Santander Uruguay Mandatory Reserves Program

Project Description

This summary covers an equity investment by Banco Santander S.A. in its subsidiary in Uruguay, Banco Santander S.A. (Uruguay). The investor has applied for an increase of its existing MIGA guarantee by up to US$100 million in mandatory reserves cover, for the remaining tenor of the existing guarantee. MIGA’s new coverage represents continued support to Banco Santander Uruguay, which began in 2016 and consisted of guarantees issued for the Santander Uruguay Mandatory Reserves Program. Click here to refer to the Project Brief.

Spain-based Banco Santander is one of the largest global financial institutions in the world in terms of market capitalization with retail and commercial operations in countries across Europe, Latin America, and North America. Its subsidiary banks abroad are required to maintain reserves at the central banks in their respective jurisdictions, based on the volume of customer deposits that these subsidiaries have. Mandatory reserves contribute to Santander’s overall risk-weighted assets (RWA) at the consolidated level, resulting in less headroom for other assets at a given level of capital.

Environmental Categorization

Santander Uruguay was categorized as an FI-2 in December 2015 per MIGA’s Policy on Environmental and Social (E&S) Sustainability (2013), and remains unchanged, as there is no change in the business activities of the bank and accordingly the associated environmental or social risks and/or impacts of the project. Click here to refer to the Summary of Proposed Guarantee posted in November 2015.

Development Impact

MIGA’s proposed guarantees will help Banco Santander reduce capital requirements of some of its assets, which will lead to a reduction in the bank’s RWA on a consolidated basis. The RWA capacity that is freed up can then be used to grow the bank’s loan book by extending more credit in Uruguay, thereby supporting growth and employment in the country.

MIGA’s proposed coverage to Santander is aligned with the World Bank Group’s strategy for Uruguay, as it supports Uruguay’s agenda of productivity, innovation and competitiveness by helping expand access to finance to private sector firms, which has been identified as one of the key constraints to private sector development in the country. Additionally, the project is aligned with CPF’s objective on “increasing the sustainability and efficient use of resources” as the potential new loans enabled through the project will target climate finance investments.