078317,301

Decrease / Increase(5,855)
2,367
(668)
1,134
(3,022)(4,546)839
567
118(3,022)a. The fair value of IBRD’s loans was $225,973 million as of September 30, 2021 ($223,687 million – June 30, 2021).

IBRD Management’s Discussion and Analysis: September 30, 2021

9

Management’s Discussion and Analysis

Section III: Financial Results

Net Income
IBRD had net income of $658 million for the first three months of FY22, compared with net income of $676 million
during the same period in FY21. The decrease in net income in FY22 YTD was primarily due to the increase inprovision for losses on loans and other exposures and lower net investment revenue as compared to same period in
FY21 (see Table 1 and Notes to Condensed Quarterly Financial Statements, Note K: Fair Value Disclosures, Table
K11).

Results from Lending activities
Loan Interest Revenue, net
Under IBRD’s pricing policy, the lending rates for all of IBRD’s loans are based on the underlying cost of theborrowings funding these loans. After the effect of related swaps, the loan and borrowing portfolios are based on
variable interest rates, and the portion of the loan portfolio funded by equity is sensitive to changes in interest rates.
For the first three months of FY22, IBRD’s loan interest revenue, net was $442 million, a decrease of $24 million
compared with the same period in FY21 (Figure 4). The decrease was primarily due to the effect of the lower averageinterest rates in the first three months of FY22 (compared with the same period in FY21), on the portion of the loan
portfolio that is sensitive to interest rate movements. This was partially offset by the higher average balance, as wellas 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, that issensitive to interest rate movements, stabilizing the net interest revenue earned from these loans. IBRD uses interest
rate swaps to convert the variable rate cash flows from these loans to fix rate cash flows. The combined effect of theincrease in interest revenue from Other ALM derivatives, net of $40 million and the decrease in loan interest revenue,
net of $24 million from FY21 YTD to FY22 YTD, was a combined increase of $16 million.
Table 3: Change Net Loans Outstanding

Figure 3: Net Loans Outstanding

In millions of U.S. dollars

In billions of U.S. dollars

Net Loans outstanding as of June 30, 2021
Activity during the period:
Gross loan disbursements
Loan repayments
Change in accumulated provision for loan losses a
Change in deferred loan income
Translation adjustments
Total change
Net Loans outstanding as of September 30, 2021$

218,799$$

6,235(2,485)(53)(15)(1,315)2,367
221,166

250

202

50

0

Jun 20Loan interest revenue, net

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

800
600
400
200
0

10

FY21

Sep 21100

Figure 4: Loan Interest Revenue, net

FY20

Jun 21

150

In millions of U.S. dollars, YTD

FY19

221

200

a. See Notes to Condensed Quarterly Financial Statements, Note D: Loans
and Other Exposures.

FY18

219

FY22

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section III: Financial Results

As of September 30, 2021, 81% of IBRD’s total loans outstanding after derivatives were denominated in U.S. dollars,and 18% were denominated in euro. For the regional presentation of loans outstanding, see Notes to Condensed
Quarterly Financial Statements, Note D: Loans and other exposures, Table D7.
Gross disbursements during the first three months of FY22 were $6.2 billion, 16% lower compared with the same
period in FY21 (Table 4), primarily due to a lower level of Development Policy Financing (DPF) disbursements.
Table 4: Gross Disbursements by Region
In millions of U.S. dollars
For the three months ended September
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
Amount% of total
731
12%
50
1
844
13
542
9
1,853
30
1,082
17
1,133
18
6,235
100%

2020
$

$

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

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

$

$

Variance
678
35
(275)
9
(1,234)(89)(326)(1,202)* Indicates percentage less than 0.5%.

Net commitments during the first three months of FY22 were $2.6 billion, 18% lower compared with the same period
in FY21 (Table 5), primarily due to lower Program for Results and Investment Project Financing commitments.
Table 5: Net Commitments by Region
In millions of U.S. dollars
For the three months ended September 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
$

$

Amount
150
69
380
1,070
98
790
2,557

2020
% of total
6%
2
15
42
4
31
100%

$

$

Amount
600
1,196
925
200
200
3,121

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

$

$

Variance
150
69
(220)
(1,196)
145
(102)
590
(564)

Results from Investing Activities
Investment Portfolio
IBRD’s net investment portfolio was $81.2 billion as of September 30, 2021 ($85.8 billion as of June 30, 2021). Of
this amount, $78.0 billion related to the liquid asset portfolio ($82.8 billion as of June 30, 2021). See Notes toCondensed Quarterly Financial Statements, Note C: Investments. The decrease in the liquid asset portfolio is primarily
due to the net loan disbursements during the period.

Net Investment Revenue
For the first three months of FY22, IBRD’s net investment revenue decreased by $28 million, primarily due tounrealized mark-to-market gains of $38 million in FY21 YTD, compared to unrealized mark-to-market losses of $5
million in FY22 YTD.

IBRD Management’s Discussion and Analysis: September 30, 2021

11

Management’s Discussion and Analysis

Section III: Financial Results

Figure 6: Net Investment Revenue

Figure 5: Net Investment Portfolio

In millions of U.S. dollars, YTD

In billions of U.S. dollars

Net Investment Revenue

Other investments portfolio
Liquid asset portfolio
100
80

3

3

60

3

40
20

60
40

83

80

78

0

20

-20

0
Jun 20Jun 21-40

Sep 21

FY18

FY19

FY20

FY21

FY22

Results from Borrowing Activities
As of September 30, 2021, the borrowing portfolio was $252.7 billion, a $1.0 billion decrease compared with June30, 2021 (see Notes to Condensed Quarterly Financial Statements, Note E: Borrowings). The decrease was primarily
due to currency translation adjustments. During the period, new issuances of medium-and long-term debt of $10.7
billion were highly diversified by currencies, with an average maturity of 6.1 years. The funds raised financed
development lending operations and satisfied the liquidity requirements.
Figure 7: Borrowing Portfolio (original maturities)
In billions of U.S. dollars
300
250

11

Medium-and long-term
10

Short-term
10

200
150
100

226

244

243

Jun 20Jun 21

Sep 2150
0Net Other Revenue
Net other revenue represents certain non-interest sources of revenue, which was $13 million lower in the first threemonths of FY22, compared with the same period in FY21. The decrease was mainly due to the lower investment
earnings from the PEBP holdings.
Table 6: Net Other Revenue
In millions of U.S. dollars
For the three months ended September 30,
Loan commitment fees
Guarantee fees
Net Earnings from PEBP and Post-Retirement Contribution Reserve Fund (PCRF)
PEF and PAF a
OthersNet other revenue (Table 1)

$

$

2021
32
3
16
1
1
53

$

$

2020
29
3
33
*
1
66

$

$

Variance
3
(17)
1
(13)

a. Amounts are fully offset by fair value changes in trades (facing counterparties) related to Pandemic Emergency Financing Facility(PEF) and Pilot Auction Facility for Methane and Climate Change Mitigation (PAF), which are included in Unrealized mark-to
market gains/(losses) on non-trading portfolios, net (Table 1).
* Indicates amounts less than $0.5 million.

12

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section III: Financial Results

Net Non-Interest Expenses
As shown in Table 7, IBRD’s net non-interest expenses primarily comprise administrative expenses, net of revenue
from externally funded activities. IBRD/IDA's administrative budget is a single resource envelope that funds the
combined work programs of IBRD and IDA. The allocation of net administrative expenses between IBRD and IDA
is based on an agreed cost and revenue-sharing methodology, approved by their Boards, which is primarily driven by
the relative level of lending, knowledge services, and other services between these two institutions. The administrative
expenses shown in Table 7 include costs related to IBRD-executed trust funds and other externally funded activities.
Figure 8: Net Non-Interest Expenses
In millions of U.S. dollars, YTD
400
300
200
100
0
FY18

FY19

FY20

FY21

FY22

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

2021
$

$

258
6
65
43
17
33
15
437

$
$

(81)
(55)
(136)
301

2020
$

$

240
2
65
110
13
29
12
471

$
$

(83)
(59)
(142)
329

Variance
$

$

18
4
(67)
4
4
3
(34)

$
$

2
4
6
(28)

a. Includes all components of pension costs. See Notes to Condensed Quarterly Financial Statements, Note H: Pension andOther Post-Retirement Benefits.
b. Includes expenses related to IBRD executed trust funds of $81 million for FY22 YTD and $83 million for FY21 YTD.
c. Includes $(71) million of pension cost, other than service cost ($3 million for FY21 YTD), included in Other Non-interest
expenses in the Condensed Statement of Income.

Net non-interest expenses for the first three months of FY22 decreased compared with the same period last year. Thisis primarily due to the decrease in pension costs, mainly driven by the higher actual asset return in FY21, which
resulted in lower amortization of unrecognized actuarial losses.

IBRD Management’s Discussion and Analysis: September 30, 2021

13

Management’s Discussion and Analysis

Section III: Financial Results

Unrealized mark-to-market gains and losses on non-trading portfolios
Unrealized mark-to-market gains and losses associated with the non-trading portfolios, are excluded from reported
net income to arrive at allocable income. As a result, from a long-term financial sustainability perspective, income
allocations are generally based on amounts that have been realized (except for the Investments-Trading portfolio, as
previously discussed). For the first three months of FY22, $354 million of net unrealized mark-to-market gains ($346
million net unrealized mark-to-market gains for same period in FY21) were excluded from reported net income toarrive at allocable income (see Table 1 and Notes to Condensed Quarterly Financial Statements, Note K: Fair Value
Disclosures, Table K11).

Loan Portfolio
Loans are reported at amortized cost, whereas the derivatives which convert the loans from fixed-rate to variable-rate
instruments for asset liability management purposes, are reported at fair value. As a result, while from an economic
perspective, IBRD’s loans after the effect of derivatives carry variable interest rates, and therefore have a low
sensitivity to interest rates, the mark to market effect is not reflected in the reported net income. Net income includes
only the unrealized mark to market gains and losses on loan related derivatives, which for the first three months of
FY22 was a gain of $407 million, primarily due to the increase in the interest rates during the period. See Section IV:
Risk Management for additional details on how IBRD uses derivatives in the loan portfolio.

Borrowing Portfolio
IBRD’s bonds and the related derivatives are reported at fair value, and, therefore, unrealized mark-to-market gains
and losses on the borrowing related derivatives are offset by unrealized mark-to-market gains and losses on theassociated bonds, except for changes in IBRD’s own credit, referred to as the Debit Valuation Adjustment (DVA)
which is recorded in Accumulated Other Comprehensive Loss (AOCL). For the first three months of FY22, the DVA
represents $369 million of unrealized mark-to-market losses, resulting mainly from the tightening of IBRD’s credit
spreads relative to London Interbank Offered Rate (LIBOR) during the period. As of September 30, 2021, IBRD’s
Condensed Balance Sheet included a cumulative DVA of $587 million mark-to-market losses reflected in AOCL,
associated with the changes in its own credit for financial liabilities measured under the fair value option (see Notes
to the Condensed Quarterly Financial Statements, Note K – Other Fair Value Disclosures).

Other ALM Portfolio
IBRD uses derivatives to stabilize its interest revenue from the portion of loans which is sensitive to changes in interest
rates. The Other ALM portfolio consists of derivatives which convert variable rate cash flows to fixed rate cash flows.
In the first three months of FY22, IBRD recorded unrealized mark to market losses of $262 million on this portfolio,
primarily due to the increase in the interest rates during the period. As of September 30, 2021, the duration of thisportfolio was 3.5 years, within the Board established limit of 5 years.

Transfers to Affiliated Organizations
Since 1964, IBRD has made transfers to IDA out of its net income, upon approval by the Governors. Under a formulabased approach for IBRD's income support to IDA, the amount of income transfer recommended for IDA is a functionof IBRD's financial results. On October 14, 2021, the Board of Governors approved a transfer of $274 million to IDA
out of FY21 allocable income, which was made on October 25, 2021.

14

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section IV: Risk Management

Section IV: Risk Management
Risk Governance
IBRD’s risk management processes and practices evolve to reflect changes in activities in response to market, credit,
product, operational, and other developments. The Board, particularly Audit Committee members, periodically review
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” where:i.

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

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

Internal Audit provides independent oversight.

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

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

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

IBRD Management’s Discussion and Analysis: September 30, 2021

15

Management’s Discussion and Analysis

Section IV: Risk Management

Coronavirus Disease 2019 (COVID-19) Outbreak
The outbreak of COVID-19 resulted in governments worldwide enacting emergency measures to combat the spreadof the virus. Those measures included travel bans, quarantine periods and social distancing, which caused material
disruption to businesses globally, resulting in an initial economic slowdown. Governments and central banks havereacted with significant monetary and fiscal interventions designed to stabilize economic conditions.
In light of COVID-19, IBRD continues to monitor developments and to manage the risks associated with all its
portfolios.
As of September 30, 2021, IBRD had sufficient resources to meet its liquidity requirements and continues to haveaccess to capital market resources. The liquid asset portfolio was 137% of the Target Liquidity Level. In the first threemonths in FY22, 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 and above minimum level (Table 8).
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 include IBRD’s current assessment of country credit
risk. 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.
IBRD continues to respond to client needs and operate its core business functions effectively by utilizing technology
for remote work. Home-based work remains in many IBRD offices throughout the world, in line with IBRD’s BusinessContinuity Procedures. In addition, other prudent measures are in place to ensure the health and safety of its
employees. IBRD continues to monitor risks associated with COVID-19 and prepare plans to respond as the situation
evolves.

Capital Adequacy
IBRD holds capital to cover the credit, market and operational risks inherent in its operating activities and financial
assets. Country credit risk is the most substantive risk covered by IBRD’s equity.
IBRD’s capital adequacy is the degree to which its equity is sufficient to withstand unexpected shocks. IBRD’s Board
monitors IBRD’s capital adequacy within a strategic capital adequacy framework and uses the equity-to-loans ratio
as a key indicator of capital adequacy. The framework seeks to ensure that IBRD’s equity is aligned with the financial
risk associated with its loan portfolio as well as other exposures over a medium-term capital-planning horizon.
As shown in Table 8, IBRD’s equity-to-loans ratio decreased to 22.3% as of September 30, 2021, from 22.6% as ofJune 30, 2021, mainly due to the increase in loan exposure, and remained above the 20% minimum ratio under the
strategic capital adequacy framework. In line with IBRD’s currency management policy, exchange rate movements
during the period did not have an impact on IBRD’s equity-to-loans ratio. Under the currency management policy, tominimize exchange rate risk, IBRD matches its borrowing obligations in any one currency (after derivatives) withassets in the same currency. In addition, IBRD periodically undertakes currency conversions to align the currencycomposition of its equity with that of its outstanding loans, across major currencies.

16

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section IV: Risk Management

Table 8: Equity-to-Loans Ratio
In millions of U.S. dollars
September 30,
2021

June 30, 2021

Usable paid-in capitalSpecial reserve
General reserve a
Cumulative translation adjustment b
Other adjustments
Equity (usable equity)$

18,608293
31,464(495)(59)
49,811$Loans exposure
Present value of guarantees
Effective but undisbursed DDOs
Related accumulated provisions
Deferred loan income
Other exposures
Loans (total exposure)$

222,990
3,028(1,693)(507)(689)
223,129

$

As of

$

$

Equity-to-Loans Ratio

$

22.3%

Total

18,583
293
31,464(268)(75)
49,997$

220,564
3,079(1,630)(495)(723)
220,795$$

Variance
Due toDue to Translation
Activities
Adjustments

$

$

25
(227)
16
(186)

$

2,426
(51)
(63)
(12)
34
2,334

$

$

$

92
92

$

3,749
(4)
(72)
(15)
34
3,692

$

(67)
(227)
16
(278)

$

$

(1,323)(47)
9
3(1,358)22.6%

a. June 30, 2021 amount includes the proposed transfer to the General Reserve, which was approved by IBRD's Executive
Directors on August 5, 2021.
b. Excludes cumulative translation amounts associated with the unrealized mark-to-market gains/losses on non-trading portfolios,
net.

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

Country Credit Risk
IBRD manages country credit risk by using individual country exposure limits and takes into account factors such as
population size and the economic situation in the country. In addition, IBRD conducts stress tests of the effects ofchanges in market variables and of potential geopolitical events on its portfolio to complement its capital adequacy
framework.
Figure 9: Country Exposures as of September 30, 2021
In billions of U.S. dollars

Top Ten Country Exposures
India
Indonesia
China
MexicoBrazilColombia
Egypt
TurkeyPhilippines
Argentina

18.1
17.2
15.6
15.5
15.4
13.2
11.5
11.2
9.6

8.3
0

2

4

6

8

10

12

14

16

18

20

IBRD Management’s Discussion and Analysis: September 30, 2021

17

Management’s Discussion and Analysis

Section IV: Risk Management

Portfolio Concentration Risk
Portfolio concentration risk, which arises when a small group of borrowers, accounts for a large share of loans
outstanding, is a key concern for IBRD. The ten countries with the highest exposures accounted for 60% of IBRD’s
total exposure as of September 30, 2021.
Concentration risk is carefully managed, in part, by applying an exposure limit to a single borrowing country for theaggregate balance of loans outstanding, the present value of guarantees, the undisbursed portion of Deferred
Drawdown Options (DDOs), and other eligible exposures that have become effective. Under the current guidelines,
IBRD’s exposure to a single borrowing country is restricted to the lower of an Equitable Access Limit (EAL) and the
SBL.
The Single Borrower Limit (SBL) framework reflects a dual-SBL system, which differentiates between countries
below the Graduation Discussion Income (GDI) threshold and those above it. Under this system, the FY22 SBL was$24.9 billion for highly creditworthy countries below the GDI, and $21.2 billion for highly creditworthy countries
above the GDI.

Accumulated Provision for Losses on Loans and Other Exposures
As of September 30, 2021, IBRD’s accumulated provision for losses on loans and other exposures was $1,711 million,
including $341 million of accumulated provision related to loan commitments (see Notes to Condensed Quarterly
Financial Statements, Note D: Loans and Other Exposures). This was less than 1% of the underlying exposures ($1,647
million as of June 30, 2021, less than 1% of total exposures). For the first three months of FY22, IBRD recorded a
provision for losses on loans and other exposures of $71 million, primarily reflecting the impact of loss given default(severity) due to the increase in the implied forward interest rates during the period.
As of September 30, 2021, 0.2% of IBRD’s loans were in nonaccrual status, all related to Zimbabwe. During the first
three months of FY22, IBRD did not receive any payments towards overdue interest and principal from Zimbabwe(Nil for FY21 YTD). See Notes to Condensed Quarterly Financial Statements, Note D: Loans and Other Exposures.

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

Commercial Counterparty Credit Risk
Commercial counterparty credit risk is the risk that counterparties fail to meet their payment obligations under theterms of the contract or other financial instruments. Effective management of counterparty credit risk is vital to thesuccess of IBRD’s funding, investment, and asset/liability management activities. The monitoring and managementof these risks is continuous as the market environment evolves.
As a result of IBRD’s use of mark-to-market collateral arrangements for swap transactions, its residual commercial
counterparty credit risk is concentrated in the investment portfolio, in instruments issued by sovereign governments
and non-sovereign holdings (including Agencies, Asset Backed Securities, Corporates, and Time Deposits). IBRD’s
overall commercial counterparty credit exposure decreased by $5.5 billion during the first three months of FY22, to$81.3 billion as of September 30, 2021, consistent with the decrease in the investment portfolio.
As shown in Table 9, the credit quality of IBRD’s investment portfolio remains concentrated in the upper end of thecredit spectrum, with 71% of the portfolio rated AA or above and the remainder predominantly rated A. The exposureswith the AAA and AA rated counterparties primarily relate to sovereign debt and time deposits. The A rated
counterparties principally consist of financial institutions (limited to short-term deposits and swaps) and sovereign
debt.

18

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section IV: Risk Management

Table 9: Commercial Credit Exposure, Net of Collateral Held, by Counterparty Rating
In millions of U.S. dollars
As of September 30, 2021
Investments
Counterparty Rating a
AAA
AA
A
BBB
BB or lower/unrated
Total

Sovereigns$
24,663
2,041
11,38338$
38,125$$Net Swap
Exposure
$
435
172
$
607

Non-Sovereigns
8,795
21,55012,16452
842,569Total Exposure
33,45824,02623,71952
46$
81,301% of Total
41%
30
29
*
*
100%

Total Exposure
35,322
26,981
24,37856
48$
86,785% of Total
41%
31
28
*
*
100%

$

As of June 30, 2021
Investments
Counterparty Rating a
AAA
AA
A
BBB
BB or lower/unrated
Total

Sovereigns$
25,186
2,828
12,18840$
40,242$$

Non-Sovereigns
10,13623,525
11,99956
845,724

Net Swap
Exposure
$
628
191
$
819

$

a. Average rating is calculated using available ratings from the three major rating agencies; however, if ratings are not available fromeach of the three rating agencies, IBRD uses the average of the ratings available from any of such rating agencies or a single 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%.

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 and fulfill their development mandates (see Table 10).
IBRD has a master derivatives agreement with the International Finance Facility for Immunisation (IFFIm), underwhich several transactions have been executed. IBRD has the right to call for collateral above an agreed specified
threshold. As of September 30, 2021, IBRD had not exercised this right, but may do so under the existing terms of theagreement. Rather than calling for collateral, IBRD and IFFIm have agreed to manage IBRD’s exposure by applying
a risk management buffer to the gearing ratio limit. The gearing ratio limit represents the maximum amount of IFFIm’s
net financial obligations less cash and liquid assets, as a percentage of the net present value of its financial assets.
Table 10: Non-Commercial Counterparty Credit Risk
In millions of U.S. dollars
Exposures as of September 30, 2021
Non-Commercial
Counterparty
Borrowing Member
Countries

Instrument
used

Purpose of derivative transaction

Derivatives

Assist borrowing member countries with managing risks $ 10,706

Affiliated Organization

Derivatives

Intermediation on behalf of IDA

Non-Affiliated
Organization

Derivatives

Assist IFFIm with managing risks

Notional

Net Exposure
$

764

3

3,415
$ 14,885

1,153

234
$

IBRD Management’s Discussion and Analysis: September 30, 2021

1,390

19

Management’s Discussion and Analysis

Section IV: Risk Management

Effect of Changes in Credit Spreads
The sensitivity of IBRD’s portfolios to changes in credit spreads is shown in the table below, where the amountrepresents the dollar change in fair value which corresponds to a one basis point parallel upward shift in credit spreads.
Table 11: Effect of Credit on IBRD’s Portfolios
In millions of U.S. dollars
As of September 30, 2021
Borrowing portfolio
Loan portfolio b
Other ALM portfolio
Investment portfolio
Total gains

Credit Effect on Portfolio$$

Sensitivity a
108
(2)
(*)
(2)
104

a. Excludes Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA) on derivatives.
b. If loans were measured at fair value.
* Sensitivity is marginal.

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

Interest Rate Risk
Under its current interest rate risk management strategy, IBRD seeks to match the interest rate sensitivity of its assets(loan and investment trading portfolios) with those of its liabilities (borrowing portfolio) by using derivatives, such as
interest rate swaps. These derivatives effectively convert IBRD’s financial assets and liabilities into variable-rate
instruments. After considering the effects of these derivatives, virtually the entire loan and borrowing portfolios arecarried at variable interest rates. The sensitivity of these portfolios to interest rate movements, after the effect ofderivatives, is shown in the table below where the amount represents the dollar change in fair value which corresponds
to a one basis point parallel upward shift in interest rates.
Table 12: Effect of Interest Rates on IBRD’s Portfolios
In millions of U.S. dollars
As of September 30, 2021

Interest Rate Effect on Portfolio

Borrowing portfolio
Loan portfolio b
Other ALM portfolio
Investment portfolio$

Total losses$

Sensitivity a
6
(4)
(16)
(1)
(15)

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

20

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section IV: Risk Management

Figure 10 illustrates how the use of derivatives affects the overall sensitivity of the borrowing, loan, Other ALM andinvestment portfolios. It illustrates the extent to which each portfolio is economically hedged. For example, for the
borrowing portfolio a one basis point upward parallel shift in interest rates would result in $108 million of unrealized
mark-to-market gains on bonds which would be offset by $102 million of unrealized mark-to-market losses on swaps.
Loan sensitivities are illustrative as loans are carried at amortized cost on the Balance Sheet.
Figure 10: Sensitivity to Interest Rates as of September 30, 2021
(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
Loan Portfolio
Other ALM Portfolio
Swaps Bonds
-102

108

-120 -80 -40 0

40 80 120

Net Sensitivity = $6 million

Swaps

Loans Swaps-38-60 -40 -20

020

Investments

-16

34

40

60

Net Sensitivity = $(4) million

0-60 -40 -20

Investment Portfolio-1

0

20 40 60

Net Sensitivity= $(16) million-60 -40 -20

0

20

40

60

Net Sensitivity = $(1) million

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

Low Interest Rate Environment
Loans to borrowing countries
Under IBRD’s loan agreements, if an interest rate formula yields a negative rate, the interest rate charged is zero.
Liquid Asset Portfolio
IBRD’s existing guidelines allow for the investment in a wide variety of credit products in both developed andemerging market economies (see investment eligibility criteria in IBRD’s MD&A as of June 30, 2021). Low andnegative fixed interest rates present a challenge for the investment of the liquid asset portfolio. However, even markets
with negative rates can provide positive spread returns once the investment is swapped back into a U.S. dollar floatingbasis. In the first three months of FY22, despite the low interest rate environment, IBRD was able to generate a positive
spread, 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 portfolio’s 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 relative to what was computed in the fixed-spread. IBRD does not match the maturity of its funding
with that of its fixed spread loans as this would result in significantly higher financing costs for all loans. Instead,
IBRD targets a shorter average funding maturity and manages the refinancing risk through two technical componentsof the fixed-spread loan pricing, both of which can be changed at Management’s discretion:•

Projected funding cost: Management’s best estimate of average funding costs over the life of the loan•

Risk premium: A charge for the risk that actual funding costs are higher than projected Liquid Asset Portfolio
Spread Exposure.

IBRD Management’s Discussion and Analysis: September 30, 2021

21

Management’s Discussion and Analysis

Section IV: Risk Management

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

Alternative Reference Rates
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. In March 2021, the FCA confirmed that
all the LIBOR settings will either cease to be provided by any administrator, or no longer be representative, as follows:
Type of LIBOR
GBP LIBOR
EUR LIBOR
CHF LIBOR
JPY LIBOR
USD LIBOR
USD LIBOR

Setting
All settings
1-week, 2-monthRemaining settings, including 6-month

Date of cessation

December 31, 2021

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 July 2021, the Commodity Futures Trading
Commission’s Market Risk Advisory Committee (MRAC) adopted a market best practice known as SOFR First, afour phased plan to switch derivative trading conventions from LIBOR to SOFR for USD derivative instruments. Alsoin July 2021, the Alternative Reference Rates Committee (ARRC) formally recommended CME Group’s forwardlooking term rate for SOFR, for use in markets where transitioning from LIBOR to an overnight rate has been difficult.
The forward-looking term rate for SOFR is based on transactions in the SOFR derivatives markets. The ARRC
recommended these rates for legacy loans and bond instruments but not for the vast majority of derivative instruments.
For its derivative portfolios, IBRD has adhered to the International Swaps and Derivatives Association (ISDA) 2020
IBOR Fallbacks Protocol (IBOR Protocol).
In consideration of the regulatory guidance and in preparation for the global markets’ transition away from LIBOR,IBRD has taken important steps to facilitate a smooth and orderly transition of its financial instruments effected byalternative reference rates.
The value of IBRD’s investments, borrowings, and derivative instruments are tied to LIBOR, and the trading market
for LIBOR-based securities could be impacted upon its discontinuance or if it is limited. IBRD previously completed
an 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 this transition from multiple
perspectives: lending, funding, accounting, operations, information technology, liquidity investing, risk and legal,
considering the portfolio of existing loans and other instruments that use LIBOR as a benchmark.
In FY20, the Board endorsed an omnibus amendment process with borrowers for certain existing loan agreements toaddress inadequate fallback provisions for LIBOR replacement, allowing IBRD to maintain and preserve the preexisting relationship between its funding costs and lending rates and maintain the principles of fairness andequivalence for any replaced reference rate. The contract amendments will enable similar treatment to all loans bybringing the fallback provisions related to changes in the reference rate in the General Conditions into conformity
with the revised General Conditions of December 2018. The new language permits IBRD to transition the interest rate
to alternative reference rates when it is appropriate to do so. The majority of IBRD loans were denominated in USD,
EUR, GBP and JPY as of September 30, 2021. IBRD has decided to adopt the following alternative reference rates:
Secured Overnight Financing Rate (SOFR) for USD denominated loans, Euro Interbank Offer Rate (EURIBOR) for
EUR denominated loans, Sterling Overnight Index Average (SONIA) for GBP denominated loans and Tokyo
Overnight Average Rate (TONA) for JPY denominated loans. IBRD has made significant progress and secured
counter-signature of the omnibus amendments from the majority of its borrowers.

22

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section IV: Risk Management

Effective from April 1, 2021, the Board approved a suspension of the offering of loans on fixed spread terms, as wellas suspension of a related conversion feature from the variable spread terms to fixed spread terms. An existing feature
to permit fixing of the reference rate in loans with variable spread 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. Thistransition plan was based on careful consideration of the regulatory guidance, relevant provisions in IBRD’s General
Conditions and loan agreements, asset liability management needs, as well as borrower implications, and took into
account the different characteristics of the new market reference rates and LIBOR, and the implications of a staggered
LIBOR cessation timetable. IBRD has notified the minority of borrowers who did not sign the omnibus amendmentsof the reference rate replacement timeline for their existing loans on an absence of objection basis and is also in theprocess of notifying other borrowers of the reference rate replacement in their existing loans. IBRD will continue towork with key stakeholders, including internal subject matter experts, senior management, borrowers, industry groups
and other market participants, to mitigate potential financial and operational risks to which IBRD is exposed, and toensure an orderly transition to the alternative reference rates. IBRD is managing the transition prudently and in a costeffective manner.

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

Liquidity Risk
Liquidity risk arises in the general funding of IBRD’s activities and in managing its financial position. It includes therisk of IBRD being unable to fund its portfolio of assets at appropriate maturities and rates, and the risk of being
unable to liquidate a position in a timely manner at a reasonable price.
Under IBRD’s liquidity management guidelines, liquid asset holdings are kept at or above a specified Prudential
Minimum to safeguard against cash flow interruptions.
The Target Liquidity Level represents twelve-months’ coverage as calculated at the start of every fiscal year. The
Prudential Minimum is defined as 80% of the Target Liquidity Level. The 150% maximum guideline (150% of Target
Liquidity Level) applies to the portfolio and it continues to function as a guideline rather than a hard ceiling (see Table
13).
Table 13: Liquidity Levels for FY22
Target Liquidity Level

In billions of U.S. dollars
57.0% of Target Liquidity Level

Guideline Maximum Liquidity Level

85.5

150%

Prudential Minimum Liquidity Level

45.6

80%

Liquid Asset Portfolio
as of September 30, 2021

78.0

137%

The FY22 Target Liquidity Level is $11 billion lower than the prior year, due to the lower projected debt service for
FY22.

IBRD Management’s Discussion and Analysis: September 30, 2021

23

Management’s Discussion and Analysis

Section IV: Risk Management

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

24

IBRD Management’s Discussion and Analysis: September 30, 2021

Management’s Discussion and Analysis

Section V: Governance

Section V: Governance
Senior Management Changes
The following changes will be effective January 1, 2022:• Jingdong Hua, Vice President and Treasurer of the World Bank, will retire.
• Jorge Familiar Calderon has been appointed to the role of Vice President and Treasurer of the World Bank.
• Pam O’Connell has been appointed as the Vice President and World Bank Group Controller, succeeding Jorge
Familiar Calderon in that role.

IBRD Management’s Discussion and Analysis: September 30, 2021

25

Management’s Discussion and Analysis

List of Tables, Figures and Box
TablesTable 1: Condensed Statement of Income
Table 2: Condensed Balance Sheet
Table 3: Change Net Loans Outstanding
Table 4: Gross Disbursements by Region
Table 5: Net Commitments by Region
Table 6: Net Other Revenue
Table 7: Net Non-Interest Expenses
Table 8: Equity-to-Loans Ratio
Table 9: Commercial Credit Exposure, Net of Collateral Held, by Counterparty Rating
Table 10: Non-Commercial Counterparty Credit Risk
Table 11: Effect of Credit on IBRD’s Portfolios
Table 12: Effect of Interest Rates on IBRD’s Portfolios
Table 13: Liquidity Levels for FY22

9
9
10
11
11
12
13
17
19
19
20
20
23

FiguresFigure 1: IBRD’s Financial Business Model
Figure 2: Sources and Uses of Revenue
Figure 3: Net Loans Outstanding
Figure 4: Loan Interest Revenue, net
Figure 5: Net Investment Portfolio
Figure 6: Net Investment Revenue
Figure 7: Borrowing Portfolio (original maturities)
Figure 8: Net Non-Interest Expenses
Figure 9: Country Exposures as of September 30, 2021
Figure 10: Sensitivity to Interest Rates as of September 30, 2021

7
8
10
10
12
12
12
13
17
21

Box
Box 1: Selected Financial Data ..................................................................................................................... 2

26

IBRD Management’s Discussion and Analysis: September 30, 2021

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT(IBRD)CONTENTS
September 30, 2021

CONDENSED QUARTERLY FINANCIAL STATEMENTSCONDENSED BALANCE SHEET

28

CONDENSED STATEMENT OF INCOME

30

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

31

CONDENSED STATEMENT OF CHANGES IN RETAINED EARNINGS

31

CONDENSED STATEMENT OF CASH FLOWS

32

NOTES TO CONDENSED QUARTERLY FINANCIAL STATEMENTS

33

INDEPENDENT AUDITOR’S REVIEW REPORT58

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)27

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

September 30, 2021
(Unaudited)

June 30, 2021
(Unaudited)

AssetsDue from banks—Notes C and K
Unrestricted cash$

Restricted cash

1,683

$

2,240

105

107

1,788

2,347

Investments-Trading (including securities transferred under
repurchase or securities lending agreements of $12 million—
September 30, 2021; $24 million—June 30, 2021)—Notes Cand K

82,31487,566

Securities purchased under resale agreements—Notes C and K

294

338

2,687

3,355

292,846

295,005(69,856)(74,441)

222,990

220,564(1,317)(1,270)

(507)

(495)

221,166

218,799

Derivative assets, net—Notes C, E, F and K
Loans outstanding—Notes D, I and K
Total loans
Less undisbursed balance (including signed loan
commitments of $60,794 million — September 30,
2021, and $59,837 million —June 30, 2021)
Loans outstanding
Less:
Accumulated provision for loan losses
Deferred loan income
Net loans outstanding
Other assets—Notes C, D, E and I
Total Assets

28

6,030
$

314,279

4,896$

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

317,301September 30, 2021
(Unaudited)

June 30, 2021
(Unaudited)

Liabilities
Borrowings—Notes E and K$

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

255,530$

260,076

172

62

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

2,061

1,222

Other liabilities—Notes C, D and I

8,320

7,863

266,083

269,223

298,533(279,197)

297,856(278,612)

19,336

19,244

Nonnegotiable, noninterest-bearing demand obligations on
account of subscribed capital

(330)

(332)

Receivable amounts to maintain value of currency holdings

(329)

(343)

Deferred amounts to maintain value of currency holdings

(17)

67

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

31,66531,007

Accumulated other comprehensive loss—Note J(2,129)(1,565)

Total equity

48,19648,078

Total liabilities
EquityCapital stock—Note B
Authorized capital (2,783,873 shares—September 30,
2021, and June 30, 2021)
Subscribed capital (2,474,681 shares—September 30,
2021, and 2,469,065 shares—June 30, 2021)
Less uncalled portion of subscriptions
Paid-in capital

Total liabilities and equity$

314,279$

317,301

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

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)29

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

Three Months Ended September 30,(Unaudited)
2021
2020
Interest revenue
Loans, net—Note D
Other asset/liability management derivatives, net
Investments-Trading, net
Other, net$

Borrowing expenses, net—Note E

484
166
34
2

$

718
126
80
1

(73)

(343)

Interest revenue, net of borrowing expenses

613

582

Provision for losses on loans and other exposures—Note D

(72)

(38)

Non-interest revenue
Revenue from externally funded activities—Note I
Commitment charges—Note D
Other
Total

136
32
10
178

142
29
10
181

Administrative—Notes H and I

(508)

(468)

Other, net—Note H
Total

65
(443)

(9)
(477)

Non-functional currency translation adjustments, net

1611

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

1071

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

356

346

Non-interest expenses

Net income

$

658

$

676

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

30

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Expressed in millions of U.S. dollars

Three Months Ended September 30,(Unaudited)
2021
2020
Net income
Other comprehensive income—Note J

$

658

$

676

Reclassification to net income:Amortization of unrecognized net actuarial losses

13

94

Amortization of unrecognized prior service costs

6

6

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

(369)

(616)

Currency translation adjustments on functional currency

(214)

347

(564)

(169)

Total other comprehensive loss
Comprehensive income

$

94

$

507

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

Three Months Ended September 30,(Unaudited)
2021
2020
Retained earnings at the beginning of the fiscal year$

Cumulative effect of change in accounting principle—Notes A, D
and G
Adjusted retained earnings at the beginning of the fiscal year$$

Net income for the period
Retained earnings at the end of the period

31,00731,007

203
$

658
$

31,66528,76528,968676$

29,644The Notes to Condensed Quarterly Financial Statements are an integral part of these Statements.

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)31

CONDENSED STATEMENT OF CASH FLOWS
Expressed in millions of U.S. dollars

Three Months Ended September 30,(Unaudited)
2021
2020
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 (used in) provided by financing activities
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash used in operating
activities:
Unrealized mark-to-market gains on non-trading portfolios, net
Non-functional currency translation adjustments, net
Depreciation and amortization
Provision for losses on loans and other exposures
Changes in:
Investments portfolio
Other assets and liabilities
Net cash provided by operating activities
Effect of exchange rate changes on unrestricted and restricted cash
Net (decrease) increase in unrestricted and restricted cash
Unrestricted and restricted cash at beginning of the fiscal year
Unrestricted and restricted cash at end of the period
Supplemental disclosure(Decrease) increase in ending balances resulting from exchange rate
fluctuations
Loans outstanding
Investment portfolio
Borrowing portfolio
Capitalized loan origination fees included in total loans
Interest paid on borrowing portfolio

$

$

$

(6,215)
2,431
54
3
4
(30)
(3,753)$(7,427)
2,276
7
3
(26)
(5,167)

9,592(10,853)

15,600(10,334)

7,470(5,950)(1,490)(138)
92
1(1,276)

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

658

676

(356)
(16)
25
72

(346)
(11)
167
38

3,944
196
4,523
(53)
(559)
2,347
1,788

270
(330)
464
56
62
1,870
1,932

(1,323)
(36)
(904)
20
81

$

$

1,796
132
1,414
10
745

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

32

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)NOTES TO CONDENSED QUARTERLY FINANCIAL STATEMENTSNOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING AND RELATED POLICIESBasis of Preparation
These unaudited condensed quarterly financial statements and notes should be read in conjunction with the June 30,
2021, audited financial statements and notes included therein. The condensed comparative information that has been
derived from the June 30, 2021 audited financial statements has not been audited. In the opinion of management, thecondensed quarterly financial statements reflect all adjustments necessary for a fair presentation of IBRD’s financial
position and results of operations in accordance with accounting principles generally accepted in the United States ofAmerica (U.S. GAAP).
Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosureof contingent assets and liabilities at the date of the condensed quarterly financial statements and the reported amounts
of income and expenses during the reporting periods. Due to the inherent uncertainty involved in making thoseestimates, actual results could differ from those estimates. Areas in which significant estimates have been madeinclude, but are not limited to, the provision for losses on loans and other exposures, valuation of certain instruments
carried at fair value, and valuation of pension and other postretirement plan-related liabilities. The results of operations
for the first three months of the current fiscal year are not necessarily indicative of results for the full year.
Certain reclassifications of the prior year’s information have been made to conform with the current year’s
presentation.
Accounting and Reporting Developments
There were no new Accounting Standard Updates (ASUs) implemented, nor new relevant ASUs issued but not yet
implemented as of September 30, 2021.
NOTE B—CAPITAL STOCK
The following table provides a summary of changes in IBRD’s authorized and subscribed shares:
Table B1: IBRD’s shares
As of June 30, 2020
General Capital Increase/Selective Capital Increase (GCI/SCI)
As of June 30, 2021
GCI/SCI
As of September 30, 2021

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

Subscribed shares
2,387,388
81,6772,469,065
5,616
2,474,681

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

As of June 30, 2020
GCI/SCI
As of June 30, 2021
GCI/SCI
As of September 30, 2021

Subscribed capital$
288,0029,854
297,856677$
298,533

Uncalled portionof subscriptions$(269,968)(8,644)(278,612)(585)$(279,197)

Paid-in capital$ 18,034
1,210
19,24492$ 19,336

The uncalled portion of subscriptions is subject to call only when required to meet the obligations incurred by IBRD
as a result of borrowings or loan guarantees.

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)33

On October 1, 2018, IBRD’s Board of Governors approved two resolutions that increased IBRD’s authorized capital.
The total increase in authorized capital was $57.5 billion, of which, $27.8 billion and $29.7 billion relate to the GCI
and SCI, respectively. Under the terms of the 2018 GCI and SCI, paid-in capital is expected to increase by up to $7.5
billion over the subscription period. As of September 30, 2021, the cumulative subscription payments received underthe 2018 capital increases were $2.9 billion.
NOTE C—INVESTMENTS
As of September 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 approximatesfair value. As of September 30, 2021, Investments were primarily comprised of government and agency obligations(53%), and time deposits (43%), with all the instruments classified as Level 1 or Level 2 within the fair value
hierarchy. As of September 30, 2021, the largest holdings of Investments from a single counterparty were Japanese
Government Instruments (12%) and U.S. Treasuries (10%).
A summary of IBRD’s Investments-Trading is as follows:
Table C1: Investments – Trading composition
In millions of U.S. dollars
September 30, 2021
Government and agency obligations
Time deposits
Asset-backed Securities (ABS)
Alternative investments a
Equity securities a
Total Investments - Trading$$

43,27235,148
1,918
1,580
396
82,314

June 30, 2021$$

48,63035,460
1,710
1,352
414
87,566

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).

34

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)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
September 30, 2021
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
Total
Derivative liabilities
Currency swaps and forward contracts
Interest rate swaps
Other
Total
Cash held in investment portfolio b
Receivable from investment securities traded and other assets c
Payable for investment securities purchased d
Net investment portfolio$$

June 30, 2021

82,314294$

87,566338(2,012)(3,333)

648
14
662

485
16
501

(204)
(628)
(2)

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

(834)
1,522
155
(935)
81,166$a. Includes $2,000 million of cash collateral received from counterparties under derivative agreements ($3,308 million—June 30,2021).
b. This amount is included in Unrestricted cash under Due from banks on the Condensed Balance Sheet.
c. This amount is included in Other assets on the Condensed Balance Sheet.
d. This amount includes $197 million of liabilities related to PCRF payable, which is included in Other liabilities on the Condensed
Balance Sheet ($178 million—June 30, 2021), and $98 million of liabilities related to short sales ($98 million—June 30, 2021).

The composition of IBRD’s net investment portfolio is as follows:
Table C3: Net investment portfolio composition
In millions of U.S. dollars
September 30, 2021
Net Investment Portfolio
Liquid asset portfolio
PEBP holdings
PCRF holdings
AMC holdings
LCMD investments
Total

$

$

77,975
2,531
612
10
38
81,166

June 30, 2021$$

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

IBRD uses derivative instruments to manage the associated currency and interest rate risks in the investment portfolio.
For details of 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
elements of credit risk. Credit risk exposure represents the maximum potential loss due to possible non-performanceby obligors and counterparties under the terms of the contracts. For all securities, IBRD limits trading to a list of
authorized dealers and counterparties. In addition, IBRD may require 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 fortransactions with individual counterparties and through the use of mark-to-market collateral arrangements for swap
transactions. IBRD may require collateral in the form of cash or other approved liquid securities from individual
counterparties in order to mitigate its credit exposure.
IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)35

IBRD has entered into master derivative agreements that contain legally enforceable close-out netting provisions.
These agreements may further reduce the gross credit risk exposure related to the swaps. Credit risk with financial
assets subject to a master derivatives arrangement is further reduced under these agreements to the extent thatpayments and receipts with the counterparty are netted at settlement. The reduction in exposure as a result of these
netting provisions can vary due to the impact of changes in market conditions on existing and new transactions. The
extent of the reduction in exposure may therefore change substantially within a short period of time following thebalance sheet date. For more information on netting and offsetting provisions see Note F—Derivative Instruments.
The following is a summary of the collateral received by IBRD for swap transactions:
Table C4: Collateral received
In millions of U.S. dollars
September 30, 2021
Collateral received
Cash
Securities
Total collateral received
Collateral permitted to be repledged
Amount of collateral repledged
Amount of Cash Collateral invested

$
$
$

2,000
755
2,755
2,755
891

June 30, 2021
$
$
$

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

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
and Mortgage-backed securities (MBS). These transactions have been conducted under legally enforceable masternetting arrangements, which allow IBRD to reduce its gross credit exposure related to these transactions. IBRD
presents its securities lending and repurchases, as well as resales, on a gross basis on the Condensed Balance Sheet.
As of September 30, 2021 and June 30, 2021, there were no amounts that could potentially be offset as a result oflegally enforceable master netting arrangements.
Securities lending and repurchase agreements expose IBRD to several risks, including counterparty risk, reinvestment
risk, and risk of a collateral gap (due to increase or decrease in the fair value of collateral pledged). IBRD has
procedures in place to ensure that trading activity and balances under these agreements are below predefinedcounterparty and maturity limits, and to actively manage net counterparty exposure, after collateral, through daily
mark-to-market. Whenever the collateral pledged by IBRD related to its borrowings under repurchase agreements andsecurities lending agreements declines in value, the transaction is re-priced as appropriate by returning cash orpledging additional collateral.
Transfers of securities by IBRD to counterparties are not accounted for as sales as the accounting criteria for thetreatment as a sale have not been met. Counterparties are permitted to repledge these securities until the repurchasedate.
As of September 30, 2021, liabilities relating to securities transferred under repurchase or securities lending
agreements amounted to $12 million ($25 million — June 30, 2021) and there were no unsettled trades relating torepurchase or securities lending agreements. There were no replacement trades entered into in anticipation of maturing
trades of a similar amount (Nil— June 30, 2021). As of September 30, 2021 and June 30, 2021, the remaining
contractual maturity of these agreements were overnight and continuous. The securities transferred were mainlycomprised 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
these securities. While these transactions are legally considered to be true purchases and sales, the securities received
are not recorded on IBRD’s Condensed Balance Sheet as the accounting criteria for treatment as a sale have not been
met. As of September 30, 2021 and June 30, 2021, there were no unsettled trades pertaining to securities purchased
under resale agreements. For resale agreements, IBRD received securities with a fair value of $293 million ($340
million—June 30, 2021). As of September 30, 2021 and June 30, 2021, none of these securities had been transferred.

36

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)NOTE D—LOANS AND OTHER EXPOSURESIBRD’s loans and other exposures (together, “exposures”) are generally made to, or guaranteed by, member countriesof IBRD. In addition, IBRD may also make loans to the International Finance Corporation (IFC), an affiliatedorganization, without any guarantee. Other exposures include: signed loan commitments (including deferreddrawdown options (DDOs) and irrevocable commitments), exposures to member countries’ derivatives, andguarantees. As of September 30, 2021, all IBRD’s loans were reported at amortized cost.
IBRD uses derivatives to manage the currency risk as well as the interest rate risk between its loans and borrowings.
For details regarding derivatives used in the loan portfolio, see Note F—Derivative Instruments.
IBRD excludes the interest receivable balance from the amortized cost basis and from the related disclosures aspermitted by U.S. GAAP. As of September 30, 2021, accrued interest receivable on loans of $801 million is includedin Other assets in the Condensed Balance Sheet ($668 million—June 30, 2021).
As of September 30, 2021, 0.2% of IBRD’s loans were in nonaccrual status and related to one borrower. The total
accumulated provision for losses on accrual and nonaccrual loans was 0.6% of the total loan portfolio. Based on
IBRD’s internal credit quality indicators, the majority of loans outstanding are in the medium-risk and high-risk
classes.
Credit Quality of Sovereign Exposures
Based on an evaluation of IBRD’s exposures, management has determined that IBRD has one portfolio segment –Sovereign Exposures. IBRD’s loans constitute the majority of the Sovereign Exposures portfolio segment.
IBRD’s country risk ratings are an assessment of its borrowers’ ability and willingness to repay IBRD on time 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 payment 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 in accordance with assigned borrower risk ratings, which relate to the likelihood of loss: Low, Mediumand 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 aregrouped into 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 arereviewed at least once a 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 September 30, 2021, including 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 provide an aging analysis of the loans outstanding:
Table D1: Loan portfolio aging structure
In millions of U.S. dollars
Days past due
Risk Class
Low
MediumHigh
Loans in accrual status
Loans in nonaccrual
statusTotal

Up to 45

46-60

61-90

91-180

$

$

$

$

1
1
-

$

1

8
8
-

$

8

11
11
-

$

11

-

September 30, 2021
Over 180 Total Past Due
$

$

-

-

$

432
$

432

$

20
20

Current$

Total

23,971
94,774
103,793
222,538$

23,971
94,774
103,813
222,558

432

-

432

452

$ 222,538$ 222,990

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)37

Table D1.1
In millions of U.S. dollars
Days past due
Risk Class
Low
MediumHigh
Loans in accrual status
Loans in nonaccrual
statusUp to 45

46-60

61-90

91-180

$

$

$

$

-

-

-

Total

$

-

-

$

-

-

$

-

June 30, 2021
Over 180
Total Past Due
$

-

$

$

432

-

$

432

$

Current

Total-$ 24,229
93,530102,373
220,132$ 24,229
93,530102,373
220,132

432

-

432

432

$ 220,132$ 220,564

The tables below disclose the outstanding balances of IBRD’s loan portfolio, classified by the year the loan agreement
was signed. IBRD considers the signature date of a loan agreement as the best indicator of the decision point in theorigination process, rather than the disbursement date.
Table D2: Loan portfolio vintage disclosure
In millions of U.S. dollars
September 30,2021
CAT DDOs
Disbursed
andRevolving

Fiscal Year of Origination
2022

2021

2020

2019

2018

CAT
DDOs
Converted
to Term
Loans

Loans
outstanding
as of
September
30, 2021$$

Prior Years

Risk
Low

$

MediumHigh
Loans in accrual status
Loans in nonaccrual
status
Total

38

- $

- $

112 $

802 $

262 $

22,795$--23,971

1,140

6,381

6,199

3,231

4,141

71,702463

1,517

94,774

638

5,674

5,993

6,746

6,402

77,384496

480

103,813

1,778

12,05512,304

10,77910,805

171,881

959

1,997

222,558

-

-

-

-

-

432

-

-

432

$ 1,778 $ 12,055 $ 12,304 $ 10,779 $ 10,805 $ 172,313

$

959

$

1,997

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)$

222,990

Table D2.1:
In millions of U.S. dollars
June 30,2021
Fiscal Year of Origination

2021

2020

2019

2018

Prior
Years

2017

CAT
CAT
DDOs
DDOs
Loans
Disburse Converte
outstandingd and
d to Term as of June 30,
Revolving
Loans
2021

Risk
Low

$

- $

109 $

702 $

237 $

1,831 $

21,350 $- $- $24,229Medium

5,477

6,040

3,171

4,074

4,101

68,674726

1,267

93,530

High

4,034

5,701

6,682

6,310

8,438

70,221

504

483

102,373

9,511

11,85010,555

10,621

14,370160,245

1,230

1,750

220,132

-

-

-

-

-

432

-

-

432

1,230 $

1,750 $

Loans in accrual
statusLoans in nonaccrual
statusTotal$ 9,511 $ 11,850 $ 10,555 $ 10,621 $ 14,370 $ 160,677 $

220,564

The amounts of Catastrophe Deferred Drawdown Options (CAT DDOs) converted to term loans during the threemonths ended September 30, 2021, are $250 million ($7 million—three months ended September 30, 2020).
Accumulated Provision for Losses on Loans and Other Exposures
Management determines the appropriate level of accumulated provision for losses, which reflects the expected losses
inherent in IBRD’s exposures. Delays in receiving loan payments result in economic losses to IBRD since it does not
charge additional interest on any overdue interest or loan charges. These economic losses are equal to the difference
between the present value of payments of interest and charges made according to the related loan's contractual terms
and the present value of its expected future cash flows. It is IBRD’s practice not to write off its loans. Historically, allcontractual obligations associated with exposures in nonaccrual status were eventually cleared, thereby allowing
borrowers to emerge from nonaccrual status. To date, no loans have been written off by IBRD.
Management reassesses the adequacy of the accumulated provision on a quarterly basis and adjustments to theaccumulated provision are recorded as a charge to or release of provision in the Statement of Income. In addition,
reasonableness of the inputs used is reassessed at least annually.
The balance of the accumulated provision as of July 1, 2020 was decreased by the $214 million transition adjustment
recorded upon adoption of CECL on July 1, 2020. The transition adjustment corresponds to the difference between
the accumulated provision calculated under the “incurred loss” model and the CECL model.

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)39Changes to the Accumulated provision for losses on loans and other exposures are summarized below:
Table D3: Accumulated provision
In millions of U.S. dollars

Accumulated provision, beginning of the fiscal year
Provision - charge
Translation adjustment
Accumulated provision, end of the period
Composed of accumulated provision for losses on:
Loans in accrual status
Loans in nonaccrual status
Total
Loans, end of the period:
Loans in accrual status
Loans in nonaccrual status
Total loans outstanding

September 30, 2021
Loan commitments
Other a
$ 326
$
51
17
2
(2)
$ 341
$
53

Loans outstanding
$
1,270
53
(6)
$
1,317
$
$

$

$

Total
1,647
72
(8)
1,711

1,101
216
1,317

$ 222,558
432$ 222,990

Table D3.1:
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 loans outstanding

Loans
outstanding$ 1,599
(465)
1,134
123
13
$ 1,270$$

June 30, 2021
Loan
commitments
Other a
Total
$
$ 99
$ 1,698
298
(47)
(214)
298
52
1,484
25
(2)
146
3
1
17
$ 326
$ 51
$ 1,647

1,054
216
1,270

$ 220,132432$ 220,564

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

Accumulated provision for loan
lossesLoan commitments and other exposures
Other liabilities(excluding exposures to member countries’
derivatives)

Provision for losses on loans and otherexposures
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.
As of September 30, 2021, there were no principal or interest amounts on loans in accrual status that were overdue by
more than three months.
Zimbabwe is the only borrowing member with loans or guarantees in nonaccrual status, and it has been in nonaccrual
status since October 2000.

40

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

The following tables provide a summary of selected financial information related to loans in nonaccrual status:
Table D4: Loans in nonaccrual status
In millions of U.S. dollars
September 30, 2021
$
432
216
432
1,051
432
619

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

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

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

Table D4.1
In millions of U.S. dollars
Three Months Ended September 30,
2021
Interest revenue not recognized as a result of loans being in nonaccrual status

$

7

2020
$

7

During the three months ended September 30, 2021 and September 30, 2020, no loans were placed in nonaccrual
status or restored to accrual status.
In addition, during the three months ended September 30, 2021, no interest income was recognized on loans in
nonaccrual status (Nil —three months ended September 30, 2020).
Guarantees
Guarantees of $6,654 million were outstanding as of September 30, 2021 ($6,705 million—June 30, 2021). This
amount represents the maximum potential amount of undiscounted future payments that IBRD could be required tomake under these guarantees and is not included in the Condensed Balance Sheet. These guarantees have original
maturities ranging between 6 and 21 years and expire in decreasing amounts through 2042.
As of September 30, 2021, liabilities related to IBRD's obligations under guarantees included the obligation to standready of $336 million ($347 million—June 30, 2021), and the accumulated provision for guarantee losses of $51
million ($50 million—June 30, 2021). These have been included in Other liabilities on the Condensed Balance Sheet.
During the three months ended September 30, 2021 and September 30, 2020, no guarantees provided by IBRD werecalled.
IBRD participates in Exposure Exchange Agreements (EEA) which are recognized as financial guarantees in thefinancial statements. Information on the location and amounts associated with the EEAs executed with the Multilateral
Investment Guarantee Agency (MIGA), African Development Bank (AfDB) and Inter-American Development Bank(IADB) included in the Condensed Balance Sheet and Condensed Statement of Income is presented in the following
table:
Table D5: Amounts associated with EEAs
In millions of U.S. dollars

Guarantee provided a,cGuarantee received b

Notional
Amount$ 3,638(3,635)$3

September 30, 2021
(Stand ready(Provision)
obligation)
Recoverable
Asset
Asset
$ (185)$ (21)
185
18
$
$ (3)

Notional
Amount$ 3,640(3,640)$-June 30, 2021
(Stand ready(Provision)
Location on
obligation)
Recoverable Condensed
Asset
Asset
Balance Sheet$(190)$ (20)
Other liabilities
190
17
Other assets$$ (3)a. For the three months ended September 30, 2021, Provisions for losses on loans and other exposures, line on the Condensed
Statement of Income includes $1 million charge relating to Guarantee provided (Less than $1 million of provision—three months
ended September 30,2020).
b. For the three months ended September 30, 2021, Non-interest revenue—Other, net, line on the Condensed Statement of Income
includes $1 million of gain in relation to Recoverable asset relating to Guarantee received (less than $1 million of gain in recoverable
asset —three months ended September 30, 2020).
c. Notional amount, obligation to stand ready and provision for the guarantee provided are included in guarantees outstanding of$6,654 million, obligation to stand ready of $336 million and accumulated provision for guarantee losses of $51 million, respectively($6,705 million, $347 million and $50 million, respectively—June 30, 2021).

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)41

Waivers of Loan Charges
IBRD provides waivers on eligible loans, which include a portion of interest on loans, a portion of the commitment
charge on undisbursed balances and a portion of the front-end fee charged on all eligible loans. Waivers are approved
annually by the Executive Directors of IBRD. As part of the COVID-19 Strategic Preparedness and Response
Program, the Executive Directors of IBRD approved the waiver of commitment/standby fees for health-related
COVID-19 operations payable during the first year of each financing and a reduced front-end fee of 25 bps for CAT
DDOs approved under the Fast Track COVID-19 Facility. The Executive Directors also approved the waiver ofcommitment fees for COVID-19 vaccine related projects under the Additional Financing to the COVID-19 Strategic
Preparedness and Response Program (SPRP) for the first 18 months, starting from the date of approval of financing
for each project.
The forgone income resulting from waivers of loan charges is summarized in the following table:
Table D6: Waivers of loan charges
In millions of U.S. dollars

Interest waivers
Commitment charge waivers
Front-end fee waivers
Total

$

$

Three Months Ended September 30,
2021
4
$
1
1
6
$

2020
7
1
1
9

Concentration risk
Loan revenue comprises interest, commitment fees, loan origination fees and prepayment premiums, net of waivers.
For the three months ended September 30, 2021, loan revenue from one country of $82 million represented more than
10% of total loan revenue.
Information about IBRD’s loan revenue and associated loans outstanding by geographic region is presented in thefollowing table:
Table D7: Loan revenue and associated outstanding loan balances
In millions of U.S. dollars
RegionLatin America and the Caribbean
Europe and Central Asia
East Asia and PacificMiddle East and North Africa
South Asia
Eastern and Southern Africa
Western and Central Africa
Total

As of and for the three months ended
September 30, 2021
September 30, 2020
Loan Revenue a
Loans Outstanding
Loan Revenue a
Loans Outstanding$
287$
69,687$338$
64,465
107
47,278142
46,734137
46,710196
45,191
99
31,359117
29,91653
21,06068
19,169
57
5,266
55
4,225
8
1,630
8
1,488
$
748
$
222,990$924$
211,188

a. Does not include interest expenses, net of $230 million from loan related derivatives ($177 million—September 30, 2020).
Includes commitment charges of $32 million ($29 million—September 30, 2020).

42

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)NOTE E—BORROWINGSIBRD issues unsubordinated and unsecured fixed and variable rate debt in a variety of currencies. Variable rates may
be based on, for example, exchange rates or market interest rates.
Borrowings issued by IBRD are reported at fair value. As of September 30, 2021, 98% of the instruments in theportfolio were classified as Level 2 within the fair value hierarchy. In addition, most of these instruments weredenominated in U.S. dollars and euro (60% and 13%, respectively).
IBRD uses derivative contracts, reported at fair value, to manage the currency risk as well as the interest rate risk
between its loans and borrowings. For details regarding the derivatives used, see Note F—Derivative Instruments.
Table E1: Borrowings after derivatives
In millions of U.S. dollars
September 30, 2021$

Borrowings a

255,530

Currency swaps, net(373)

Interest rate swaps, net(2,455)$

252,702

June 30, 2021$

260,076(2,913)(3,507)$

253,656

a. Includes $1,136 million of unsettled borrowings, representing a non-cash financing activity, for which there is a related
receivable included in Other assets on the Condensed Balance Sheet (Nil —June 30, 2021).

For the three months ended September 30, 2021, Borrowing expenses on the Condensed Statement of Income of $73
million ($343 million—three months ended September 30, 2020) include $686 million of interest revenue, net related
to derivatives associated with the Borrowing portfolio ($707 million—three months ended September 30, 2020).
NOTE F—DERIVATIVE INSTRUMENTS
IBRD uses derivative instruments in its investment, loan and borrowing portfolios, and for asset/liability management
purposes. It also offers derivative intermediation services to clients and, concurrently, enters into offsetting
transactions with market counterparties.
The following table summarizes IBRD’s use of derivatives in its various financial portfolios:
Portfolio

Derivative instruments used

Purpose / Risk being managed

Risk management purposes:
Investments

Loans

Currency swaps, currency forward contracts,
interest rate swaps, options, swaptions andfutures contracts, to-be-announced (TBA)
securities
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

Manage currency and interest rate risk in theportfolio

Manage currency risk as well as interest rate risk
between loans and borrowings
Manage currency risk as well as interest rate risk
between loans and borrowings
Manage currency risk and the duration of IBRD’s
equityAssist clients in managing risks

The derivatives in the related tables of Note F are presented on a net basis by instrument. A reconciliation to theCondensed Balance Sheet presentation is shown in table F1.
Offsetting assets and liabilities
IBRD enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements with
substantially all of its derivative counterparties. These legally enforceable master netting agreements give IBRD theright to liquidate securities held as collateral and to offset receivables and payables with the same counterparty, in theevent of default by the counterparty.

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

43

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
included in the Derivative Liabilities columns. The gross columns represent the fair value of the instrument leg that isin an asset or liability position that are then netted with the other leg of the instrument in the gross offset columns. The
effects of the master netting agreements are applied on an aggregate basis to the total derivative asset and liability
positions and are presented net of any cash collateral received on the Condensed 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 to disclose 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

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

September 30, 2021
Derivative Assets
Derivative Liabilities
Gross
Gross Amounts Net Amounts
Gross Gross Amounts Net Amounts
Amounts
OffsetPresented
Amounts
OffsetPresented$
24,387 $(15,160) $9,227$ 27,562 $(19,046) $8,516
94,328(87,340)
6,988
50,875(45,615)
5,260
4
(2)
2
$ 118,715 $(102,500) $ 16,215d$ 78,441 $(64,663) $13,778d
11,688e
1,840
$

2,687

11,717f

$

2,061

704
$

1,983

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 $13 million CVA.
f. Includes $42 million DVA.

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

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

June 30, 2021
Derivative Assets
Derivative Liabilities
Gross
Net
Gross
Gross
Amounts
Amounts
Amounts
Net Amounts
Amounts
OffsetPresented
Gross Amounts
OffsetPresented$
23,893 $ (13,832) $ 10,061 $
26,577 $(18,206) $8,371
98,836(90,147)
8,689
44,173(39,196)
4,977
2
(1)
1
$
122,729 $ (103,979) $ 18,750d $70,752 $(57,403) $13,349d

12,124e
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.

44

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

12,127f$

1,222

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

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

Interest rate swaps
$
14
750
1,161
5,776
1,526
$
9,227

September 30, 2021
Currency swaps (including
currency forward contracts)
$
648
946
671
4,723
$
6,988

Other a
$
$
-

Total
662
1,696
1,832
10,4991,526$ 16,215$

Table F2.1:
In millions of U.S. dollars
June 30, 2021
Currency swaps (including
Portfolio
Interest rate swaps
currency forward contracts)
Other aTotal
Investments
$
16
$
485
$
$
501
Loans
645
782
1,427
Client operations
1,227
648
1,875
Borrowings
6,529
6,774
13,303
Other asset/liability management derivatives
1,644
1,644
Total Exposure$
10,061$
8,689$$ 18,750
a. 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 futurescontracts are interest rate contracts.

The volume of derivative contracts is measured using the U.S. dollar equivalent notional balance. The notional balance
represents the face value, or reference value, on which the calculations of payments on the derivative instruments are
determined. As of September 30, 2021, the notional amounts of IBRD’s derivative contracts outstanding were as
follows: interest rate contracts $451,166 million ($452,450 million—June 30, 2021), currency swaps $138,768 million($136,467 million—June 30, 2021), long positions of other derivatives $189 million ($186 million—June 30, 2021),
and short positions of other derivatives $101 million ($75 million—June 30, 2021).
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 September 30, 2021 was $1,904 million ($1,078 million—June 30, 2021). IBRD has not posted any
collateral with these counterparties due to its triple-A credit rating.
If the credit-risk related contingent features underlying these agreements were triggered to the extent that IBRD would
be required to post collateral as of September 30, 2021, the amount of collateral that would need to be posted would
be $883 million ($209 million—June 30, 2021). Subsequent triggers of contingent features would require posting ofadditional collateral, up to a maximum of $1,904 million ($1,078 million—June 30, 2021). In contrast, IBRD received
collateral totaling $2,755 million as of September 30, 2021 ($4,391 million—June 30, 2021), in relation to swap
transactions (see Note C—Investments).

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

45

The following table provides information on the amount of unrealized mark-to-market gains and losses on the nontrading derivatives and their location on the Condensed Statement of Income:Table F3: Unrealized mark-to-market losses on non-trading derivatives
In millions of U.S. dollars
Reported as:
Interest rate swaps
Currency swaps (including currency forward
contracts and structured swaps)
Total

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

Three Months Ended September 30,
2021
2020
$
(359)
$
(220)
(839)
(1,198)

$

$

(9)
(229)

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

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

Three Months Ended September 30,
2021
2020

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

$
$

(5)
15
10

$
$

39
32
71

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

NOTE G—RETAINED EARNINGS, ALLOCATIONS AND TRANSFERS
IBRD makes net income allocation decisions on the basis of reported net income, adjusted to exclude unrealized markto-market gains and losses on non-trading portfolios, net; restricted income; Board of Governors-approved and othertransfers; non-functional currency translation adjustments; and the allocation to the pension reserve.
On August 5, 2021, IBRD’s Executive Directors approved the following allocations relating to the net income earnedin the fiscal year ended June 30, 2021: an increase in the General Reserve of $874 million and a decrease in the Pension
Reserve by $38 million, as well as 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.
On August 4, 2021, IBRD’s Board of Governors approved a transfer of $20 million from Surplus to the IBRD Fundfor Innovative Global Public Goods Solutions (GPG Fund). The transfer was made on August 12, 2021.
Subsequent event:
On October 14, 2021, IBRD’s Board of Governors approved a transfer to the International Development Association(IDA) of $274 million and a transfer of $100 million to Surplus out of the net income earned in the fiscal year ended
June 30, 2021. The transfer to IDA was made on October 25, 2021.

46

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)Retained earnings comprised the following components:
Table G1: Retained earnings composition
In millions of U.S. dollars
September 30, 2021
293
31,464693
80(2,084)
1,032
41
146
$
31,665Special reserve
General reserve
Pension reserve
Surplus
Cumulative fair value adjustments a
Unallocated net income
Restricted retained earnings
Other reserves b
Total

June 30, 2021
293
30,387731
100(3,303)
2,450
54
295
$
31,007$$a. Unrealized mark-to-market gains or losses, net applicable to non-trading portfolios reported at fair value.
b. Comprised of non-functional currency translation gains/losses and the unutilized portion of the transfer to the GPG Fund.

NOTE H—PENSION AND OTHER POSTRETIREMENT BENEFITSIBRD, IFC and MIGA participate in the defined benefit Staff Retirement Plan (SRP), a Retired Staff Benefits Plan
(RSBP) and the PEBP that cover substantially all of their staff members.
All costs, assets and liabilities associated with these pension plans are allocated between IBRD, IFC and MIGA based
upon their employees’ respective participation in the plans. Costs allocated to IBRD are then shared between IBRD
and IDA based on an agreed cost-sharing methodology.
The following table summarizes the benefit costs associated with the SRP, RSBP, and PEBP for IBRD and IDA:
Table H1: Pension plan benefit costs
In millions of U.S. dollars
Three Months Ended
September 30, 2021
SRP
RSBP
PEBP
$ 166
$
45
$ 28
165
30
16
(322)
(56)
-

Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognizedprior service costsa
Amortization of unrecognized net
actuarial lossesa
Net periodic pension cost
Of which:
IBRD’s share
IDA’s share

1

$
$

10
4
6

$
$

4

1

23

13
$ 58

11
12

$ 28
30

$

Three Months Ended
September 30, 2020
SRP
RSBP
PEBP
$ 160
$
43
$ 28
147
27
14
(242)
(41)
-

Total
239
211
(378)
6

$
$

1

13
91

$

43
48

$

78
144

$

67
77

$

4

1

3
36

13
$ 56

17
19

$ 26
30

$

Total
231
188
(283)
6

$
$

94
236
110
126

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

The components of net periodic pension cost, other than the service cost, are included in the Non-interest expenses —Other, net on the Condensed Statement of Income. The service cost component is included in the Non-interest
expense—Administrative on the Condensed State of Income.
The following table provides the amounts of IBRD’s pension service cost:
Table H2: Pension service cost
In millions of U.S. dollars

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

$
$

SRP
166
79
87

Three Months Ended
September 30, 2021
RSBP
PEBP
$
45
$
28
$
$

21
24

$

14
14

$

Total
239
114
125

$
$

SRP
160
74
86

Three Months Ended
September 30, 2020
RSBP
PEBP
$
43
$
28
$
$

20
23

$

13
15

$

Total
231
107
124

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

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)47

NOTE I—TRANSACTIONS WITH AFFILIATED ORGANIZATIONSIBRD transacts with affiliated organizations by providing loans, administrative and derivative intermediation services,
as well as through its pension and other postretirement benefit plans.
In addition, IBRD provides transfers to IDA out of its net income, upon approval by the Board of Governors (see Note
G—Retained Earnings, Allocations and Transfers).
IBRD had the following receivables from (payables to) its affiliated organizations:
Table I1: IBRD’s receivables and payables with affiliated organizations
In millions of U.S. dollars
IDA
Administrative Services, net $ 185
Derivative Transactions a
Derivative assets, net
27
Derivative liabilities, net(23)
Pension and Other
Postretirement Benefits(601)
Investments$ (412)September 30, 2021
IFC
MIGA
$

19

$

11

Total
$

June 30, 2021
IFC
MIGA

IDA

215

$ 268

$

36

$

13

Total
$

317

-

-

27
(23)

27
(19)

-

-

27
(19)

(657)
(197)
$ (835)(25)(14)(1,283)(197)$ (1,261)(572)$ (296)

(645)
(178)
$ (787)(25)(12)(1,242)(178)$ (1,095)$$

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

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

Administrative services a

Other assets

Derivative transactions

Derivative assets/liabilities – net

Investments

Other liabilities

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

Loans and Other Exposures
IBRD has a Local Currency Loan Facility Agreement with IFC, which is capped at $300 million. As of September
30, 2021 and June 30, 2021, there were no loans outstanding under this facility.
During the fiscal year ended June 30, 2014, IBRD entered into an exposure exchange agreement with MIGA underwhich IBRD and MIGA exchanged selected exposures, with each divesting exposure in countries where their lending
capacities are limited, in return for exposure in countries where they have excess lending capacity. Under theagreement, IBRD and MIGA have each exchanged $120 million of notional exposure as follows: MIGA assumes
IBRD's loan principal and interest exposure in exchange for IBRD's assumption of principal and interest exposure of
MIGA under its Non-Honoring of Sovereign Financial Obligation agreement. As of September 30, 2021, assets related
to IBRD’s right to be indemnified under this agreement amounted to $1 million ($1 million—June 30, 2021), whileliabilities related to IBRD’s obligation under this agreement amounted to $1 million ($1 million—June 30, 2021).
These include an accumulated provision for guarantee losses of less than $1 million as of September 30, 2021 (lessthan $1 million—June 30, 2021).
Administrative Services
Expenses jointly incurred by IBRD and IDA are allocated based on an agreed cost-sharing methodology, and amounts
are settled quarterly. For the three months ended September 30, 2021, IBRD’s administrative expenses are net of theshare of expenses allocated to IDA of $392 million ($455 million—three months ended September 30, 2020).

48

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)Revenue
Revenue jointly earned by IBRD and IDA is allocated based on an agreed revenue-sharing methodology and amounts
are settled quarterly. For the three months ended September 30, 2021, IBRD’s other revenue is net of revenue allocatedto IDA of $47 million ($57 million—three months ended September 30, 2020), respectively, and is included in
Revenue from externally funded activities on the Condensed Statement of Income. This revenue also includes revenue
from contracts with clients, that are not affiliated with IBRD and are as follows:
Table I2: Revenue from contracts with clients
In millions of U.S. dollars

Trust fund fees
Reimbursable advisory services
Asset management services$$
Of which:
IBRD's share
IDA's share$

Three Months Ended September 30,
2021
2020
10
$
17
13
16
8
8
31
$
41
17
14

$

21
20

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

September 30, 2021

June 30, 2021

$

$

80
205

79
196

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

Fees charged to IFC
Fees charged to MIGA$

Three Months Ended September 30,
2021
2020
20
$
19
1
1

Pension and Other Postretirement Benefits
The payable to IDA represents IDA’s net share of prepaid costs for pension and other postretirement benefit plans and
PEBP assets. These will be realized over the life of the plan participants.
The payables to IFC and MIGA represent their respective share of PEBP assets. The PEBP assets are managed by
IBRD and are part of the investment portfolio.
For Pension and Other Postretirement Benefits related disclosure see Note H—Pension and Other Postretirement
Benefits.
Derivative Transactions
These relate to currency forward contracts entered into by IDA with IBRD acting as the intermediary with the market.
Investments
These relate to investments that IBRD has made on behalf of IFC, associated with the PCRF and are included in
Investments-Trading on IBRD’s Condensed Balance Sheet. The corresponding payable to IFC is included in Other
IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)49

liabilities on the IBRD’s Condensed Balance Sheet. As a result, there is no impact on IBRD’s investments net asset
value from these transactions.

NOTE J—ACCUMULATED OTHER COMPREHENSIVE LOSS
Comprehensive income or loss consists of net income and other gains and losses affecting equity that, under U.S.
GAAP, are excluded from net income. Other comprehensive income (loss) comprises currency translation adjustments
on assets and liabilities denominated in euro; DVA on fair value elected liabilities, pension related items, and thecumulative effects of a change in accounting principle related to the implementation of U.S. GAAP requirements.
These items are presented in the Condensed Statement of Comprehensive Income.
The following tables present the changes in Accumulated Other Comprehensive Loss (AOCL) balances:
Table J1: AOCL changes
In millions of U.S. dollars
Three Months Ended September 30, 2021
Amounts
Net
reclassified
Changes
Changes
into net
during thein AOCL
incomeperiodBalance, end of
the period$$

Balance,
beginning of
the fiscal
year
Cumulative Translation Adjustments on
functional currency$
359
DVA on Fair Value option electedliabilities(218)
Unrecognized Net Actuarial (Losses)
Gains on Benefit Plans(1,640)
Unrecognized Prior Service (Costs)
Credits on Benefit Plans
(66)
Other
Total Accumulated Other
Comprehensive Loss
$ (1,565)

$

(214)

$

-

$

(214)

145

(382)

13

(369)

(587)

-

13

13

(1,627)

-

6
-

6
-

(60)
-

(596)

$

32

$

(564)

$

(2,129)

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

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

50

Balance,
beginningof the fiscal
year

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

$

$

$

$

(106)

347

$

-

$

347

241

1,214

(605)

(11)

(616)

598

(6,745)-94

94(6,651)

(89)
-

-

6
-

6
-

(83)
-

(5,726)

$

(258)

$

89

$

(169)

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)$(5,895)NOTE K—OTHER FAIR VALUE DISCLOSURES
Valuation Methods and Assumptions
As of September 30, 2021 and June 30, 2021, IBRD had no assets or liabilities measured at fair value on a nonrecurring basis.
Due from Banks
The carrying amount of unrestricted and restricted currencies is considered a reasonable estimate of the fair value ofthese positions.
Loans
There were no loans carried at fair value as of September 30, 2021 and June 30, 2021. IBRD’s loans and loan
commitments would be classified as Level 3 within the fair value hierarchy.
Summarized below are the techniques applied in determining the fair values of IBRD’s financial instruments.
Investment securities
Investment securities are classified based on management’s intention on the date of purchase, their nature, and IBRD’s
policies governing the level and use of such investments. As of September 30, 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 atface value or NAV, which approximates fair value. Where available, quoted market prices are used to determine thefair value of trading securities. Examples include most government and agency securities, mutual funds, exchangetraded equity securities and ABS securities.
For instruments for which market quotations are not available, fair values are determined using model-based valuation
techniques, whether internally generated or vendor-supplied, that include the standard discounted cash flow method
using 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 areshort term in nature.
Securities purchased under resale agreements, Securities sold under repurchase agreements, and Securities lent under
securities lending agreements
These securities are of a short-term nature and reported at face value, which approximates fair value.
Discount notes and vanilla bonds
Discount notes and vanilla bonds 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.
Where available, quoted market prices are used to determine the fair value of short-term notes.
Structured bonds
Structured bonds issued by IBRD have coupon or repayment terms linked to the level or the performance of interest
rates, foreign exchange rates, equity indices, catastrophic events or commodities. The fair value of the structured bonds
is generally derived using the discounted cash flow method based on estimated future pay-offs determined byapplicable models and computation of embedded optionality such as caps, floors and calls. A wide range of industry
standard models such as one factor Hull-White, LIBOR Market Model and Black-Scholes are used depending on thespecific structure. These models incorporate 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 incorporate significant unobservable inputs such as correlations and long-dated interest rate
volatilities. Generally, the movements in correlations are considered to be independent of movements in long-dated
interest rate volatilities.
Derivative instruments
Derivative contracts include currency forward contracts, TBA securities, swaptions, exchange traded options andfutures contracts, currency swaps and interest rate swaps. Currency swaps and interest rate swaps are either plain
vanilla or structured. Currency forward contracts and plain vanilla currency and interest rate swaps are valued using
the standard discounted cash flow methods using 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
IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)51

to the ones applicable to structured bonds valuation are used. Where applicable, the models also incorporate significant
unobservable inputs such as correlations and long-dated interest rate volatilities.
Valuation adjustments on fair value option elected liabilities
The DVA on fair value option elected liabilities is measured by revaluing each liability to determine the changes infair value of that liability arising from changes in IBRD’s cost of funding relative to LIBOR.
The table below presents IBRD’s estimates of fair value of its financial assets and liabilities along with their respective
carrying amounts:
Table K1: Fair value and carrying amount of financial assets and liabilities
In millions of U.S. dollars

AssetsDue from banks
Investments-Trading (including Securities
purchased under resale agreements)
Net loans outstanding
Derivative assets, net
Miscellaneous assets
Liabilities
Borrowings
Securities sold/lent under repurchaseagreements/securities lending agreements
and payable for cash collateral received
Derivative liabilities, net

September 30, 2021
Carrying Value
Fair Value

June 30, 2021
Carrying Value
Fair Value

$

$

1,788

$

1,788

2,347

$

2,347

82,608221,166
2,687
50

82,608225,973
2,687
50

87,904
218,799
3,355
50

87,904
223,687
3,355
50

255,530

255,530

260,076

260,076

172
2,061

172
2,061

62
1,222

62
1,222

As of September 30, 2021, IBRD’s signed loan commitments were $60.8 billion ($59.8 billion—June 30, 2021) andhad a fair value of $2.6 billion ($2.6 billion—June 30, 2021).

52

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

The following tables present IBRD’s fair value hierarchy for assets and liabilities measured at fair value on arecurring basis. The fair value of alternative investments and certain equities measured using the NAV per share areincluded in the table below but excluded from the fair value hierarchy as a practical expedient.
Table K2: Fair value hierarchy of IBRD’s assets and liabilities
In millions of U.S. dollars
Fair Value Measurements on a Recurring Basis
September 30, 2021
Level 2
Level 3
Total

Level 1
Assets:Investments – Trading
Government and agency obligations
Time deposits
ABS
Alternative investments a
Equity securities
Total Investments – Trading$$

Securities purchased under resale agreements
Derivative Assets
Currency swaps b
Interest rate swaps
Other C

Liabilities:
Borrowings
Securities sold under repurchase agreements andsecurities lent under securities lending agreements d

$

$

18

$

$
Less:
Amounts subject to legally enforceable master netting
agreements e
Cash collateral received
Derivative Assets, net
Miscellaneous assets

22,5901,549
396
24,535-

20,682
33,5991,918
56,199

$

$

276

$

$

6,710
9,008
15,718

-

$

$

-

$

$

278
219
497

43,27235,148
1,918
1,580
396
82,314
294

$

$

6,988
9,227
16,215

$

-

$

50

$

-

$
$

11,688
1,840
2,687
50

$

-

$

250,906

$

4,624

$

255,530

Derivative Liabilities
Currency swaps b
Interest rate swaps
Other C
$

-

12

-

12

2
2

5,030
8,453
13,483

230
63
293

5,260
8,516
2
13,778

$

$

$

Less:
Amounts subject to legally enforceable master netting
agreements f
Derivative Liabilities, net

11,717$

2,061

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)53

a. Investments at NAV related to PEBP holdings, not included in the fair value hierarchy.
b. Includes currency forward contracts and structured swaps.
c. These relate to swaptions, exchange traded options and future contracts and TBA securities.
d. Excludes $2,000 million relating to payable for cash collateral received.
e. Includes $13 million CVA.
f. Includes $42 million DVA.

Table K2.1:
In millions of U.S. dollars
Fair Value Measurements on a Recurring Basis
June 30, 2021
Level 1
Level 2
Level 3
Total
Assets:Investments – Trading
Government and agency obligations
Time deposits
ABS
Alternative investments a
Equity securities
Total Investments – Trading
Securities purchased under resale agreements
Derivative Assets
Currency swaps b
Interest rate swaps
Other C

$

$

$

$
Less:
Amounts subject to legally enforceable master netting
agreements e
Cash collateral received
Derivative Asset, net
Miscellaneous assets
Liabilities:
Borrowings
Securities sold under repurchase agreements andsecurities lent under securities lending agreements f
Derivative Liabilities
Currency swaps b
Interest rate swaps
Other C

21,325839
414
22,578
63

$

-

$

$

$

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

$

8,314
9,820
18,134

$

$

$

-

$

375
241
616

$

$

48,63035,460
1,710
1,352
414
87,566
338

$

8,689
10,061
18,750

$

-

$

50

$

-

$
$

12,124
3,271
3,355
50

$

-

$

255,482

$

4,594

$

260,076

$

-

25

-

25

1
1

4,756
8,309
13,065

221
62
$

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

$

$

283

Less:
Amounts subject to legally enforceable master netting
agreements f
Derivative Liabilities, net
a. Investments at NAV related to PEBP holdings, not included in the fair value hierarchy.
b. Includes currency forward contracts and structured swaps.
c. These relate to swaptions, exchange traded options and future contracts and TBA securities.
d. Excludes $3,308 million relating to payable for cash collateral received.
e. Includes $18 million CVA.
f. Includes $21 million DVA.

IBRD’s Level 3 borrowings primarily relate to structured bonds. The fair value of these bonds is estimated using
discounted cash flow valuation models that incorporate model parameters, observable market inputs, and unobservable
inputs. The significant unobservable inputs used in the fair value measurement of structured bonds and swaps arecorrelations and long-dated market interest rate volatilities. Generally, the movements in correlations are considered
to be independent of the movements in long-dated interest rate volatilities.
Correlation is the statistical measurement of the relationship between two variables. For contracts where the holder
benefits from the convergence of the underlying index prices (e.g., market interest rates and foreign exchange rates),
an increase in correlation would generally result in an increase in the fair value of the instrument. The magnitude anddirection of the fair value adjustment would depend on whether the holder is short or long the option.
Interest rate volatility is the extent to which the level of interest rates changes over time. For purchased options, anincrease in volatility would generally result in an increase in the fair value. In general, the volatility used to price theoption depends on the maturity of the underlying instrument and the option strike price. During the three months ended
September 30, 2021, and the fiscal year ended June 30, 2021, the interest rate volatilities for certain currencies wereextrapolated for certain tenors and, thus, are considered an unobservable input.
In certain instances, particularly for instruments with coupon or repayment terms linked to catastrophic events,
management relies on instrument valuations supplied by external pricing vendors.

54

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

The following table provides a summary of the valuation technique applied in determining fair values of these Level
3 instruments and quantitative information regarding the significant unobservable inputs used. Level 3 instruments
represent 1.8% of IBRD’s borrowings.
Table K3: Level 3 Borrowings and derivatives valuation technique and quantitative information regarding
the significant unobservable inputs:
In millions of U.S. dollars
Fair Value at
September 30,
2021

Fair Value atJune 30,
2021

Valuation
Technique

Borrowings$4,624$4,594

Discounted
Cash Flow

Derivative
liabilities

$ 204

$ 333

Discounted
Cash Flow

Range(average),
September
30, 2021-12% to 95%(12%)
51% to 54%(53%)-12% to 95%(12%)
51% to 54%(53%)

Unobservable
input
Correlations
Interest rate
volatilities
Correlations
Interest rate
volatilities

Range(average),
June 30,2021-14% to 92%(13%)
52% to 54%(53%)-14% to 92%(13%)
52% to 54%(53%)

The table below provides the details of all inter-level transfers. Transfers between Level 2 and Level 3 are due tochanges in observable inputs.
Table K4: Borrowings and derivatives inter level transfers
In millions of U.S. dollars
Three Months Ended September 30, 2021
Level 2
Level 3Three Months Ended September 30, 2020
Level 2
Level 3

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

$

-

$

-

$

21
21

$

(21)
(21)

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

$

-

$

-

$

-

$

-

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

$

$

(2)
(2)
(2)

$

$

-

$

Total Derivative Transfers, net

-

2
2
2

$

$

$

The following tables provide a summary of changes in the fair value of IBRD’s Level 3 borrowings and derivatives:
Table K5: Borrowings Level 3 changes
In millions of U.S. dollars

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

Three Months Ended September 30,
2021
2020
4,594
$
5,347
185
34
(33)
(266)
(76)
(46)
4,624

$

119
53
(21)
5,266

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)55

Table K6: Derivatives Level 3 changes
In millions of U.S. dollars

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

Three Months Ended September 30, 2021
Derivatives, Assets/(Liabilities)
Currency
Interest Rate
Swaps
Swaps
Total
$
154
$ 179
$ 333
(15)
(15)
8
(1)
7

$

(72)
(42)
48

(6)
(1)
$ 156

(78)
(43)
$ 204

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

$

39
15
2
(101)

65
2
40

$

104
17
2
$ (61)

Information on the unrealized gains or losses included in the Condensed Statement of Income and Condensed
Statement of Comprehensive Income relating to IBRD’s Level 3 borrowings and derivatives that are still held at thereporting dates, is presented in the following table:
Table K7: Unrealized gains or losses relating to IBRD’s Level 3 borrowings and derivatives
In millions of U.S. dollars
Three Months Ended September 30,
2021
2020
Reported as follows:
Borrowings
Net income (loss) a
Other comprehensive income (loss) b
Derivatives
Net income (loss) a
Other comprehensive income (loss) c

$

(34)
46

$

(85)
(53)

$

42
(43)

$

92
17

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

Table K8: Borrowings fair value and contractual principal balance
In millions of U.S. dollars
September 30, 2021
June 30, 2021$$

Fair Value
255,530
260,076

Principal Amount Due Upon Maturity$
257,072$
260,277$$

Difference(1,542)(201)

The following table provides information on the changes in fair value due to the change in IBRD’s own credit risk forfinancial liabilities measured under the fair value option, included in the Condensed Statement of Other
Comprehensive Income:Table K9: Changes in fair value due to IBRD’s own credit risk
In millions of U.S. dollars
Unrealized mark-to-market (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

56

Three Months Ended September 30,
2021
2020
$
(382)
$
(605)
13
(11)
$
(369)
$
(616)

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)

The following table provides information on the cumulative changes in fair value due to the change in IBRD’s owncredit risk for financial liabilities measured under the fair value option, as well as where those amounts are includedin the Condensed Balance Sheet:
Table K10: Cumulative changes in fair value due to the change in IBRD’s own-credit risk
In millions of U.S. dollars
DVA on fair value option elected liabilities
Reported as follows:
Accumulated other comprehensive loss

September 30, 2021

June 30, 2021

$

$

(587)

(218)

Table K11: Unrealized mark-to-market gains or losses on investments-trading, and non-trading portfolios, net
In millions of U.S. dollars
Three Months Ended
September 30, 2021
Realized
gains(losses)
Investments-Trading$ 201
Non-trading portfolios, net
Loan derivatives—Note F
2Other assets/liabilities
management
derivatives, net
Borrowings, including
derivatives—Notes E and F
Client operations
derivatives
Total
$ 2

Three Months Ended
September 30, 2020

Unrealized
gains (losses)
excludingrealizedamounts a

Unrealized
gains (losses)

Realized
gains(losses)

Unrealized
gains (losses)
excludingrealizedamounts a

Unrealized
gains(losses)$$10$ (577)

$

648

$ 71

407

409

-

304

304

(262)

(262)

-

(136)

(136)

211
(2)

211 b
(2)

-

176
2

176 b
2

354

$ 356

346

$ 346

$

(191)

$

-

$

a. Adjusted to exclude amounts reclassified to realized gains (losses).
b. Includes $1,343 million of unrealized mark-to-market losses related to derivatives associated with borrowings (unrealized
mark-to-market losses of $399 million —three months ended September 30, 2020).

NOTE L—CONTINGENCIESIn light of the COVID-19 pandemic, IBRD may be exposed to additional credit, market and operational risks. The
duration of the COVID-19 pandemic remains difficult to predict at this time, as are the extent and efficacy of economic
interventions by governments and central banks. The length and severity of the pandemic and the related
developments, as well as the impact on the financial results and position of IBRD in future periods cannot bereasonably estimated at this point in time and continue to evolve. IBRD continues to monitor the developments andto manage the risks associated with its various portfolios within existing financial policies and limits.
From time to time, IBRD may be named as a defendant or co-defendant in legal actions on different grounds in various
jurisdictions. The outcome of any existing legal action, in which IBRD has been named as a defendant or codefendant,
as of and for the three months ended September 30, 2021, is not expected to have a material adverse effect on IBRD's
financial position, results of operations or cash flows.

IBRD Condensed Quarterly Financial Statements: September 30, 2021 (Unaudited)57

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

INDEPENDENT AUDITOR’S REVIEW REPORT
President and Board of Executive Directors
International Bank for Reconstruction and Development:
Results of Review of Interim Financial Information
We have reviewed the accompanying condensed balance sheet of the International Bank for Reconstruction and Development(“IBRD”) as of September 30, 2021, and the related condensed statements of income, comprehensive income, changes in retained
earnings, and cash flows for the three-month periods ended September 30, 2021 and 2020, and the related notes (collectively
referred to as the “interim financial information”).
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial
information for it to be in accordance with accounting principles generally accepted in the United States of America.
Basis for Review Results
We conducted our reviews in accordance with auditing standards generally accepted in the United States of America (GAAS)
applicable to reviews of interim financial information. A review of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial
information is substantially less in scope than an audit conducted in accordance with GAAS, the objective of which is an expressionof an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required
to be independent of IBRD and to meet our other ethical responsibilities in accordance with the relevant ethical requirements
relating to our review. We believe that the results of the review procedures provide a reasonable basis for our conclusion.
Responsibilities of Management for the Interim Financial Information
Management is responsible for the preparation and fair presentation of the interim financial information in accordance withaccounting principles generally accepted in the United States of America and for the design, implementation, and maintenance ofinternal control relevant to the preparation and fair presentation of interim financial information that is free from material
misstatement, whether due to fraud or error.
Report on Condensed Balance Sheet as of June 30, 2021
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the balance
sheet of IBRD as of June 30, 2021, and the related statements of income, comprehensive income, changes in retained earnings,
and cash flows for the year then ended (not presented herein); and we expressed an unmodified audit opinion on those audited
financial statements in our report dated August 6, 2021. In our opinion, the accompanying condensed balance sheet of IBRD as ofJune 30, 2021, is consistent, in all material respects, with the audited financial statements from which it has been derived.

November 12, 2021

58