ING Ukraine Mandatory Reserves Coverage

Project description 

This summary describes ING Bank N.V.’s (ING) equity ownership of its subsidiary in Ukraine, Joint stock company “ING Bank Ukraine” (ING Ukraine). The MIGA guarantee is expected to provide regulatory capital relief to ING on a consolidated level by reducing the amount of Risk Weighted Assets (RWAs). The tenor of the guarantee is expected to be up to 1 year and 1 day (the Project). 

ING is a global financial institution with a strong European base, offering retail and wholesale banking services. Its subsidiary banks outside of the Netherlands are required to maintain reserves at the central banks in their respective jurisdictions. Mandatory reserves in ING Ukraine contribute to ING’s overall RWA at the consolidated level, resulting in less headroom for other assets at a given level of capital.  

Environmental Categorization  

ING Ukraine provides wholesale banking products and services to large corporates in Ukraine. The MIGA guarantee will support short-term transactions such as working capital loans, trade finance loans and pre-export finance. These transactions are considered to have potentially limited adverse environmental and social (E&S) risks or impacts that are generally site-specific, reversible and can be addressed through mitigation measures. This project has thus 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 ING Ukraine’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 the bank’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 lending portfolio for this project will be: (i) MIGA Exclusion List; and (ii) applicable E&S laws in Ukraine.  

As of December 2024, ING Ukraine’s portfolio included predominantly short-term (less than 12 months) transactions via following products for corporate clients – working capital/revolving credit lines, trade finance and pre-export finance. The MIGA guarantee will only support direct lending by ING Ukraine in the above asset classes. The main sectors financed include commodities, food and agriculture; construction and natural resources.  ING Ukraine has no exposure to activities on the MIGA Exclusion list, coal or upstream oil and gas activities.   

In relation to E&S risk management, ING Ukraine implements ING Group’s Environmental and Social Risk Framework which was established in 2012, and last updated in January 2023. The framework covers the E&S screening process for clients and transactions, and evaluation process for E&S risks across several sectors – animal farming (including livestock farming, poultry farming and aquaculture), chemicals, defense and security, energy, forestry and agricultural commodities, manufacturing, maritime, mining and metals, and infrastructure. Transactions in these sectors are screened for E&S issues, including compliance with E&S laws, and where applicable, mitigation measures are agreed with clients to address identified gaps. The framework also specifies restricted activities within these sectors as well as the application of the Equator Principles1 to eligible transactions. For the MIGA guarantee, ING Ukraine is required to screen transactions against the MIGA Exclusion List and applicable E&S laws in Ukraine; ING Ukraine will therefore be required to incorporate MIGA’s Exclusion List into the E&S procedures in the targeted asset classes.  

ING Ukraine has established emergency response measures that comply with the requirements of PS1. In addition, the banks’ labor practices are also in line with PS2. The bank has policies and procedures that address amongst other aspects, terms of employment, complaints handling, workers’ organizations, and non-discrimination.  

ING Ukraine will be required to report periodically to MIGA on its portfolio, the implementation of the E&S procedures and on its labor practices.  

Development Impact  

MIGA’s guarantee allows to attract lower risk weights for mandatory reserves, held at ING Ukraine, which enables ING to achieve RWA relief at the group consolidated level. The RWA capacity that is freed up is expected to support lending activities related to Ukraine transactions. The proposed Project is aligned with the World Bank Group Ukraine global response.