JSC UKRSIBBANK Capital Optimization

Project description  

This summary covers equity investments by BNP Paribas S.A. (BNPP or the Group), in its subsidiary in Ukraine, JSC UKRSIBBANK (UKRSIBBANK or the Subsidiary). The investor has applied for a MIGA guarantee of up to EUR100 million for capital optimization cover for a period of up to 1 year and 1 day (the Project).   

BNP Paribas is a global systemically important bank headquartered in Paris, France, and active in 63 countries. It is the largest bank in the European Union in terms of total assets. It offers a comprehensive range of services including retail banking, corporate and institutional banking, wealth management, and specialized financial solutions. BNP Paribas’ operations in the Central and Eastern Europe (CEE) region include the Czech Republic, Hungary, Romania, Slovakia, Poland, and Ukraine.  

UKRSIBBANK is one of the Ukraine's largest universal banks. It provides a comprehensive range of financial services, catering to both individual and corporate clients. It is 60% owned by BNP Paribas.  

Environmental Categorization  

JSC UKRSIBBANK provides financial products and services to individuals, small and medium enterprises, and corporates in Ukraine. The MIGA guarantee will support transactions across these three segments. The main sectors supported by the bank are commerce and trade, manufacturing, and agriculture and food processing. The transactions and sectors supported by UKRSIBBANK are typically considered to have limited E&S risks and impacts that are generally site-specific, largely 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 UKRSIBBANK’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; (ii) applicable E&S laws in Ukraine; and (iii) the Performance Standards (for eligible corporate transactions).  

As of October 2024, UKRSIBBANK’s portfolio included the following business segments – retail/consumer lending, 29%; small and medium enterprises, 5%; and corporates (mainly short-term transactions) 66%. The main sectors supported are commerce and trade, manufacturing, and agriculture and food processing. UKRSIBBANK has no exposure to activities on the MIGA Exclusion list.   

In relation to E&S risk management, UKRSIBBANK has an E&S team that is responsible overseeing E&S risk management procedures. The bank implements BNPP Group E&S Policies which are focused on certain sectors1, with the application of the Performance Standards (PSs) limited to Equator Principles2 transactions.  Transactions in these sectors are screened for E&S issues and where applicable, mitigation measures are agreed with clients.  UKRSIBBANK 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.   UKRSIBBANK will also develop and implement a procedure for addressing E&S concerns raised by third parties about projects financed by the bank.    

UKRSIBBANK has emergency response procedures in place which meet the requirements of PS1. In addition, the banks’ labor practices are also in line with PS2.  

UKRSIBBANK 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  

MIGA’s guarantee aims to help BNPP optimize the Group’s risk-weighted assets (RWA) on a consolidated basis. With the MIGA guarantee, the parent bank (BNPP) will pass the benefits of the RWA relief at the Group level to its operating subsidiary in Ukraine. The RWA capacity freed up by MIGA’s proposed guarantee is expected to be used by BNPP to support UKRSIBBANK in growing its lending operations in Ukraine. The Project is therefore expected, on a best-effort basis, to increase access to finance for corporates, SMEs (including Women-owned SMEs), and households in Ukraine, including support for energy efficiency projects, at a time when the country is facing exceptionally challenging conditions.