Global bank

Global bank (also World Bank) is a financial institution that started operating as a result of the Bretton Woods Conference of July 1944, and started its operations on June 25, 1946. The main reason for its creation was primarily the desire to rebuild the countries of Europe and Japan, which had been destroyed by the Second World War .

Currently, the institution has 189 member countries and is based in Washington, with Jim Yong Kim as its president.

The main bodies of the Global Bank are :

• Board of Governors,
• Executive Directors (Directorate)
• President, head of the Secretariat.

Formally, each of these bodies has separate competences and improvements in relation to each of these three organisations according to their statutory provisions .

The member countries or shareholders are represented by the Board of Governors, who are the final decision-makers in the Global Bank.

The Global Bank’s mission

The Global Bank's most important mission is to reduce global poverty by helping the poorest countries and creating the right conditions for sustainable development .

Objectives of the Global Bank

When the Global Bank was set up, its main task was to help European countries rebuild after the Second World War. Today, the World Bank's most important objectives are (objectives set out in the UN Millennium Declaration) :

• eradicating poverty and hunger
• promoting universal access to education
• promoting equality between women's and men's rights
• reducing child mortality
• the improvement of material living conditions
• the fight against HIV/AIDS, malaria and other diseases
• promoting sustainable development
• measures to protect the environment.

Member States

The Global Bank is not a bank in the strict sense of the word. It provides long-term loans at preferential rates for the most needy Member States and public enterprises (after receiving government guarantees), grants, technical assistance - all for the purpose of fighting poverty and financing the development of such areas of social life as health care, education, environmental protection or the development of infrastructure. Instead, however, it requires certain political measures, such as the fight against corruption, the development of democracy or, most importantly, the development of the private sector . Funding for lending to less developed countries comes from Member States' contributions, the repayment of earlier debts by countries and the issuance of bonds on the global capital markets. Countries belonging to the International Monetary Fund may become members of the Global Bank.

Global Bank Group

The term Global Bank refers to two of the five UN specialised agencies working together in the Global Bank Group :

• The International Bank for Reconstruction and Development (IBRD)
• The International Development Association.
• The term World Bank also refers to the three other institutions that are organisationally linked but financially independent. Together they are referred to as the Global Bank Group:
• International Centre for Settlement of Investment Disputes (ICSID). Founded in 1966, it is an independent international institution created to negotiate and discuss between investors and capital importers and settle disputes between them.

The Multilateral lnvestment Guarantee Agency (MIGA) was established in 1988. It supports private investments in developing countries and investment insurance against economic risk. It supports governments seeking private investment with advice. MIGA guarantees reach US$2 billion annually (Global Financial Development Report 2015/2016). International Finance Corporation (IFC) was established in 1956. It supports the economic development of developing countries by providing direct loans to the private sector. No government guarantees are required (as opposed to WB loans). The Corporation lends US$2 billion annually. IFC also has the right to participate (up to 30%) in the companies to which it lends. IFC also forms lending consortia .

Examples of Global bank

• The World Bank Group: a unique partnership of five specialized institutions: The International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). The World Bank Group is the largest source of development finance in the world, providing loans, grants, and other forms of financial assistance to more than 100 developing countries around the world.
• Asian Development Bank: established in 1966, the Asian Development Bank (ADB) is a regional development bank focused on poverty reduction in the Asia-Pacific region. It provides financing to member countries in the form of loans, grants, guarantees, and technical assistance.
• European Bank for Reconstruction and Development: the European Bank for Reconstruction and Development (EBRD) is an international financial institution established in 1991 to help countries in Central and Eastern Europe and the Commonwealth of Independent States to transition to market-based economies. The EBRD provides investment, technical assistance and advice to governments, businesses and civil society to promote economic development and progress in the countries where it operates.

Advantages of Global bank

The Global Bank is an international financial institution that offers numerous advantages to its users. These include:

• Access to low-cost investment capital: The Global Bank has a large portfolio of funds and investments, making it a source of low-cost capital for projects and initiatives in developing countries.
• Technical assistance and capacity building: The Global Bank provides technical assistance and capacity building to help countries to develop their economies and to improve their standards of living.
• Borrowing and lending opportunities: Through its lending activities, the Global Bank provides borrowing and lending opportunities to countries, which can be used to finance public and private sector projects.
• Promoting international cooperation: The Global Bank also promotes international cooperation and collaboration between countries, helping them to develop mutually beneficial partnerships.
• Establishing global standards: The Global Bank sets global standards for financial operations, helping to ensure that countries comply with international law and regulations.
• Investment in infrastructure: The Global Bank makes investments in infrastructure in developing countries, which can help to create jobs and stimulate economic growth.

Limitations of Global bank

Global banks have certain limitations related to their structure and operation. These include:

• Lack of direct control over national governments, since the bank does not have the power to impose its policies on countries that are members or potential members.
• Limited ability to influence the economies of member countries, since the bank does not have the power to control their economies.
• Restricted access to capital markets and limited ability to engage in financial transactions such as currency swaps, derivatives, and other investments.
• Limited influence on global economic and financial policies, since the bank is not a member of any international organization and is not able to impose its policies on other countries.
• Limited ability to provide loans and other capital to developing countries, due to restrictions on the amount of resources that can be allocated to particular countries.
• Limited influence on global economic and financial policies, since the bank is not a member of any international organization and is not able to impose its policies on other countries.
• Limited ability to mobilize resources for global development, since the bank does not receive funding from governments or international organizations.

Other approaches related to Global bank

The Global bank is often associated with more than just rebuilding the countries of Europe and Japan. Other approaches related to the Global bank include:

• Supporting economic development and poverty reduction in developing countries by providing loans, grants, and other forms of financial aid.
• Supporting global public goods, such as improved infrastructure, education, and health services.
• Promoting the adoption of new technologies and practices among developing countries, such as those related to climate change.
• Supporting regional integration, including through the implementation of regional trade agreements.
• Facilitating international trade and investment.

In summary, the Global bank is an international financial institution, created to help rebuild Europe and Japan after the Second World War, which now has a wide range of functions related to economic development and poverty reduction in developing countries, global public goods, technologies, regional integration and international trade and investment.

Global bank — recommended articles

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References

• Allayannis G., Ihrig, J. and Weston, J. (2001). Exchange-Rate Hedging: Financial versus Operational Strategies. American Economic Review, 91(2), p. 391-395.
• Andreeva, A., Branda R., (2009). Rates of Return on Assets and Equity for Private Banking Sector in Selected Countries of Western and Eastern Europe. Background Paper, World Bank, Washington, DC, p. 8-9.
• Arvai Z., Driessen K., Ötker-Robe I. (2009). Regional Financial Interlinkages and Financial Contagion within Europe. IMF Working Paper 09/6, International Monetary Fund, Washington, DC, p. 7-8.
• Bogetic Z., (2009). Russian Economic Report 18. Europe and Central Asia Region, World Bank, Washington, DC, p.15.
• Global Financial Development Report 2015/2016: Long-Term Finance Published: August 2015 World Bank Group p.: 173-189
• http://www.worldbank.org/

Footnotes

Author: Justyna Wąsiołek