The International Bank for Reconstruction and Development (IBRD), generally referred to as the World Bank in the capital markets, is one of the largest international borrowers in the world. It is also one of the most frequent international bond issuers with hundreds of transactions per year. The World Bank was founded in 1944 and issued its first bond in 1947. Since then, it has continuously developed innovative debt products, opened new markets for issuance, and built a broad investor base around the world. Bonds issued by the World Bank are rated triple-A (highest possible bond rating) by Moody´s and S&P.
The World Bank's borrowing requirements are primarily determined by its lending activities for sustainable development projects. As World Bank lending has changed over time, so have its annual borrowing programs. In fiscal year 2022, the World Bank issued debt securities in a variety of currencies for a total volume equivalent to approximately US$41 billion. For fiscal year 2022 and beyond, annual bond issuance is expected to be around US$45-55 billion. As of June 30, 2022, the amount of total borrowings outstanding was US$257 billion.
The International Development Association, the institution in the World Bank Group that serves lower income countries, and the International Finance Corporation (IFC), the private sector lending affiliate of the World Bank Group, also offer debt instruments.
The World Bank is the most established development finance institution in the world. Funds raised by the World Bank in the financial markets are used to end extreme poverty and promote shared prosperity in a sustainable manner. These “twin goals” are aligned with the Sustainable Development Goals. More specifically, World Bank funding is used for investing in people, protecting the climate and environment, stimulating private sector growth, strengthening government capacity, promoting economic reform, and attracting co-financing from others.
After its establishment in 1944 amidst the ruins of World War II, the World Bank made its first loans to European countries for post-war reconstruction. IBRD's focus shifted towards poverty alleviation in the 1960s and lending to middle income countries.
Individual debt instruments issued by the World Bank are not direct obligations of any government. However, World Bank debt instruments are collectively backed by the capital commitments of its member countries. This is one of the reasons why rating agencies and other members of the financial community often refer to the World Bank as a "quasi-sovereign" issuer. The World Bank has a triple-A credit rating from Moody´s and S&P.
At the present time, the World Bank has 189 sovereign shareholders. The largest shareholders include the United States (16.7% of total subscribed capital), Japan (7.9%), China (5.6%), Germany (4.3%), and France and the United Kingdom (with 4.1% each). Of the World Bank's total subscribed capital of US$307 billion, US$287 billion is callable capital. Callable capital can only be called from our shareholders for the purpose of satisfying claims by World Bank debt holders or meeting certain guarantee obligations. Over the course of its 75-year history, the World Bank has never made a capital call.
The World Bank has been rated triple-A, the highest possible rating available, for more than 60 years by the major credit rating agencies. This quality assessment is confirmed by the capital markets which have been welcoming World Bank debt instruments since the issuance of the first World Bank bond in 1947.
There are six main reasons for the high degree of quality of World Bank debt instruments. First, World Bank is supported by the World Bank's 189 sovereign shareholders. Second, the World Bank follows highly prudent financial policies that restrict its lending to a maximum of one dollar in loans per one dollar of total subscribed capital and reserves - the current ratio is 69.5%. Third, the World Bank has earned positive allocable income in every year since 1964. Fourth, the World Bank maintains a highly liquid asset base to be flexible in the timing of its new debt issuance. Fifth, the World Bank´s prudent lending policies and loan concentration limits ensure the high quality of the World Bank's loan portfolio. And finally, the World Bank only lends to sovereigns and sovereign-guaranteed projects and is recognized by the major rating agencies to enjoy a preferred creditor status with its borrower shareholders.
World Bank bonds support the financing of World Bank’s sustainable development projects according to the project cycle that integrates Environmental, Social and Governance criteria according to the World Bank’s standards as articulated in the Environment and Social Framework.
All World Bank bonds are labeled bonds and align with the guidelines published by the International Capital Markets Association (ICMA). Bonds are either labeled “Sustainable Development Bonds” and align to the Sustainability Bond Guidelines (see IBRD Sustainable Bond Framework) or “Green Bonds” and align to the Green Bond Principles (see IBRD Green Bond Framework).
The World Bank launched the world’s first labeled green bond in 2008 to engage investors around the urgency of tackling climate change and to highlight the contributions the World Bank was making on climate change. This green bond responded to investors’ growing awareness of climate change risk and desire to support the financing of projects that helped tackle climate change through a product that was simple and fit their portfolios. It ultimately became the standard for a market focused on increasing transparency and investing for impact. While the World Bank continues to issue green bonds, most are now labeled as Sustainable Development Bonds.
The Sustainable Development Bond label highlights how proceeds go to support the financing of projects with both green and social goals and emphasizes the holistic approach that the World Bank takes to mainstream climate change in all its operations, as explained in its Climate Change Action Plan 2021-2025. For example, 100% of all World Bank projects are screened for climate risk, and 95% of all IBRD projects last year had climate financing components, including in what is traditionally thought of as “social” sectors such as health and education.
The World Bank offers a wide range of debt instruments available in the capital markets. For 75 years, the World Bank has continuously worked to develop new types of debt products in order to meet the specific needs of both its institutional and retail investors throughout the world.
World Bank debt instruments can be classified into four main categories: (i) benchmark and global bonds in major world currencies that provide high liquidity and spread performance and are generally placed with institutional investors; (ii) plain vanilla and local currency bonds that offer a potential yield pick-up for retail and institutional investors without credit risk; (iii) structured notes that are often custom-made to fit the particular asset and liability management requirements of institutional investors, and (iv) USD discount notes with maturities of 360 days or less.
The primary objective of issuing a variety of World Bank debt instruments is to meet investors' needs by providing a maximum degree of flexibility in its debt offerings.
The World Bank issues bonds in several of ways: on very short notice and at any local business time; in most of the active borrowing currencies; in most maturities and issue sizes; in Eurobond, global bond or domestic bond formats; using a variety of settlement and clearing systems; and with a multitude of structured note elements and options. The World Bank works daily with a broad range of financial institutions to utilize underwriters' strengths and deliver the best possible value to investors.
World Bank discount notes are debt instruments denominated in USD with maturities of 360 days or less that are offered under its Discount Notes Program. The World Bank offers Discount Notes through a group of dealers on a continuous basis in the Eurodollar and in the US domestic market. The Federal Reserve Bank of New York acts as Fiscal Agent with respect to discount notes issued by the World Bank. Information as to the maturities and rates at which the discount notes are available, can be obtained from the dealers (please see the Offering Circular for a list of the dealers).
Benchmark bonds issued by the World Bank are designed to offer high secondary market liquidity and spread performance to the institutional investor. Benchmark bonds are supported by the commitment of the World Bank´s underwriting partners in the financial community to carry out active secondary trading and make markets throughout the life of an issue. The World Bank regularly monitors the spread quotations of its benchmark issues versus the underlying government issues to ensure consistent market pricing and superior performance.
Benchmark securities are sometimes issued in "global" bond format in order to allow the securities to be placed simultaneously with investors in all major international capital markets. Global bonds typically clear through several settlements systems such as Euroclear and Clearstream in Europe, and the Federal Reserve Bank or the Depository Trust Company bookentry system in the United States. Due to their worldwide placement, global benchmark bonds are often very large in size (about US$1-8 billion) and offer a high degree of market liquidity.
Benchmark issues have accounted for approximately 80% of World Bank debt issuance in recent years, and are expected to remain a key instrument for access to the capital markets for years to come (List of Global Bond Issues).
Structured notes issued by the World Bank are debt securities that feature specific properties which match the needs of particular groups of investors. By introducing an element of return volatility, structured notes offer higher nominal coupons than non-structured, plain vanilla bonds.
Structured notes can include one or more of the following properties: call and put options for the early redemption of principal prior to maturity; fixed coupons that step up or step down over the life of the security; dual currency features that provide for payment of coupon income and/or principal redemption in different currencies; foreign exchange options where the level of coupon income and/or principal redemption is dependent on the movement of foreign exchange rates over time; initial fixed rate coupons which are followed by floating rate coupons linked to a market interest rate such as SOFR; and equity options where coupon income or principal redemption is a function of the performance of a predetermined index of stock prices.
The share of structured notes in the World Bank's total annual funding varies from year to year and accounts for about 20% of all capital market borrowings.
Yes. Many of the structured notes, but also plain vanilla bonds, issued by the World Bank are designed to meet the particular needs of individual, generally institutional investors that approach the World Bank either directly or through an underwriter. These customized notes are tailored to respond to the specific asset and liability management requirements or general investment needs of major investors such as pension funds, insurance companies and other asset managers. Turn-around times for new issuance of such notes by our in-house teams range from a few hours to a few days. Discount notes issued by the World Bank also respond to the particular needs of investors with respect to settlement date, amount, and maturity.
World Bank bonds are offered in all major international currencies. The objective is to provide investors with a broad choice of currencies. In some instances, this involves opening new markets for bond issuance, thereby promoting local capital market development.
While the bulk of borrowing is carried out in major currencies such as the US Dollar, Euro, and Pound Sterling, the World Bank frequently issues in many other currencies as well, including those in the Dollar bloc (Australian, New Zealand and Canadian dollars). World Bank bonds are also issued in a wide variety of currencies of local capital markets located in Africa, Asia, Eastern and Southern Europe, and Latin America.
The issue size of World Bank debt offerings is driven by investor demand and the type of security to be issued. Over the past few years, new bond issues have ranged from less than US$10 million up to a maximum of US$8 billion. Large-sized liquid issues are typically placed with institutional investor accounts in Europe, Asia, the Middle East and the Americas. Smaller World Bank bond issues are frequently driven by demand at the retail investor level in Europe and Japan. The World Bank can also offer smaller-sized transactions in the specific issue volume that an individual institutional investor may require. Discount Notes are issued in a variety of amounts with a minimum of US$50,000.
World Bank debt instruments can be offered in any maturity. Discount notes have maturities of one day to 360 days. Bonds are offered with maturities ranging from about one year up to 50 years and even longer. The World Bank considers any specific maturity requirement that its institutional investors might have. Over the past years, the average borrowing maturity for debt securities has ranged between 5 and 10 years.
In most markets, World Bank debt instruments offer a considerable yield pick-up over government bonds while providing the reassurance of a triple-A-rating and the support of the World Bank´s shareholders. Investors have been buying World Bank debt instruments since their introduction in 1947. Many institutional investors diversify their sovereign investment portfolios to include World Bank instruments with the objective of enhancing returns without adding credit risk. World Bank debt securities are included in virtually all main international bond indices that investors utilize as benchmarks for managing their portfolios.
World Bank bonds can be bought and sold through security houses, commercial banks, dealers and brokers. Investors should contact their local financial service providers for information on specific World Bank securities, including prices and availability. Prices are quoted on securities exchanges and major electronic trading platforms.
The World Bank is a leader in maintaining close relationships with a broad range of underwriters in all financial markets. World Bank debt securities have been brought to the market by some 30 different lead managers. Many bond issues include additional financial houses and banks in the bond syndicate to ensure a broad geographical distribution and firm primary placement of the bonds. Discount notes of the World Bank are sold through a group of dealers under the Discount Notes Program (please see the Discount Notes Program Offering Circular for a list of the dealers).
Discount notes are continuously offered through a group of dealers selected by the World Bank. Information on rates and maturities can be obtained from the dealers of the Discount Note Program.
On the day of their launch, most new World Bank bond issues are announced on electronic market information systems such as Bloomberg and Reuters. The financial institutions that underwrite World Bank debt securities also contact institutional investors directly to offer these bonds. Members of the bond syndicates often include banks with extensive branch networks that offer new World Bank debt securities to their retail investors. Retail investors can also obtain information on new World Bank debt issues through the internet and financial media. Information on World Bank bonds that have recently been issued is also available on the Issues page and on the News page for Investors.
The World Bank may, in its discretion, buy back all or portions of certain of its debt issues. Structured notes, debt denominated in local market currencies, or smaller, older transactions that are not traded frequently are often candidates for a buyback. The minimum size requirement for a trade is typically US$ equivalent 10 million. The pricing for the buyback would be based on market prices. Because of counterparty risk issues, the World Bank can only buy back debt from or through approved dealers.
World Bank bonds are listed on many of the main securities exchanges in the world. Most Eurobonds that we issue are listed on the Luxembourg Stock Exchange. World Bank bonds issued under the domestic law of the bond currency country will frequently be listed on the stock exchange of that same country. In some cases, investors prefer our debt securities not to be listed and to purchase these instruments as a non-listed private placement.
World Bank bonds clear through a variety of international and domestic clearing systems. The most widely used systems include the bookentry systems operated by the Federal Reserve or the Depository Trust Company (DTC) in the United States, and Euroclear and Clearstream in Europe. Electronic securities and payment transfer links have been established among these systems and others which enable our debt securities to be issued, held and transferred among the various clearing systems.
The Federal Reserve Bank of New York is the fiscal and paying agent for US Dollar denominated World Bank bonds in the United States and held through the bookentry system operated by the Federal Reserve Banks. Citibank, N.A., London office, is the Global Agent for debt securities issued in the United States and held through DTC and for securities held through Euroclear, Clearstream and other clearing systems.
For Discount Notes of the World Bank, the Federal Reserve Bank of New York acts as the fiscal agent.
The World Bank uses a universal debt documentation platform for most of its current debt issuance. The Global Debt Issuance Facility (GDIF), constitutes the general prospectus applicable for the vast majority of new debt issuance. In addition, for each new bond transaction, the World Bank prepares the Final Terms (previously the Pricing Supplement) that contain the terms of, and pricing details for, that issue. Under the GDIF, debt securities may be issued and outstanding in an unlimited aggregate principal amount.
The Offering Circular for the Discount Note Program provides detailed information on the discount notes issued by the World Bank.
In general, World Bank debt instruments and the interest thereon are subject to taxation in accordance with the national and other tax laws applicable to the holders. Neither the World Bank nor its fiscal agents or paying agents are subject to withholding or back-up withholding tax requirements for interest payments on World Bank bonds.
Accordingly, the interest due on the debt instruments is paid to the fiscal or paying agent without deduction in respect of any such tax. However, tax withholding requirements may apply to interest payments made by financial intermediaries acting in any capacity other than as the World Bank's fiscal or paying agent.
This summary of the tax treatment of World Bank instruments and the interest thereon is not intended as tax advice; investors considering the purchase of World Bank discount notes and bonds should consult their tax counsel or other experts for advice in this area. More information about the tax treatment is available in the Program Prospectus for the GDIF (please see the Offering Circular for the Discount Notes Program).
Investors and other parties that require more information on World Bank debt instruments can contact us directly by sending an email to email@example.com.
Visit the World Bank's main web site at www.worldbank.org. This site contains a wealth of information on the World Bank's mission, structure, and operations.