BBVA Peru Capital Optimization

Project Description

This summary covers equity investments by Banco Bilbao Vizcaya Argentaria, S.A. (BBVA or the Group), in its subsidiary in Peru, Banco BBVA Perú S.A. (BBVA Peru or the Subsidiary). The investor has applied for a MIGA guarantee of up to USD700 million for capital optimization cover for a period of up to 3 years (the Project). This guarantee is part of a multi-country Mandatory Reserves Program with BBVA [link to Turkiye SPG; link to Argentina SPG].

BBVA is a global financial services group founded in 1857. The bank is present in more than 25 countries, has a strong leadership position in the Spanish market, is the largest financial institution in Mexico and it has leading franchises in South America and Turkey. BBVA contributes with its activity to the progress and welfare of all its stakeholders: shareholders, clients, employees, providers and society in general. In this regard, BBVA supports families, entrepreneurs and companies in their plans, and helps them to take advantage of the opportunities provided by innovation and technology. Likewise, BBVA offers its customers a unique value proposition, leveraged on technology and data, helping them improve their financial health with personalized information on financial decision-making. As of December 2024, the group employed 125,916 people across 5,749 branches and served more than 77.2 million customers. Further information on the BBVA Group can be found on https://shareholdersandinvestors.bbva.com/.

BBVA Peru was acquired by the Group in 1995. The Group holds 47.1% of shares. The Subsidiary provides a broad range of financial and non-financial products, serving more than 8.8 million clients through its 7,545 employees.

Environmental Categorization

BBVA Peru provides financial products and services to retail, small and medium enterprises and corporate clients in Peru. The sectors and types of transactions supported by BBVA Peru are considered to be mostly medium risk, with potentially limited adverse E&S risks and impacts that are site-specific, reversible and can be addressed through mitigation measures. Transactions in high-risk sectors with significant E&S risks and impacts are expected to be few. The Project is thus categorized as FI-2 in accordance with MIGA’s Policy on Environmental and Social Sustainability (2013).

The main E&S risks of this Project are associated with BBVA Peru’s ability to identify, assess and manage the E&S risks of its financing activities and the Bank’s labor practices. The applicable E&S requirements for the MIGA Project portfolio will be: (i) MIGA’s Exclusion List; (ii) applicable national environmental and social laws and regulations in Peru; and (iii) the MIGA Performance Standards (for eligible corporate loans).

MIGA analyzed BBVA Peru’s portfolio by types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. As of December 2024, BBVA Peru’s portfolio included the following business segments – corporate finance (medium to long term loans to clients in mostly medium-risk sectors), and project finance, retail banking and consumer loans, SMEs, and loans to financial institutions. The main sectors supported include consumer loans; retail; agriculture and fishing; construction and real estate; consumer goods; retail; transportation; transport service; leisure and common services; machinery and other industrial production; and oil, gas and mining. BBVA Peru currently has no exposure to activities on the MIGA Exclusion List. The Bank has exposure to oil and gas activities. BBVA Group has policies covering the Group’s commitment decarbonization of its loan portfolio by 2030 and Net Zero by 2050.

MIGA assessed BBVA Peru’s E&S policies and procedures in line with the requirements of MIGA Performance Standard 1: Assessment and Management of E&S Risks and Impacts (PS1) and also assessed the bank’s labor practices in line with MIGA Performance Standard 2: Labor and Working Conditions (PS2).

In relation to E&S risk management, BBVA Group has been an Equators Principles financial intermediary since 2004. The Group has E&S policies – Sustainability General Policy and the Environmental and Social Framework; these are mainly focused on management of E&S risks associated with high-risk sectors and are applicable to all subsidiaries.. BBVA Peru has a Sustainability Policy and an Environmental and Social Management System (ESMS) for identifying and evaluating potential E&S risks and impacts associated with its lending activities. The ESMS covers transaction screening, risk categorization, compliance with E&S national laws and identification of E&S actions to address identified gaps, as well as monitoring and reporting requirements and stakeholder engagement. The ESMS also covers the application of the IFC Performance Standards to Equator Principles transactions. In addition, BBVA Peru has an E&S team responsible for the implementation of the E&S procedures. For the MIGA Project, BBVA Peru will be required to include MIGA’s criteria for applying the Performance Standards in its E&S procedures. BBVA Peru will also be required to develop and implement an external communication mechanism for receiving and addressing E&S concerns raised by third parties regarding projects financed by BBVA Peru.

MIGA reviewed the Bank’s emergency response procedures and found them to be in line with the requirements of MIGA PS1. In relation to PS2, MIGA’s assessment revealed that BBVA Peru’s labor policies and procedures are in line with the requirements of PS2 and national labor laws in Peru. The Bank’s policies and procedures cover amongst other aspects, terms of employment, performance management, benefits and remuneration, employees’ rights and responsibilities, occupational health and safety, harassment, non-discrimination and grievance mechanism.

For the proposed guarantee, BBVA Peru will report annually to MIGA regarding the implementation of the E&S procedures for the Project portfolio, as well as its labor practices.

Development Impact

The aim of MIGA’s proposed guarantee is to help BBVA optimize the Group’s risk- weighted assets (RWA) on a consolidated basis. Through the MIGA guarantee, the parent bank will pass the benefits of the RWA relief at the Group level to its operating subsidiary. The RWA capacity that is freed up by MIGA’s proposed guarantee would be utilized to support BBVA Peru’s lending operations in key socially responsible development areas, such as climate activities, social projects and SMEs, including women-SMEs. 

The Project is aligned with the World Bank Group (WBG) Country Partnership Framework (CPF) FY23-27 under the High-Level Outcomes (HLOs) of “Increased access to quality economic opportunities for workers and entrepreneurs” and “Increased resilience to shocks” as it will support increased access to finance in Peru, including in support of financing climate activities. The proposed guarantee is aligned with MIGA’s FY24-26 Strategy and Business Outlook under its strategic direction of addressing the global challenge of climate change by supporting climate finance lending for BBVA’s Subsidiary in Peru.