【摘要】Background on the World Bank´s Activities in the Financial MarketsHow much does the World Bank borrow in the capital markets every year?
The International Bank for Reconstruction and Development (IBRD), generally referred to as the World Bank, 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 up new markets for issuance, and built-up a broad investor base around the world. Bonds issued by the World Bank are AAA-rated (highest possible bond rating) by Moody´s and S&P.
The World Bank‘s borrowing requirements are primarily determined by its lending activities for development projects. As World Bank lending has changed over time, so has its annual borrowing programs. In fiscal year 2015, the World Bank issued debt securities for a total volume equivalent to US$58 billion. For fiscal year 2016 and beyond, annual bond issuance is expected to be around US$45-50 billion. As of June 30, 2015, the amount of total borrowings outstanding was US$161 billion.
The International Finance Corporation (IFC), the private sector lending affiliate of the World Bank, also offers debt instruments.
What does the World Bank do with the funds that it raises in the financial markets?
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 for its general operations, which include lending to developing and emerging economies in order to fight poverty and to help people help themselves. More specifically, World Bank funding is used for investing in people, protecting the environment, stimulating private sector growth, strengthening government capacity, promoting economic reform, and attracting co-financing from other donors.
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. In the 1950s and 1960s, its lending focus shifted to other developing parts of the world, such as Japan. Today, the World Bank is a major player in building the markets of tomorrow in Africa, Asia, Latin America, Eastern Europe, and the former Soviet Union. As the single largest investor in human development, social development and gender, and social protection projects, investment in the social sector accounts for approximately 30 percent of the World Bank‘s total portfolio. The World Bank is also the largest funder of environmental projects with more than US$11 billion of investment in projects with a focus on the environment and natural resources.
Characteristics of World Bank Debt Instruments Are World Bank debt instruments backed by the government?
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 AAA-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 (17.07% of total subscribed capital), Japan (7.89%), China (5.09%), Germany (4.614%), and France and the United Kingdom (with 4.13% each). Of the World Bank‘s total subscribed capital of US$252.8 billion, US$237.6 billion is callable capital. This latter 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 60-year history, the World Bank has never made a capital call.
What is the quality of World Bank debt instruments?
The World Bank has been rated AAA, the highest possible rating available, for more than 50 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 debt is backed by the 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 56%. Third, the World Bank has earned positive allocable income in every year since 1964. Fourth, the World Bank maintains a highly liquid asset base in order to be flexible in the timing of its new debt issuance. Fifth, the World Bank´s prudent lending policies, 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.
Why are World Bank bonds considered "ethical" or "socially responsible" investments (SRI)?
Socially Responsible Investing (SRI) is one of many terms used to describe an investment strategy aiming to maximize social good and financial returns. Others include social, sustainable, ethical, and mission-based investing.
The World Bank‘s mission to fight poverty in a sustainable way, through education, health and environment, make IBRD bonds suitable for investors with such an investment strategy.
The World Bank is a global development cooperative owned by 189 member countries. Its purpose is to help its members achieve equitable and sustainable economic growth in their national economies and find effective solutions to pressing regional and global problems in economic development and environmental sustainability, all with a view to overcoming poverty and improving standards of living for people worldwide.
IBRD‘s bonds finance projects that emphasize the need to (1) invest in people, particularly through strengthening basic health and education systems, (2) protect the environment by strengthening governance and reducing environmental degradation, (3) support private business development, (4) strengthen the ability of governments to deliver quality public services, (5) promote reforms to create stable macroeconomic environments, and (6) foster social development, inclusion, governance and institution-building as key elements of poverty reduction. For more information about the SRI nature of World Bank bonds, Click Here.
World Bank Debt Product Offerings What types of debt products does the World Bank offer?
The World Bank offers a wide range of debt instruments available in the capital markets. For 60 years, the World Bank has continuously working 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 emerging 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 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 a variety 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; as registered or bearer bonds, in either definitive or global note forms; using a variety of settlement and clearing systems; and with a multitude of structured note elements and options such as calls and puts, floating and fixed-rate coupons, and equity and foreign exchange-linked coupons and redemptions. The World Bank works daily with a broad range of financial houses so as to utilize underwriters‘ strengths and deliver the best possible value to investors.
What are World Bank "discount notes"?
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).
What are "benchmark bonds" and "global bonds" issued by the World Bank?
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 backed 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 in order 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$1-6 billion) and offer a high degree of market liquidity.
Benchmark issues have accounted for approximately 40% 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).
What are "structured notes" issued by the World Bank?
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 LIBOR; 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 has been continuously increasing over the past years. It now accounts for about one quarter of all capital market borrowings.
Does the World Bank customize its debt products to the requirements of individual institutional investors?
Yes. Many of the structured notes, but recently 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 of major investors such as pension funds, insurance companies and other asset managers. Turn-around time for new issuance of such notes by our in-house teams ranges 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.
In which currencies does the World Bank offer debt instruments?
World Bank bonds are offered in all major international borrowing currencies. In fiscal year 2015, the World Bank issued debt securities in 21 different currencies. So far, the World Bank has offered investors bonds in over 55 different currencies. The objective is to provide investors with a broad choice of currencies. In many 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, Japanese Yen and Pound Sterling, the World Bank frequently issue 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 emerging capital markets located in Africa, Asia, Eastern and Southern Europe, and Latin America. For example, in 2003, Emerging Market Magazine recognized the World Bank for issuance in regional currencies, by awarding Japanese Yen and Hungarian Forint bonds as the "Best Multilateral Deals in a Regional Currency". In 2000, the World Bank was the first foreign issuer to launch a bond in Mexican Pesos and Chilean Pesos. In 1999, the World Bank issued the largest outstanding international bonds available in Greek Drachma and Polish Zloty at that time. The World Bank´s efforts in emerging capital markets were recognized by LatinAmerican Finance with the "Multilateral Bond of the Year 2000" award for our Mexican Peso bond and by Euromoney with the "Polish Zloty Bond of the Year" award in 1998 and 1999 as well as the "Greek Drachma Bond of the Year" award in 1999.
The World Bank´s discount notes are issued under the Discount Note Program and are denominated in USD (please see the Offering Circular for a list of the dealers).
What is the typical volume of any one World Bank debt issue?
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$6 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 broad-based demand at the retail investor level in Europe and Japan. The World Bank also offers 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
In which maturities are World Bank debt instruments offered?
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 with perpetual maturity. 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 4 and 8 years.
How does the return on World Bank debt instruments compare with other investments?
In most markets, World Bank debt instruments offer a considerable yield pick-up over government bonds while providing the reassurance of a AAA-rating and the backing 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.
Buying and selling World Bank Debt InstrumentsWhere and how are World Bank debt instruments bought and sold?
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 many securities exchanges, the major electronic trading platforms, and in selected financial newspapers.
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 of the new 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).
How can I obtain up-to-date information about new World Bank debt issues?
Discount notes are continuously offered through a group of dealers specified 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 houses that underwrite World Bank debt securities 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 by referring to the financial press. Information on selected World Bank bonds that have recently been issued is also available on the Debt Products page and on the page News for Investors.
Does the World Bank buy back its own debt from approved dealers?
The World Bank may, in its discretion, buy back all or portions of certain of its debt issues. Structured notes, debt denominated in emerging 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 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.
Listing, Clearing and Legal AspectsOn which security exchanges are World Bank bonds listed?
World Bank bonds are listed on many of the main securities exchanges in the world. For the majority of Eurobonds that we issue, the Luxembourg Stock Exchange will be a place of listing. 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 to not be listed and to purchase these instruments as a private placement.
Which clearing and settlement systems does the World Bank use for its debt instruments?
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.
What is the legal documentation used for World Bank debt instruments?
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 contains 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.
What is the tax status of World Bank debt instruments?
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 and the (please see the Offering Circular for the Discount Notes Program.
Sources for Further InformationWhom can I contact for more information on World Bank debt instruments?
Investors and other parties that require more information on World Bank debt instruments can contact us directly by sending an email to debtsecurities@worldbank
.org or a fax to +1 (202) 477-8355.
Where can I obtain more information about the World Bank‘s overall mission, financial structure and lending activities?
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.