International Bank for Reconstruction and

Development
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International Bank for

Reconstruction and Development

IBRD logo

Formation 1944; 77 years ago

Type Development finance institution

Legal status Treaty

Purpose Development assistance, poverty

reduction

Headquarters Washington, D.C., U.S.

 Membership 189 countries

President of the World Bank David Malpass

Parent organization World Bank Group

Website worldbank.org/ibrd

The International Bank for Reconstruction and Development (IBRD) is

an international financial institution, established in 1944 and headquartered
in Washington, D.C., United States, that is the lending arm of World Bank Group. The
IBRD offers loans to middle-income developing countries. The IBRD is the first of five
member institutions that compose the World Bank Group. The initial mission of the
IBRD in 1944, was to finance the reconstruction of European nations devastated by
World War II. The IBRD and its concessional lending arm, the International
Development Association (IDA), are collectively known as the World Bank as they share
the same leadership and staff.[1][2][3]
Following the reconstruction of Europe, the Bank's mandate expanded to advancing
worldwide economic development and eradicating poverty. The IBRD provides
commercial-grade or concessional financing to sovereign states to fund projects that
seek to improve transportation and infrastructure, education, domestic
policy, environmental consciousness, energy investments, healthcare, access to food
and potable water, and access to improved sanitation.
The IBRD is owned and governed by its 189 member states, with each country
represented on the Board of Governors. The IBRD has its own executive leadership and
staff which conduct its normal business operations. The Bank's member governments
are shareholders which contribute and have the right to vote on its matters. In addition
to contributions from its member nations, the IBRD acquires most of its capital by
borrowing on international capital markets through bond issues at a preferred rate
because of its AAA credit rating.
In 2011, it raised US$29 billion in capital from bond issues made in 26 different
currencies. The Bank offers a number of financial services and products, including
flexible loans, grants, risk guarantees, financial derivatives, and catastrophic risk
financing. It reported lending commitments of $26.7 billion made to 132 projects in
2011.

Contents

 1Governance
 2Background
 3Financial model
 4Services
 5See also
 6References
 7External links

Governance[edit]
There are five "closely associated institutions" that each have a "distinct role" [4] and
together form the World Bank—the IBRD, the International Development
Association (IDA), the International Finance Corporation (IFC), that "invests in private
firms and promotes entrepreneurship",[5] the Multilateral Investment Guarantee
Agency (MIGA), that guarantees loans, and the International Centre for Settlement of
Investment Disputes (ICSID). Their mission is to "fight poverty and improve living
standards for people in the developing world." [4] By 2018, the World Bank Group was
"one of the world's largest sources of funding and knowledge for developing
countries."[4] Of the five institutions, the IBRD and the IDA are the World Bank's two
largest units.[5] When a country reaches a GDP per person over US$1,145, they are no
longer eligible for IDA financial support. For example, of the BRIC countries, China was
no longer eligible in 1999 and by 2014, neither was India. [5]
The IBRD is governed by the World Bank's Board of Governors which meets annually
and consists of one governor per member country (most often the country's finance
minister or treasury secretary). The Board of Governors delegates most of its authority
over daily matters such as lending and operations to the Board of Directors. The Board
of Directors consists of 25 executive directors[6] and is chaired by the President of the
World Bank Group. The executive directors collectively represent all 189 member states
of the World Bank. The president oversees the IBRD's overall direction and daily
operations.[1][7]
The Bank and IDA operate with a staff of approximately 10,000 employees. [8]
On 9 April 2019, United States President Donald Trump nominated David Malpass as
the World Bank Group's President.[5][9] Malpass had served as one of President Trump's
economic advisers and as a senior official in the United States Treasury Department.
[5]
 The IBRD member nations did not sponsor a "rival candidate" and Malpass became
President, in spite of the fact that he is critical of the role of the IBRD. [5]

Background[edit]
The International Bank for Reconstruction and Development (IBRD) and International
Monetary Fund (IMF) were established by delegates at the Bretton Woods
Conference in 1944 and became operational in 1946. [10] According to a March
2012 Washington Post article, IBRD was the "original 'world bank'".[11]
IBRD field offices were opened in Paris, France, Copenhagen, Denmark, and Prague in
the former Czechoslovakia.[12]
The IBRD was established with the original mission of financing the reconstruction
efforts of war-torn European nations following World War II, [5] with goals shared by the
later Marshall Plan. The Bank issued its inaugural loan of $250 million ($2.6 billion in
2012 dollars[13]) to France in 1947 to finance infrastructure projects.
In 1946, a few months after in became operational, Chile sought financial help from the
IBRD—the first of the developing countries to do so. [5]
Throughout the remainder of the 1940s and 1950s, the Bank financed projects seeking
to dam rivers, generate electricity, and improve access to water and sanitation. It also
invested in France, Belgium, and Luxembourg's steel industry. Following the
reconstruction of Europe, the Bank's mandate has transitioned to eradicating poverty
around the world.
In 1960, the International Development Association (IDA) was established to serve as
the Bank's concessional lending arm and provide low and no-cost finance and grants to
the poorest of the developing countries as measured by gross national income per
capita.[2]
At the time of its creation, the IBRD was the only Multilateral Development Bank. During
the period of decolonization—the mid‐1950s to the mid‐1970s—a number of MDB's
were created—the International Finance Corporation, the International Development
Association. They were both WBG members.[14] During this period other MDBs that were
similar to the IBRD in their governance and operations, were established by countries
that were not member nations of the WBG. This included the Inter‐American
Development Bank (IDB), the African Development Bank (AfDB), the Asian
Development Bank (ADB), the Andean Development Corporation (CAF), and
the Islamic Development Bank (IsDB). Both the CAF and IsDB are "primarily owned and
controlled by borrower countries."[14]
In the early 1990s, European nations established the European Bank of Reconstruction
and Development (EBRD) and expanded European Investment Bank, to foster
European integration and to assist post‐communist countries to transform their
economies to become more market‐oriented.[14]
By 2012, according to The Post, IBRD was using "its AAA credit rating to sell bonds at
interest rates close to those of U.S. Treasury bonds." It loaned money to developing
nations, such as China and Brazil.[11]
According to the Global Policy, journal, While the IBRD and the IDA historically
prioritized funding infrastructure projects, since the 1990s, the Bank has directed less
lending to infrastructure projects in favor of other development projects such as
fighting climate change, eradicating poverty and ensuring good governance. [14]

Financial model[edit]
The IBRD finances its activities from the shares its members hold, as well as borrowing
on international capital markets by issuing World Bank bonds. The Bank raised
US$54.0 billion worth of capital in fiscal 2019 from bonds issued in 27
different currencies.[15]
Since 1959, the IBRD, which is backed by world governments [5] has had a triple-A credit
rating, which allows it to borrow capital at lower rates.[16]
According to a 2015 article, commissioned by the Intergovernmental Group of Twenty-
Four on International Monetary Affairs and Development—also known as the Group of
24 (G-24)—multilateral development banks (MDBs)—such as the IBRD—"represent
one of the most successful types of international organization created in the post-World
War II era." By October 2015, although the WBG—with its lending arms—was the only
"global institution,[14]:1 there were more than twenty operational 20 MDBs in the world. [17] In
2016, the Asian Infrastructure Investment Bank and BRICs New Development
Bank began operations.[17] Like other multilateral development banks, (MDBs), the IBRD
has a preferred credit treatment (PCT), through which borrowers grant the MDBs a
"privileged position to be first in line for repayment, should a country face financial
restrictions."[17]:5
The bank also generates income from the return on its equity and from the small
margins on the loans. As the IBRD does not seek profit, it transfers part of its excess
income to the IDA ($259 million in fiscal 2019). [15]
In 2011, the IBRD loaned about US$26 billion, which represented just a "fraction of the
$72 billion the IMF approved as a credit line to a single nation, Mexico." [11] In the early
2010s, the total of "capital investments in emerging markets from all sources have
topped $1 trillion annually".[11] According to the Institute of International Finance, in 2011,
the "combined net investment of the World Bank and other international development
banks and agencies" was about $20 billion in 2011. [11]
According to a 2019 The Economist article, the IBRD is "more controversial" than the
International Development Association (IDA) lending arm. With its AAA credit rating, the
IBRD can "borrow money cheaply on the international financial markets". [5] Middle-
income countries, like Brazil and China that currently borrow from the IBRD, could
"borrow in abundance from foreign investors" on their own. [5]

Services[edit]

IBRD loans and IDA credits in 2005

The IBRD provides financial services as well as strategic coordination and information
services to its borrowing member countries.[18] The Bank only finances sovereign
governments directly, or projects backed by sovereign governments. [19] The World Bank
Treasury is the division of the IBRD that manages the Bank's debt portfolio of over $100
billion and financial derivatives transactions of $20 billion.[20]
The Bank offers flexible loans with maturities as long as 30 years and custom-tailored
repayment scheduling. The IBRD also offers loans in local currencies. Through a joint
 effort between the IBRD and the International Finance Corporation, the Bank offers
financing to subnational entities either with or without sovereign guarantees. For
borrowers needing quick financing for an unexpected change, the IBRD operates a
Deferred Drawdown Option which serves as a line of credit with features similar to the
Bank's flexible loan program.[21] Among the World Bank Group's credit enhancement and
guarantee products, the IBRD offers policy-based guarantees to cover
countries' sovereign default risk, partial credit guarantees to cover the credit risk of a
sovereign government or subnational entity, and partial risk guarantees to private
projects to cover a government's failure to meet its contractual obligations. The IBRD's
Enclave Partial Risk Guarantee to cover private projects in member countries of the IDA
against sovereign governments' failures to fulfill contractual obligations. [22] The Bank
provides an array of financial risk management products including foreign exchange
swaps, currency conversions, interest rate swaps, interest rate caps and floors,
and commodity swaps.[23] To help borrowers protect against catastrophes and other
special risks, the bank offers a Catastrophe Deferred Drawdown Option to provide
financing after a natural disaster or declared state of emergency. It also issues
catastrophe bonds which transfer catastrophic risks from borrowers to investors. [24] The
IBRD reported $23.2 billion in lending commitments for 100 projects in fiscal year 2019.
[15]
 The top 10 borrowers were India, Indonesia, Jordan, Egypt, Argentina, China,
Morocco, Turkey, Ukraine and Colombia. The most supported sector was Public
Administration.

See also[edit]

 Banks portal

 Bretton Woods system

Coordinates:  38.8990°N 77.0425°W

References[edit]
1. ^ Jump up to:a b Ottenhoff, Jenny (2011).  World Bank (Report). Center for Global Development.
Retrieved 5 June 2012.
2. ^ Jump up to:a b World Bank. "History". World Bank Group. Archived from the original  on 19 May
2016. Retrieved  17 July 2012.
3. ^ International Bank for Reconstruction and Development.  "Background". World Bank Group.
Archived from  the original on 16 August 2010. Retrieved  17 July 2012.
4. ^ Jump up to:a b c "OECD, UN Environment and World Bank call for a radical shift in financing for a
low-carbon, climate-resilient future". OECD. 28 November 2018. Retrieved  24 February  2020.
5. ^ Jump up to:a b c d e f g h i j k "How does the World Bank work?". The Economist. 9 April
2019.  ISSN  0013-0613. Retrieved 24 February 2020.
6. ^ "IBRD Governors"  (PDF), World Bank, 21 February 2020, retrieved 24 February 2020
7. ^ International Bank for Reconstruction and Development.  "Leadership". World Bank Group.
Retrieved 17 July  2012.
8. ^ "World Bank (IBRD & IDA) Structure". Bank Information Center. Archived from  the
original on 8 February 2012. Retrieved 1 July  2012.
9. ^ "David Malpass profile on the world bank web page". Retrieved  14 October 2019.
10. ^ Proceedings and Documents of the United Nations Monetary and Financial Conference.
United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1–22,
1944. Washington, D.C.: U.S. Department of State. 1948. Retrieved 17 July  2012.
11. ^ Jump up to:a b c d e Schneider, Howard (19 March 2012).  "In a globalized world, what role for the
World Bank?".  Washington Post.  ISSN  0190-8286. Retrieved 24 February 2020.
12. ^ World Bank. "Interactive Timeline". World Bank Group. Retrieved  21 July 2012.
13. ^ "CPI Inflation Calculator". U.S. Bureau of Labor Statistics. Retrieved 20 June  2012.
14. ^ Jump up to:a b c d e Wang, Hongying (7 February 2017). "New Multilateral Development Banks:
Opportunities and Challenges for Global Governance". Global Policy.  8 (1): 115.  doi:10.1111/1758-
5899.12396.
15. ^ Jump up to:a b c The World Bank Annual Report 2019  (PDF) (Report). World Bank Group.
Retrieved 20 July  2012.
16. ^ International Bank for Reconstruction and Development.  "How IBRD is Financed". World
Bank Group. Retrieved 14 October  2019.
17. ^ Jump up to:a b c Humphrey, Chris (30 October 2015), Are Credit Rating Agencies Limiting the
Operational Capacity of Multilateral Development Banks?  (PDF), retrieved  24 February2020
18. ^ International Bank for Reconstruction and Development.  "Products and Services". World
Bank Group. Archived from  the original on 16 April 2013. Retrieved 17 July  2012.
19. ^ "World Bank (IBRD & IDA) Lending". Bank Information Center. Archived from the
original on 5 November 2011. Retrieved  1 July 2012.
20. ^ International Bank for Reconstruction and Development.  "How IBRD is Financed". World
Bank Group. Retrieved 17 July  2012.
21. ^ International Bank for Reconstruction and Development.  "Financing". World Bank Group.
Retrieved 17 July  2012.
22. ^ World Bank (2012). World Bank Group Guarantee Products  (PDF)  (Report). World Bank
Group. Retrieved 22 July  2012.
23. ^ International Bank for Reconstruction and Development.  "Hedging Products". World Bank
Group. Retrieved 17 July  2012.
24. ^ International Bank for Reconstruction and Development.  "Disaster Risk Financing". World
Bank Group. Retrieved 17 July  2012.