Losses due to country credit risk are covered by income-generating capacity and risk-bearing capital

Portfolio concentration risk, which arises when a small group of borrowers account for a large

Share of loans outstanding, is a key concern for IBRD and is carefully managed, in part, through a

Single borrower exposure limit.

For FY 2005, the single borrower exposure limit is $13,5 billion, unchanged from FY 2004, which is

the lower of the concentration risk limit ($13,5 billion) and the equitable access limit ($21,4 billion).

Since the current exposure data presented are at a point in time, evaluating these exposures

Relative to the limit requires consideration of the repayment profiles of existing loans, as well as

Disbursement profiles and projected new loans and guarantees.

Under certain circumstances, IBRD would be able to continue to lend to a borrower that was

Reaching the single borrower exposure limit by entering into an arrangement that would prevent its

Net exposure from exceeding the limit. Any such arrangement would need to be approved in advance

by IBRD's Executive Directors. During FY 2003, IBRD entered into the first such arrange-

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Ment with one borrower, China. As of June 30, 2004, China had not exceeded the single borrower

Exposure limit and therefore, activation of the arrangement was not required.

Vocabulary Notes to Text 10.7.1.3.