RBI Central Bank Mandatory Reserves Coverage
Project Description
On March 31, 2021, MIGA issued a guarantee of up to EUR115.0 million covering equity investments by Raiffeisen Bank International AG (RBI) in its subsidiary in Bosnia and Herzegovina, Raiffeisen Bank d.d. Bosna i Hercegovina (RBI BiH) for a period of up to three years.
Vienna-based RBI is a universal banking group that has operated for over 30 years in Central, Eastern and Southeastern Europe (CEE), with subsidiary banks in 13 CEE markets. RBI’s subsidiary banks 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
RBI BiH has been a MIGA client since 2015. The Project is categorized as FI-2 under MIGA’s Policy on Environmental and Social Sustainability (2013). RBI BiH, part of the RBI universal banking group, is a commercial bank providing loans to corporates, SMEs and retail clients in Bosnia. RBI BiH is the third largest bank in the country and operates through a network of 103 branches. The bank has been subject to periodic MIGA monitoring assessments that indicate a satisfactory environmental and social (E&S) performance since then and the bank has met MIGA’s E&S requirements in this regard.
As an existing client, the bank has an E&S officer and has implemented an Environmental Management System (EMS) which is in line with the requirements of MIGA Performance Standard 1 regarding Environmental and Social Management Systems (ESMS). The EMS applies to all lending and includes all applicable E&S requirements defined as the MIGA Exclusion List, compliance with national laws and regulations, and application of the Performance Standards. Transactions are screened against the applicable E&S requirements and E&S action plans are developed to address identified gaps where required. RBI BiH has developed a set of human resources policies and procedures, that are in line with requirements of the national legislation and all the applicable requirements of MIGA Performance Standards 2: Labor and Working Conditions.
RBI BiH will continue to report periodically to MIGA on the implementation of the EMS and application of the Performance Standards.
Development Impact
MIGA’s guarantee will 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).
MIGA’s guarantee helps RBI reduce the risk of some of its assets, which lead to a reduction in the group’s RWA on a consolidated basis. The RWA capacity that is freed up is expected to be used by RBI to support operations in Bosnia and Herzegovina.
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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