AUB is a publicly listed bank. As of December 2010, 53% of the Bank’s shares are publicly held among 5,600 shareholders and the balance is held by the Kuwaiti Public Institution of Social Security (“PIFSS”), the Bahraini Social Insurance Organization, Tamdeen Investment Company (Al Marzouq Family) and the Qatari General Retirement & Pension Company.

The Proposed investment is expected to be made by the IFC Capitalization Fund (“ICF”), which is sponsored and managed by IFC.

AUB is headquartered in Manama, Bahrain but has operations across the MENA region. The Bank operates through its majority owned subsidiaries in Kuwait, Egypt, Iraq and the UK and its affiliates in Qatar, Oman and Libya.

The main developmental impact of the project is expected to be in the developing member countries in the MENA region where AUB plans to expand as follows:

Improving the quality and operational standards of the local banks acquired/to be acquired by the Bank.
Strengthening the financial systems in the local markets where AUB is/will operate through introducing new talent, modern management, best practices and comprehensive risk management frameworks. It would also increase competition, resulting in the provision of better financial services and banking products.
Strengthening the capital base of the banks acquired/to be acquired that will lead to enhancing the access to finance in the underdeveloped markets in the Region and as such contribute to economic growth, capital formation, employment and private sector development.
Developing the retail lending and housing finance capabilities of the banks acquired/to be acquired, which would benefit the underserved consumer segments.
Supporting the flow of funds from the resource surplus GCC countries to the less developed markets and facilitate trade, investment, remittances, etc and thus increase regional economic integration.

IFC’s expected additionality, through this project, can be summarized as follows:

Provision of Risk Capital. IFC will provide risk capital to support AUB’s planned expansion in the less developed markets in the Region.
Proliferation of strong banking practices in the underdeveloped markets in the Region. Under this project, IFC will be promoting regional integration in MENA, helping AUB proliferate its stronger banking expertise practices developed over a long period to the underdeveloped markets of the Region. The project will also help scale-up access to finance to SMEs as well as housing finance in these underserved markets.
Institutionalization of the Bank’s shareholding structure. IFC will contribute to institutionalizing the Bank’s shareholding structure, thus contributing to facilitating AUB’s access to international capital markets and enhancing the corporate governance and the credibility of the institution.
E&S management. IFC will help the Bank in implementing and adopting best practices with regards to environmental and social management.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC analyzed the FI portfolio, for types of transactions, size, tenor and industry sectors and determined the Applicable Performance Requirements based on an analysis of the potential Social and Environmental risks associated with the FI portfolio and considering IFC’s investment. The Applicable Performance Requirements are:
The IFC FI Exclusion List;
The applicable National Social and Environmental Laws and regulations; and
The IFC Performance Standards.

Based on the Applicable Performance Requirements and review of the FI existing Social & Environmental Management System (SEMS) and capacity, the project will be required to:

Provide evidence of implementation of the existing SEMS on group level and subsidiaries, prior to commitment to the satisfaction of IFC.
Upgrade its existing SEMS on group level and subsidiaries, prior to commitment to the satisfaction of IFC.
The client will be required to demonstrate that SEMS implementation has been strengthened on group level, prior to disbursement, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements.
Commit to implement the amended SEMS within 6 months of disbursement in all subsidiaries and affiliates, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements.
Demonstrate commitment and resources to implementing the SEMS procedures and ensure training is provided to staff in all subsidiaries.
Notify IFC of any new acquisition and submit FI portfolio information along with any exposure to activities on IFC exclusion list. Within 6 – 12 months of any acquisition, subsidiary or affiliate would implement an SEMS similar to group level.
Demonstrate commitment to applying the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions.
Submit a periodic report to IFC as per a format to be provided by IFC.

In addition to any other requirements, the FI will also review information available in the public domain and avoid investments in sub-projects that have substantial unresolved social and environmental issues.