Risk Management

At Bancoii your savings are in safe hands. Your deposit is guaranteed and of course you receive interest. Let us explain how we do it. When you let Bancoii manage your savings, we lend out some of the money to institutions, governments and others. They pay us interest on those loans. We also invest in companies and projects. In turn, all these income enables us to pay you interest. As you are not involved in our day-to-day operations or investment decisions, we feel all the more responsible for the choices we make. So when making these decisions, we take into consideration not only the borrower’s credit risk and the yield on the loan or the investments, but also aspects such as human rights, ethical issues and the environment.

Because financial institutions can influence environmental, social and ethical outcomes indirectly through their choice of business partners and the terms on which they work with them.

In allocating capital, we have both a responsibility and an opportunity to promote best corporate practice. Bancoii has integrated environmental, social and ethical considerations into its risk engagement process. This helps us to reduce the fundamental risks underlying our selected client portfolios and transactions and to create more sustainable (and profitable) long-term business relationships. Both our business and our clients benefit.

For example, Bancoii does not use your savings to finance cluster bombs or landmines, nor do we finance projects in countries such as Burma/Myanmar and Sudan. And Bancoii does not finance fur farms or animal testing for the cosmetics industry.

Bancoii takes a prudent, holistic and professional approach to managing risks, including credit risk; environmental, social and ethical risk; country risk; market risk; operational risk; and risk to our reputation. This approach includes separating our risk management from the commercial lines of business to ensure balanced and independent decision-making.

Risk policies

We have developed some policies to assess how our involvement with clients could affect the environment and communities. One example is our forestry policy, which governs our business transactions with clients and projects – such as palm oil plantations – that may harm tropical rainforests and the people who live there. Recently we have developed an animal testing position statement.

Community Investment Policy

This policy outlines the bank's view of its role in society, and addresses how Group-wide and local Business Units community investment activities can complement one another. It also provides a common Group framework defining the shared focal areas based on the concept of sustainable livelihoods. To this end our policy provides for a project assessment process based on clear criteria, a structured decision-making process and monitoring, procedural and verification guidance.

Country Social and Ethical Risk Framework

The Country Social and Ethical Risk Framework assesses and identifies countries where we deem there to be significant social and ethical concerns based on criteria including the country's political situation, human rights record, level of corruption and degree of integration into the international community. The Framework will further improve our existing country assessment practices by making non-economic criteria more explicit and transparent.

The Framework is designed to flag high-risk countries in which additional due diligence is needed for all transactions. This gives us the opportunity to manage or withdraw, as appropriate, from engagements that are of particular concern. The Framework is being integrated into our client and business engagement procedures.

Human Rights Position Statement

Our respect for human rights and the integration of human rights principles into our own operations are guided by the standards established in the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, the eight Fundamental International Labour Organisation Conventions and the UN Global Compact.

We strive within our sphere of influence to uphold and promote human rights, taking full responsibility for our own operations. While we do not have a direct influence over our business partners' operations, we recognize that our engagement with them creates an indirect impact on our human rights performance. So we will only engage with our business partners who are deemed responsible and share our belief in human rights. In situations where national laws differ from our own standards, we engage and work with our business partners to assess a course of action to foster and protect human rights.

Equator Principles

Bancoii also follow the Equator Principles, a set of voluntary guidelines for addressing social and environmental risk in project financing, based on the policies and standards set by the World Bank and the International Finance Corporation (IFC). More than 50 financial institutions have now adopted The Equator Principles.

We apply the Principles to project finance engagements, irrespective of the capital cost. We also apply the spirit of the Equator Principles to corporate loans and other financial services products where these are connected to a particular asset.

See www.equator-principles.com for more information on the Equator Principles.

Sustainable Risk Advisory (SRA)

Comprehensive risk management is a core competency of Bancoii. We believe that integrating sustainability criteria into our business engagement processes enables us to take a coherent, multifaceted approach to business choices and reach balanced, well-informed decisions.

To facilitate and support this objective, the bank's Risk Committee is mandated to include ESE considerations in decision-making on client and transaction engagements. A dedicated team - Sustainable Risk Advisory (SRA) - assesses and advises the GRC and acts as a centre of expertise for the various Business Units (BUs). In line with Bancoii's Sustainability Strategy and Strategic Risk Agenda, SRA launched a project to integrate ESE risk assessment into the mainstream risk assessment processes within all the Business Units across the bank.

As part of Group Risk Management, SRA operates independently of the bank's commercial activities.