BNP Paribas Algeria Capital Optimization
Project Description
This summary covers equity investments by BNP Paribas S.A. (BNPP or the Group), in its subsidiary in Algeria, BNP Paribas El Djazaïr (BNPPED or the Subsidiary). The investor has applied for a MIGA guarantee of up to USD241.0 million for capital optimization cover for a period of up to 3 years (the Project).
BNPP is a leading bank and key player in international banking, which has a presence in 65 countries, with close to 190,000 employees, including nearly 145,000 in Europe. The Group supports all its customers - individuals, associations, entrepreneurs, SMEs and institutions – in the success of their projects through its financing, investment, savings and protection solutions.
BNPPED, a 100% subsidiary of the BNPP Group since 2002, exercises a universal banking activity, thus addressing all types of customers: Individuals (including Algerians residing abroad), Professionals and Companies, through its network of 71 branches and 14 business centers in Algeria.
Environmental Categorization
The Project will support all of BNPPED’s activities. BNPPED provides financial products and services to individuals, micro, small and medium enterprises (MSMEs), and corporates in Algeria. The main sectors supported include industrial manufacturing, automobile sales and repairs, real estate, and construction. These sectors are typically considered to have limited E&S risks and impacts which can be managed through mitigation measures. This project has been 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 BNPPED’s ability to identify, assess, and manage the E&S risks and impacts associated with its lending activities and the management of labor matters. MIGA analyzed BNPPED’s portfolio for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. MIGA also analyzed the bank’s E&S risk management procedures in line with the requirements of Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts (PS1), and the bank’s labor practices in line with the requirements of Performance Standard 2: Labor and Working Conditions (PS2). The applicable E&S requirements for this project will be: (i) MIGA Exclusion List; (ii) applicable E&S laws and regulations in Algeria; and (iii) the Performance Standards (for eligible corporate transactions).
As of December 2021, BNPPED’s portfolio included the following business segments – retail, MSME, corporates and financial intermediaries. The main sectors supported include industrial manufacturing, automobile sales and repairs, real estate, and construction. BNPPED has no exposure to activities on the MIGA Exclusion list.
In relation to E&S risk management, BNPPED has E&S officers who are responsible overseeing E&S risk management procedures. The bank implements BNPP Group E&S procedures which are focused on certain sectors, with the application of the Performance Standards (PSs) limited to Equator Principles transactions. Transactions in these sectors are screened for E&S issues and where applicable, mitigation measures are agreed with clients. BNPPED will be required to incorporate MIGA’s E&S requirements into the existing procedures for all non-retail transactions, including screening against the MIGA Exclusion List, compliance with national laws and regulations, and application of the PSs to eligible sub-projects. BNPPED will also develop and implement a procedure for addressing E&S concerns raised by third parties about projects financed by the bank.
BNPPED has emergency response procedures in place which meet the requirements of PS1. In addition, the banks’ labor practices are also in line with PS2.
BNPPED will be required to report periodically to MIGA on its portfolio, the implementation of the ESMS, including the application of the PSs, and on its labor practices.
Development Impact
The aim of MIGA’s proposed guarantees is to help BNPP reduce the risk of some of its assets in Algeria, which would lead to a reduction in the group’s risk-weighted assets (RWA) on a consolidated basis. The RWA capacity that is freed up is expected to be used by BNPP to support the growth of its lending operations in Algeria, as possible, where credit to the private sector is low by regional standards. The proposed Project is therefore expected to increase on a best effort basis access to finance primarily for domestic and multinational corporates operating in Algeria while encouraging climate-related lending consistent with BNPPED’s strategy.
The project is expected to support BNPP’s overall business strategy in Algeria. MIGA’s guarantee allows BNPP to achieve RWA relief at the group consolidated level and provide the enabling conditions to the parent bank to pass the benefits of this support to its operating subsidiary, as possible. As reserves, held at each respective central bank, attract lower risk weights because of MIGA, assets in Algeria can be deployed more productively, thereby either accelerating the pace of leveraging (i.e. expansion of loans to customers) or slowing down the pace of deleveraging (i.e. retention of loans to customers), according to market conditions and BNPP risk policies prevailing at that time.
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MIGA supports its clients (as defined in MIGA Policy on Environmental and Social Sustainability) in addressing environmental and social issues arising from their business activities by requiring direct investment clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities. MIGA support to Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations as per the requirements of Performance Standards 1.
In addition, Affected Communities have unrestricted access to the Compliance Advisor/Ombudsman (CAO), the independent accountability mechanism for MIGA. The CAO is mandated to address complaints from people affected by MIGA-guaranteed business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of MIGA.
Independent of MIGA management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of MIGA’s environmental and social performance through its compliance arm.
Complaints may relate to any aspect of MIGA-guaranteed business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of a MIGA-guaranteed business activity. Complaints can be submitted to the CAO in writing to the address below:
Compliance Advisor/Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue NW
Room F11K-232
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400
E-mail: cao-compliance@ifc.org