Over half of the BDO shares are owned by the SM Group, primarily through SM Investments Corporation (SMIC), the holding company controlled by the Sy family. SMIC has investments in retailing, shopping malls, banking and finance, property, and tourism. The other main shareholders are the Philippine Social Security System (14.89%), Trans Middle East Phils. Equities (4.11%), the IFC (1.38%), and United Overseas Bank Ltd. (0.99%). About 23.72% of the shares are traded freely in the Philippine stock market.

The proposed IFC investment is participation in BDO’s Tier 2 notes up to $150 million.

149.40 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	149.40
Equity

* These investment figures are indicative

BDO is headquartered in Manila, Philippines and operates 699 branches throughout the country. Investments can be made throughout the country.

The project has many development impacts:

- Support consolidation in the Philippine banking sector by supporting a strong local financial institution that plays a consolidator role. Consolidation of the banking industry in itself has the following development impact, namely:

- fewer players imply better capitalized banks that are better able to weather external economic shocks such as the 1997 Asian financial crisis,
- cost efficiencies that benefit both the banks and its customers, and
- bigger banks are in the best position to introduce innovative financial products and services.

- Broadening access to finance. As banks grow, the need to diversify earning streams is perceived. With intense competition in the traditional growth areas such as corporate banking, banks are compelled to seriously consider serving underserved sectors. BDO is best positioned to show leadership in terms of product development and service delivery to underserved consumer and SME client groups.

- Capital market development. The proposed project supports the development of the local capital markets through the issuance of tradable long-term local currency denominated corporate bonds. The issuance of long-term corporate bonds would provide institutional and retail investors an alternative long-term investment vehicle to the more traditional government securities. The trading of these bonds will also contribute to the development of the secondary market.

- IFC’s role of financier and comfort provider:

This project is expected to be the first issuance of Lower Tier 2 tradable paper in the Philippines. IFC’s participation and stamp of approval will strengthen the corporate note issue and help BDO raise money through the local capital markets.

- IFC’s role is to support the development of the local capital markets by participating in a new financial product, i.e. tradable Tier 2 subordinated notes.

- IFC’s role as advisor:

Going forward, IFC can provide advisory services to the Bank especially in sectors that it is looking into that has historically been underserved or untapped such as Sustainable Energy Finance and SME/Microfinance.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. During appraisal, IFC will analyze the FI portfolio for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements, if any, that would include a combination of:

- The IFC FI Exclusion List and/or;
- The applicable National Environmental and Social Laws and regulations and/or;
- The IFC Performance Standards.

While the client is an existing client, considering that the project will apply the new Environmental and Social Policy framework, IFC will review the effectiveness of the implementation of the requirements under the existing transaction. IFC will also review, if required, the capacity of the FI to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS).

If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS. Based on the review, the project will be required to:

- Develop an, or upgrade, if necessary, any existing SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Requirements;
- Commit to take action to remedy any gaps in SEMS implementation on an ongoing basis;
- Submit a periodic report to IFC as per a format to be provided by IFC.