## EXECUTIVE SUMMARY (ppea2023002)

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---

### Introduction
- Five applications by official entities to become prescribed holders of SDRs:
  - Caribbean Development Bank (CDB)
  - Development Bank of Latin America (Corporacion Andina de Fomento or CAF)
  - European Bank for Reconstruction and Development (EBRD)
  - European Investment Bank (EIB)
  - Inter-American Development Bank (IADB)
- All five institutions are well-established multilateral financial institutions and are eligible under Article XVII, Section 3 (i) of the Articles of Agreement.
- Staff recommends that the Executive Board prescribe the five applicants as holders of SDRs.
- Date: January 23, 2023

### Legal framework for becoming a prescribed holder
- SDR Department and participation
  - The SDR Department is separate from the General Department and from trusts and resources administered by the IMF under Article V, Section 2(b).
  - All current Fund members are participants in the SDR Department.
  - SDRs can be held only by the official sector: Fund members participating in the SDR Department, the Fund itself (through the General Resource Account, GRA), and other official entities prescribed by the Executive Board.
  - Prescription requires an Executive Board decision adopted by an 85 percent majority of the total voting power.
- Qualification criteria (Article XVII, Section 3 (i))
  - Eligible entities include: non-members, members that are not participants, institutions that perform functions of a central bank for one or more members, and other official entities.
- Terms and conditions for holding and using SDRs
  - The Executive Board established standard terms and conditions in 1980 under Article XVII, Section 3(iii); these terms have applied to all prescribed holders since then (see Annex I in the source).
- Approval process
  - Staff performs due diligence, ascertains willingness to accept standard terms and conditions, and conducts outreach with the Executive Board to assess likely broad support prior to bringing applications to the Board.
- Permitted prescribed operations
  - Prescribed holders may acquire and use SDRs in prescribed operations with participants and other holders and may elect to take part in the SDR Department’s voluntary trading arrangements (VTA).
  - They do not receive allocations of SDRs, may not request exchange of SDRs with designation, and may not initiate transactions with the General Resources Account.
  - Permitted operations include settlement of financial obligations, loans, pledges, transfers as security, swap operations, forward operations, and donations.
- Termination of prescribed status
  - Ends by (i) Board decision terminating status (majority of votes cast) or (ii) written notice from the prescribed holder seeking termination.

### Experience with existing prescribed holders
- Historical prescribing and usage
  - To date the Fund has prescribed 15 official institutions as holders of SDRs.
  - Most prescribed holders were approved in the 1980s; the last application was from the European Central Bank (ECB) and was approved in 2000.
  - The historic SDR allocation in 2021 nearly tripled total allocated SDRs to SDR 660.7 billion, prompting renewed interest among institutions to become prescribed holders.
- Transaction volumes and patterns
  - Since the creation of the SDR Department, total transactions by prescribed holders amount to about SDR 16 billion.
  - This is approximately 8 percent of total transactions in the SDR Department by volume, and 14 percent by number of transactions.
  - Transaction volumes by category:
    - Regional central banks: SDR 6.6 billion
    - Intergovernmental monetary institutions: SDR 8.5 billion
    - Development institutions: SDR 0.6 billion
  - As of November 30, 2022, six of the fifteen prescribed holders hold SDRs.
- Typical operations
  - Most transactions have been exchanges of SDRs for freely usable currencies through bilateral transactions by agreement or through VTAs, and settlement of financial obligations between regional central banks or intergovernmental monetary institutions and their member states.
  - The BIS is the most active prescribed holder and plays an important role in conducting sales on behalf of trusts and administered accounts administered by the Fund.
- Use by MDBs and multilateral financial institutions
  - Use has been more sporadic; of the eight multilateral financial institutions prescribed, four have made SDR transactions since becoming prescribed holders.

### Assessment of applicants’ eligibility and implications of prescription
- Applicants’ characteristics and engagement
  - The five applicants are well-established official institutions in good standing (see Annex II in the source).
  - Their sovereign shareholders are mostly Fund members and participants in the SDR Department, with specified exceptions noted by staff.
  - Institutions have established track records in development financing, operations similar to existing prescribed holders, adequate funding, robust capital structures, and strong credit ratings.
  - The Fund engages regularly with these institutions in operational activities, including ascertaining financing assurances for Fund-supported programs.
  - Applicants have had technical discussions with staff on SDR operations; some are exploring vehicles for SDR channeling to leverage development financing operations.
- Staff assessment and recommendation
  - Staff assesses that the five applicants meet the criteria to become prescribed holders under Article XVII, Section 3 (i).
  - All applicants understand and accept that their SDR operations must conform with the terms and conditions of prescription for SDR operations.
- Expected implications for the SDR Department
  - Benefits for participants
    - Prescription would enlarge members’ choices to use SDRs, including settling financial obligations and potentially channeling SDRs to development institutions, thereby increasing the attractiveness of the SDR as a reserve asset.
  - Impact on SDR transactions volume and operating costs
    - Based on experience with existing prescribed holders, prescription of new holders is likely to result in a modest increase in SDR transactions and related operating costs in the near future.
    - If new prescribed holders obtain SDRs through settlement of financial obligations by their members (or through channeling), they could either hold SDRs on their balance sheets or exchange them for currencies via direct exchanges with members or in the VTA market.
  - Impact on the VTA market
    - Near-term impact likely limited as applicants are expected to operate only occasionally in the market.
    - There is no indication that any applicant would become a VTA member at this point.
    - Prescription does not impose a duty to acquire SDRs, and prescribed holders would have no initial holdings of SDRs, making immediate VTA membership unlikely.
    - In the longer term, participation and impact on VTAs and IMF trusts would depend on development of SDR channeling options.
    - If channeling materializes, an expectation could be established that members channeling SDRs to development financing institutions stand ready to exchange freely usable currencies for SDRs in the VTA market (an expectation that already exists for members channeling SDRs into the PRGT and Resilience and Sustainability Trust (RST)).
    - Prescribed holders could be encouraged to become VTA members if they are expected to maintain sizeable SDR holdings; any VTA participation would be established through an agreement.

### Enterprise risk assessment — summary findings
- Operational risk
  - Transactions expected to be similar to those of existing prescribed holders and would not materially increase operational risk in the near term.
  - Onboarding of the new holders and their integration in the Fund’s operating systems would be relatively straightforward.
  - Over time, operational risks could rise if transactions increase substantially, including from potential channeling of SDRs to prescribed holders.
  - Mitigation: Close monitoring of developments and adequate administrative resources to support financial operations.
- Financial and reputational risk
  - Financial and reputational risks to the Fund from prescribing the applicants appear low given their characteristics, mandate, and track record, and the expected range and volume of their SDR operations in the near term.
  - Non-prescription could raise questions of evenhanded treatment with similar institutions that are already prescribed holders.
  - Some financial risks could arise over time if substantial amounts of SDRs are channeled to new and existing prescribed holders and these hold on to the SDRs, as this could have a detrimental effect on the liquidity of the VTA market.
  - Mitigation: Encourage prescribed holders with large SDRs holdings to become VTA members.

### Staff recommendation (paragraph 20)
- Staff recommends the approval of the five applications.
- Rationale:
  - The applicants are all official entities and have indicated that they accept the standard terms and conditions of prescription.
  - The prescription of the five applicants as other holders of SDRs would enhance the attractiveness of the SDR as a reserve asset and be consistent with the effective functioning of the SDR Department.
- Decision rule:
  - Pursuant to Article XVII, Section 3(i), the prescription of any holder of SDRs requires an Executive Board decision adopted by an 85 percent of the total voting power.

### Annex I — Terms and Conditions (key provisions)
- 1. Acceptance, Holding, and Use by Prescribed Holders
  - (a) Acceptance and use: A prescribed holder may accept or use SDRs (i) in exchange for an equivalent amount of a monetary asset other than gold in a transaction entered into by agreement with a participant, or another prescribed holder, or (ii) in an operation entered into by agreement with a participant or another prescribed holder in accordance with and on the same terms and conditions established at that time for participants by decisions of the Fund under Article XIX, Section 2(c).
  - (b) Holding: A prescribed holder may hold SDRs, subject to the provisions of this decision, accepted in accordance with (a) above or received as interest paid on its holdings of SDRs in accordance with Article XX, Section 1.
- 2. Acceptance and Use by Participants in Transactions and Operations with Prescribed Holders
  - Participants may enter into transactions and operations by agreement with a prescribed holder in accordance with the prescriptions in paragraph 1(a) of this decision.
- 3. Application of General Provisions
  - The holding of SDRs and the acceptance and use of them in transactions and operations by a prescribed holder shall be governed by the provisions of the Articles, By-Laws, Rules and Regulations, and decisions of the Fund that apply from time to time to all holders of SDRs.
- 4. Exchange Rates
  - The Rules and Regulations and decisions of the Fund that determine the exchange rates applicable at the time of each use or acceptance of SDRs by a participant shall apply to each use or acceptance of them by a prescribed holder.
  - A prescribed holder shall not levy any charge or commission in respect of a transaction involving SDRs.
- 5. Information and Recording
  - The Fund shall inform prescribed holders of matters relevant to the acceptance, holding, and use of SDRs by them.
  - A prescribed holder shall inform the Fund promptly of the facts necessary to record any transactions or operations in which a prescribed holder accepts or uses SDRs.
- 6. Consultation and Review
  - (a) Consultation between the Fund and a prescribed holder shall be held at the request of the Fund or the prescribed holder with respect to the application of this decision or the decision prescribing the holder or with respect to transactions or operations entered into involving SDRs.
  - (b) The Executive Board shall review periodically this decision and decisions prescribing holders.
- 7. General Undertaking
  - Each prescribed holder shall collaborate with the Fund, participants, and other prescribed holders with respect to its acceptance, holding, and use of SDRs in order to facilitate the effective functioning of the SDR Department and the proper use of SDRs in accordance with the Articles and the terms and conditions prescribed by the Fund now or in the future for the acceptance, holding, and use of SDRs by prescribed holders.
- 8. Suspension
  - During any period in which a suspension is in effect under Article XXIII, Section 1 with respect to participants, the suspension shall apply to the same extent to prescribed holders.
- 9. Termination
  - (a) The prescription of a holder of SDRs may be terminated by the Fund by a decision of the Executive Board or by a notice from the prescribed holder in writing to the Fund at its principal office. Termination shall become effective on the date specified in the decision of the Executive Board but not earlier than the date of the decision, or when notice from the prescribed holder is received by the Fund at its principal office.
  - (b) A prescribed holder whose status as such has been terminated may continue to hold the SDRs it held on termination and to receive SDRs as interest on its holdings and may continue to use SDRs to dispose of them in transactions or operations in accordance with paragraph 1(a) above. A prescribed holder whose status has been terminated shall make arrangements, with the concurrence of the Fund, to dispose of its holdings of SDRs as expeditiously as possible and shall exchange SDRs for a freely usable currency selected by the prescribed holder when requested by the Fund.

### Annex II — Summary information on the applicants (key data preserved verbatim)
- A. European Bank for Reconstruction and Development (EBRD)
  - Membership: The EBRD is owned by 71 countries from five continents, as well as the European Union and the European Investment Bank.
  - Headquarters: London.
  - Establishment: The EBRD was established in 1991.
  - Functions:
    - Since its inception, the Bank has invested over EUR 180 billion in a total of more than 6,500 projects in its countries of operations.
    - Activities: Banking and Treasury; main investment products are loans, share investments and guarantees.
  - Financial structure:
    - Share capital: As of the end of 2021, the Bank’s authorized share capital is EUR 30.0 billion, of which subscribed capital amounts to EUR 29.8 billion. Of the subscribed amount, paid-in capital constitutes EUR 6.2 billion.
    - Credit rating: AAA/Aaa/AAA (stable).
- B. Inter-American Development Bank (IADB)
  - Membership: Currently, 48 countries are members.
  - Headquarters: Washington D.C.
  - Establishment: The IADB was established in 1959.
  - Functions:
    - The IADB’s principal activities are providing loans, credit guarantees, and technical assistance to support development projects in its 48 developing member countries.
    - Since its founding, it has approved more than USD 3 33 billion in loans for projects in key sectors.
  - Financial structure:
    - Share capital: At December 31, 2021, subscribed capital stock, net of subscriptions receivable, was USD 170.9 billion, of which USD 6 billion is paid-in, USD 5 .8 billion is additional paid-in capital, and USD 164.9 billion is callable.
    - Credit rating: AAA/Stable/A-1+ by Standard & Poor’s, Aaa/Stable/P1 by Moody’s Investor Services and AAA/Stable/F1+ by Fitch Ratings.
- C. Development Bank of Latin America (Corporacion Andina de Fomento or CAF)
  - Membership: CAF current membership includes 20 shareholder countries in Latin America, the Caribbean, Spain and Portugal, as well as 13 private banks.
  - Headquarters: Caracas, Venezuela.
  - Establishment: The CAF was established in 1968.
  - Functions:
    - CAF offers financial and related services to governments, public and private institutions, corporations and joint ventures operating in its shareholder countries; primarily provides short, medium, and long-term loans and guarantees.
  - Financial structure:
    - The current authorized capital of CAF is USD 25 billion.
    - The subscribed capital of CAF as of December 31, 2021 amounted to USD 7.7 billion of which USD 1.6 billion is callable capital shares.
    - In December 2021, CAF’s Board of Directors approved a USD 7 billion capital increase; this decision was ratified during the CAF’s Shareholders Assembly meeting in March 2022.
    - Credit ratings and updates:
      - On June 17, 2022, Standard and Poor’s raised its long-term credit rating for CAF from AA- to A+ with positive outlook, as well as its short-term credit rating from A-1 to A-1+.
      - In January 2022, Fitch Ratings revised the Outlook on CAF's Long-Term Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at 'A+'.
      - In September 2022, Japan Credit Rating Agency upgraded CAF's rating to AA+ from AA.
      - Moody's Investor Service rates CAF in Aa3.
- D. European Investment Bank (EIB)
  - Membership: The members of the European Investment Bank are the 27 Member States of the European Union.
  - Headquarters: Luxembourg.
  - Establishment: The EIB was established in 1958.
  - Functions:
    - The EIB is a Multilateral Development Bank and the European Union's long-term lending institution.
  - Financial structure:
    - Subscribed capital: The total subscribed capital of the EIB amounts to EUR 248.8 billion (as of 31 December 2021). The subscribed capital is composed of callable and paid-in capital.
    - Credit rating: AAA rating.
- E. Caribbean Development Bank (CDB)
  - Membership: CDB has a total of 28 member countries, including 19 regional borrowing members, 4 regional non-borrowing members, and 5 non-regional, non-borrowing members.
  - Headquarters: St. Michael, Barbados.
  - Establishment: The CDB was established by an Agreement signed October 18, 1969; entered into force January 26, 1970.
  - Functions:
    - The CDB’s principal activities are providing loans, guarantees, investments, borrowing programs, technical assistance, and policy advice to support its member countries’ strategic, economic, social and developmental goals and initiatives.
    - Since its founding, it has approved approximately USD 5.6 billion in loans for projects in key sectors.
  - Financial structure:
    - At the fortieth meeting of the Board of Governors in May 2010, a general capital increase of 150 percent was approved.
    - The Bank’s capital as at December 31 2021 was as follows: subscribed capital USD 1.8 billion, callable capital USD 1.4 billion.

### Annex III — Letters Submitted by Applicants (selected excerpts)
- ANNEX III.A — Listing of Members (excerpted entries as presented)
  - Albania — 18Dec1991 — 30,010
  - Algeria — 19Oct1991 — 2,030
  - Armenia — 7Dec1992 — 14,990
  - Australia — 30Mar1991 — 300,140
  - Austria — 28Mar1991 — 684,320
  - Azerbaijan — 25Sep1992 — 30,010
  - Belarus — 10Jun1992 — 60,020
  - Belgium — 10Apr1991 — 684,320
  - Bosnia and Herzegovina — 17Jun1996 — 50,710
  - Bulgaria — 28Mar1991 — 237,110
  - Canada — 28Mar1991 — 1,020,490
  - China — 15Jan2016 — 29,000
  - Croatia — 15Apr1993 — 109,420
  - Cyprus — 28Mar1991 — 30,010
  - Czech Republic — 1Jan1993 — 256,110
  - Denmark — 28Mar1991 — 360,170
  - Egypt — 28Mar1991 — 21,010
  - Estonia — 28Feb1992 — 30,010
  - European Investment Bank — 28Mar1991 — 900,440
  - European Union — 28Mar1991 — 900,440
  - Finland — 28Mar1991 — 375,180
  - France — 28Mar1991 — 2,556,510
  - Georgia — 4Sep1992 — 30,010
  - Germany — 28Mar1991 — 2,556,510
  - Greece — 29Mar1991 — 195,080
  - Hungary — 28Mar1991 — 237,110
  - Iceland — 29May1991 — 30,010
  - India — 11July2018 — 9,860
  - Ireland — 28Mar1991 — 90,040
  - Israel — 28Mar1991 — 195,080
  - Italy — 28Mar1991 — 2,556,510
  - Japan — 2Apr1991 — 2,556,510
  - Jordan — 29Dec2011 — 9,860
  - Kazakhstan — 27Jul1992 — 69,020
  - Korea, Republic of — 28Mar1991 — 300,140
  - Kosovo — 17Dec2012 — 5,800
  - Kyrgyz Republic — 5Jun1992 — 21,010
  - Latvia — 18Mar1992 — 30,010
  - Lebanon — 17Jul2017 — 9,860
  - Libya — 16July2019 — 9,860
  - Liechtenstein — 28Mar1991 — 5,990
  - Lithuania — 5Mar1992 — 30,010
  - Luxembourg — 28Mar1991 — 60,020
  - Malta — 28Mar1991 — 2,100
  - Mexico — 28Mar1991 — 45,010
  - Moldova — 5May1992 — 30,010
  - Mongolia — 9Oct2000 — 2,990
  - Montenegro — 3June2006 — 5,990
  - Morocco — 28Mar1991 — 24,640
  - Netherlands — 28Mar1991 — 744,350
  - New Zealand — 19Aug1991 — 10,500
  - North Macedonia — 21Apr1993 — 17,620
  - Norway — 28Mar1991 — 375,180
  - Poland — 28Mar1991 — 384,180
  - Portugal — 5Apr1991 — 126,050
  - Romania — 28Mar1991 — 144,070
  - Russian Federation — 9Apr1992 — 1,200,580
  - San Marino — 7Jun2019 — 2,030
  - Serbia — 19Jan2001 — 140,310
  - Slovak Republic — 1Jan1993 — 128,070
  - Slovenia — 23Dec1992 — 62,950
  - Spain — 28Mar1991 — 1,020,490
  - Sweden — 28Mar1991 — 684,320
  - Switzerland — 29Mar1991 — 684,320
  - Tajikistan — 16Oct1992 — 21,010
  - Tunisia — 29Dec2011 — 9,860
  - Turkey — 28Mar1991 — 345,150
  - Turkmenistan — 1Jun1992 — 2,100
  - Ukraine — 13Apr1992 — 240,110
  - United Arab Emirates — 23Sep2021 — 2,030
  - United Kingdom — 28Mar1991 — 2,556,510
  - United States of America — 28Mar1991 — 3,001,480
  - Uzbekistan — 30Apr1992 — 44,120
- ANNEX III.A — Balance sheet references
  - Headings include: "Balance sheet" and "Balance Sheet (In USD million)" and "Balance Sheet As of December 31, 2020 and December 31, 2021 (In thousands of U.S. dollars)."
- ANNEX III.B — Regional groupings and member listings
  - Regional developing members listed include: Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, Venezuela.
  - Non-borrowing member countries listed include: Austria, Belgium, Canada, China, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Japan, Korea, Republic of, Netherlands, Norway, Portugal, Slovenia, Spain, Sweden, Switzerland, United Kingdom, United States of America.
- ANNEX III.C, III.D, III.E — Additional listings and categorizations
  - ANNEX III.C includes a "Balance Sheet As of December 31, 2020 and December 31, 2021 (In thousands of U.S. dollars)."
  - ANNEX III.E separates "Borrowing Member Countries" and "Non-Borrowing Member Countries." Examples shown:
    - Borrowing Member Countries: Anguilla, Antigua and Barbuda, The Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Commonwealth of Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos Islands.
    - Non-Borrowing Member Countries shown in ANNEX III.E: Brazil, Canada, China, Colombia, Germany, Italy, Mexico, United Kingdom, Venezuela.
  - ANNEX III includes multiple "Balance Sheet (In USD million)" headings.

*International Monetary Fund — Applications to Become Holders of SDRs (content unit: ppea2023002, Executive Summary and Annexes I–III excerpts).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Introduction
- This paper presents for the Executive Board’s consideration five applications by official entities to become prescribed holders of SDRs.
- Applicants:
  - Caribbean Development Bank (CDB)
  - Development Bank of Latin America (Corporacion Andina de Fomento or CAF)
  - European Bank for Reconstruction and Development (EBRD)
  - European Investment Bank (EIB)
  - Inter-American Development Bank (IADB)
- All five institutions are well-established multilateral financial institutions and are eligible to be prescribed as holders of SDRs in accordance with Article XVII, Section 3 (i) of the Articles of Agreement.
- Staff recommends that the Executive Board prescribe the five applicants as holders of SDRs.
- Date: January 23, 2023

### Legal framework for becoming a prescribed holder
- SDR Department and participation
  - The SDR Department is separate from the General Department and from trusts and resources administered by the IMF under Article V, Section 2(b).
  - All current Fund members are participants in the SDR Department.
  - SDRs can be held only by the official sector: Fund members participating in the SDR Department, the Fund itself (through the General Resource Account, GRA), and other official entities prescribed by the Executive Board.
  - Prescription requires an Executive Board decision adopted by an 85 percent majority of the total voting power.
- Qualification criteria (Article XVII, Section 3 (i))
  - Eligible entities include: non-members, members that are not participants, institutions that perform functions of a central bank for one or more members, and other official entities.
- Terms and conditions for holding and using SDRs
  - The Executive Board established standard terms and conditions in 1980 under Article XVII, Section 3(iii); these terms have applied to all prescribed holders since then (see Annex I in the source).
- Approval process
  - Staff performs due diligence, ascertains willingness to accept standard terms and conditions, and conducts outreach with the Executive Board to assess likely broad support prior to bringing applications to the Board.
- Permitted prescribed operations
  - Prescribed holders may acquire and use SDRs in prescribed operations with participants and other holders and may elect to take part in the SDR Department’s voluntary trading arrangements (VTA).
  - They do not receive allocations of SDRs, may not request exchange of SDRs with designation, and may not initiate transactions with the General Resources Account.
  - Permitted operations include settlement of financial obligations, loans, pledges, transfers as security, swap operations, forward operations, and donations.
- Termination of prescribed status
  - Ends by (i) Board decision terminating status (majority of votes cast) or (ii) written notice from the prescribed holder seeking termination.

### Experience with existing prescribed holders
- Historical prescribing and usage
  - To date the Fund has prescribed 15 official institutions as holders of SDRs.
  - Most prescribed holders were approved in the 1980s; the last application was from the European Central Bank (ECB) and was approved in 2000.
  - The historic SDR allocation in 2021 nearly tripled total allocated SDRs to SDR 660.7 billion, prompting renewed interest among institutions to become prescribed holders.
- Transaction volumes and patterns
  - Since the creation of the SDR Department, total transactions by prescribed holders amount to about SDR 16 billion.
  - This is approximately 8 percent of total transactions in the SDR Department by volume, and 14 percent by number of transactions.
  - Transaction volumes by category:
    - Regional central banks: SDR 6.6 billion
    - Intergovernmental monetary institutions: SDR 8.5 billion
    - Development institutions: SDR 0.6 billion
  - As of November 30, 2022, six of the fifteen prescribed holders hold SDRs.
- Typical operations
  - Most transactions have been exchanges of SDRs for freely usable currencies through bilateral transactions by agreement or through VTAs, and settlement of financial obligations between regional central banks or intergovernmental monetary institutions and their member states.
  - The BIS is the most active prescribed holder and plays an important role in conducting sales on behalf of trusts and administered accounts administered by the Fund.
- Use by MDBs and multilateral financial institutions
  - Use has been more sporadic; of the eight multilateral financial institutions prescribed, four have made SDR transactions since becoming prescribed holders.

### Assessment of applicants’ eligibility and implications of prescription
- Applicants’ characteristics and engagement
  - The five applicants are well-established official institutions in good standing (see Annex II in the source).
  - Their sovereign shareholders are mostly Fund members and participants in the SDR Department, with specified exceptions noted by staff.
  - Institutions have established track records in development financing, operations similar to existing prescribed holders, adequate funding, robust capital structures, and strong credit ratings.
  - The Fund engages regularly with these institutions in operational activities, including ascertaining financing assurances for Fund-supported programs.
  - Applicants have had technical discussions with staff on SDR operations; some are exploring vehicles for SDR channeling to leverage development financing operations.
- Staff assessment and recommendation
  - Staff assesses that the five applicants meet the criteria to become prescribed holders under Article XVII, Section 3 (i).
  - All applicants understand and accept that their SDR operations must conform with the terms and conditions of prescription for SDR operations.
- Expected implications for the SDR Department
  - Benefits for participants
    - Prescription would enlarge members’ choices to use SDRs, including settling financial obligations and potentially channeling SDRs to development institutions, thereby increasing the attractiveness of the SDR as a reserve asset.
  - Impact on SDR transactions volume and operating costs
    - Based on experience with existing prescribed holders, prescription of new holders is likely to result in a modest increase in SDR transactions and related operating costs in the near future.
    - If new prescribed holders obtain SDRs through settlement of financial obligations by their members (or through channeling), they could either hold SDRs on their balance sheets or exchange them for currencies via direct exchanges with members or in the VTA market.
  - Impact on the VTA market
    - Near-term impact likely limited as applicants are expected to operate only occasionally in the market.
    - There is no indication that any applicant would become a VTA member at this point.
    - Prescription does not impose a duty to acquire SDRs, and prescribed holders would have no initial holdings of SDRs, making immediate VTA membership unlikely.
    - In the longer term, participation and impact on VTAs and IMF trusts would depend on development of SDR channeling options.
    - If channeling materializes, an expectation could be established that members channeling SDRs to development financing institutions stand ready to exchange freely usable currencies for SDRs in the VTA market (an expectation that already exists for members channeling SDRs into the PRGT and Resilience and Sustainability Trust (RST)).
    - Prescribed holders could be encouraged to become VTA members if they are expected to maintain sizeable SDR holdings; any VTA participation would be established through an agreement.

*Source: EXECUTIVE SUMMARY (ppea2023002) — Applications to Become Holders of SDRs, International Monetary Fund*

### 19.      Potential enterprise  risks associated with the approval of the current applications for

### 19.      Potential enterprise  risks associated with the approval of the current applications for 

### Enterprise risk assessment — summary findings
- Operational risk
  - The nature of financial transactions to be executed by the applicants are expected to be similar to those of existing prescribed holders and would not materially increase operational risk in the near term.
  - Onboarding of the new holders and their integration in the Fund’s operating systems would also be relatively straightforward.
  - Over time, operational risks could rise if transactions increase substantially, including from potential channeling of SDRs to prescribed holders.
  - Mitigation: Close monitoring of developments and adequate administrative resources to support financial operations would mitigate these risks.
- Financial and reputational risk
  - Financial and reputational risks to the Fund from prescribing the applicants as holders of SDRs appear low given their characteristics, mandate, and track record, and the expected range and volume of their SDR operations in the near term.
  - Non-prescription could raise questions of evenhanded treatment with similar institutions that are already prescribed holders.
  - Some financial risks could arise over time if substantial amounts of SDRs are channeled to new and existing prescribed holders and these hold on to the SDRs, as this could have a detrimental effect on the liquidity of the VTA market.
  - Mitigation: Encourage prescribed holders with large SDRs holdings to become VTA members.

### Staff recommendation (paragraph 20)
- Staff recommends the approval of the five applications.
- Rationale:
  - The applicants are all official entities and have indicated that they accept the standard terms and conditions of prescription.
  - The prescription of the five applicants as other holders of SDRs would enhance the attractiveness of the SDR as a reserve asset and be consistent with the effective functioning of the SDR Department.
- Decision rule:
  - Pursuant to Article XVII, Section 3(i), the prescription of any holder of SDRs requires an Executive Board decision adopted by an 85 percent of the total voting power.

### Annex I — Terms and Conditions for Acceptance, Holding, and Use of Special Drawing Rights by Other Holders (key provisions)
- 1. Acceptance, Holding, and Use by Prescribed Holders
  - (a) Acceptance and use: A prescribed holder may accept or use SDRs (i) in exchange for an equivalent amount of a monetary asset other than gold in a transaction entered into by agreement with a participant, or another prescribed holder, or (ii) in an operation entered into by agreement with a participant or another prescribed holder in accordance with and on the same terms and conditions established at that time for participants by decisions of the Fund under Article XIX, Section 2(c).
  - (b) Holding: A prescribed holder may hold SDRs, subject to the provisions of this decision, accepted in accordance with (a) above or received as interest paid on its holdings of SDRs in accordance with Article XX, Section 1.
- 2. Acceptance and Use by Participants in Transactions and Operations with Prescribed Holders
  - Participants may enter into transactions and operations by agreement with a prescribed holder in accordance with the prescriptions in paragraph 1(a) of this decision.
- 3. Application of General Provisions
  - The holding of SDRs and the acceptance and use of them in transactions and operations by a prescribed holder shall be governed by the provisions of the Articles, By-Laws, Rules and Regulations, and decisions of the Fund that apply from time to time to all holders of SDRs.
- 4. Exchange Rates
  - The Rules and Regulations and decisions of the Fund that determine the exchange rates applicable at the time of each use or acceptance of SDRs by a participant shall apply to each use or acceptance of them by a prescribed holder.
  - A prescribed holder shall not levy any charge or commission in respect of a transaction involving SDRs.
- 5. Information and Recording
  - The Fund shall inform prescribed holders of matters relevant to the acceptance, holding, and use of SDRs by them.
  - A prescribed holder shall inform the Fund promptly of the facts necessary to record any transactions or operations in which a prescribed holder accepts or uses SDRs.
- 6. Consultation and Review
  - (a) Consultation between the Fund and a prescribed holder shall be held at the request of the Fund or the prescribed holder with respect to the application of this decision or the decision prescribing the holder or with respect to transactions or operations entered into involving SDRs.
  - (b) The Executive Board shall review periodically this decision and decisions prescribing holders.
- 7. General Undertaking
  - Each prescribed holder shall collaborate with the Fund, participants, and other prescribed holders with respect to its acceptance, holding, and use of SDRs in order to facilitate the effective functioning of the SDR Department and the proper use of SDRs in accordance with the Articles and the terms and conditions prescribed by the Fund now or in the future for the acceptance, holding, and use of SDRs by prescribed holders.
- 8. Suspension
  - During any period in which a suspension is in effect under Article XXIII, Section 1 with respect to participants, the suspension shall apply to the same extent to prescribed holders.
- 9. Termination
  - (a) The prescription of a holder of SDRs may be terminated by the Fund by a decision of the Executive Board or by a notice from the prescribed holder in writing to the Fund at its principal office. Termination shall become effective on the date specified in the decision of the Executive Board but not earlier than the date of the decision, or when notice from the prescribed holder is received by the Fund at its principal office.
  - (b) A prescribed holder whose status as such has been terminated may continue to hold the SDRs it held on termination and to receive SDRs as interest on its holdings and may continue to use SDRs to dispose of them in transactions or operations in accordance with paragraph 1(a) above. A prescribed holder whose status has been terminated shall make arrangements, with the concurrence of the Fund, to dispose of its holdings of SDRs as expeditiously as possible and shall exchange SDRs for a freely usable currency selected by the prescribed holder when requested by the Fund.

### Annex II — Summary information on the applicants (key data preserved verbatim)
- A. European Bank for Reconstruction and Development (EBRD)
  - Membership: The EBRD is owned by 71 countries from five continents, as well as the European Union and the European Investment Bank.
  - Headquarters: London.
  - Establishment: The EBRD was established in 1991.
  - Functions:
    - Since its inception, the Bank has invested over EUR 180 billion in a total of more than 6,500 projects in its countries of operations.
    - Activities: Banking and Treasury; main investment products are loans, share investments and guarantees.
  - Financial structure:
    - Share capital: As of the end of 2021, the Bank’s authorized share capital is EUR 30.0 billion, of which subscribed capital amounts to EUR 29.8 billion. Of the subscribed amount, paid-in capital constitutes EUR 6.2 billion.
    - Credit rating: AAA/Aaa/AAA (stable).
- B. Inter-American Development Bank (IADB)
  - Membership: Currently, 48 countries are members.
  - Headquarters: Washington D.C.
  - Establishment: The IADB was established in 1959.
  - Functions:
    - The IADB’s principal activities are providing loans, credit guarantees, and technical assistance to support development projects in its 48 developing member countries.
    - Since its founding, it has approved more than USD 3 33 billion in loans for projects in key sectors.
  - Financial structure:
    - Share capital: At December 31, 2021, subscribed capital stock, net of subscriptions receivable, was USD 170.9 billion, of which USD 6 billion is paid-in, USD 5 .8 billion is additional paid-in capital, and USD 164.9 billion is callable.
    - Credit rating: AAA/Stable/A-1+ by Standard & Poor’s, Aaa/Stable/P1 by Moody’s Investor Services and AAA/Stable/F1+ by Fitch Ratings.
- C. Development Bank of Latin America (Corporacion Andina de Fomento or CAF)
  - Membership: CAF current membership includes 20 shareholder countries in Latin America, the Caribbean, Spain and Portugal, as well as 13 private banks.
  - Headquarters: Caracas, Venezuela.
  - Establishment: The CAF was established in 1968.
  - Functions:
    - CAF offers financial and related services to governments, public and private institutions, corporations and joint ventures operating in its shareholder countries; primarily provides short, medium, and long-term loans and guarantees.
  - Financial structure:
    - The current authorized capital of CAF is USD 25 billion.
    - The subscribed capital of CAF as of December 31, 2021 amounted to USD 7.7 billion of which USD 1.6 billion is callable capital shares.
    - In December 2021, CAF’s Board of Directors approved a USD 7 billion capital increase; this decision was ratified during the CAF’s Shareholders Assembly meeting in March 2022.
    - Credit ratings and updates:
      - On June 17, 2022, Standard and Poor’s raised its long-term credit rating for CAF from AA- to A+ with positive outlook, as well as its short-term credit rating from A-1 to A-1+.
      - In January 2022, Fitch Ratings revised the Outlook on CAF's Long-Term Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at 'A+'.
      - In September 2022, Japan Credit Rating Agency upgraded CAF's rating to AA+ from AA.
      - Moody's Investor Service rates CAF in Aa3.
- D. European Investment Bank (EIB)
  - Membership: The members of the European Investment Bank are the 27 Member States of the European Union.
  - Headquarters: Luxembourg.
  - Establishment: The EIB was established in 1958.
  - Functions:
    - The EIB is a Multilateral Development Bank and the European Union's long-term lending institution.
  - Financial structure:
    - Subscribed capital: The total subscribed capital of the EIB amounts to EUR 248.8 billion (as of 31 December 2021). The subscribed capital is composed of callable and paid-in capital.
    - Credit rating: AAA rating.
- E. Caribbean Development Bank (CDB)
  - Membership: CDB has a total of 28 member countries, including 19 regional borrowing members, 4 regional non-borrowing members, and 5 non-regional, non-borrowing members.
  - Headquarters: St. Michael, Barbados.
  - Establishment: The CDB was established by an Agreement signed October 18, 1969; entered into force January 26, 1970.
  - Functions:
    - The CDB’s principal activities are providing loans, guarantees, investments, borrowing programs, technical assistance, and policy advice to support its member countries’ strategic, economic, social and developmental goals and initiatives.
    - Since its founding, it has approved approximately USD 5.6 billion in loans for projects in key sectors.
  - Financial structure:
    - At the fortieth meeting of the Board of Governors in May 2010, a general capital increase of 150 percent was approved.
    - The Bank’s capital as at December 31 2021 was as follows: subscribed capital USD 1.8 billion, callable capital USD 1.4 billion.

*International Monetary Fund — Applications to Become Holders of SDRs (content unit: ppea2023002, Annexes I–II excerpts).*

### Annex III.  Letters Submitted by Applicants

### Annex III.  Letters Submitted by Applicants

### ANNEX III.A — Listing of Members (excerpted entries as presented)
- Albania — 18Dec1991 — 30,010
- Algeria — 19Oct1991 — 2,030
- Armenia — 7Dec1992 — 14,990
- Australia — 30Mar1991 — 300,140
- Austria — 28Mar1991 — 684,320
- Azerbaijan — 25Sep1992 — 30,010
- Belarus — 10Jun1992 — 60,020
- Belgium — 10Apr1991 — 684,320
- Bosnia and Herzegovina — 17Jun1996 — 50,710
- Bulgaria — 28Mar1991 — 237,110
- Canada — 28Mar1991 — 1,020,490
- China — 15Jan2016 — 29,000
- Croatia — 15Apr1993 — 109,420
- Cyprus — 28Mar1991 — 30,010
- Czech Republic — 1Jan1993 — 256,110
- Denmark — 28Mar1991 — 360,170
- Egypt — 28Mar1991 — 21,010
- Estonia — 28Feb1992 — 30,010
- European Investment Bank — 28Mar1991 — 900,440
- European Union — 28Mar1991 — 900,440
- Finland — 28Mar1991 — 375,180
- France — 28Mar1991 — 2,556,510
- Georgia — 4Sep1992 — 30,010
- Germany — 28Mar1991 — 2,556,510
- Greece — 29Mar1991 — 195,080
- Hungary — 28Mar1991 — 237,110
- Iceland — 29May1991 — 30,010
- India — 11July2018 — 9,860
- Ireland — 28Mar1991 — 90,040
- Israel — 28Mar1991 — 195,080
- Italy — 28Mar1991 — 2,556,510
- Japan — 2Apr1991 — 2,556,510
- Jordan — 29Dec2011 — 9,860
- Kazakhstan — 27Jul1992 — 69,020
- Korea, Republic of — 28Mar1991 — 300,140
- Kosovo — 17Dec2012 — 5,800
- Kyrgyz Republic — 5Jun1992 — 21,010
- Latvia — 18Mar1992 — 30,010
- Lebanon — 17Jul2017 — 9,860
- Libya — 16July2019 — 9,860
- Liechtenstein — 28Mar1991 — 5,990
- Lithuania — 5Mar1992 — 30,010
- Luxembourg — 28Mar1991 — 60,020
- Malta — 28Mar1991 — 2,100
- Mexico — 28Mar1991 — 45,010
- Moldova — 5May1992 — 30,010
- Mongolia — 9Oct2000 — 2,990
- Montenegro — 3June2006 — 5,990
- Morocco — 28Mar1991 — 24,640
- Netherlands — 28Mar1991 — 744,350
- New Zealand — 19Aug1991 — 10,500
- North Macedonia — 21Apr1993 — 17,620
- Norway — 28Mar1991 — 375,180
- Poland — 28Mar1991 — 384,180
- Portugal — 5Apr1991 — 126,050
- Romania — 28Mar1991 — 144,070
- Russian Federation — 9Apr1992 — 1,200,580
- San Marino — 7Jun2019 — 2,030
- Serbia — 19Jan2001 — 140,310
- Slovak Republic — 1Jan1993 — 128,070
- Slovenia — 23Dec1992 — 62,950
- Spain — 28Mar1991 — 1,020,490
- Sweden — 28Mar1991 — 684,320
- Switzerland — 29Mar1991 — 684,320
- Tajikistan — 16Oct1992 — 21,010
- Tunisia — 29Dec2011 — 9,860
- Turkey — 28Mar1991 — 345,150
- Turkmenistan — 1Jun1992 — 2,100
- Ukraine — 13Apr1992 — 240,110
- United Arab Emirates — 23Sep2021 — 2,030
- United Kingdom — 28Mar1991 — 2,556,510
- United States of America — 28Mar1991 — 3,001,480
- Uzbekistan — 30Apr1992 — 44,120

### ANNEX III.A — Balance sheet references
- The Annex includes headings: "Balance sheet" and "Balance Sheet (In USD million)" and "Balance Sheet As of December 31, 2020 and December 31, 2021 (In thousands of U.S. dollars)."

### ANNEX III.B — Regional groupings and member listings
- Regional developing members listed include: Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, Venezuela.
- Non-borrowing member countries listed include: Austria, Belgium, Canada, China, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Japan, Korea, Republic of, Netherlands, Norway, Portugal, Slovenia, Spain, Sweden, Switzerland, United Kingdom, United States of America.

### ANNEX III.C, III.D, III.E — Additional listings and categorizations
- ANNEX III.C includes a "Balance Sheet As of December 31, 2020 and December 31, 2021 (In thousands of U.S. dollars)."
- ANNEX III.E separates "Borrowing Member Countries" and "Non-Borrowing Member Countries." Examples shown:
  - Borrowing Member Countries: Anguilla, Antigua and Barbuda, The Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Commonwealth of Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos Islands.
  - Non-Borrowing Member Countries shown in ANNEX III.E: Brazil, Canada, China, Colombia, Germany, Italy, Mexico, United Kingdom, Venezuela.
- ANNEX III includes multiple "Balance Sheet (In USD million)" headings.

*Source: ppea2023002 - Annex III.  Letters Submitted by Applicants*

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_Source: https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023002.pdf_