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Bosnia and Herzegovina

RBI Central Bank Mandatory Reserves Coverage

$174.5 million
Banking
Summary of Proposed Guarantee
Proposed
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Project Facts

Project Facts

Project Facts

Bosnia-and-Herzegovina
Project ID
12893
Guarantee Holder
Raiffeisen Bank International AG
Investor Country
Austria
Environmental Category
FI
Date SPG Disclosed
February 22, 2018
Projected Board Date
March 30, 2018
Project Type
Non-SIP
Fiscal Year
2018

Project description

This summary covers equity investments by Raiffeisen Bank International AG (RBI) in its subsidiary in Bosnia and Herzegovina, Raiffeisen BANK d.d., Bosna i Hercegovina (Raiffeisen BiH). The investor has applied for a MIGA guarantee of up to €142.5million ($174.5 million equivalent) for a period of up to five years in connection with the reserves held by the subsidiary with the local central bank. 

Vienna-based RBI is a universal banking group that has operated for over 30 years in Central, Eastern and Southeastern Europe (CEE). It is present in 15 markets with a network of retail banks across CEE. RBI’s subsidiary banks abroad are required to maintain reserves at the central banks in their respective jurisdictions, generally based on the volume of customer deposits that these subsidiaries have. This exposure leads to higher risk weights on assets at the consolidated level, resulting in increased capital allocation for country risk exposure. At the consolidated level, the risk weighting determines the amount of equity required to maintain a specified capital adequacy ratio in accordance with European banking regulations.

 

Environmental Categorization

This project is a Category FI-1 project according to MIGA’s Policy on Environmental and Social Sustainability.  MIGA has performed an analysis of Raiffeisen BiH’s portfolio for types of transactions, size, tenor, and industry sectors. Corporate lending constitutes a significant portion of the portfolio, and some of the sectors receiving financing are likely to include high to medium environmental and social risks. The main E&S risks of this project are associated with the bank’s lending activities in potentially high E&S risk sectors and its capacity to manage these risks. Based on the environmental and social risks associated with Raiffeisen BiH’s portfolio, the applicable performance requirements are MIGA’s Exclusion List, applicable national environmental and social laws and regulations, and MIGA’s Performance Standards.

MIGA has had an active guarantee covering Raiffeisen BiH since 2015. Based on recent monitoring activities, Raiffeisen BiH is considered in compliance with the applicable performance requirements. An Environmental and Social Management System (ESMS) is being implemented which includes screening against MIGA’s Exclusion list and requirements of national legislation, categorization of projects, application of the Performance Standards for higher risk corporate loans and project financing, and monitoring and reporting. There is a sustainability officer in place whose responsibilities include coordination of the ESMS and environmental and social reporting, and Raiffeisen BiH rolled out an ESMS capacity building program for its employees in 2015 and 2016. Labor practices and working conditions at Raiffeisen BiH are based on a Raiffeisen group level Code of Conduct, and in line with national regulations and the requirements of MIGA’s Performance Standards. Raiffeisen BiH will continue to submit an annual report to MIGA, documenting the implementation of the ESMS as well as ongoing compliance with applicable elements of the Performance Standards.


Development impact

The project is expected to support RBI’s overall business strategy in Bosnia and Herzegovina. MIGA’s guarantee allows RBI 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 subsidiaries. As mandatory reserves, held at each respective central bank, attract lower risk weights because of MIGA, assets in Bosnia and Herzegovina 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).