Borislav Bangeev: ESG risks are an existential issue for banks

Borislav Bangeev: ESG risks are an existential issue for banks

With each passing day, ecology, social responsibility and transparent governance are becoming more and more crucial for the future of the economy. Against the backdrop of the pandemic, society has become increasingly aware of the need to act responsibly towards nature before it is too late.

As a significant step in this direction we could highlight the conclusion of the so-called “Green Deal”, by which the European Union committed to develop a green and digital economy. However, there are significant implications, including regulatory ones.

This is why businesses are increasingly striving to meet new environmental requirements and also contribute to green goals. The banking sector is no exception. This is evidenced by the new regulations, known as ESG (Environmental, Social, and Governance), on environmental, social and corporate governance that banks must implement.

“The ESG subject has always been touched upon in risk management in banks, but perhaps with a more chaotic nature. In recent years, following the regulations, we have been trying to systematise our approach in this respect.”

This was told by Borislav Bangeev, Chief Risk Officer and Member of the Management Board of UniCredit Bulbank, who was a speaker in the panel Financing the Green Transition in the international forum “Green Transition – Challenges and Solutions for Bulgaria”, organized by Dir.bg and 3eNews. During the conference, Bangeev commented on the change in the way banks perceive and assess risks, putting an increasing component on both ESG regulations and climate risks. And also the extent to which the new requirements affect customers of financial institutions.

The business of banking is deeply connected to regulations. Risks around ESG topics under the new European Banking Authority and European Central Bank guidelines must be integrated into every aspect of banks’ activities – from planning, through monitoring of activity, to the allocation of appropriate capital.

“This is a burden for us, but we try not to transfer this burden to the end user, because our clients have their own problems to manage, and we as a financial institution are part of solving these problems,” Borislav Bangeev said.

He added that while in the past ESG risks were more of an ethical and reputational issue for banks, now they are becoming an existential issue.

“The enormity of the change is so great that if we don’t help and assist our clients in making the right transition to a greener economy we are very likely to have financial losses as an institution in the absence of collaboration,” he explained.

How do banks assess ESG risks?

There are European Banking Authority guidelines on lending and monitoring, which came into force in the middle of this year. They place very specific requirements on the assessment of the plans that clients provide to banks in terms of how effective the projects can be over time. In fact, this is a key part of the banks’ decision on whether a project can be supported or not.

“We are the ‘translator’ between the policy, making it effective and close to individual clients. Not only for large corporate clients, who have a fairly high level of understanding of what they need to do to make their business sustainable over time, but also for small and medium-sized enterprises, where the need for the bank as an advisor in this aspect is extremely important”, explained the Chief Risk Officer of UniCredit Bulbank.

He added that as far as individuals are concerned, the bank usually directs their consumption in the right direction through its products so that there is sustainable development of the environment and the economy.

Borislav Bangeev was adamant that actions related to local specificities are needed.

“This is the strength of the banks, because we know the local characteristics and the local market extremely well, we know our clients and we are able to help them effectively in finding the best solutions. Not only financially, but sometimes even in terms of project selection, so that they can go through the transactional transition most smoothly,” said the Chief Risk Officer of UniCredit Bulbank.

He added that the transparent and efficient allocation of public financial instruments can only be done with a strong banking system.

“UniCredit is part of it – a leading leader of the banking system in Europe, and of course in Bulgaria”, said Borislav Bangeev in conclusion.

Borislav Bangeev is Chief Risk Officer at UniCredit Bulbank. He started his career in the bank as a Retail Banking Monitoring Manager in Risk Management. From October 2007 to May 2010 he was Credit Policy, Products and Procedures Manager at UniCredit Bulbank. In May 2010 Borislav started building his international career at UniCredit SpA as a Business Manager in the FIBS & Credit Risk Commercial Portfolio Unit in Munich, Germany.

In May 2012, he became Vice President and Business and Change Management Manager for Commercial Risk Group in Milan, Italy. In September 2013, he rejoined FIBS, consolidating his expertise and assuming progressively more senior management positions as Head of Group Core Markets and, since March 2016, First Vice President and Chief Lending Officer of FIBS.

In October 2017 Borislav Bangeev took the position of Global Head of Credit Transactions with Financial Institutions, Banks and Sovereigns (FIBS) at UniCredit Group.

Borislav holds a Master’s degree in Finance and Banking from Sofia University “St. Kliment Ohridski”.