The Financial Report 2024 includes the
approved and audited financial statements
required to be submitted under Article 27 of the
Agreement Establishing the European Bank for
Reconstruction and Development and Section 13
of its By-Laws.

The EBRD is a multilateral bank that promotes
the development of the private sector and
entrepreneurial initiative in 36 economies across
three continents. The Bank is owned by 75
countries as well as the EU and the EIB. EBRD
investments are aimed at making the economies
in its regions competitive, well governed, green,
inclusive, resilient and integrated.

EBRD Financial Report 2024 1

Contents

2 EBRD Financial Report 2024

Highlights

The EBRD¹ recorded a net profit of €1.7 billion in 2024, building further on the €2.1 billion gain achieved in 2023.

Similar to 2023, the Bank’s loan investments also continued to provide a stable flow of income of €2.5 billion in 2024, representing 46 per cent of total revenue. The proportion of non-performing loans fell to 6.3 per cent, substantially lower than the 7.9 per cent in 2023, reaching the lowest level since the Russian invasion of Ukraine. Additionally, the return of some non-performing loans to performing status prompted a net release of impairment charges of €0.1 billion.

The Bank’s equity investments performed well, contributing €0.9 billion of gains, 16 per cent of total revenue. These primarily consisted of realised and unrealised fair value gains and this performance exceeded benchmarks applicable to the regions in which the Bank invests.

As a third source of revenue, the Bank’s Treasury activities contributed 39 per cent, totalling €2.1 billion.

While total revenue in 2024 exceeded the 2023 level by €0.3 billion, net profit in 2024 was €0.4 billion lower in comparison to last year, primarily due to higher funding costs of €0.4 billion. The increases in revenue and funding costs were both driven by the same factors: higher average interest rates through the year and an expansion in the size of the balance sheet.

The Bank continues to benefit from very strong support from its members, and in 2024 the first subscriptions to its latest issuance of paid-in capital became effective, resulting in an increase of €1.2 billion. Further subscriptions are anticipated in 2025.

Allowing for income allocations of €20 million and movements recorded in the statement of other comprehensive income, the Bank’s members’ equity increased by €3.0 billion to €25.3 billion overall. The EBRD continues to be rated triple-A with a stable outlook, and was affirmed as such by all three major credit ratings agencies in 2024.

EBRD Financial Report 2024 3

 

EBRD Financial Report 2024 3

Financial results 2020-24

Operational results 2020-24

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²The number of projects to which the Bank made commitments in the year.

³Volume of commitments made by the Bank during the year. This includes (i) new commitments (less any amount cancelled or syndicated within the year); (ii) restructured commitments; and (iii) trade finance (TFP) amounts issued during the year and outstanding at year-end.

⁴Annual mobilised investment is the volume of commitments from entities other than the Bank made available to the client that is explicitly due to the Bank’s direct involvement.

⁵Financing from a private entity on commercial terms due to the Bank’s active involvement.

⁶Multilateral development bank (MDB)-agreed private indirect mobilisation (PIM) is defined as financing from private entities provided in connection with a specific activity for which an MDB is providing financing, where no MDB is playing an active or direct role that leads to the commitment of the private entity’s finance. This amount includes many instances where the EBRD was instrumental in the underlying transaction but the structure of the project did not allow it to evidence the qualification of the mobilised amount as direct mobilisation.

⁷The sum of annual mobilised investment and private indirect mobilisation in a given year.

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⁸As region/sector amounts and disbursements/repayments are individually reported to one decimal point, the sum of these amounts may create a rounding difference with the Annual Bank Investment total.

⁹The Bank’s loans and equity investments at cost, together with undrawn commitments.

¹⁰Principal outflows from the Bank to a client or other agreed third parties.

¹¹Operating assets are the total amounts disbursed less reflows.

¹²See page 68 in note 3 for further details.

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EBRD Financial Report 2024 5

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¹³See page 74 in note 10 for a more detailed explanation.

¹⁴ For information on subscriptions received after 31 December 2024, see note 33 on page 95.

6 EBRD Financial Report 2024

Key financial indicators 2020-24

Key financial indicators are presented for the EBRD covering the last five years. These ratios are influenced by the growth in Banking and Treasury portfolios and Annual Bank Investment over the five-year period in line with the Bank’s strategy. This business growth utilises the Bank’s capital capacity in pursuit of its mandated objectives, while underlying ratios remain at prudent levels.

The Bank’s profits and reserves show volatility due, in particular, to movements in the valuations of share investments and changes in the level of impairment. Return on members’ equity was 7.9 per cent during 2024, achieving an average return on equity of 6.1 per cent over the last five years (2019-23: an average return of 6.5 per cent). The Bank’s non-performing loan ratio stood at 6.3 per cent at 31 December 2024 (2023: 7.9 per cent).

In terms of cost efficiency, the cost to debt income ratio improved to 57.6 per cent in 2024 (2023: 59.3 per cent). This improvement mainly reflected higher debt operating income¹⁵ driven by gains on loans measured at fair value through profit or loss.

Leverage – debt divided by members’ equity – has increased to 218.2 per cent at 31 December 2024 (2023: 203.0 per cent), mainly attributable to an increase in the level of borrowings during the year.

The Bank’s capital strength is illustrated by the level of members’ equity, which represented 29.4 per cent of total assets at 31 December 2024 (2023: 30.2 per cent) and 60.3 per cent of Banking assets (development-related exposure) at 31 December 2024 (2023: 58.1 per cent). The strength of both capital ratios is supported by profitability and subscriptions to the Bank’s third general capital increase, which became effective on 31 December 2024.

During 2024, the Bank’s triple-A credit rating with a stable outlook was affirmed by all three major credit ratings agencies.

Explanatory notes on ratios above

1.(Total closing members’ equity minus total opening members’ equity) divided by total opening members’ equity. The total closing members’ equity is before net income allocations and capital subscriptions accounted for during the year.

2.(Total closing members’ equity minus total opening members’ equity) divided by total opening members’ equity. The unrealised Banking fair value movements are excluded from both the total closing and opening members’ equity. The total closing members’ equity is also adjusted for net income allocations and capital subscriptions accounted for during the year.

3.Total administrative expenses (excluding non-budgeted and exceptional items) divided by total Banking debt operating income before provisions for impairment.

4.Total non-performing loans as a percentage of total loan operating assets before provisions and fair value adjustments. For further information on non-performing loans see page 38 in the “Risk management” section.

5.Represents the average credit rating weighted by Treasury liquid assets based on the Bank’s internal rating scale on page 38.

6.The average tenor of Treasury assets in years is derived from the weighted average time to final maturity, with the exception of asset-backed securities (ABS) whose final maturity is approximated by the average life of the transaction.

7.Treasury liquid assets divided by total Banking undrawn commitments (undisbursed but committed investments), plus one year’s debt service, which comprises debt due for redemption within one year (based on expected rather than contractual maturity) and one year’s estimated interest expense.

8.Total borrowings divided by total members’ equity.

9.Total members’ equity (adjusted for paid-in capital receivable) divided by total assets (adjusted for liabilities owed to the Equity Participation Fund).

10.Total members’ equity (adjusted for paid-in capital receivable) divided by total net book value of Banking assets.

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¹⁵For the calculation of this metric, movements in debt income attributable to effective interest rate (EIR) adjustments are excluded.

EBRD Financial Report 2024 7

Additional reporting and disclosures

Corporate governance

The Bank is committed to the highest standards of corporate governance. Responsibilities and related controls throughout the Bank are properly defined and delineated. Transparency and accountability are integral elements of its corporate governance framework. This structure is further supported by a system of reporting, with information appropriately tailored for, and disseminated to, each level of responsibility within the Bank to enable checks and balances on the Bank’s activities to function effectively.

The Bank’s governing constituent document is the Agreement Establishing the EBRD (the Agreement), which states that the institution will have a Board of Governors, a Board of Directors, a President and Vice Presidents, as well as other officers and staff.

Board of Governors

All the powers of the Bank are vested in the Board of Governors, which represents the Bank’s 77¹⁶ members. With the exception of certain reserved powers, the Board of Governors has delegated the exercise of its powers to the Board of Directors, while retaining overall authority.

Board of Directors

The Board of Directors comprises 23 Directors and is chaired by the President. Each Director represents one or more members. Subject to the Board of Governors’ overall authority, the Board of Directors is responsible for the direction of the Bank’s general operations and policies. It exercises the powers expressly assigned to it by the Agreement and those powers delegated to it by the Board of Governors. The Board of Governors has established the following Committees: the Procedures Committee, the Governors’ Committee, the Remuneration Committee and the Ethics Committee.

Board committees

The Board of Directors has established three board committees to assist with its work:

The Audit and Risk Committee assists the Board of Directors in fulfilling its responsibilities in relation to the following:

•the integrity of the Bank’s financial statements and its accounting, financial reporting and disclosure policies and practices

•the soundness of the Bank’s systems of internal controls that management has established regarding finance and accounting matters and their effective implementation

•the Bank’s Independent Evaluation function, including its status, performance and ability to perform its duties independently and in line with the provisions of the Bank’s Evaluation Policy

•the Bank’s Independent Project Accountability Mechanism (IPAM), including its status, performance and ability to perform its duties independently and in line with the provisions of the Project Accountability Policy

•the Bank’s Internal Audit function

•the Bank’s Compliance function

•the Bank’s Risk Management function

•the independence, qualifications and performance of the Bank’s external auditors

•other responsibilities within its remit.

The Budget and Administrative Affairs Committee assists the Board of Directors in fulfilling its responsibilities in relation to the following:

•oversight of the preparation of the Strategy Implementation Plan (SIP) and review of those parts that fall within its remit

•efficiency, cost control and budgetary prudence

•oversight of the Bank’s Special Funds (in particular the EBRD Shareholder Special Fund), the use of donor funding and relations with the donor community

•the Bank’s human resources policies

•specific responsibilities in relation to Governors, the President, Vice Presidents and Directors of the Bank

•the Bank’s administrative arrangements

•other responsibilities within its remit.

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¹⁶At 31 December 2024 the Bank had 76 members. Nigeria became the Bank’s 77th member on 26 February 2025.

8 EBRD Financial Report 2024

 

The Financial and Operations Policies Committee assists the Board of Directors in fulfilling its responsibilities in relation to the following:

•oversight of the preparation of the Strategic and Capital Framework (SCF) and review of those parts that fall within its remit

•the Bank’s financial policies

•the Bank’s operations policies, which include (but are not limited to) sector strategies

•the annual review of the Bank’s operations and lending strategy in each recipient country

•the Bank’s policies relating to transparency, disclosure and good governance, and the promotion of environmentally sound and sustainable development

•other responsibilities within its remit.

The President

The President is elected by the Board of Governors. The President is the legal representative and chief of staff of the EBRD. Under the guidance of the Board of Directors, the President conducts the day-to-day business of the Bank.

The President chairs the Bank’s Executive Committee, which also includes the Vice Presidents and other members of the Bank’s senior management.

Primary management committees

Listed below are the committees that directly advised the President or a member of the Executive Committee on the overall management of the Bank during 2024.

EBRD Financial Report 2024 9

 

Compliance

The EBRD’s Office of the Chief Compliance Officer (OCCO) has been established as a function that is independent of the Bank’s operational departments. It is headed by a Chief Compliance Officer (CCO) who reports to the President and has full and free access to the Chair of the Audit and Risk Committee. Any decision to remove the CCO (other than for misconduct) shall be taken by the President in accordance with guidance given by the Board of Directors in an Executive Session.

OCCO’s mission is to protect the integrity and reputation of the Bank, to promote ethical standards of behaviour and to strengthen the Bank’s accountability and transparency. OCCO assists in identifying, assessing and monitoring integrity risks arising from failure to comply with the Bank’s standards and policies; and contributes, in an independent manner, to the Bank’s effective management of such risks. OCCO is also responsible for the development and maintenance of the policies and standards it enforces. The EBRD’s Integrity Risks Policy and Terms of Reference for OCCO, most recently revised on 16 July 2024, and available on the EBRD’s website,¹⁷ set out, for the benefit of the Bank’s stakeholders, the manner in which OCCO helps the Bank to protect its integrity and reputation and to manage integrity risks related to clients and personal conduct-related risks.

As part of its standard-setting role, OCCO is responsible for developing and recommending the policies, rules, procedures and processes governing the ethical behaviour of Board officials, management and staff of the Bank; for establishing the standards of integrity that the Bank expects of its clients, project sponsors and other counterparties; and for ensuring that policies, rules, procedures and processes are effectively communicated and implemented. Its objective is to ensure that the internal standards of integrity at the EBRD are in line with international good practice, creating a demonstration effect in the economies where the Bank invests.

The Code of Conduct for Officials of the Board of Directors of the EBRD and the Code of Conduct for EBRD Personnel (the Codes) are the Bank’s core ethical policies that allow it to assess and mitigate personal conduct-related risks. The Codes are approved by the Bank’s Board of Governors and represent and articulate the values, duties, obligations and ethical standards that the EBRD expects of its Board Officials and staff members. Each Code must be reviewed as and when deemed necessary, but no later than five years from the date on which it became effective. A key element of the Bank’s ethics architecture is a standing Ethics Committee, consisting of Directors selected under a codified procedure. It exercises prescribed functions under the Codes for Covered Persons (namely: (i) Board Officials; (ii) the President; (iii) Vice Presidents; (iv) the Chief Evaluator; (v) the Chief Accountability Officer; (vi) the Chief Compliance Officer; and (vii) the Chief Internal Auditor). For example, it considers requests for authorisations and/or derogations for Covered Persons and investigates reports of alleged misconduct by Covered Persons. The Codes can be found at: www.ebrd.com/integrity-and-compliance.html.

Financial and integrity due diligence are integrated into the Bank’s approval of new business and the monitoring of its existing operations. OCCO provides independent expert advice to management on significant integrity concerns and assesses whether the potential risk is acceptable to the Bank. It monitors the integrity due diligence information provided by the Banking Department to ensure that it is accurate and that integrity concerns are properly identified and, where possible, mitigated. It also advises on and manages risks relating to the identification and handling of material non-public information, and those relating to conflicts of interest that may arise between the EBRD’s multiple relationships with, or interests in, clients. In addition, the EBRD’s policy on Domiciliation of EBRD Clients (the Domiciliation Policy) sets out the conditions under which the EBRD may finance a project when a borrower, an investee or a controlling entity is domiciled in a jurisdiction other than that where the project is located (a third jurisdiction). The Domiciliation Unit within OCCO assesses projects to determine whether jurisdictions used in cross-border ownership structures are acceptable.

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¹⁷www.ebrd.com/home/who-we-are/strategies-governance-compliance/office-chief-compliance-officer.html

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OCCO is further responsible for investigating allegations of staff misconduct, as well as allegations of fraud and corruption in relation to the Bank’s projects and counterparties. Allegations of staff misconduct are investigated under the Conduct and Disciplinary Rules and Procedures (CDRPs), which address, among other things, the Bank’s approach to handling complaints of inappropriate behaviour and the division of responsibility between the CCO as fact-finder and the Managing Director, Human Resources and Organisational Development as decision-maker. The CDRPs specify the rights and duties of both the Bank and the staff member in question during the investigative and disciplinary processes and provide safeguards for the subject of the investigation. Allegations of misconduct on the part of the Covered Persons are dealt with in accordance with the provisions of the Codes. Revision of the CDRPs, together with the Harassment-Free and Respectful Workplace Procedures (RWPs), which set out processes for dealing with improper interpersonal behaviour, was completed in 2024 and the updated CDRPs and RWPs came into effect on 14 October 2024.

Allegations of fraud and corruption in relation to activities and projects financed from the Bank’s ordinary capital resources (including the purchase of goods, works or services for the Bank) or from special resources, or from Cooperation Funds administered by the Bank, are investigated under the Bank’s Enforcement Policy and Procedures (EPPs). The EBRD’s EPPs are the policy and procedures governing the investigation and sanctioning (if necessary) of parties alleged to have engaged in Prohibited Practices in relation to Bank assets or a Bank project and the sanctioning of parties on whom a third-party finding (as defined by the EPPs) has been imposed. The EPPs define Prohibited Practices as coercion, collusion, corruption, fraud, misuse of EBRD resources or EBRD assets, obstruction and theft. They also allow for a two-tier decision-making process, the introduction of a settlement process and streamlining the procedures for referring matters to national authorities. The EPPs also describe the process by which the Bank applies sanctions imposed by other multilateral development banks pursuant to the Agreement for the Mutual Enforcement of Debarment Decisions. Details of the individuals, entities and sanctions are posted at www.ebrd.com/ineligible-entities.html.

OCCO is also responsible for training Bank personnel in relation to the Bank’s ethical principles, anti-money-laundering and counter-terrorist-financing requirements. It also provides mandatory training to Board Officials on the Board Code of Conduct. In addition, it provides specialist training and advises, as necessary, individuals who are nominated by the Bank to serve as directors on the boards of companies in which the Bank holds an equity interest.

The Bank’s annual Integrity and Anti-Corruption Report is published by OCCO. The report describes the Bank’s strategy to promote integrity and prevent fraud and corruption and highlights the most recent measures taken. It can be found at www.ebrd.com/integrity-and-compliance.html.

Independent Project Accountability Mechanism

The Bank has an accountability mechanism that assesses and reviews complaints about environmental, social and disclosure issues in relation to Bank-financed projects and provides, where warranted, a determination as to whether the Bank acted in compliance with relevant policies when it approved a particular project. The mechanism also has a problem-solving function which can serve to address concerns through dialogue between the project sponsor and members of the affected community. The Independent Project Accountability Mechanism (IPAM) reports to the Board via the Audit and Risk Committee and is headed by the Chief Accountability Officer. The Chief Accountability Officer is responsible for directing the effective implementation of the EBRD’s 2019 Project Accountability Policy, promoting institutional accountability at the project level, institutional learning and upholding the reputation of the Bank.

Information about IPAM and registered complaints can be found at
www.ebrd.com/home/what-we-do/projects/independent-project-accountability-mechanism.html.

Independent Evaluation department

The independent Evaluation Department evaluates the performance of the Bank’s completed projects and programmes relative to objectives. It reports directly to the Board of Directors, is independent from the Bank’s management, and systematically analyses the results of both individual projects and wider themes defined in the Bank’s policies. The independence of the department ensures that it can perform two critical functions: enhance the Bank’s accountability through a rigorous independent assessment of its operations, policies and strategies; and promote institutional learning through effective evaluation knowledge management and learning loops. While the department considers management’s views in preparing its evaluations, it alone makes the final decision about the content of its reports.

EBRD Financial Report 2024 11

 

Reporting

The EBRD’s corporate governance structure is supported by appropriate financial and management reporting. The Bank has a functioning mechanism to be able to certify in the Financial Report 2024 as to the effectiveness of internal controls over external financial reporting, using the COSO (Committee of Sponsoring Organisations of the Treadway Commission) internal control framework (2013). This annual certification statement is signed by both the President and the Vice President, Chief Financial Officer and is subject to a review and an attestation by the Bank’s external auditors. In addition, the Bank has a comprehensive system of reporting to its Board of Directors and its committees. This includes reporting to the Audit and Risk Committee on the activities of the Independent Evaluation Department and the Internal Audit Department.

Financial and operational risks

Financial and operational risks are discussed in the “Risk management” section of this report, which begins on page 35.

Internal audit

The Internal Audit Department is a third line of defence and, in accordance with the Institute of Internal Auditors’ International Professional Practices Framework, is responsible for providing independent and objective assurance to executive management and the Board of Directors on the adequacy and effectiveness of internal controls, governance and risk management processes to mitigate the Bank’s key risks.

External auditors

The external auditors are appointed by the Board of Directors, on the recommendation of the President. The external auditors may be appointed for terms of five years with a maximum of two consecutive terms. In 2019, the Board approved the appointment of PricewaterhouseCoopers LLP as the Bank’s external auditors for the five-year period 2020-24. In 2024 the Board approved the appointment of Deloitte LLP as the Bank’s subsequent external auditors for the five-year period 2025-29.

The external auditors perform an annual audit in order to be able to express an opinion on whether the financial statements give a true and fair view of the state of the Bank’s affairs and of its profit and cash flows, in accordance with International Financial Reporting Standards (IFRS). In addition, the external auditors provide their opinion on management’s assertion as to the effectiveness of internal controls over financial reporting. This opinion is given as a separate report to the audit opinion. At the conclusion of their annual audit, the external auditors prepare a management letter for the Audit and Risk Committee, setting out their views and management’s responses on the effectiveness of internal controls and other matters. This letter is reviewed in detail and discussed with the Audit and Risk Committee. The Audit and Risk Committee reviews the performance and independence of the external auditors annually.

There are key provisions in the Bank’s policies regarding the independence of the external auditors. The external auditors are prohibited from providing non-audit-related services to the Bank unless such a service is judged to be in the interest of the Bank, is consistent with relevant professional independence principles, and is approved by the Audit and Risk Committee. The external auditors can also provide consultancy and other services paid for by the Bank, Special Funds and Cooperation Funds relating to client projects only if such incidences are similarly approved by the Audit and Risk Committee. Collectively, all non-audit-related services provided by the external auditor are subject to a cap approved by the Audit and Risk Committee.

Reward policy

The Bank has designed a market-oriented staff reward policy, within the constraints of its status as an international financial institution (IFI), with the following principles that reward should:

•be competitively positioned in order to attract and retain high calibre employees from a wide range of the Bank’s regions

•promote a culture where consistent high performance and behaviours that reflect EBRD values and competencies are recognised and rewarded

•facilitate mobility in support of business objectives and continued staff development

•deliver a high-quality package of benefits on a global basis to provide an appropriate level of security and be relevant to a diverse employee base

•engage with employees through an open and transparent total reward process.

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To help meet these principles, the Bank uses market comparators to evaluate its staff compensation and aims to ensure that salary and performance-based compensation awards are driven by performance. Market comparators for the Bank are primarily private-sector financial institutions in each of its locations plus other IFIs.

The performance-based compensation awards are structured to recognise individual and team contributions to the Bank’s overall performance. These payments represent a limited proportion of the overall total compensation and benefits package provided to staff.

EBRD staff remuneration

Staff on fixed-term or regular contracts are eligible for an annual salary adjustment which is reviewed on 1 January each year. In addition, members of staff who are not eligible for overtime pay are eligible to receive a performance-based compensation award depending on the Bank’s and the individual staff member’s performance, and subject to any eligibility clause specified within their contractual terms of reference.

Staff on fixed-term or regular contracts, as well as most of the Board of Directors,¹⁸ the President and Vice Presidents, are covered by medical insurance, life insurance and participate in the Bank’s retirement plans. Certain staff hired from abroad may be eligible for some allowances to assist with costs related to their relocation.

There are two retirement plans in operation. The Money Purchase Plan is a defined contribution plan to which both the Bank and staff contribute, with Plan members making individual investment decisions. The Final Salary Plan (FSP) is a defined benefit plan, to which only the Bank contributes. Both plans provide a lump sum benefit on leaving the Bank or at retirement age, such that retirement plan obligations to staff once they have left the Bank or retired are minimal (being limited to inflation adjustments on undrawn or deferred benefits under the FSP). The rules for the retirement plans are approved by the Board of Directors and the operation of the plans is monitored by a Retirement Plan Committee, a Retirement Plan Administration Committee and a Retirement Plan Investment Committee.

The salaries and emoluments of all staff are subject to an internal tax, applied at rates that vary according to the individual’s salary and personal circumstances. Their salaries and emoluments are exempt from national income tax in the United Kingdom.

President and Vice Presidents

The President is elected by the Board of Governors and typically receives a fixed-term contract of four years. The President’s salary and benefits are approved by the Board of Governors. The President can participate in the same benefit schemes as the staff but is not eligible for performance-based compensation awards.

The Vice Presidents are appointed by the Board of Directors on the recommendation of the President and typically have fixed-term contracts of four years. Their salaries and benefits are approved by the Board of Directors. The Vice Presidents can participate in the same benefit schemes as the staff but are not eligible for performance-based compensation awards.

The gross salaries, from which internal tax is deducted, for each of these positions is as follows:

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¹⁸Some Directors and Alternate Directors are paid directly by their constituency and do not participate in the Bank’s retirement plans and/or other benefits.

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Board of Directors

Directors are elected by the Board of Governors for a term of three years and may be re-elected. Directors appoint Alternate Directors. The salaries of Directors and Alternate Directors are approved by the Board of Governors. They can participate in the same benefit schemes as staff but are not eligible for performance-based compensation awards. Some Directors and Alternates are paid directly by the constituency that they represent. In such cases, the funds that would otherwise be used by the Bank to pay such Directors and Alternates are made available to the directorship to offset other eligible costs.

The most recently approved gross salaries for these positions, from which internal tax is deducted, are as follows:

Senior management

Key management personnel comprise members of the Bank’s Executive Committee and Managing Directors. This group, excluding the President and Vice Presidents (for whom information is given above), consists of 36 (2023: 36) individuals who received gross salaries, from which internal tax is deducted, in the ranges shown in the table below. The average performance-based compensation award for eligible members of this group was 20 per cent of annual gross salaries in 2024 (2023: 20 per cent).

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Consolidated income statement

These financial statements were approved for issue by the Board of Directors on 9 April 2025.

Pages 19 to 95 are an integral part of these financial statements.

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Consolidated statement of
comprehensive income

Pages 19 to 95 are an integral part of these financial statements.

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¹⁹The presentation of this note has been amended to align with the requirements of IAS 1, by separately disclosing those gains or losses on cash flow hedges that have been reclassified to profit or loss and those which may be reclassified subsequently. Previously, in this table, they had been disclosed on a net basis as one line item. €33 million of gains formerly presented as items that may be reclassified to profit and loss are now disclosed as items that have been reclassified to profit or loss. There is no change in the total amounts presented.

²⁰See footnote 19.

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Consolidated balance sheet

Pages 19 to 95 are an integral part of these financial statements.

EBRD Financial Report 2024 17

Consolidated statement of changes
in equity

Refer to note 27 on “Reserves and retained earnings” on page 85 for a further explanation of the Bank’s reserves.

Pages 19 to 95 are an integral part of these financial statements.

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Consolidated statement of cash flows

Cash and cash equivalents are amounts with less than three months to maturity from the date of the transactions, which are available for use at short notice and are subject to insignificant risk of change in value. Within the 31 December 2024 balance is €2 million restricted for technical assistance to be provided to member economies in the SEMED region (2023: €2 million). Also within the 31 December 2024 balance is €44 million (2023: €18 million) of “restricted cash”. The restricted cash cannot be transferred out of Russia. See note 13 on page 80 for total amounts in “Placements with and advances to credit institutions”.

Interest received was €7,724 million (2023: €5,411 million) and interest paid was €6,247 million (2023: €4,407 million).

Pages 19 to 95 are an integral part of these financial statements.

EBRD Financial Report 2024 19

Accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

A. Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through other comprehensive income, financial assets and financial liabilities held at fair value through profit or loss and all derivative contracts. In addition, financial assets and liabilities subject to amortised cost measurement which form part of a qualifying hedge relationship have been accounted for in accordance with hedge accounting rules – see “Derivative financial instruments and hedge accounting” on page 22.

2022 was the first year for which consolidated financial statements were presented. From 31 December 2022 the Bank began to control the EBRD Shareholder Special Fund. As the parent entity, the Bank is therefore required to present consolidated financial statements. There is no statutory or other requirement for the Bank to present standalone parent entity accounts.

The financial statements have been prepared on a going-concern basis owing to the strength of the Bank’s capital and liquidity positions, the level of operational resilience demonstrated in previous years and the high level of shareholder support (as demonstrated through the capital increase which became effective on 31 December 2024). The Bank’s Board of Directors considered the Bank’s ongoing financial sustainability when approving the Bank’s “Strategy Implementation Plan 2025-27” in December 2024, which analysed the Bank’s capital and liquidity position. The going-concern assessment was confirmed by the President and Vice President, Chief Financial Officer on 9 April 2025, the date on which they signed the financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain significant accounting estimates. It also requires management to exercise its judgement in the process of applying the Bank’s policies. The areas involving a higher degree of judgement or complexity, or areas where judgements and estimates are significant to the financial statements, are disclosed in “Accounting policies and judgements” which begins on page 20 and “Significant accounting estimates and critical judgements” which begins on page 28.

New and amended IFRS mandatorily effective for the current reporting period

There were a number of amendments to existing standards, effective for the current reporting period, which have negligible or no impact on the Bank’s financial statements, namely:

•Amendments to IFRS 16: Leases

•Amendments to IAS 1: Presentation of Financial Statements

•Amendments to IFRS 7: Financial Instruments: Disclosures and IAS 7: Statement of Cash Flows

IFRS not yet mandatorily effective and not adopted early

The following standards and amendments are not yet effective and have not been adopted early.

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B. Accounting policies and judgements

Consolidation

The consolidated financial statements of the Bank combine the financial statements of the European Bank for Reconstruction and Development and its wholly controlled subsidiary, the EBRD Shareholder Special Fund (SSF). The Bank has control over another entity when it has each of the following:

•Power over the relevant activities of the entity

•Exposure to, or rights to, variable returns from its involvement with the entity

•The ability to affect those returns through its power over the entity.

The assessment of control is based on the consideration of all facts and circumstances. The Bank reassesses whether it controls an entity if facts and circumstances indicate that there are changes to one or more of the three elements of control. On 31 December 2022 the rules of the SSF were amended such that, in the event of its liquidation, all remaining resources of the fund would be passed to the Bank. This amended the EBRD’s assessment of control as, through the change, the Bank became exposed to variable returns through its involvement with the SSF, whereas previously it was not. The Bank consolidated the SSF on an acquisition accounting basis, whereby the Bank recognised the identifiable assets and liabilities of the SSF at the date of consolidation and paid no monetary consideration to obtain control of the SSF. As the Bank paid no cash consideration to acquire the SSF, and only an implied capital contribution which was recognised, no goodwill arose on consolidation. As the change was delivered through a change in the rules of the SSF approved by the shareholders of the Bank, the change has been accounted for as a transaction with shareholders in the consolidated statement of changes in equity on page 17.

Intra-group transactions and balances are eliminated on consolidation. Consistent accounting policies are used across the Bank and its subsidiary for the purposes of consolidation.

Financial assets – classification and measurement

The classification of the Bank’s financial assets depends on both the contractual characteristics of the assets and the business model adopted for their management. Based on this, financial assets are classified in one of three categories: those measured at amortised cost, those measured at fair value through other comprehensive income and those measured at fair value through profit or loss.

Financial assets at amortised cost

An investment is classified as “amortised cost” only if both of the following criteria are met: the objective of the Bank’s business model is to hold the asset to collect the contractual cash flows; and the contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding, interest being consideration for the time value of money and the credit risk associated with the principal amount outstanding.

Investments meeting these criteria are measured initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. They are subsequently measured at amortised cost using the effective interest method less any impairment. Except for debt securities held at amortised cost, which are recognised on trade date, the Bank’s financial assets at amortised cost are recognised at settlement date.

Financial assets at fair value through other comprehensive income

The Bank accounts for a small number of strategic equity investments²¹ at fair value through other comprehensive income with no recycling of such fair value gains or losses through the income statement on derecognition. Dividend income received on these investments is recognised in the income statement. Such a classification is available only for equity investments that are not held for trading purposes, following an irrevocable election to do so at the point of initial recognition.

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²¹See note 20 to the financial statements on page 82.

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In addition to the above class of financial assets at fair value through other comprehensive income, a category is available whereby gains or losses recognised in other comprehensive income are subsequently recognised in the income statement. An investment is classified as “fair value through other comprehensive income” in this manner only if both of the following criteria are met: the objective of the Bank’s business model is achieved by both holding the asset to collect the contractual cash flows and by selling the asset; and the contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding, interest being consideration for the time value of money and the credit risk associated with the principal amount outstanding.

A subsection of the Bank’s loan investments meeting these criteria are measured initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. They are subsequently measured at fair value, but until derecognition the amounts recorded in the income statement are the interest income measured using the effective interest method less any impairment. The difference between the fair value movements and the amounts recorded in the income statement is recognised in the statement of other comprehensive income. Upon derecognition the fair value gains or losses previously recognised as other comprehensive income are then recycled to the income statement. The Bank’s financial assets at fair value through other comprehensive income are recognised at settlement date.

Financial assets at fair value through profit or loss

If neither of the classifications above apply, the financial asset is classified as “fair value through profit or loss”. The presence of an embedded derivative, or other features which could potentially change the cash flows arising on a financial asset so that they no longer represent solely payments of principal and interest, requires that instrument to be classified at fair value through profit or loss, an example being a convertible loan.

Financial assets classified at fair value through profit or loss are recognised on a settlement-date basis if within the Banking loan portfolio and on a trade-date basis if within the Treasury portfolio.

The Bank’s share investments – equity investments held within its Banking portfolio – are measured at fair value through profit or loss, including associate investments. The Bank considers the latter to be venture capital investments for which IAS 28: Investments in Associates and Joint Ventures does not require the equity method of accounting. This is a critical judgement. The Bank’s financial objectives through these investments are to generate returns from capital appreciation and dividend income. The Bank plays no active role in their management and their performance is measured by the Bank on a fair value basis.

The basis of fair value for listed share investments in an active market is the quoted bid market price on the balance sheet date. The basis of fair value for share investments that are either unlisted or listed in an inactive market is determined using valuation techniques appropriate to the market and industry of each investment. The primary valuation techniques used are net asset value and earnings-based valuations, to which a multiple is applied based on information from comparable companies and discounted cash flows. Techniques used to support these valuations include industry valuation benchmarks and recent transaction prices.

The Bank’s share investments are recognised on a trade-date basis.

At initial recognition, the Bank measures these assets at their fair value. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the income statement. Such assets are carried at fair value on the balance sheet with changes in fair value included in the income statement in the period in which they occur.

Derecognition of financial assets

The Bank derecognises a financial asset, or a portion of a financial asset, where the contractual rights to that asset have expired or where the rights to further cash flows from the asset have been transferred to a third party and, with them, either:

1)substantially all the risks and rewards of the asset, or

2)significant risks and rewards, along with the unconditional ability to sell or pledge the asset.

Where significant risks and rewards have been transferred, but the transferee does not have the unconditional ability to sell or pledge the asset, the Bank continues to account for the asset to the extent of its continuing involvement. Where neither derecognition nor continuing involvement accounting is appropriate, the Bank continues to recognise the asset in its entirety and recognises any consideration received as a financial liability.

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Financial liabilities

With the exception of derivative instruments that must be measured at fair value, and the Bank’s obligations to the Equity Participation Fund,²² the Bank does not designate any financial liabilities at fair value through profit or loss. All are measured at amortised cost, unless they are part of a designated fair value hedge in which case the amortised cost is adjusted for the fair value movements attributable to the risks being hedged. Liabilities are recognised when the Bank becomes party to the contractual provisions of the instrument.

Interest expense is accrued using the effective interest rate method and is recognised within the “interest expense and similar charges” line of the income statement, except for the allocated cost of funding Treasury’s trading assets which is recognised within “net gains from Treasury activities at fair value through profit or loss”.

Where a financial liability contains an embedded derivative, which is of a different economic character to the host instrument, that embedded derivative is bifurcated and measured at fair value through the income statement. IFRS does not require bifurcation of embedded derivatives in the case of financial assets.

Contingent liabilities

Contingent liabilities are possible obligations arising from past events, whose existence will be confirmed only by uncertain future events, or present obligations arising from past events that are not recognised because either an outflow of economic benefits is not probable, or the amount of the obligation cannot be reliably measured. Contingent liabilities are not recognised but information about them is disclosed unless the possibility of any outflow of economic benefits in settlement is remote.

Derivative financial instruments and hedge accounting

The Bank primarily makes use of derivatives for five purposes:

1)to swap the majority of the Bank’s issued securities, excluding commercial paper, so as to convert the issuance proceeds into the currency and interest rate structure sought by the Bank

2)to manage the net interest rate risks and foreign exchange risks arising from all of its financial assets and liabilities, and some of its forecast transactions

3)to provide potential exit strategies for its unlisted equity investments through negotiated put and call options

4)through currency swaps, to manage funding requirements for the Bank’s loan portfolio

5)to manage the foreign exchange risks arising from the Bank’s expenses, the majority of which are incurred in pound sterling.

All derivatives are measured at fair value through profit and loss unless they form part of a qualifying cash flow hedge, in which case the fair value movement is taken into reserves and released into the income statement at the same time as the risks on the hedged cash flows are recognised therein. Any hedge ineffectiveness will result in the relevant proportion of the fair value movement remaining in the income statement.

Derivative fair values are derived primarily from discounted cash flow (DCF) models, option pricing models and from third-party quotes. Derivatives are carried as assets when their fair values are positive and as liabilities when their fair values are negative.

The Bank applies additional valuation measures for its over-the-counter (OTC)²³ derivatives portfolio to reflect credit and funding cost adjustments which the Bank reasonably anticipates will be incorporated into the exit price for such instruments.

In line with market practice, the Bank also applies valuation adjustments to these derivatives attributable to “cheapest-to-deliver” factors, reflecting the value of terms and conditions relating to the posting of collateral in the Bank’s Credit Support Annexes (CSA) to the ISDA Master Agreements.

The valuation adjustment deriving from these factors is detailed within the “Risk management” section of the report on page 35.

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²²See page 93 in note 32 for further details on the Equity Participation Fund.

²³OTC derivatives are those not settled through a central clearing party.

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Hedge accounting

Hedge accounting is designed to bring accounting consistency to financial instruments that would not otherwise be permitted. A valid hedge relationship exists when a specific relationship can be identified between two or more financial instruments in which the change in value of one instrument (the hedging instrument) is highly negatively correlated to the change in value of the other (the hedged item).

The Bank applies IFRS 9 hedge accounting treatment to individually identified hedge relationships. The Bank documents the relationship between hedging instruments and hedged items upon initial recognition of the transaction. The Bank also documents its assessment, on an ongoing basis, of whether the derivatives that are used in hedging transactions have an economic relationship with the hedged items, offsetting changes in their fair values or cash flows.

The gains and losses associated with these hedge relationships are recognised within “Fair value movement on non-qualifying and ineffective hedges”. Also included within this portion of the income statement are the gains and losses attributable to derivatives that the Bank uses for managing interest-rate risk on a macro basis, but for which the Bank does not apply hedge accounting.

Fair value hedges

The Bank’s hedging activities are primarily designed to mitigate interest rate risk by using swaps to convert the interest rate risk profile, on both assets and liabilities, into floating rate risk. Such hedges are known as “fair value” hedges. Changes in the fair value of the derivatives that are designated and qualify as fair value hedges are included in the income statement, along with the corresponding change in fair value of the hedged asset or liability that is attributable to that specific hedged risk. In the event that a hedge relationship ceases prior to the maturity of the hedged item, any accumulated fair value adjustments applied to the hedged item are amortised to the income statement over the remaining life of the instrument.

To qualify for hedge accounting under IFRS 9, there must be a demonstrable economic relationship between the hedged item and the hedging instrument, where credit risk is not a dominant factor in the value changes expected in that relationship. The principal factors driving valuation changes in the Bank’s hedged items in these hedging relationships are the hedged risk, interest rate risk, and foreign exchange risk²⁴. Credit risk is a negligible factor driving valuation changes in the hedged items.

One of the principal causes of ineffectiveness in the Bank’s fair value hedging relationships is the foreign currency basis spread; a pricing factor applicable to the cross-currency swaps designated as hedging items in many of the Bank’s hedge relationships. Changes in foreign currency basis risk lead to hedge ineffectiveness as they cause movements in the value of the hedging instrument, the cross-currency swap, but do not directly lead to movements in the value of the hedged item. The Bank applies the option available under IFRS 9 to separate the foreign currency basis spread of a financial instrument in a hedging relationship, with changes in its value recognised in “Other comprehensive income”. The amounts recognised in “Other comprehensive income” are subsequently amortised through the income statement over the remaining life of the hedging relationship in “Fair value movement on non-qualifying and ineffective hedges”.

Any remaining ineffectiveness arising from the Bank’s fair value hedging relationships after separating the foreign currency basis risk is recognised in “Fair value movement on non-qualifying and ineffective hedges” in the income statement.

Cash flow hedges

The Bank typically engages in cash flow hedges for two purposes. These are to minimise the exchange rate risk associated with the fact that the majority of its administrative expenses are incurred in pound sterling, and to minimise the volatility of its euro-denominated interest income. The amount and timing of such hedges fluctuate in line with the Bank’s view on opportune moments to execute the hedges. The movement in the fair value of these hedges is recognised as other comprehensive income until such time as the relevant income or expenditure occurs, when the hedge gains or losses will be reflected as part of the hedged income statement line item for the year. At 31 December 2024 the Bank had hedged a portion of its forecast euro interest income and had not yet hedged any of the 2025 anticipated pound sterling administrative expenditure.

For further information on risk and related management policies see the “Risk management” section, which begins on page 35.

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²⁴ Foreign exchange risk is not managed through hedge accounting relationships but through matched funding across the balance sheet (as explained in the “Market risk” section, which begins on page 51). There is minimal residual foreign exchange risk held by the Bank in relation to the hedged items.

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Interest rate benchmark reforms

A number of interest rate benchmarks to which the Bank is exposed have undergone reform. The reforms were intended to create a more transparent system that minimises the reliance on judgement and maximises the use of observable trade data in producing the benchmarks. The reforms were completed on 30 September 2024, when synthetic US dollar LIBOR settings (one-month, three-month and six-month) ceased to be published.

The majority of the Bank’s trades that referenced interest rate benchmarks subject to these reforms have now transitioned, including all those instruments to which the Bank applies hedge accounting. The table below shows the Bank’s exposure at the year-end to significant benchmark interest rates subject to reform where the trades have yet to transition.²⁵ These instruments are subject to fallback provisions which are designed to address the transition-related issues for those contracts that continue to reference the previous benchmarks, pending their transition to a new benchmark rate.

Issued financial guarantees

Issued financial guarantees are initially recognised at their fair value, with an asset representing the discounted value of the guarantee fee income and a liability representing the expected credit loss (ECL). After initial recognition, the guarantee asset continues to be recognised at the discounted value of the future fee income. The guarantee liability is subsequently measured at the higher of the amortised value at initial recognition or the expected credit losses. The differences between the unwinding of the discount on the asset and the movements of the liability are recognised in the income statement. The financial guarantee assets and liabilities are recognised within “other financial assets” and “other financial liabilities”.

Impairment of financial assets

Financial assets at amortised cost – performing assets (Stages 1 and 2)

Under IFRS 9 the Bank’s methodology is to calculate impairment on an expected credit loss basis. Provisions for impairment for assets that are not individually identified as credit-impaired are calculated on a portfolio basis.

A “three-stage” model for impairment is applied based on changes in credit quality since origination,²⁶ with the stage allocation being based on the financial asset’s probability of default (PD) and additional qualitative considerations. At origination loans are classified in Stage 1. If there is subsequently a significant increase in credit risk associated with the asset, it is then reallocated to Stage 2. The transition from Stage 1 to Stage 2 is significant because provisions for Stage 1 assets are based on expected losses over a 12-month horizon, whereas Stage 2 assets are provisioned based on lifetime expected losses. When objective evidence of credit impairment is identified, the asset is reallocated to Stage 3 as described below.

The staging model relies on a relative assessment of credit risk – that is, a loan with the same characteristics could be included in Stage 1 or in Stage 2, depending on the credit risk at origination of the loan. As a result, the Bank could have different loans with the same counterparty that are included in different stages of the model, depending on the credit risk that each loan had at origination.

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²⁵These remaining trades are anticipated to transition in 2025.

²⁶For the purpose of calculating impairment, origination is the trade date of the asset (that is, the signing date in the case of the Bank’s loans at amortised cost), not the date of the initial recognition of the asset on the Bank’s balance sheet.

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For Stage 1 and Stage 2 assets impairment is deducted from the asset categories on the balance sheet and charged to the income statement. The Bank additionally makes transfers within its reserves, maintaining a separate loan loss reserve to supplement the cumulative amount provisioned through the Bank’s income statement for Stage 1 assets. The amounts held within the loan loss reserve equate to the difference between the ECL calculated on a lifetime basis and the ECL calculated over a 12-month horizon for the assets held in Stage 1.

Assets that have been modified will continue to be assessed for staging purposes against the PD from the original inception of the asset, unless the modified cash flows are sufficiently different that the original asset has been derecognised and a new asset, with a new inception PD, has been recognised in its place.

Stage assessment

In order to determine whether there has been a significant increase in the credit risk since origination, and hence transition to Stage 2 is required, a combination of quantitative and qualitative risk metrics is employed. All loans with at least a three-notch downgrade in PD on the Bank’s internal ratings scale since origination (or a two-notch downgrade in the case of loans originated with a higher level of credit risk), all loans for which the contractual payments are overdue by between 31 and 89 days inclusive, as well as all loans placed on the “watch list”²⁷ are transitioned to Stage 2.

Financial assets at amortised cost – non-performing assets (Stage 3)

Where there is objective evidence that an identified loan asset is credit-impaired, any specific provisions for impairment that are required are recognised in the income statement and, under IFRS 9, the asset is classified in Stage 3. The data that the Bank uses to determine if there is observable evidence that the asset is credit-impaired include:

•delinquency in contractual payments of principal or interest

•cash flow difficulties experienced by the borrower

•breach of loan covenants or conditions

•initiation of bankruptcy proceedings

•deterioration in the borrower’s competitive position.

Impairment is quantified as the difference between the carrying amount of the asset and the net present value of expected future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an offsetting impairment account and the amount of the loss is recognised in the income statement. After initial impairment, subsequent adjustments include first the continued recognition of interest income, using the effective interest rate methodology at the original rate on the loan, based on the remaining net book value, and second any adjustments required in respect of a reassessment of the initial impairment.

The carrying amount of the asset is reduced directly only through repayment or upon write-off. When a loan is deemed uncollectible the principal is written off against the related impairment provision. Such loans are written off only after all necessary procedures have been completed and the amount of the loss has been determined.

Loans and advances may be renegotiated in response to an adverse change in the circumstances of the borrower. Where the original loan has been significantly amended it will be derecognised and replaced with a new loan. To the extent the original loan is retained, any changes in present value attributable to the modification will be recognised as an adjustment to the carrying value of the asset with the associated gains or losses on modification recognised in the income statement.

Financial assets at fair value through other comprehensive income

Impairment of financial assets held at fair value through other comprehensive income is assessed in the same way as for financial assets at amortised cost. The impairment gains and losses thus calculated are recorded in the income statement within impairment provisions on Banking loan investments. Unlike amortised cost instruments, no separate provision is recorded on the balance sheet, with the impairment gains and losses instead forming part of the overall fair value of these assets.

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²⁷A project is assigned to the “watch list” when a risk officer determines that there is a heightened risk, which needs to be flagged to management and Corporate Recovery, of the project failing to meet debt service and the Bank subsequently suffering a financial loss.

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Write-offs

Financial assets are written off when the Bank assesses that there is no longer any reasonable expectation of further recoveries. The Bank continues to apply its enforcement processes even for financial assets that have been written off. In the event that further recoveries are made after a financial asset has been written off, these are credited to the income statement as a reversal of previous impairment losses.

Statement of cash flows

The statement of cash flows is prepared using the indirect method. Cash and cash equivalents comprise balances with less than three months’ maturity from the date of the transaction, which are available for use at short notice and are subject to insignificant risk of changes in value.

Foreign currencies

The Bank’s reporting currency for the presentation of its financial statements is the euro. The functional currency of the Bank is also the euro, the currency in which the receipts from its operating activities are retained and which, in line with its risk management strategies, most faithfully represents the economic effects of the Bank’s underlying transactions, events and conditions.

Foreign currency transactions are initially translated into euro using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at the year-end exchange rate of monetary assets and liabilities denominated in foreign currencies, are included in the income statement, except when deferred in reserves as qualifying cash flow hedges.

Capital subscriptions

The Bank’s share capital is denominated in euros and is divided into paid-in and callable shares. Paid-in shares are recognised on the balance sheet as “Members’ equity”. The paid-in shares are puttable instruments and hence are compound instruments with both debt and equity components. The Bank has made a critical judgement by electing to assess the present value of the puttable amount, the debt component, by assessing the timing of the expected future cash flows. At the point of issuance, and at subsequent reporting dates, there was no significant likelihood that members would exercise their right to request repurchase of their shares by the Bank within the foreseeable future. This is due to the fact that the terms of this option are not financially advantageous, and also because the EBRD benefits from very strong support for its mandate from shareholders, whose backing is not primarily driven by the financial returns associated with their membership of the Bank. Consequently the future redemption amount associated with this option had no material present value at issuance and at subsequent reporting dates, and no separate liability representing the option has therefore been recognised. To date no member has ever exercised this option or given notice to exercise this option.

New subscriptions to paid-in shares are recognised at the date the subscription becomes effective. In 2023 the Board of Governors approved the Bank’s third general capital increase (GCI), an increase to the authorised share capital of new paid-in shares. Members wishing to subscribe to the GCI must provide an instrument of subscription together with a representation that all necessary legislative and internal steps have been taken to enable the subscription. Subscriptions meeting these criteria became effective on 31 December 2024. Paid-in capital receivables arising from subscriptions made to the GCI are initially recognised at fair value, which equates to the notional amount payable by subscribing members, and are subsequently measured at amortised cost. Paid-in capital receivables are non-interest-bearing financial assets and are recorded within “Other receivables” on the balance sheet.

Callable shares will not be recorded on the balance sheet unless the Bank exercises its right to call the shares.

Transfers of net income

Transfers of net income approved by the Board of Governors are accounted for, at the date of approval, as transactions with equity holders recorded in the statement of changes in equity.

Intangible assets

Costs associated with maintaining computer software programs are recognised as an expense as incurred. Costs that are directly associated with identifiable and unique software products controlled by the Bank, and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the staff costs of the software development team.

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Expenditure that enhances or extends the performance of computer software programs beyond their original specifications is recognised as a capital improvement and is added to the original cost of the software. Computer software development costs recognised as intangible assets are amortised using the straight-line method over an estimated life of three to ten years.

Accounting for leases

Short-term leases of 12 months or less and low-value leases of assets worth less than £5,000 are accounted for as a general administrative expense, recognised in the income statement on a straight-line basis over the period of the lease.

The leases for the Bank’s office accommodation do not qualify for this simplified treatment under IFRS 16. Instead, at the inception of such a lease, the Bank recognises a lease liability and a “right-of-use” asset on the balance sheet.

The lease liability is calculated as the present value of the remaining lease payments, discounted at the Bank’s incremental cost of borrowing. Over the life of the lease the discount to the future lease payments is unwound and recognised in the income statement as an interest expense. The right-of-use asset represents the value to the Bank of its right to operate the leased asset over the life of the lease. This asset is depreciated on a straight-line basis over the life of the lease. The total cost of the lease is therefore recognised through a combination of both interest expense and depreciation over the life of the lease.

Under the terms of the Bank’s headquarters lease, the Bank has a reinstatement obligation to restore the premises at end of its tenancy. A provision of €7 million for the estimated cost of this obligation is recognised in other financial liabilities.

Property and equipment

In 2017 the Bank took legal ownership of a stock of railcars in part settlement of a loan which was in default, and which had been fully provisioned. The loan and associated provision were each reduced by the value attributed to the railcars. The railcars are classified as “property and equipment” with income generated from the operation of the railcars classified as fee and commission income.

Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method to write off the cost of each asset to its residual value over the estimated life as follows:

Interest, fees, commissions and dividends

Interest income and expense is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future payments or receipts to the gross carrying amount of the financial instrument. This method requires that, in addition to the contractual interest rate attached to a financial instrument, those fees and direct costs associated with originating the instrument are also recognised as interest income or expense over the life of the instrument. Further details are provided below.

•Banking loans: this represents interest income on banking loans. Interest is recognised on credit-impaired loans through unwinding the discount used in deriving the carrying value of the expected future cash flows.

•Fixed-income debt securities and other: this represents interest income on Treasury investments with the exception of those measured at fair value where the interest is recognised in “net gains from Treasury activities at fair value through profit or loss”. Where hedge accounting is applied to an underlying investment – typically using a swap to convert fixed-rate interest into floating – the net interest of the swap is included within this interest income line.

•Interest expense and similar charges: this represents interest expense on all borrowed funds. The majority of the Bank’s borrowings are undertaken through the issuance of bonds that are usually paired with a one-to-one swap to convert the proceeds into the currency and floating rate profile sought by the Bank. Hedge accounting is applied to such relationships and the net interest of the associated swap is included within interest expense.

•Net interest income/(expense) on derivatives: in addition to swaps where the interest is associated with specific investments or borrowings, the Bank also employs a range of derivatives to manage the risk deriving from interest rate mismatches between the asset and liability side of the balance sheet. The net interest associated with these derivatives is presented separately as it is not identifiable to individual assets or liabilities presented elsewhere within “net interest income”. This lack of specific “matching” also means that hedge accounting is not applied in respect of the risks hedged by these derivatives.

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Fees earned in respect of services provided over a period of time, including loan commitment fees, are recognised as income as the services are provided and the performance obligations met. Fees and commissions in respect of other services are recognised in the income statement, as the right to consideration or payment accrues through performance of services. Issuance fees and redemption premiums or discounts are amortised over the period to maturity of the related borrowings on an effective yield basis.

Dividends relating to share investments are recognised when the Bank’s right to receive payments has been established, and when it is probable that the economic benefits will flow to the Bank and the amount can be reliably measured.

Staff retirement schemes

The Bank has a defined contribution scheme and a defined benefit scheme to provide retirement benefits to its staff. The Bank keeps all contributions to the schemes, and all other assets and income held for the purposes of the schemes, separately from all of its other assets.

Under the defined contribution scheme, the Bank and staff contribute a set amount to provide a lump sum benefit, such contributions being charged to the income statement and transferred to the scheme’s independent custodians.

The defined benefit scheme is funded entirely by the Bank and benefits are based on years of service and a percentage of final gross base salary as defined in the scheme. The Bank’s contributions to the defined benefit scheme are determined by the Retirement Plan Committee, with advice from the Bank’s actuaries, and the contributions are transferred to the scheme’s independent custodians.

The defined benefit cost charged to the income statement represents the service cost, the net interest income/(cost) and any foreign exchange movements on the plan’s net asset or liability. Remeasurements due to actuarial assumptions, including the difference between expected and actual net interest, are recognised in “other comprehensive income”. The net defined benefit or liability recognised on the balance sheet is equal to the difference between the fair value of the plan assets and the liabilities of the defined benefit plan as determined using the projected unit credit method.

Taxation

In accordance with Article 53 of the Agreement, within the scope of its official activities, the Bank, its assets, property and income are exempt from all direct taxes. Taxes and duties levied on goods or services are likewise exempted or reimbursable except for those parts of taxes or duties that represent charges for public utility services.

Funds administered by the Bank

The Bank administers a number of funds on behalf of donors; these are described in detail in note 31 on page 92 and note 32 on page 93. With the exception of the EBRD Shareholder Special Fund, the Bank does not control these funds as it manages the funds as an agent, on behalf of and for the benefit of the donors, and does not have significant exposure to variability of returns through its administration of the funds. The funds are therefore not consolidated within the Bank’s financial statements.

Following a change to its rules on 31 December 2022 the EBRD Shareholder Special Fund (SSF) is now controlled by the Bank and is therefore consolidated within its financial statements. For further information on the consolidation of the SSF, please see note 2 on page 68.

C. Significant accounting estimates and critical judgements

Preparing financial statements in conformity with IFRS requires the Bank to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts included in the income statement during the reporting period. Estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

These estimates are highly dependent on a number of variables that reflect the economic environment and financial markets of the economies in which the Bank invests, but which are not directly correlated to market risks such as interest rate and foreign exchange risk. The Bank’s significant accounting estimates are outlined below.

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Fair value of derivative financial instruments

The fair values of the Bank’s derivative financial instruments are determined by using discounted cash flow models and option pricing models. These cash flow models are based on underlying market prices for currencies, interest rates and option volatilities. Where market data are not available for all elements of a derivative’s valuation, extrapolation and interpolation of existing data has been used. Where significant unobservable inputs have been used, a sensitivity analysis has been included under “Fair value hierarchy” on page 64 within the “Risk management” section of the report.

Fair value of Banking loans

The fair values of the Bank’s loans carried at fair value are determined by using a combination of third-party valuations, whole firm valuations based on multiples and discounted cash flow models. These models incorporate relevant market data pertaining to interest rates, a borrower’s credit spreads, underlying equity prices and dividend cash flows. Where relevant market data are not available extrapolation and interpolation of existing data has been used. Where significant unobservable inputs have been used, a sensitivity analysis has been included under “Fair value hierarchy” on page 64 within the “Risk management” section of the report. While this population, as a result of its relatively small size, does not carry a significant risk of material changes in estimate over the next 12 months, it is nonetheless an area of greater estimation uncertainty.

Fair value of share investments

The Bank’s method for determining the fair value of share investments is described under “Financial assets” in the “Accounting policies” section of the report and an analysis of the share investment portfolio is provided in note 19 on page 82. In relation to the Bank’s share investments where the valuations are based on significant unobservable market inputs, additional sensitivity information has been included under “Fair value hierarchy” on page 64 in the “Risk management” section of the report.

Staff retirement defined benefit obligation

Independent actuaries calculate the defined benefit obligation at least every three years by using the projected unit credit method. For intermediate years, the defined benefit obligation is estimated using approximate actuarial roll-forward techniques that allow for additional benefit accrual, actual cash flows and changes in the underlying actuarial assumptions. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows (relating to service accrued to the balance sheet date) using the yields available on high-quality corporate bonds. The determination of this rate is a significant assumption within this accounting estimate. The Bank utilises an industry-standard third-party classification system to determine the population of bonds used to make this estimate. The valuation of the pension obligation is a significant accounting estimate; the sensitivities in respect of this estimate are described in note 30 on page 90.

Impairment of loan investments

The Bank’s method for determining the level of impairment of loan investments is described within the “Accounting policies and judgements” section of the report on page 20 and further explained under “Credit risk” within the “Risk management” section of the report on page 35.

In accordance with IFRS 9, ECL represents the average credit losses weighted by the probabilities of default (PD), whereby credit losses are defined as the present value of all cash shortfalls. The ECL is calculated for both Stage 1 and Stage 2 loans by applying the provision rate to the projected exposure at default (EAD) and discounting the resulting provision using the loan’s effective interest rate (EIR). The provision rate is generated by multiplying the PD rate and the loss given default (LGD) rate applicable to the loan. The determination of PD, LGD and EAD are key assumptions in this estimate, and are explained in greater depth below.

In both 2024 and 2023, in addition to the modelled ECL for loans in Stage 1 and Stage 2, the Bank further included a post-model adjustment (PMA) increasing the provision for impairments of amortised cost loan investments based in Ukraine by €400 million (2023: €387 million) at year-end. The purpose of the adjustment was to cater for the uncertainties related to the war on Ukraine where the inputs for the ECL model are unable to appropriately reflect the impact and expectations of deterioration within affected portfolios. The PMA is scenario-based, centralising on the assumption of a prolonged war (2024: 55 per cent weighting, 2023: 70 per cent), with other scenarios covering escalation (2024: 30 per cent weighting, 2023: 20 per cent) and cessation of hostilities (2024: 15 per cent weighting, 2023: 10 per cent). In 2024 the weightings of the scenarios were adjusted based on the Bank’s most recent assessment of the situation in Ukraine. The loss assumptions in the different scenarios are an estimate with a high degree of expert judgement applied given the limited availability of reliable data. These assumptions are summarised as follows:

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•The prolonged war scenario applies assumptions of losses based on industry sector, with provision rates ranging from 29 to 100 per cent.

•The escalation scenario applies an assumption of 100 per cent losses on all assets based in Ukraine.

•The cessation of hostilities scenario assumes that all losses have been identified with no further deterioration expected.

Point-in-time PD rates

To calculate expected credit losses for both Stage 1 and Stage 2 assets, a default probability is mapped to each PD rating using historical default data. The Bank uses forward looking point-in-time (PIT) PD rates to calculate the ECL. The PIT PD rates are derived from through-the-cycle (TTC) PD rates adjusted for projected macroeconomic conditions.

TTC PD rates express the likelihood of a default based on long-term credit risk trend rates, and are constructed by using external benchmarks for investment grades and internal default experience for sub-investment grades. These are then adjusted based on analysis of the Bank’s historical default experience in relation to the macroeconomic environment prevailing at the time of default.

In 2024 the Bank updated its methodology for collecting default data and deriving PD ratings. The changes encompassed:

•Recording observations at the level of the counterparty as opposed to the operation level

•Refreshing the sectoral TTC PD matrices in line with the above change in observation methodology.

The impact of this change on the date of application in September 2024 was an increase in ECL of €10 million.

The cumulative TTC PD rates used in 2024 and 2023 are set out by internal rating grade below:

Financial institutions (FI)

Corporate sector

Sustainable infrastructure (SI)

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²⁸The Bank’s internal PD rating scale is explained in detail on page 38 in the “Risk management” section.

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Financial institutions

Corporate sector

Sustainable infrastructure

The Bank has applied forward-looking macroeconomic scenario information in the ECL calculation by breaking down TTC PD rates into PD rates applicable during periods of macroeconomic growth and recession, therefore considering two distinct forward-looking macroeconomic scenarios for each country. The probabilities of growth and recession are derived from GDP forecasts, sourced from the IMF, using the normal distribution of forecasted GDP with standard deviation equal to historical mean forecasting error for the country. The weighted average one-year probability of growth was 86 per cent at the end of 2024 (2023: 84 per cent).²⁹ Given the regions in which the Bank operates, there is a relative scarcity of applicable historical macro-financial data. Of these, GDP growth has been assessed as having comfortably the most significant correlation with historic loss experience, and therefore GDP growth is the sole variable used in establishing PIT PD rates. Forward-looking country-specific probabilities of macroeconomic growth and recession using a three-year GDP horizon are a key driver of PIT PD rates, and therefore a key driver of the level of impairment recognised by the Bank.

Loss given default rates

A loss given default (LGD) rate is assigned to individual facilities indicating how much the Bank expects to lose on each facility if the borrower defaults. The rates for non-sovereign senior and subordinated loans are derived from the Bank’s default and recovery experience, and rates for covered bonds are in line with the guidance provided by the European Banking Authority.

In the case of a sovereign default, the Bank believes that its payment would be more likely to remain uninterrupted, benefiting from its preferred creditor status. These features are reflected in the LGD rate assigned to a sovereign exposure. Different categories of LGD rates are established based on the ability of the state to extend preferred creditor status (PCS), primarily through reviewing the ratio of preferred creditor debt to overall public debt and the overall institutional and governance effectiveness. Sub-sovereign recovery rates are adjusted in line with the recovery rates associated with the respective sovereigns.