Argentina Project Notice - Santander Central Bank Mandatory Reserves Coverage

Project Notice

PNR 51619
Project Name Santander Central Bank Mandatory Reserves Coverage
Project Detail MIGA issued additional guarantees of up to US$100 million to Banco Santander, S.A. of Spain (“Santander”) for a period of up to 2 years covering the risk of expropriation of the mandatory reserves held by Banco Santander Argentina S.A. (“Santander Argentina” or the “Bank”) at the Central Bank of Argentina. The new issuance is part of MIGA’s existing support under the Santander Central Bank Mandatory Reserves Program in Argentina. Spain-based Banco Santander, S.A. 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 Argentina provides retail and consumer loans, small and medium enterprise (“SME”) and corporate finance services to clients in Argentina. The MIGA guarantee provides coverage for Santander’s equity investment in Santander Argentina and, as such, it provides support to the Bank´s lending activities. MIGA analyzed the Bank’s portfolio for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s exclusion list. Santander Argentina’s portfolio has corporate finance exposure to certain sectors that could have potential environmental and social (E&S) risks and impacts such as oil and gas, agriculture and fisheries, construction and chemicals. This project has thus been categorized as FI-1 under MIGA’s Policy on Environmental and Social Sustainability (2013). As of December 2022, about 55% of the Bank’s lending is to retail, 30% to corporates, 15% to SMEs. The main sectors supported include agriculture and fisheries, food processing, construction, oil and gas. These are mostly medium to high-risk and certain sectors such as oil and gas can have potential significant adverse E&S risks and impacts. Santander Argentina has limited exposures to activities on the MIGA Exclusion List. The main E&S considerations of this project relate to Santander Argentina’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 also analyzed Santander Argentina’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 Santander Argentina’s labor practices in line with the requirements of Performance Standard 2: Labor and Working Conditions (PS2). The applicable E&S requirements for this project are: (i) MIGA Exclusion List; (ii) applicable E&S laws and regulations in Argentina; and (iii) MIGA E&S Performance Standards. Santander Group is an Equator Principles financial institution and is also a signatory to other global sustainable/responsible finance initiatives. As a member of the Santander Group, Santander Argentina aligns its E&S risk management procedures with Santander Group’s Environmental, Social and Climate Risk Management Policy. Santander Argentina’s E&S risk management system (ESMS) is focused on transactions in four sensitive sectors – (i) mining and metallurgy, (ii) energy, (iii) oil and gas, and (iv) soft commodities. Transactions in these four sensitive sectors are assessed for E&S risks and impacts. The sector policies, reflect amongst other aspects, the E&S issues associated with the sectors, scope of application, best practice standards, as well as prohibited and restricted activities within the sectors. The Sector policies are adapted to consider the particular characteristics and development of the market in which the relevant Santander subsidiary operates. The ESMS was updated in October 2022 to incorporate MIGA’s E&S requirements – the scope of the ESMS was expanded to include all non-retail lending and to screen transactions against MIGA’s Exclusion List, applicable E&S laws as well as assessing transactions in accordance the MIGA Performance Standards for eligible corporate loans. Santander Argentina appointed a dedicated E&S officer who oversees the E&S risk management system. The implementation of the ESMS is considered adequate. Santander Argentina has an external communication procedure in place for receiving and addressing E&S concerns and requests for information from third parties, in line with the requirements of PS1. MIGA also considered the Emergency Response Plan of Santander Argentina as part of the management system which was determined to be adequate. Human resources and labor practices are compliant with the requirements of PS2. Amongst other aspects, Santander Argentina has labor policies and procedures that address terms of employment, recruitment, renumeration, and benefits, grievance management, training and others. Santander Argentina has also satisfactorily completed and implemented the agreed E&S Action Plan (October 2022). Santander Argentina is required to report periodically to MIGA on the implementation of the ESMS and application of the Performance Standards.
Funded By Multilateral Investment Guarantee Agency (MIGA)
Sector Forestry
Country Argentina , South America
Project Value ARS 10,000,000

Contact Information

Company Name Multilateral Investment Guarantee Agency (MIGA)
Web Site

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