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Responsible Banking - NOV 2016

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BBVA
BBVA

BBVA provides banking services with a focus on social responsibility and positive impact. It aims to have transparent, clear and responsible relationships with customers. Some of its key initiatives include financial education programs that have reached over 6.7 million people, microfinance programs that serve over 1.7 million customers, support for SMEs and entrepreneurs, addressing climate change through green financing and reducing its own environmental impact, and promoting a culture of social commitment among employees through volunteering and diversity programs.

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BBVAResponsibleBanking Responsible banking A diferent way of banking
November 2016 Responsible Banking A different way of banking
3 What’s happening today? 1. Financial industry is still suffering a reputational crisis 2. More regulation & soft regulation in customer protection, responsible practices & non- financial disclosure 3. Competition landscape: digital disruption & new players in financial industry mean a world of opportunities but also new material issues as privacy & security 4. Key improvement areas for banks according customer surveys: transparency & clarity 5. A growing demand of ESG performance (Environmental, Social & Governance) among investors community 6. Employees value more highly the ethical behavior of the companies they work for 7. Society & Governments expect a higher commitment to development & climate change management from companies At BBVA, we have a different way of doing banking
4 1 What do we mean by Responsible Banking? 2 How do we do Responsible Banking? 3 BBVA’s impact on society Summary
5 What do we mean by Responsible Banking at BBVA?
6 A unique banking model based on 4 pillars
7 A new competitive landscape: strategy focused on transformation from and to the customer Be the best bank for our customers Six strategic priorities
8 Compliance Risks Responsible Business With management systems… … and an internal control model with three lines of defense Integrity Prudence Transparency Role of Responsible Business: 2nd line of defense to ensure that people are systematically placed at the decision-making processes Return adjusted to Principles 1st line: business units & support areas Takes risks and owns them. Includes a team that puts controls into operation 2nd line: control experts Define policies, challenge and advise 1st line 3rd line: internal audit Independent monitoring BBVA offers a different way of banking
9 Governance and Accountability • Approval and monitoring the CSR policy and responsible business plan • Report to plenary & to different committees Board of Directors Operational Model • Interventions at Strategy & Planning Group Meeting • Interventions at Local Management Meetings • RB Co-dependency: Customer Solutions & Communications Responsible business function reports directly to the Board of Directors (*) Responsible business is embedded on the SDA (Single Development Agenda) Strategic Plan • New Strategic Plan 2016-2018
10 International standards with BBVA’s active participation
11 How do we do Responsible Banking?
12 Reputational Risk Management Model Mitigation actionsImpact vs Strength MatrixOutcomes (Global & local) Process Governance & Accountability Risk identification % impact assessment Assurance Providers identification Strength assessment & mitigation proposals Implementation & follow up Local/ Global review (6 months) Reputational Risk Working Group (integrated in Corporate Assurance Framework) Operational Risk, Responsible Business, Compliance & Comms 1 Reput. risk appetite + ICAAP (integrated in Global Risk Management)
13 TCR relationships with our customers (transparent, clear & responsible)2 TCR relationships 1st clearest and most transparent bank in major markets Our aspiration 2018 Systematically ensure that BBVA’s interactions with customers are transparent, clear and responsible to help them to make better financial decisions Transparent Include all relevant information for the customer in balanced way Clear Make it easy to understand (it has to do with language and structure) Responsible Take into account customer interests in the S/M/L term
14 What are we doing? TCR to transform the traditional bank TCR to create the new bank TCR advertising code TCR summary pages & commercial protocols TCR external sales & call centers TCR contracts TCR complaints management TCR in SDA* customer solutions TCR in agile methodology TCR training & UX system (*) SDA: Single Development Agenda
15 ROI for TCR relationships (example) Page 15RSC2 Model developed by McKinsey & Seres Foundation Growth: • Higher customer recommendation (NPS) • Higher non-customer consideration • More digital sales Return on Capital: • Reduce complaints • More efficient commercial dialog • Higher employee pride of belonging and motivation Risk Management: • Lower risk of fines • Lower reputational risk • Lower operational costs for unfair commercial practices • Anticipating regulation
16 Financial Education & Capability Building 3 Financial capabilities into customer solutions Financial education for society More than 6.7 million participants €56 million invested between 2008-2015 Advocacy & knowledge generation Data verified by Deloitte
17 Promoting banking solutions for Financial Inclusion, specially in emerging markets Data verified by Deloitte 4 +1.7 million customers 509 branches 7,910 employees 7 Countries United Nations Award for Best Social Business in 2012 BBVA Microfinance Foundation +10 million customers in Mexico, South America, Spain & Portugal Low-cost digital channels and easy-to-use products FI Segment Cuenta Express: +3.5 million active accounts +46,000 banking correspondants Remmittances: +10 million transactions/year United Nations UN grants consultative status to BBVA Microfinance Foundation
18 Customer Privacy & Data Security Data Protection Risk Management • Risks identification and assessment • Consistent set of policies and procedures • Definition of a whole range of mitigation measures/actions focused on mitigating identified risks • Definition and tracking of indicators such as consumers claims/complaints, security incidents/breaches or independent review processes, including a causal analysis • Reputational risk assessment Operational and Technological Risk Management • New Engineering Risk & Corporate Assurance unit • Focus on adapting the levels of information protection to the new challenges arising from the Group's digital strategy • BBVA CERT: new center of BBVA Group's cybersecurity and fraud strategy. • Cyber Trust Program: continuous cybersecurity monitoring and improvement plan 5 Specific Technology & Cybersecurity Board Committee
19 Climate strategy6 Integration of environmental factors into risk management* • Global Eco-efficiency Plan 2013-2015 (figures per person): -16% CO2 emissions -43% paper consumption -23% water consumption -14% electricity consumption 33% people working in certified buildings (ISO, LEED) • New Global Eco-efficiency Plan 2016-2020 • Leading in renewable energy funding: 1,221 MW financed in 2015 (+17% than 2014) • Leading Spanish institution in green bonds underwriting • Green lines financing: IFC, EIB, IADB… • Support to main industry initiatives: EMF-ECB Energy Efficiency Mortgage Initiative; EBRD- UNEP FI Statement by Financial Institutions on Energy Efficiency; European Financial Services Roundtable Providing climate finance solutions (*) See next slide Reduction of direct impacts
20 Integration of environmental & social factors in risk management New environmental & social risk framework (to be approved in 2017) • Reviewing all operations under the EP, regardless of the amount. • Application beyond their mandatory scope. • Applied in all countries. • Exclusion lists of companies and countries updated quarterly. • Risk portfolio rating of SMEs from an environmental perspective. • Applied in Spain and Mexico. • Corporate Retail Credit Risk Policy and Specific Rules on responsible granting of loans and consumer credit. • Analysis of every case by the Committee for the Protection of Mortgage Debtors. • Providing individual solutions in accordance with each family's specific situation. • Specific commitment and global due diligence in process perspective. Equator Principles • Continually improve the identification and management of environmental risks in the Group’s operations. Rules of Conduct in Defense Social Housing Policy Ecorating tool Responsible lending Human Rights Environmental Policy 7
21 Development of high social impact customers solutions8 • +67,000 clients refinanced in light of payment difficulties • +7,000 houses for social rent • Over 1,500 families benefited by the integration program Comprehensive Plan to help families in difficult situations in Spain 5 year commitment of $11,000 million in loans, investments and services pledge for low income communities BBVA commitment in US on CRA • Yo Soy Pyme (Mexico) • Crédito flexible (Chile) • Líneas ICO & Yo Soy Empleo Academy (Spain) • Women entrepreneurs (Turkey) SMEs integral support in all markets
22 Promotion of a culture of social commitment and shared values among employees Data verified by Deloitte 9 XXX Global Corporate Volunteering Plan Territorios Solidarios Global Diversity Plan Training €34,3 million investment 49,4 hours of training per employee 93% employees trained €7,4 million in grants 786 charitable projects approved and +4 million people benefited since its launch 20% women in the management team Employee ratio 54% women / 46% men Diversity Charter and UN Women’s Empowerment Principles signatory 8,148 BBVA volunteers devoted 135,000 hours
23 Other Social programs: education, entrepreneurship, science & culture10 Integral program to support social enterprises in their growth Program to identify, award & support fintech start-ups EntrepreneurshipEducation Turkey Mexico Spain Science & culture • Support for advanced research in biomedicine, basic science, environment and socio-economics • Promotion of cultural activities: music and visual arts • “BBVA Foundation Frontiers of Knowledge Awards”
24 BBVA’s impact on society
25 1.7 million people live in homes financed 1,720,968 SMEs, micro-enterprises and self-employed workers supported €23,552M of finance granted to SMEs, micro-enterprises and self-employed workers BBVA’s impact on society €1,013.7M of remuneration in cash to shareholders €5.047M paid in salaries and wages Contribution to development - customer support Creating wealth €8,157M contribution through paid and accrued taxes 2015 Data verified by Deloitte Contributions to society €103.6 M investment in social programs 64,807 children and young people with integration grants 6.9 million beneficiaries from BBVA Microfinance Foundation activity
For further information www.bbvaresponsiblebanking.com
November 2016 Responsible Banking A different way of banking

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Responsible Banking - NOV 2016

  • 3. 3 What’s happening today? 1. Financial industry is still suffering a reputational crisis 2. More regulation & soft regulation in customer protection, responsible practices & non- financial disclosure 3. Competition landscape: digital disruption & new players in financial industry mean a world of opportunities but also new material issues as privacy & security 4. Key improvement areas for banks according customer surveys: transparency & clarity 5. A growing demand of ESG performance (Environmental, Social & Governance) among investors community 6. Employees value more highly the ethical behavior of the companies they work for 7. Society & Governments expect a higher commitment to development & climate change management from companies At BBVA, we have a different way of doing banking
  • 4. 4 1 What do we mean by Responsible Banking? 2 How do we do Responsible Banking? 3 BBVA’s impact on society Summary
  • 5. 5 What do we mean by Responsible Banking at BBVA?
  • 6. 6 A unique banking model based on 4 pillars
  • 7. 7 A new competitive landscape: strategy focused on transformation from and to the customer Be the best bank for our customers Six strategic priorities
  • 8. 8 Compliance Risks Responsible Business With management systems… … and an internal control model with three lines of defense Integrity Prudence Transparency Role of Responsible Business: 2nd line of defense to ensure that people are systematically placed at the decision-making processes Return adjusted to Principles 1st line: business units & support areas Takes risks and owns them. Includes a team that puts controls into operation 2nd line: control experts Define policies, challenge and advise 1st line 3rd line: internal audit Independent monitoring BBVA offers a different way of banking
  • 9. 9 Governance and Accountability • Approval and monitoring the CSR policy and responsible business plan • Report to plenary & to different committees Board of Directors Operational Model • Interventions at Strategy & Planning Group Meeting • Interventions at Local Management Meetings • RB Co-dependency: Customer Solutions & Communications Responsible business function reports directly to the Board of Directors (*) Responsible business is embedded on the SDA (Single Development Agenda) Strategic Plan • New Strategic Plan 2016-2018
  • 10. 10 International standards with BBVA’s active participation
  • 11. 11 How do we do Responsible Banking?
  • 12. 12 Reputational Risk Management Model Mitigation actionsImpact vs Strength MatrixOutcomes (Global & local) Process Governance & Accountability Risk identification % impact assessment Assurance Providers identification Strength assessment & mitigation proposals Implementation & follow up Local/ Global review (6 months) Reputational Risk Working Group (integrated in Corporate Assurance Framework) Operational Risk, Responsible Business, Compliance & Comms 1 Reput. risk appetite + ICAAP (integrated in Global Risk Management)
  • 13. 13 TCR relationships with our customers (transparent, clear & responsible)2 TCR relationships 1st clearest and most transparent bank in major markets Our aspiration 2018 Systematically ensure that BBVA’s interactions with customers are transparent, clear and responsible to help them to make better financial decisions Transparent Include all relevant information for the customer in balanced way Clear Make it easy to understand (it has to do with language and structure) Responsible Take into account customer interests in the S/M/L term
  • 14. 14 What are we doing? TCR to transform the traditional bank TCR to create the new bank TCR advertising code TCR summary pages & commercial protocols TCR external sales & call centers TCR contracts TCR complaints management TCR in SDA* customer solutions TCR in agile methodology TCR training & UX system (*) SDA: Single Development Agenda
  • 15. 15 ROI for TCR relationships (example) Page 15RSC2 Model developed by McKinsey & Seres Foundation Growth: • Higher customer recommendation (NPS) • Higher non-customer consideration • More digital sales Return on Capital: • Reduce complaints • More efficient commercial dialog • Higher employee pride of belonging and motivation Risk Management: • Lower risk of fines • Lower reputational risk • Lower operational costs for unfair commercial practices • Anticipating regulation
  • 16. 16 Financial Education & Capability Building 3 Financial capabilities into customer solutions Financial education for society More than 6.7 million participants €56 million invested between 2008-2015 Advocacy & knowledge generation Data verified by Deloitte
  • 17. 17 Promoting banking solutions for Financial Inclusion, specially in emerging markets Data verified by Deloitte 4 +1.7 million customers 509 branches 7,910 employees 7 Countries United Nations Award for Best Social Business in 2012 BBVA Microfinance Foundation +10 million customers in Mexico, South America, Spain & Portugal Low-cost digital channels and easy-to-use products FI Segment Cuenta Express: +3.5 million active accounts +46,000 banking correspondants Remmittances: +10 million transactions/year United Nations UN grants consultative status to BBVA Microfinance Foundation
  • 18. 18 Customer Privacy & Data Security Data Protection Risk Management • Risks identification and assessment • Consistent set of policies and procedures • Definition of a whole range of mitigation measures/actions focused on mitigating identified risks • Definition and tracking of indicators such as consumers claims/complaints, security incidents/breaches or independent review processes, including a causal analysis • Reputational risk assessment Operational and Technological Risk Management • New Engineering Risk & Corporate Assurance unit • Focus on adapting the levels of information protection to the new challenges arising from the Group's digital strategy • BBVA CERT: new center of BBVA Group's cybersecurity and fraud strategy. • Cyber Trust Program: continuous cybersecurity monitoring and improvement plan 5 Specific Technology & Cybersecurity Board Committee
  • 19. 19 Climate strategy6 Integration of environmental factors into risk management* • Global Eco-efficiency Plan 2013-2015 (figures per person): -16% CO2 emissions -43% paper consumption -23% water consumption -14% electricity consumption 33% people working in certified buildings (ISO, LEED) • New Global Eco-efficiency Plan 2016-2020 • Leading in renewable energy funding: 1,221 MW financed in 2015 (+17% than 2014) • Leading Spanish institution in green bonds underwriting • Green lines financing: IFC, EIB, IADB… • Support to main industry initiatives: EMF-ECB Energy Efficiency Mortgage Initiative; EBRD- UNEP FI Statement by Financial Institutions on Energy Efficiency; European Financial Services Roundtable Providing climate finance solutions (*) See next slide Reduction of direct impacts
  • 20. 20 Integration of environmental & social factors in risk management New environmental & social risk framework (to be approved in 2017) • Reviewing all operations under the EP, regardless of the amount. • Application beyond their mandatory scope. • Applied in all countries. • Exclusion lists of companies and countries updated quarterly. • Risk portfolio rating of SMEs from an environmental perspective. • Applied in Spain and Mexico. • Corporate Retail Credit Risk Policy and Specific Rules on responsible granting of loans and consumer credit. • Analysis of every case by the Committee for the Protection of Mortgage Debtors. • Providing individual solutions in accordance with each family's specific situation. • Specific commitment and global due diligence in process perspective. Equator Principles • Continually improve the identification and management of environmental risks in the Group’s operations. Rules of Conduct in Defense Social Housing Policy Ecorating tool Responsible lending Human Rights Environmental Policy 7
  • 21. 21 Development of high social impact customers solutions8 • +67,000 clients refinanced in light of payment difficulties • +7,000 houses for social rent • Over 1,500 families benefited by the integration program Comprehensive Plan to help families in difficult situations in Spain 5 year commitment of $11,000 million in loans, investments and services pledge for low income communities BBVA commitment in US on CRA • Yo Soy Pyme (Mexico) • Crédito flexible (Chile) • Líneas ICO & Yo Soy Empleo Academy (Spain) • Women entrepreneurs (Turkey) SMEs integral support in all markets
  • 22. 22 Promotion of a culture of social commitment and shared values among employees Data verified by Deloitte 9 XXX Global Corporate Volunteering Plan Territorios Solidarios Global Diversity Plan Training €34,3 million investment 49,4 hours of training per employee 93% employees trained €7,4 million in grants 786 charitable projects approved and +4 million people benefited since its launch 20% women in the management team Employee ratio 54% women / 46% men Diversity Charter and UN Women’s Empowerment Principles signatory 8,148 BBVA volunteers devoted 135,000 hours
  • 23. 23 Other Social programs: education, entrepreneurship, science & culture10 Integral program to support social enterprises in their growth Program to identify, award & support fintech start-ups EntrepreneurshipEducation Turkey Mexico Spain Science & culture • Support for advanced research in biomedicine, basic science, environment and socio-economics • Promotion of cultural activities: music and visual arts • “BBVA Foundation Frontiers of Knowledge Awards”
  • 25. 25 1.7 million people live in homes financed 1,720,968 SMEs, micro-enterprises and self-employed workers supported €23,552M of finance granted to SMEs, micro-enterprises and self-employed workers BBVA’s impact on society €1,013.7M of remuneration in cash to shareholders €5.047M paid in salaries and wages Contribution to development - customer support Creating wealth €8,157M contribution through paid and accrued taxes 2015 Data verified by Deloitte Contributions to society €103.6 M investment in social programs 64,807 children and young people with integration grants 6.9 million beneficiaries from BBVA Microfinance Foundation activity