Sustainability: BBVA CSR strategy

Business Study

Banco Bilbao Vizcaya Argentaria is one of the biggest Spanish banks nowadays. It was born in 1999 from the merge of “Banco Bilbao Vizcaya” and “Argentaria”.This fusion created controversy among politics and stakeholders before happening, but it turned out very successful and profitable at the end.

BBVA covers all businesses with private individuals, small and mid-size enterprises, other companies and institutions, consumer finance, insurance, investment banking, production and asset management.

It is present all over the world, to enlist every country where it is already set up check the following link:

http://www.bbva.com/TLBB/tlbb/jsp/ing/conozca/paises/index.jsp

During the last three or four years, the euro area is suffering a very deep crisis that has very high impact in the banking sector, that has reduced its funding. Some entities had to ask for liquidity to The European Central Bank. Most of the assets are loosing value, there were falls in the equity, and public and private debt markets have very low activity. This brings loss in confidence in the markets.

Taking into account this context, the group BBVA has a privileged position in terms of liquidity  and generation of earnings with respect to most of its competitors.The weak lending activity in Spain and the positive performance of deposits elsewhere helped the bank to improve and recover from the previous situation. A wholesale banking business characterized by low leverage levels makes possible to recover competitiveness in such a complicated environment.

All business areas in the different countries have contributed positively to the Group’s results.

BBVA has grown in 2010, 9,4% with respect to 2009.  It reached this success expanding to different business and growing geographically, that helped it to maintain the income. It has enhance its brand in Latin America and Asia. And it also came to an agreement to buy the second largest bank of Turkey, a promising country in terms of development.

 

Stakeholder Study

We define stakeholders as all those people, institutions and segments having a significant bearing on the company’s operations and decisions, or that are affected by them (positively or negatively).

Main BBVA stakeholders and the Group’s commitments to each are:

 

In addition, they exist secondary stakeholders such as competitors, NGO´s andmedia .

Stakeholders affect the company at all levels and are essentials for its existence and survival. So their importance is critical in order to:

Þ            To give or to revoke authorizations and licenses.

Þ            To improve or to damage the company’s reputation.

Þ            To contribute or to hinder the services offered by the organization.

Þ            To allow or to restrict funding.

 

It is important to have fluent and transparent communication with the stakeholders. Creation of channels for listening and dialogue provides early detection of issues that could lead to mitigation of future risks or taking advantage of opportunities.

Furthermore, there are basic requirements or needs of the stakeholders towards the organization and in order to satisfy the stakeholders, the organization has to fulfill their needs.

Customers have expectations like good quality of services at reasonable rates, in such a competitive banking market the customer´s satisfaction is crucial.

Similarly, for fulfilling the needs of the suppliers, the company has to make good relationships and long term business contracts with the suppliers.

Shareholders will trust on good and low risky business contracts and when profits are guaranteed at the end of the year.

Employees desire a company that promotes continuous training, equal opportunities for men and women, involvement and motivation in the company, fluent communication and of course, stability.

Regulators expect a good performance of the company within the political and legal framework they draw up.

Society expects a social responsible company that returns to society what society gives to it.

The company has to fulfill all their needs to survive in the market and to attain its various goals.

 

 

CSR strategy developed by the company

Reputational risks for BBVA

In relation to the risk associated with changes in the perception of stakeholders (customers, stockholders, employees, etc.),we have all witnessed the effects of the current financial crisis. Public debate is centered on how those in charge should have predicted the depth of the crisis, and lost of trust in banking system comes to the fore.

Countries descend into financial chaos and even bankruptcy, with some even having their sovereignty rating downgraded like Spain. Now more than ever banks need to take action in order to re-build and regain lost oftrust, and to do this they need transparency.

 

Real scandals at the national and international level.

But transparency does not necessarily mean that business conduct is being ethical.

• ·BBVA secret accounts

One of the latest and greatest scandalsinvolving BBVA was between the years 2001 and 2002, this one led to the resignation of the majority of the board of the bank, including its chairman, Emilio Ybarra.

This scandal took place in 2002 when the national central Bank of Spain began disciplinary proceedings against BBVA and 16 of its former directors and officers for the existence of funds amounting to approximately EUR 225 million, belonging to BBV and which were not included in the public statements.

 

After the Bank of Spain carried out the inspection it was uncovered the factthatBBVA had secret accounts in Jersey, Liechtenstein and Caiman Islands. This destinations were all considered tax havens where BBVA bought shares for the treasury and kept the money for the pensions of its executives.The main protagonist of the scandal of false accounting and personal enrichment was its chairmain Emilio Ybarra, he was the mastermind of the operation, who devised from where to get the funds, how to invest, who would be the beneficiaries and the amounts each would receive. The fact that BBVA had for years (from 1987) maintained an account which was not reflected in its public statements influenced drastically on the bank´s reputation and transparency principles.

Consumers and investors perception was damaged when credibility and trust were lost.The bank shares were also affected as they fell a 4% and 5% in the following days after the scandal was covered by the media and due to the increasing concerns about the implications in the investigation.

According to banking analysts the scandal was national without any direct linkage with latinamerican operations. Among International Banks BBVA has a solid presence and reputation in LatAm.

• ·BBVA and controversial weapons production.

The campaign “BBVA sin armas” (“BBVA without arms”), composed by Centro Delás de Estudios por la Paz de Justicia y Paz, el Observatorio de la Deuda en la Globalización (ODG), and Federación SETEM,were heard at the shareholders’ meetings that the Bank,chaired by Francisco Gonzalez, has held since the year 2008.

These NGO’s participate in the meetingsto denounce before the Board of Directors of BBVA and its shareholders the continued relationship between the spanish bank and the production of controversial weapons such as nuclear weapons, cluster bombs and depleted uranium weapons, among others.

The report presentedvarious reveals, for example, since 2006 “the BBVA Group participated in loans, issuance of bonds and management of investment funds which owns stocks and bonds of 16 companies producing controversial weapons.”

A situation that conflicts with BBVA´s internal policies on human rights and environmental and with voluntary initiatives of Corporate Social Responsibility to which the mentioned financial institution is attached.

 

CSR strategy

Corporate responsibility (CR) at BBVA has been reinforced in the light of recent events. Within the crisis context,banking corporate responsibility should be a differentiating factor. The aim of BBVA’s policy, therefore, continues to be to define commitments and foster behavior that creates value for all its stakeholders (social value), as well as for BBVA itself (reputational value and direct economic value).

The strategic focus of corporate responsibility

At BBVA corporate responsibility is completely linked and aligned with the business.Through their Corporate Responsibility and Reputation Committee, BBVA is committed to involving all the areas of the Group in determining their strategic focus.

Principles of Strategic CR plan are financial literacy and inclusion, responsible banking and community involvement.

1.  Financial inclusion. The segments of society with the lowest incomes are not usually able to provide the guarantees required by traditional banks for granting loans and other financial services. Microfinance is the most useful instrument to enable the most underprivileged to access the financial system. BBVA has a number of projects related to financial inclusión, the most important of them is the BBVA Microfinance Foundation.

2.  Education and financial literacy. In the year 2010 the Global Financial Education Plan El dinero en nuestras vidas (the Money in Our Lives) was consolidated. The plan aimed to support people’s financial education and improve their current and future financial situation.

The Global Financial Education Plan is aimed at different geographcal areas.In Spain and Portugal, Valores de futuro (Future Values) is designed for primary school children and those in the first cycle of ESO.

 

The international economic crisis has made clear the need and the opportunity to strengthen people’s financial culture, education in this area forms part of the fight for financial inclusion.

 

3. Responsible Banking. Integratingresponsible finance (GSC) environment, social and corporate governance-variables), responsible investment, customer focus, human resources, responsable procurement, the environment.

4.Community Involvement(Education and Research)

In 2010, the Group increased its community investment to €76 m, 1.6% of the Group’s net attributable profit.

 

BBVA’s commitment to education was again evident in 2010 through its alliance with the Organization of Ibero-American States and their “Educational Goals 2021”. Among the highlights in research since 2008 have been the BBVA Foundation Frontiers of Knowledge Awards. Through these awards, the Foundation recognizes scientific and artistic contributions that have extended the frontiers of knowledge and increased the possibility of a better future for society.

Furthermore, since 2010 BBVA owns a corporate website: Banca para todos (Banking for all) which reflects the efforts of the entity on Corporate Social Responsibility (CSR) with all the information needed.

 

 

What kind of policies should the company implement and which of them should be abandoned?

Alligned with one of the abovementoined scandals, BBVA with the highest presence in companies manufacturing controversial weapons, we are going to asses how the company can implement strategies to compensate a particular case:

 

BBVA has financed Maxamcorp Holding SL, owner of Explosivos Alaveses S.A.responsible for manufacturing and selling anti-personnel mines and cluster munitions until their banning by the government. These weapons have hurt and mutilated thousands of people all over the world. So besides stop financing this kind of companies, BBVA needs to make a washing in this area and compensate the damage.

BBVA should help the people who have been hurt by this weapons they have financed.For instance in Colombia, which is the second country in the world with victims by anti-personnel landmines and where BBVA is present. The bankmust help the victims financing projects in order to help them to reach a better quality of life.

Our proposal is giving financial support to the Colombian Campaign against Landmines (CCCM)which strives for a reduction of social, economic and cultural effects of antipersonnel Mines.

In second place BBVA may support education and prevention programs regarding mine risk and the accompaniment of victims in the Chaim of their rights, creating alliances and strategies for the physical, psychological and social recovery of victims of landmines.

Programs aimed at the reintegration of survivors into Colombian society is also a potential opportunity to pay for the social damage its business may have provoked.

From our viewpoint BBVA should focus on the consequences of the type of businesses they finance, ethical allignment is needed between the spanish bank and its clients.

If mistakes have been made in the past, the optimum way to compensate them is the immediate blocking of financial support for such controversial activities, effective gathering of information about the bussinesses they support and adressing their efforts directly to the damaged area and community.

Other policies which are been developed by BBVA:

 

GROUP 6:

Tatiana Casquero

Elena Arboleya

David García

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