Washington, D.C, February 27, 2023—IFC, a member of the World Bank Group, and BNP Paribas (BNPP), the European Union's largest bank as measured by assets and a key player in international banking, today announced a landmark Synthetic Significant Risk Transfer (Synthetic SRT) transaction, which will enable BNPP to expand its trade finance activities and continue to support emerging market economies. The transaction is expected to be particularly impactful, as international trade finance flows have been adversely impacted by ongoing global economic uncertainty.
BNPP is a strategic user of SRTs across a variety of asset classes in developed economies, where the SRT product plays an important role in allowing the bank to meet increased lending needs of its clients. But this deal – a $1 billion SRT on which IFC provided a $50 million risk guarantee – marks the first time BNPP is deploying this product to enable further lending operations in emerging markets. IFC is the sole investor in this transaction.
Synthetic SRTs are still relatively new in emerging markets. By effectively transferring credit risk to investors, this type of transaction allows banks to lower the risk weights on their asset exposures. Unlike a traditional securitization in which assets are sold to a special purpose entity issuing securities to investors, synthetic SRTs leave the assets on a bank's balance sheet and third-party investors, such as IFC, assume some of their risk – freeing up regulatory capital and enabling the financial institution to undertake increased lending operations.
"We are delighted to partner with IFC on this landmark transaction to drive the development of trade finance in emerging markets," said Sandrine Ferdane, Global Head of Financial Institutions Coverage at BNP Paribas. "In today's complex macroeconomic environment, SRT securitizations are an important tool that enables a bank [like ourselves] to manage risk and capital to expand lending activity and support emerging market economies."
"This strategic transaction demonstrates how leading international banks can work with global investors to extend more credit to underserved markets, especially during a period of global volatility." said Tomasz Telma, Global Head of IFC's Financial Institutions Group. "We look forward to supporting such innovative structures being deployed in emerging markets."
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2022, IFC committed a record $32.8 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. For more information, visit www.ifc.org.
About BNP Paribas
BNP Paribas is the European Union's leading bank and key player in international banking. It operates in 65 countries and has nearly 190,000 employees, including nearly 145,000 in Europe. The Group has key positions in its three main fields of activity: Commercial, Personal Banking & Services for the Group's commercial & personal banking and several specialised businesses including BNP Paribas Personal Finance and Arval; Investment & Protection Services for savings, investment and protection solutions; and Corporate & Institutional Banking, focused on corporate and institutional clients. Based on its strong diversified and integrated model, the Group helps all its clients (individuals, community associations, entrepreneurs, SMEs, corporates and institutional clients) to realise their projects through solutions spanning financing, investment, savings and protection insurance. In Europe, BNP Paribas has four domestic markets: Belgium, France, Italy and Luxembourg. The Group is rolling out its integrated commercial & personal banking model across several Mediterranean countries, Turkey, and Eastern Europe. As a key player in international banking, the Group has leading platforms and business lines in Europe, a strong presence in the Americas as well as a solid and fast-growing business in Asia-Pacific. BNP Paribas has implemented a Corporate Social Responsibility approach in all its activities, enabling it to contribute to the construction of a sustainable future, while ensuring the Group's performance and stability.