BBVA Türkiye Capital Optimization
Project Description
This summary covers equity investments by Banco Bilbao Vizcaya Argentaria, S.A. (BBVA or the Group), in its subsidiary in Türkiye, Türkiye Garanti Bankası A.Ş. (BBVA-Türkiye or the Subsidiary). The investor has applied for a MIGA guarantee of up to USD1,000 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 Argentina SPG; link to Peru 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 Türkiye, has been 85.97% owned by the BBVA Group since 2022, with the rest of its shares publicly traded in Türkiye (Borsa Istanbul), and its depositary receipts are listed on the OTC (Over-The-Counter) Markets in the USA. BBVA Türkiye operates in every segment of the banking sector including corporate, commercial, SME, payment systems, retail, private and investment banking, with subsidiaries in pension and life insurance, leasing, factoring, brokerage and asset management, as well as international subsidiaries in the Netherlands and Romania, and serves 27.7 million customers through 795 branches as well as digital and mobile channels (as of December 2024).
Environmental Categorization
BBVA Türkiye provides financial products and services to retail clients, small and medium enterprises (SMEs) and corporate clients in Türkiye. The sectors and types of transactions supported by BBVA Türkiye 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 relate to BBVA Türkiye’s ability to identify, assess and manage the E&S risks and impacts associated with its financing activities and the Bank’s labor practices. The applicable E&S requirements for the lending portfolio will be: (i) MIGA’s Exclusion List; (ii) applicable national environmental and social laws and regulations in Türkiye; and (iii) the MIGA Performance Standards (for eligible corporate loans).
MIGA analyzed BBVA Türkiye’s portfolio by types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. As of September 2024, trade finance represented the largest portion of BBVA Türkiye’s portfolio, with other segments being corporate finance, retail banking, SME loans and loans to financial intermediaries. The main sectors financed are transport and vehicles; agriculture livestock and food production; construction; energy; mining, metals and metal products; retail; real estate; and textiles and apparel. BBVA Türkiye currently has limited exposure to activities on the MIGA Exclusion List. The Bank also has exposure to coal-related projects, as well as oil and gas activities. BBVA Group has policies covering the Group’s commitment to decarbonization of its loan portfolio by 2030 and Net Zero by 2050.
MIGA assessed BBVA Türkiye’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 Türkiye has an Environmental and Social Impact Assessment Management Process (ESIAP), established in 2012, for identifying, assessing, and managing E&S risks and impacts associated with its lending activities. The ESIAP covers the screening of transactions to identify key environmental and social risks and impacts, as well as compliance with national E&S laws. The ESIAP includes the identification of necessary actions to mitigate risks and impacts prior to financing and monitoring of the implementation of these actions. The ESIAP also covers the application of the Performance Standards for Equator Principles transactions. In addition, BBVA Türkiye has an Environmental and Social Credit Standard (March 2024), which covers restrictions to finance and best practices for high-risk sectors – defense, mining, agriculture, energy and infrastructure. BBVA Türkiye has an E&S team responsible for the implementation of the E&S procedures. For the MIGA Project, BBVA Türkiye will be required to include MIGA’s criteria for applying the Performance Standards in its E&S procedures. BBVA Türkiye 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 Türkiye.
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 Türkiye’s labor policies and procedures are in line with the requirements of PS2 and national labor laws in Türkiye. The Bank’s policies and procedures cover amongst other aspects, terms of employment, performance management, benefits and renumeration, employees’ rights and responsibilities, occupational health and safety, harassment, non-discrimination, and grievance management.
For the proposed guarantee, BBVA Türkiye 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 Türkiye’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’s Country Partnership Framework (CPF) FY24-28 for Türkiye, under High Level Objective 1 “High and sustainable productivity growth”; and expected to contribute to the achievement of CPF Objective 1: Boost competitiveness and enabling services, and CPF Objective 4: Improve jobs for women, youth and vulnerable groups, including the greening of the country’s industrial firms and supporting sustainable and inclusive job creation through increasing access to finance for firms, MSMEs and women entrepreneurs. The Project is also 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 Türkiye. Furthermore, it has the potential to align with the strategic focus of ensuring inclusive growth by supporting underserved groups, like MSMEs and women.