PRESENTATION OF NATIXIS 3 1.1 Presentation of Natixis 4 1.2 History and links with BPCE 6 1.3 2014 Key fi gures 8 1.4 Natixis’ business lines 10 1.5 Natixis and its shareholders 26
CORPORATE GOVERNANCE 31 2.1 Corporate governance 32 2.2 Additional information on the corporate offi cers’ positions 34 2.3 Management and oversight of corporate governance 57 2.4 Natixis Compensation Policy 72 2.5 Report of the Chairman of the Board of Directors on internal control and risk management procedures 86 2.6 Statutory Auditors’ report on the report of the Chairman of the Board of Directors 98
This registration document was fi led with the French Financial Markets Authority on March 12, 2015, in accordance with Article 21213 of the general regulations of the French Financial Markets Authority. It may be used in connection with a fi nancial transaction only if accompanied by a transaction note approved by the French Financial Markets Authority.
1.1 PRESENTATION OF NATIXIS 4 1.2 HISTORY AND LINKS WITH BPCE 6 1.2.2 Financial solidarity mechanism 6 1.2.3 BPCE organization chart 7 1.3.1 Income statement 8 1.3.2 Financial structure 8 1.3.3 Net revenues by business 8 1.3.4 Pre-tax profi t by business 9 1.3.5 Long and short-term ratings (as of February 2015) 9 1.3.6 2015 Investor relations calendar 9 1.4 NATIXIS’ BUSINESS LINES 10 1.4.1 Wholesale Banking 10 1.4.2 Investment Solutions 15 1.4.3 Specialized Financial Services 20 1.4.4 Major contracts 23 1.4.5 Financial Investments 23 1.5 NATIXIS AND ITS SHAREHOLDERS 26 1.5.1 Key share data at December 31, 2014 26 1.5.2 Breakdown of share capital at December 31, 2014 26 1.5.3 Shareholder scorecard 26 1.5.4 Share price information 27 1.5.5 Natixis and its individual shareholders 27 1.5.6 Investors relations 29
Car insurance, home insurance, home and leisure accidents insurance, health insurance, legal protection insurance and means of payment insurance
Natixis is the corporate, investment, insurance and fi nancial services arm of Groupe BPCE, the 2nd-largest banking group in France (1) with 36 million clients spread over two retail banking networks, Banque Populaire and Caisse d’Epargne. Natixis is listed on the Paris Stock Exchange.
With more than 16,000 employees, Natixis has a number of areas of expertise that are organized into three main business lines: Wholesale Banking, Investment Solutions & Insurance, and Specialized Financial Services.
Equipment and real estate lease fi nancing (equipment leasing, real estate leasing, operations leasing, leasing with option to buy, IT operational leasing, Sofergie loans and long-term leasing)
Natixis was formed by the completion of the following contributions: V CNCE’s contribution to Natexis Banques Populaires of certain subsidiaries and shareholdings in corporate, investment and service banking businesses, as well as a share of the cooperative investment certificates (CCI) issued since 2004 by each Caisse d’Epargne et de Prévoyance; and
Between November 18, 2006 and December 5, 2006, CNCE and BFBP (through SNC Champion) sold some of their Natixis shares on the market via a Retail Public Offering in France for retail investors and a Global Offering for institutional investors both in and outside France. Once this transaction was completed, CNCE and BFBP each held a 34.44% stake in Natixis.
With the 18 Banque Populaire banks, 17 Caisses d’Epargne, Natixis, Crédit Foncier, Banque Palatine and BPCE International et Outremer, Groupe BPCE offers its customers a broad range of products and services, including solutions for savings, investment, cash management, fi nancing and insurance.
Pursuant to Article L.511-31 of the French Monetary and Financial Code (Code monétaire et fi nancier), BPCE shall, as the central institution, take any measures necessary to guarantee the liquidity and solvency of Groupe BPCE. Natixis, in its capacity as an institution affi liated with BPCE, is covered by the Groupe BPCE fi nancial solidarity mechanism. Thus, in the event Natixis encounters fi nancial diffi culty, (i) BPCE would fi rstly provide support using its own regulatory capital in accordance with its duty as a shareholder; (ii) should this prove insuffi cient, it would use the mutual guarantee fund created by BPCE, totaling €360.4 million in December 31, 2014 in assets provided jointly by both the Banques Populaires and Caisses d’Epargne networks, and which is increased through an annual contribution (subject to the amounts which would be used in the event of a call for funds); (iii) if BPCE’s regulatory capital and this mutual guarantee fund should prove insuffi cient, BPCE would call on (in equal proportions) both the Banques Populaires and Caisses d’Epargne networks’ own guarantee funds of €900 million in total and, fi nally (iv) if calls on BPCE’s regulatory capital and these three guarantee funds should prove insuffi cient, additional sums would be requested from all Banques Populaires and Caisses d’Epargne.
1 PRESENTATION OF NATIXIS2014 Key fi gures 1.3 2014 Key figures 1.3.1 INCOME STATEMENT
Financial Investments 828 855 * Pro forma data, see section 4.1.1 “Methodology” for exceptional items and Appendix to 4.1.3 “Consolidated results”.
After market close (subject to modifi cation) 2015 First Quarter Results
In 2014, Natixis carried out structural projects in all of its Wholesale Banking businesses, in accordance with the objectives of the New Frontier strategic plan.
It continued its “asset-light” strategy in accordance with its “Originateto -Distribute” model, and increased its international presence with signifi cant initiatives in Japan and Australia, the development of its Latin American platform, and a cooperation agreement in Saudi Arabia. In addition, to improve its business development capacities and better meet the needs of its clients it created a single Customer Relationship Management application, and a Client Services Department responsible for improving client referrals, and more.
V Coverage: Natixis’ bankers are developing a strategic dialog with corporates, institutional investors and private equity funds. They anticipate their needs and, in conjunction with the business lines, offer them all of Natixis’ products and services, from vanilla finance to more complex solutions with high added value.
V Financing: the dedicated teams provide customers with comprehensive advisory, arrangement, underwriting and financial engineering expertise in various types of financing (aircraft, export and infrastructure finance, energy and commodities finance, acquisition and strategic finance, and real estate finance).
V Portfolio Management: under the “Originate-to-Distribute” model implemented in 2013, Portfolio Management is responsible for actively managing Wholesale Banking’s portfolio. It optimizes balance-sheet rotation and the use of related resources, thereby offering Natixis renewed origination capacity.
Within the Wholesale Banking division, Coverage is the key component to Natixis’ client coverage. It supports clients at every stage of their development, meets their traditional fi nancing needs, advises them, and offers them a comprehensive, customized range of products by leveraging all of Natixis’ solutions and services. Coverage draws on its strategic advisory teams (mergers and acquisitions, equity capital markets, structural fi nance and ratings) to work closely with the bank’s various businesses. This structure allows maximized responsiveness and the ability to anticipate client needs through in-depth strategic dialog.
Natixis is also developing advisory services for carrying out public tenders or exchange offers and implementing defense strategies. Natixis is a key player in France and a leader in launching public offerings, and was ranked the No. 2 bookrunner on equity capital markets in terms of the number of transactions in France in 2014 (1). In 2014, Natixis carried out several key transactions, including capital increases for Peugeot (€1.95 billion) and Arkema (€350 million), Coface’s IPO (€957 million) and a convertible bond issue (€1.15 billion) for Alcatel Lucent. Internationally, it helped Italian company Italcementi do a €500 million capital increase and Cnova, a Casino subsidiary, go public on the Nasdaq.
In terms of structured fi nancing, Natixis has comprehensive advisory, arrangement, underwriting and fi nancial engineering capacity in aircraft fi nancing, export and infrastructure fi nancing, energy and commodities fi nancing, acquisition and strategic fi nancing and real estate fi nancing .
In 2014, Natixis was ranked No. 2 bookrunner for real estate fi nance in the EMEA region (1), No. 4 bookrunner in project fi nance in the EMEA region, No. 10 mandated arranger worldwide and No. 10 in the Americas (2), No. 11 bookrunner for LBO fi nancing in the EMEA region (3) and No. 2 in France (4).
V In energy and commodities, Natixis provides sectoral coverage and loans specific to these markets: pre-export financing, transactional facilities, borrowing base financing (5), reserve-based lending (6) for oil and mining operations, etc. Natixis promotes all of its business lines to its customers in this sector. In 2014, Natixis consolidated its positioning: R with its producer clients by arranging fi nancing, namely for Petrobras Oil & Gas in Nigeria ($700 million); R with its trading clients by, for example, arranging borrowing base fi nancing (5) in the United States in the energy sector for Trafi gura ($3.5 billion), Mercuria ($2.9 billion), as part of acquiring JP Morgan’s trade activities, and for French mining and metallurgy group Eramet (€100 million), a world leader in the sector. In 2014, for the third year running, Natixis was ranked third in the “Best Trade Bank in Metals and Mining” (7) category.
Over the next few years, Natixis will continue to selectively develop its Energy & Commodities franchise internationally (Latin America, Asia, Australia, Africa and the Middle East) by leveraging its expertise in structured finance and commodity trade finance, and by expanding the range of solutions available to its customers.
V In the area of Real Estate Finance, Natixis’ teams are developing expert advisory services for equity transactions and for arranging corporate and specialized financing solutions. Natixis is a leading banks in France and has strong, well-known franchises in Europe and the United States. Mortgage lending bank Natixis Pfandbriefbank, whose primary activity is financing commercial real estate transactions in Europe, stepped up its development by issuing close to €300 million in Pfandbriefe bond issues in 2014, rated AAA by Moody’s. Natixis Pfandbriefbank also conducted and successfully placed its first syndicated bond issue with its German clients for an amount of €100 million in November 2014.
(5) Loans for which the amount is determined by the assets pledged.
1 PRESENTATION OF NATIXISNatixis’ business lines Natixis deepened its activity in Europe through its role in landmark transactions: it helped real estate investment company Eurosic acquire SIIC de Paris for approximately €1.5 billion, arranged a record-breaking loan of €1.5 billion for Carrefour (through its Carmila subsidiary) for the acquisition of 172 shopping centers, and financed the purchase of the Beaugrenelle shopping center for a total of €560 million.
With more than 300 employees in France and internationally dedicated to cash equity and equity derivative markets, Natixis offers its customers investment, fi nancing and hedging projects that range from the simplest to the most innovative solutions.
On the cash equity market, Natixis is positioned as a Europe-wide broker specializing in the French market. It offers the full range of expertise: research, sales, and value-adding execution products. Three distribution platforms - in Paris, London and New York - are available for corporate and institutional clients, as well as for the Groupe BPCE networks. In 2014, the teams were heavily involved in the Coface IPO led by Natixis as global coordinator and joint bookrunner, and in promoting the stock on the secondary market with strong market share on Euronext.
At the same time, Natixis has continued to develop its international equity market customer coverage by expanding its sales teams. Revenues generated abroad have increased markedly, particularly in the Americas and Asia.
As for e-trading on the equity markets, aside from a full range of products and services for execution (algorithms, DMA, DCA, DSA, SORS, program trading, etc.), Natixis also provides its clients with a range of electronic platforms that draw on its fi nancial engineering expertise: an advisory tool for asset allocation, a price generator, transactional tools for structured products, investment solutions for stocks, indexes and baskets (EMAPS and Squall proprietary platforms).
Equity linked fi nance was strengthened by the creation of Strategic Equity Transaction (SET), a joint venture between the Structured Financing and Capital Markets business lines. The dedicated team designs, advises on and implements structured transactions on listed shares for corporate fi nance, using fi nancing tools, derivatives and other fi nancial instruments for Natixis’ large European and international corporate clients.
The Fixed Income Commodities & Treasury business line comprises over 700 employees located in Europe (Paris, London, Milan, Madrid and Frankfurt), the Middle East (Dubai), Asia (Singapore, Tokyo and Hong Kong) and the United States (New York, Houston and São Paulo). They offer customers fi nancing, investment and hedging products on the fi xed income, credit, forex and commodities markets in OECD countries. They are also positioned on emerging markets.
In a 2014 market climate dominated by extremely low interest rates, an overall lack of volatility, an uncertain geopolitical, changing regulatory environment and shrinking margins, Natixis maintained its sales momentum, and demonstrated the ability of its teams to offer customized solutions that meet the needs of its customers, whether corporates, institutions, central banks or hedge funds. The expansion of its fi xed income, credit and forex businesses is the result of expanding its client franchise and deploying it internationally, especially in the United States and Asia.
(2) Source: Global Investor/ISF Fall 2014 – Equity Lending, Fixed Income Lending & Technology Survey 2014 “Best Global Borrower Group 2, highest rated by Group 2 Lenders”.
Natixis has expanded on the high yield market with an increasingly broad range of products, and on the green bond market. It has also continued its development to support clients by arranging issues denominated in foreign currency, especially dollars. The loan syndication activity continued to expand in 2014. Thanks to a cross-functional approach to securitization, asset and liability management, advisory and portfolio restructuring services (GSCS activity), Natixis offered its clients innovative, cutting-edge solutions to meet requirements related to regulatory and accounting changes, as well as issues concerning balance-sheet reduction, use of resources, alternative fi nancing research, etc. In 2014, Natixis was an active arranger on the US CLO market (1). In the same year, Natixis completed innovative transactions such as BPCE’s fi rst Uridashi bond issue, primarily targeting Japanese retail investors. In addition, it carried out several major bond transactions, including a three-tranche hybrid bond issue for EDF (€2.75 billion), a bond issue for Fiat (€850 million), the fi rst dual tranche covered bond issue for Unicredit, a four-tranche bond issue for Etisalat (€3.4 billion), a three-tranche bond issue for Sanofi (€3 billion), a bond issue for the Kingdom of Morocco (€1 billion), two bond issues worth €1 billion and €1.25 billion for Wells Fargo, and a dollar-denominated issue for Turkish bank IsBank ($750 million). As for securitization, Natixis played a major role as the sole lead manager for two CLOs (1) from Fortress Investment Group.
In emerging markets, Natixis offers a full range of fi xed income, credit and forex products. Natixis is expanding this activity at the local level (Moscow, Shanghai and Dubai) and in Paris, London and New York. Natixis is developing its products for local and sovereign debt, as well as in local currencies for emerging markets.
Research is a key part of Natixis’ sales strategy. Every day, the Research teams publish analyses to guide clients in their investment decisions, and continue to creating of fi nancial solutions tailored to customer needs.
In 2014, Natixis developed its cross-functional research by combining its equity, credit and economic research teams in order to offer clients cross-functional expertise based on cross-sectional analyses and targeted themes. It now forms one of the biggest research teams in the market with a focus on six forms of expertise: equity, credit, economic, investment strategy, commodities, and fi xed income and forex. Cross-functional research is increasing the number of studies and investment recommendations it publishes. It also organizes cross-functional conferences on equity, credit, fi xed income, forex and commodities.
Its teams are based in Paris, New York and Hong Kong, and are responsible for ensuring the best possible rotation of Wholesale Banking’s loan portfolio (i.e. all the vanilla and structured fi nancing originated by the bank) and managing the Originate-to-Distribute chain from end to end for greater overall effi ciency.
The drivers for accelerating balance-sheet rotation are: V increasing disposal volumes to ensure the portfolio is effectively rotated and to free up origination capacity, especially for the most profitable forms of financing; V establishing structured off-balance sheet solutions for Natixis by optimizing RWA (3) consumption and liquidity; V continuing to expand the investor base by increasing the percentage of institutional investors and internationalizing the distribution of corporate financing; V helping to establish co-origination partnerships.
In 2014, Portfolio Management signifi cantly sped up balance-sheet rotation of bank fi nancing, in particular by establishing structured solutions.
1 PRESENTATION OF NATIXISNatixis’ business lines V Correspondent Banking: maintains a vast network of correspondent banks throughout the world in order to support customers and Groupe BPCE in all stages of international transactions.
In 2014, the platform strengthened its presence in Chile, Colombia, Peru, Mexico, Canada and the United States. A new representative offi ce dedicated to real estate opened in Los Angeles. The platform established a strategic partnership in Canada with Trez Capital Group, one of the leaders in CMBS (commercial mortgage-backed securities) transactions. In addition, the platform expanded its range of products and services, allowing it to deepen its relationship with existing clients and attract new ones, particularly by reinforcing its cash equity activities.
Cooperation with Natixis teams worldwide has resulted in several major fi nancing deals to better serve its clients: Natixis fi nanced Clayton, Dubilier & Rice’s acquisition of Mauser. For the Kelar Power project in Chile, Natixis provided fi nancial advisory services to South Korean project sponsors Samsung and KOSPO, then provided fi nancing. On behalf of Fortress Investment Group’s Credit Funds, it acted as sole lead manager in two CLO (collateralized loan obligation) transactions, helped issue unsecured notes and granted various lines of revolving credit.
2014 was a year of development for the Asia-Pacifi c Platform, which launched a number of projects including strengthening the distribution platform in Tokyo and establishing a fi nancing team in Sydney that specializes in projects and infrastructure.
The platform achieved some key commercial successes with leading roles in structured fi nancing activities. These included commodities fi nancing (multi-currency fi nancing for Vitol S.A.’s acquisition of Royal Dutch Shell’s Australian assets, etc.), aircraft fi nancing (fi nancing of two Boeing 777-300ER purchased by BBAM LP and leased to Cathay Pacifi c, etc.), acquisition fi nancing (syndicated loan amortized over fi ve years on behalf of WH Group Limited, etc.) or infrastructure fi nancing (advisory services for fi nancing project to build and launch a satellite on behalf of Measat International, etc.). As a result, 2014 was marked by a considerable increase in origination and distribution, in keeping with the Originate-to-Distribute strategy.
Half of revenue is now generated with our biggest clients, with 50% growth among fi nancial institutions and 70% among corporates.
Natixis is active in approximately 100 countries in the EMEA region (Europe except France, Middle East and Africa). The region is served by teams based in Paris and by some 550 employees divided among fi ve branches (London, Frankfurt, Milan, Madrid and Dubai), two subsidiaries (Moscow and Frankfurt) and three representative offi ces (Almaty, Johannesburg and Istanbul).
(1) Australia, China, Hong Kong, Taiwan, India, Indonesia, Japan, South Korea, Malaysia, Singapore, Thailand and Vietnam.
V In northern Europe (the United Kingdom, Germany, Scandinavia, the Benelux countries and Switzerland), the bank is active in many specialized finance activities , such as financing for UK-based projects, commodities in Switzerland, real estate in Germany (through its Natixis Pfandbriefbank subsidiary) and acquisitions throughout the region. Its core business is nonetheless focused on capital markets.
Natixis’ asset management subsidiary, Natixis Global Asset Management (NGAM), aims to further its international development. Two-thirds of NGAM’s 3,400 employees already work outside France, mainly in the United States, the world’s biggest asset management market. In addition, NGAM has a global distribution platform of close to 700 people and has a leading position in the US mutual fund segment. Private Banking also has a platform in Luxembourg, where some 100 people are working to build up the European private banking business, while Private Equity offers a global range of funds of funds through asset management fi rms in Europe, the US and Asia.
Operating within the Investment Solutions and Insurance division, Natixis’ asset management business markets a wide range of investment solutions including funds, dedicated products and mandates in all asset classes (money market, bonds, equities, real estate, alternative, diversifi ed and capital investment).
The Asset Management business is structured around the Natixis Global Asset Management (NGAM) holding company. Natixis Global Asset Management ensures the overall consistency of asset management operations and also has responsibility for developing a global distribution platform and overseeing the fi nancial and strategic management of around 20 specialized asset management and investment service companies in Europe, the United States and Asia. Combined, these entities have 3,450 staff, 2,000 of whom are in the United States. They hold key positions in Europe - primarily in France - and are developing their presence in Asia Pacifi c, the Middle East and, since 2014, Latin America and Canada.
In 2014, Natixis Gl obal Asset Management posted its best results since its inception in 2006. It pursued its growth strategy as well as its investment policy to ensure the steady development of its asset management expertise and consolidate the distribution platform in the United States, Europe and Asia. Numerous strategic projects were run, including the launch of a distribution network in Latin America (Mexico and Montevideo) and of activities in Toronto, Canada, via the acquisition of Nexgen Financial, and the international expansion of the retail business. In 2015, NGAM will continue to invest in new targeted development projects and will consider external growth opportunities and partnerships.
The asset management companies’ performance was also driven by the effi ciency of the entire Natixis Global Asset Management distribution platform which is dedicated to collecting infl ows for asset management companies. This platform covers asset management infl ows from the United States, mainly for the retail activity, as well as from Europe, the Middle East, Asia and Australia. The integration of French distribution teams - previously part of Natixis Asset Management - into the international distribution platform in fall 2013 contributed to the dynamic pace of growth.
In addition to its strong presence in the US market, in 2014 the platform continued to expand its international coverage in Asia for major corporate clients and global advisors, and in Europe, mainly in the UK market, where business with institutional clients was brisk and for which a retail market strategy was implemented. A strategy of extending coverage to several Latin American countries has been followed since 2014, starting with Mexico and Uruguay and set to take in Colombia in 2015. In 2014 the distribution activity picked up in France, Japan, and other European countries including Italy, Spain and Germany.
European asset management companies at end-2014 (assets under management in billions of euros): R Natixis Asset Management (€304.9 billion): fi xed income, European equities, investment and client solutions, volatility and structured products, global emerging and responsible investing; R AEW Europe (€16 billion) real estate asset management, real estate investment trusts (SCPIs) and real estate mutual funds (OPCI); R VEGA Investment Managers (€5.6 billion): funds of funds and fund selection; R H
Natixis Global Asset Management operates in Europe through Natixis Asset Management (NAM), one of the leading European asset management companies. Natixis Asset Management offers proven expertise in the main asset classes and portfolio management styles. It also provides privileged access to the complementary expertise of VEGA Investment Managers, specializing in fund selection and funds of funds management, Dorval Finance - 50.1%-owned since 2014 - in fl exible portfolio management and H
Natixis Asset Management’s assets under management totaled €304.9 billion at end-2014 versus €291 billion at end-2013. Money market products continued to record signifi cant outfl ows due to the low interest rate environment. In contrast, medium- and long-term product infl ows on equity, bond, diversifi ed and insurance products were positive for Natixis Asset Management and its subsidiaries, in particular Mirova and H2O. CNP’s assets totaled €159 billion, i.e. 47% of NAM’s assets under management.
In 2015, Natixis Asset Management will pursue its transformation to better meet the needs of the market by developing the new growth drivers it has identifi ed, and by continuing to align its structure with the multi-affi liate model.
AEW Europe is owned in partnership with Caisse des Dépôts, which has a 40% stake. This subsidiary is a European leader in investment advisory services and third-party real estate asset management. AEW Europe operates in nine European countries, with a particularly strong presence in Paris and London, and managed €16 billion in assets at end-2014. In 2014, fund raising and transactions (acquisitions and disposals) were strong. AEW Europe presented its 2015-2018 strategic plan with auspicious business prospects based on development and international diversifi cation opportunities amid considerable investor interest in real estate. The partnership between AEW Capital Management – in the United States and Asia – and AEW Europe constitutes a global platform that ranks number 6 in the world in terms of assets under management.
Net infl ows from US companies reached a record high of $36.1 billion. Recording the largest infl ows were Loomis and Sayles (bonds and equities) with $25.8 billion and Harris Associates (equity products) with $12.6 billion. In addition, among the smaller affi liates, Vaughan Nelson IM returned to growth and Alpha Simplex Group became a recognized specialist in alternative cash products.
In early 2014, NGAM took fi rst place in the Barron’s/Lipper ranking of mutual funds in the United States for its 2013 performances. Worldwide, NGAM won some 20 Lipper awards - in the United States, France, the United Kingdom, Switzerland, Germany, Taiwan and Singapore - for the performance of its affi liates’ funds in 2013.
1 PRESENTATION OF NATIXISNatixis’ business lines US and Asian asset management companies at end-2014 (assets under management in billions of dollars): R Loomis Sayles ($230.2 billion): equities (growth, core, value) and bonds (core to high yield); R Harris Associates ($131.7 billion): US and international value stocks; R AEW Capital Management ($20.3 billion): real estate asset management; R Reich & Tang Asset Management ($17.6 billion): money market; R Gateway Investment Advisers ($12.2 billion): hedged equity; R McDonnell Investment Management ($12 billion): municipal bonds; R Vaughan Nelson Investment Management ($11.1 billion): value stocks and bonds; R Aurora Investment Management ($7.6 billion) milliards de dollars): funds of hedge funds; R IDFC (20%-owned, $7.2 billion): Indian stocks and bonds; R Managed Portfolio Advisors ($7.5 billion): overlay strategies; R Alpha Simplex Group ($5.6 billion) quantitative investment management; R Capital Growth Management (50%-owned, $3.6 billion): equities; R Snyder Capital Management ($2.0 billion): US small- and mid-cap value stocks; R Absolute Asia Asset Management ($0.8 billion): Asian equities (excluding Japan), emerging Asian equities; R NexGen Financial ($0.8 billion): delegated management; R Active Investment Advisors ($0.6 billion): discretionary index-based strategies.
Through its historic private equity specialist structure, Natixis Private Equity (NPE), Natixis has been a key private equity services provider focusing on SMEs in both France and abroad, covering the various segments of venture capital, private equity and diversifi ed funds of funds. Given this experience and recognized performance, in 2008 Natixis decided to restructure this business to focus on private equity structures capable of meeting the needs of external investors.
The Natixis private banking activity is dedicated to the fi nancial planning of its private investors. It comprises Banque Privée 1818, geared towards the French market, and Natixis Private Banking whose teams are based in Luxembourg and Belgium. At end-2014, its assets under management totaled €24.7 billion.
The private banking activity serves three customer categories: the Groupe BPCE networks, independent wealth management advisors (IWMAs) through its Sélection 1818 subsidiary (multi-product and multi-service platform) and direct customers, brought mainly by Natixis.
Business owners and senior executives in France and abroad represent the core target markets of private banking teams in charge of direct customers (€6.71 billion in assets under management at December 31, 2014). They work closely with Natixis’ Coverage teams to roll out innovative and customized wealth-management solutions to meet the specifi c needs of this demanding customer segment.
Notable achievements in 2014 included the renewed rating of Banque Privée 1818’s Corporate Advisory team as a major player in the “best investment bank for managerial team support” category.
With €5.7 billion in assets under management and 800 active IWMAs, Sélection 1818 launched a new extranet - an ergonomic portal bringing together all its services in one place - to optimize its commercial relations with its partners. In 2014, Sélection 1818 also topped the 21st ranking by suppliers of Gestion de Fortune magazine, as the leading bank platform dedicated to IWMAs.
VEGA Investment Managers, the result of the merger of Natixis Multimanager and 1818 Gestion on December 31, 2012, is an asset management company (60%-owned by Banque Privée 1818 and 40%-owned by Natixis Asset Management) specialized in wealthmanagement solutions for private investors. It is also Natixis’ specialized unit for open-architecture fund-of-funds management and fund selection for all kinds of clients (individuals, institutions and companies). Its activity is structured around three business lines: collective investments, discretionary portfolio management and advisory & fund selection. In 2014, for the second year in a row, VEGA Investment Managers was recognized as the best French asset manager in its category at the European Funds Trophy awards (26-40 funds rated). In addition, the Elite 1818 Euro Rendement fund was given a fi rst rating of fi ve stars by Morningstar.
In the space of one year Horizéo has become the leading policy for individual customers. Quintessa was launched for private banking customers. Assets managed by ABP Vie under fl exible mandates exceeded €1 billion, as did the assets managed by Natixis Life with the Luxembourg teams, demonstrating an ability to meet the requirements of high net-worth customers.
Growth in the personal protection insurance business remained strong in 2013, with premiums increasing by 15% to €627 million. Payment protection insurance accounted for 77% of personal protection insurance premiums in 2014.
Natixis’ Specialized Financial Services division comprises two major business categories, Specialized Financing and Financial Services, with similar industry and distribution strategies.
CEGC ranks second in the French market for mortgage guarantees for individuals and guaranteed €19 billion in loans in 2014 (down by 17%, historical business volumes in 2013) in a market driven by loan renegotiations.
The company shares the leading position in the property administration, third-party management of retail and offi ce space, and realtor market, issuing more than 5,000 guarantees under the Hoguet Law, with a volume of more than €6 billion. It guaranteed the completion of 12,000 single-family homes in France, accounting for approximately 25% of the market.
Natixis Lease is a key player in the French leasing market. It supports companies and other professionals in all of their equipment and real estate leasing investment projects. Social economy and institutional players are also among Natixis Lease’s customers. Natixis Lease is a subsidiary of Natixis and develops and distributes one of the widest ranges of integrated solutions on the market in terms of equipment and real estate leasing, long-term vehicle leasing, renewable energy fi nancing and IT operational leasing. It also arranges and syndicates customer loans.
Natixis Lease’s specialization in fi nancing companies and professionals as well as its in-depth knowledge of professional real estate, give it a better understanding of customer expectations in the Banque Populaire, Caisse d’Epargne and Natixis networks.
Following the creation of the United Partnership JV on January 1, 2013 - resulting from the joint venture entered into by Natixis Financement and BNP Paribas Personal Finance - a shared IT platform was launched in October 2014.
Operating through the Natixis Cofi ciné subsidiary and holding marketleading positions in France and Europe, Natixis fi nances the full range of audiovisual professions.
After initially targeting a French client base, Natixis Cofi ciné is now expanding its activities in several countries in the European Union (Germany, Belgium, Spain, Luxembourg, the UK and Nordic countries) and Canada.
For the fi fth year in a row, the collective pension plan (Perco) offered posted robust growth, particularly in the corporate and institutional client segments. The number of Perco accounts increased 23% yearon -year, taking the market share of accounts under management to 30.7% (source: AFG at June 30, 2014).
The employee savings offer tailored to SMEs and professionals, distributed by the Banque Populaire and Caisse d’Epargne networks, delivered another strong performance with close to 12,500 new contracts. In order to optimize the client experience, Natixis Interépargne placed listening to companies and Perco clients as well as the co-creation of new services at the heart of its innovation approach. A comprehensive range of digital services and online tools (virtual advisor, simulation tools, smartphone and tablet applications enabling mobile transactions, etc.) is available to assist Perco clients with their investment choices. Payment vouchers, such as Chèques de Table® (meal vouchers) and CESU Domalin® (employment services vouchers), issued by Banque Populaire banks, Caisses d’Epargne and Natixis posted stable growth and an increase of 7.1% to €921 million in the total equivalent amount, mainly to mid-caps and local authorities.
In 2014, Titres Cadeaux, a joint venture with La Banque Postale, continued its development by expanding the scope of its CA DO Carte multi-brand prepaid gift vouchers. In October, the company launched the CA DO CARTE Edition Universelle, which is reloadable to the nearest euro. Issues of CA DO Chèque and CA DO Carte came to an equivalent amount of €114 million at the end of 2014, up by 8%.
Natixis Payment Solutions processes and oversees cash and sales payment fl ows of Banque Populaire banks, the Caisses d’Epargne, major French banking institutions and new payment market players, such as Payment services providers.
With over 20% market share - placing it third among payments operators in France - Natixis Payment Solutions processed close to 6.7 billion mass transactions in 2014.
■ CHANGE IN NUMBER OF TRANSACTIONS PER PREPAID CARD (CARDHOLDERS AND RETAILERS) (in billions of transactions)
To support the development of its corporate clients, both in France and abroad, Coface offers credit insurance solutions aimed at protecting companies against the risk of fi nancial default by their purchasers. It also strives to help its clients assess and anticipate risks, allowing them to make informed decisions. Coface thus offers comprehensive, detailed risk analysis of countries, sectors and companies around the world. This analysis draws on its unrivaled global network through which it offers its services in 97 countries.
(2) Current operating income including fi nancing costs is restated for the interest expense on hybrid debt issued in March 2014.
(3) At constant scope and exchange rates, excluding the costs of moving the registered offi ce and posting to profi t of capital gains in 2013.
After fully exercising this option, the total number of Coface shares offered during the IPO came to 91,987,426, i.e. 58.65% of the capital and voting rights, bringing Coface Group’s market capitalization to €1,631 million.
A simultaneous offer reserved for employees was also launched in 19 countries, covering 80% of the Group’s headcount. This offer was also a success, with employee participation at nearly 50%. At December 31, 2014, and after factoring in the capital increase reserved for employees, Natixis held a 41.24% stake in Coface.
This issue helped optimize the group’s capital structure, given its extremely low debt ratio (less than 1% at the end of 2013), and strengthen its regulatory capital.
This strategy is the spearhead of its Strong Commitment II business plan and is founded on two major pillars: innovation and implementation of a multi-channel distribution model.
Over the course of 2014, Coface’s offering was expanded to include innovative solutions such as Easyliner (reserved for SMEs), CofaServe (a solution integrating Coface services in the client’s information system), as well as PolicyMaster and CashMaster (two new services simplifying the day-to-day management of policies and access to bank funding).
Finally, the Group continued its efforts to improve the effi ciency of its sales forces by rolling out the fi rst ever joint training program for all Coface sales and CRM teams around the world, and by improving its sales monitoring and oversight tools.
As part of its strategic refocusing efforts initiated in 2011, risk management remains a top priority for the Group.
In 2008, Natixis established the GAPC division (Gestion Active des Portefeuilles Cantonnés – Workout Portfolio Management) in order to (i) isolate the assets that were most impacted by the crisis and that were no longer deemed to fi t the new strategic direction of Natixis and to (ii) progressively offl oad these assets by means of active management, ensuring the proper balance between speeding up the return of capital and the resale price of the assets. Since June 30, 2009, a portion of the GAPC portfolios has been covered by a guarantee from BPCE.
The implementation of the Guarantee triggered two payments to BPCE: V the first for €1.183 billion in respect of the financial guarantee (including €1.035 billion for assets recognized as loans and receivables (L&R) and €148 million for available-for-sale assets (AFS) versus €1.249 billion in provisions); V the second for €367 million in respect of the Option.
1 PRESENTATION OF NATIXISNatixis and its shareholders 1.5 Natixis and its shareholders 1.5.1 KEY SHARE DATA AT DECEMBER 31, 2014
(c) For 2014, an ordinary dividend of €0.20 and a special dividend of €0.14 for Coface’s partial IPO.
The average daily volume of Natixis shares traded on the market amounted to around 4.06 million in 2014 versus an average of around 4.30 million in 2013.
1 PRESENTATION OF NATIXISNatixis and its shareholders New in 2014 On July 1, 2014, more information was added to the interactive voice server of Natixis’ toll-free service to keep shareholders better informed. In addition to learning about the share price, shareholders calling the service can now also fi nd out about: R the Company’s fi nancial calendar; R the highlights of the latest results, as presented in the press release; R and the upcoming events of the Shareholders’ Club.
V The website (www.natixis.com): R includes company information; R provides a comprehensive archive of the Company’s press releases, calendar and fi nancial news in the “Investor Relations” section; R includes all editorial content and documents for shareholders and, in particular, all issues of the Shareholder Annual Newsletter in the “Individual Shareholders’ Corner”.
V At end-2014, the Natixis Shareholders’ Club had more than 12,600 members.
R periodic invitations to events as part of our sponsorship policy, which are sent by e-mail.
Members can access the dedicated website (clubdesactionnaires. natixis.com) containing information about the Club and its Program of activities (interactive Shareholder Annual Newsletters, video conferences, chats, economic videos, sponsorship events, etc.).
R Philippe Waechter, Chief Economist at Natixis Asset Management, for two video chats on the latest economic news, Marie-Pierre Ripert, Sophie Chardon, Bei Xu, Inna Mufteeva, Sylvain Broyer and Cédric Thellier, economists from our Economic Research team, who spoke on the themes “Macroeconomics and Equity Markets: 2013 in Review”, “The French and European Economic Environment: Mid-2014 Review” and “China and the United States: a Macroeconomic Update”.
Moreover, two information meetings about Natixis were held for shareholders in Strasbourg and Marseille. The meetings were organized in partnership with investment journal Le Revenu and the Federation of Individual Investors and the Investments Clubs (F2iC), and gave investors insights into Natixis, its businesses, fi nancial results and strategy. Over 500 shareholders attended these multi-issuer events and individual investors were invited to submit their questions to Natixis representatives.
V In 2014, the CCAN met twice, specifically to work on the “New Frontier” strategic plan, the visibility of the shareholders’ club and the governance of Natixis, particularly for the preparation and assessment of the 2014 General Shareholders’ Meeting, which is the main gathering between directors and shareholders.
A special effort was made for the presentation of governance. The Meeting also voted for the fi rst time on matters relating to compensation due or granted to each executive corporate offi cer in respect of the 2013 fi scal year, and on matters relating to compensation of the Company’s “regulated” staff.
Chief Offi cer Finance, Risk and Operations (BPCE), member of the
Director (1) The term “Chief Executive Offi cer” is not used as it is defi ned in Article L.225-66 of the French Commercial Code.Attendants to the Board Independent Director 2.1.2 SENIOR MANAGEMENT COMMITTEE AND EXECUTIVE COMMITTEE
Pierre Servant - Investment Solutions – Asset Management and Private Banking
Strategic committee ▲ ▲ ▲ ▲ ◆ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲
(1) “Dirigeant effectif” as defi ned by the French Monetary and Financial Code.
2 CORPORATE GOVERNANCE Additional information on the corporate offi cers’ positions 2.2 Additional information on the corporate officers’ positions
First appointed: Board Meeting of 04.30.2009, effective 05.14.2009 Renewal date: Board Meeting of 02.18.2015 Term expires: 2019 AGM (e)
Laurent Mignon has been Chief Executive Offi cer of Natixis since 2009 and a member of BPCE’s Management Board since August 6, 2013.
V Member of BPCE Management Board V Chairman of the Board of Directors of: Natixis Global Asset Management,
V Member of the Board of: Arkema (a-b), Lazard Ltd (a-b)
V Member of the Board of Natixis Global Asset Management (until 09.01.2010), then Chairman of the Board of Directors
Member and Chairman of the Board of Directors (from 05.15 to 12.19.2012)
François Pérol is a graduate of HEC and the Institut d’Études Politiques de Paris. After graduating from ENA, he started his career at the Inspection Générale des Finances (French General Inspectorate of Finance). He held various positions at the Ministry of the Economy and Finance, beginning with the Treasury Department (1994-2002), and then on the Cabinets of Ministers Francis Mer and Nicolas Sarkozy (2002-2004). He then left the administration to join Rothschild & Cie Banque as Managing Partner from 2005 to 2007. He was appointed Deputy Secretary General to the President of the Republic from 2007 to 2009.
V Chairman of the Fédération Bancaire Française (French Banking Federation) (since 09.01.2014)
V Vice-Chairman of the Fédération Bancaire Française (French Banking Federation) (until 08.31.2014)
Compliance with rules governing the number of offi ces held AFEP-Medef code: compliant French Monetary and Financial Code : compliant
V Chairman of the Fédération Bancaire Française (French Banking Federation) (since 09.01.2010)
V Chairman of the Board of Directors of Fondation des Caisses d’Epargne pour la Solidarité (since 06.30.2010)
V Chairman of the Board of Directors and member of the Board of BPCE IOM
V Vice-Chairman of the Board of Directors of Crédit Immobilier et Hôtelier (Morocco)
V Permanent Representative of BPCE Maroc, member of the Board of Banque Centrale Populaire
Attendance rate in 2014 Board of Directors: 100% Audit Committee: 80% Strategic Committee: 100%
V Permanent Representative of BPCE, member of the Board and Chairman of the Audit Committee of Crédit Foncier
V Permanent Representative of Banque Palatine, member of the Supervisory Board of GCE Capital
V Deputy Chief Executive Officer of CE Holding Promotion (since 05.06.2013)
V Permanent Representative of BPCE to CE Holding Promotion (since 05.06.2013)
V Director and Chairman of the Strategic Committee, Member of the Audit Committee of Legrand SA (a)
V Director and Member of the Audit & Compensation Committee of Smurfit Kappa V Vice-Chairman of La Fabrique de l’Industrie
V Member of the Board and Chairman of the Legrand S.A. Strategic Committee (since May 2012)
V Director and Member of the Audit & Compensation Committee of Smurfit Kappa (since November 2012)
Director First appointed: co-opted by the Board on 01.28.2013 and ratifi ed at the CSM of 05.21.2013 Term expires: 2015 AGM (c)
V Member of the Supervisory Board and Audit and Risks Committee of BPCE
V Member of the Board of Directors of Natixis (a) (since 01.28.2013)
(a) Listed company. (c) 2015 AGM convened to approve the fi nancial statements for the year ending 12.31.2014.
Alain Condaminas has a degree in Economic Sciences and a DESS in Banking and Financial Techniques. He joined the Banque Populaire Group in 1984. In 1992, he began working at Banque Populaire Toulouse-Pyrénées as Head of Production, supervising the Human Resources Department, and subsequently as Head of Operations. In 2001, he became Chief Executive Offi cer of Banque Populaire Quercy-Agenais. In 2003, he oversaw the merger with Banque Populaire du Tarn et de l’Aveyron, followed by another with Banque Populaire Toulouse-Pyrénées, to form what is now Banque Populaire Occitane.
Alain Condaminas has been Chief Executive Offi cer of Banque Populaire Occitane since 2006.
V Chief Executive Officer of Banque Populaire Occitane V Member of the BPCE Supervisory Board V Chairman of Fondation d’Entreprise BP Occitane V Member of the Board of Natixis Asset Management V Permanent Representative of BP Occitane, Member of the Board of i-BP V Permanent Representative of BP Occitane, member of the Investment Committee of
V Manager of SCI de l’Hers V Permanent Representative of BP Occitane, Vice-Chairman of the Board of Directors of CELAD S.A. (until 06.01.2014) V Permanent Representative of BP Occitane, Member of the Board of IRDI V Permanent Representative of BP Occitane, member of the Supervisory Board of SOTEL
2 CORPORATE GOVERNANCE Additional information on the corporate offi cers’ positions Offi ces held in previous fi scal years
Occitane, Vice-Chairman of the Board of Directors of CELAD S.A. (b)
V Permanent Representative of BP Occitane, member of the Investment Committee of Multicroissance
Laurence DEBROUX Member of the Management Board - Chief Financial & Administrative Offi cer at JCDecaux (until 01.15.2015)
Independent director First appointed: co-opted by the Board on 04.01.2010 and ratifi ed at the CSM of 05.27.2010 Term expires: 2015 AGM (c)
Attendance rate in 2014 Board of Directors: 75% Audit Committee: 80% Strategic Committee: 100%
A graduate of HEC, Laurence Debroux began her career in 1992 at Merrill Lynch Bank. From 1993 to 1996, she worked in the Finance division of Elf Aquitaine. In 1996, she joined Sanofi fi rst as Chief Financing & Treasury Offi cer and then as Chief Financial Offi cer before becoming Director of Strategy and being promoted to the Executive Committee of Sanofi -Aventis.
Key advisory skills: expertise in issues related to fi nance, communications and business strategy.
V Member of the Board of: JCDecaux Bolloré Holding (S.A.S.), Média Aéroports de Paris (S.A.S.)
V Member of the Management Board - Chief Financial & Administrative Officer of JCDecaux
V Member of the Board of: Média Aéroports de Paris (S.A.S.) (since 09.07.2011), JCDecaux Bolloré Holding (S.A.S.) (since May 2011)
V Member of the Supervisory Board of Médiakiosk (S.A.S.) (since 11.30.2011)
V Member of the Board of: BPIfrance Participations (since 07.12.2013), BPIfrance Investissement (since 07.12.2013)
Attendance rate in 2014 Board of Directors: 100% Strategic Committee: 100%
Holding a degree in Management Sciences from Université de PARIS 1, Michel Grass began his career in 1983, working in healthcare as a Clinic Director in Sens. From 1987 to 2010, he founded and ran a regional group of private clinics. In 2000, he became a director at Banque Populaire de Bourgogne and has served as a commercial court judge since 2009.
Key advisory skills: entrepreneurial experience, knowledge of the regional economic fabric.
V Vice-Chairman of Fédération Nationale des Banques Populaires V Member of the Board of: Natixis Global Asset Management, SA HLM
Brennus Habitat (since 06.16.2014), Banque Palatine V Secretary of the Conference of Banque Populaire Chairmen
V Deputy Mayor of the city of Sens (since 03.31.2014) V Judge with the Commercial Court of Sens (until 12.31.2014) V Vice-Chairman of the Senonais Communauté de Communes (since 04.17.2014) V Associate member of the Chamber of Commerce and Industry of Yonne
V Chairman of: Fédération Hospitalisation Privée Bourgogne Franche Comté, Commission Economique Hospitalisation Privée
V Member of the Board of Natixis Global Asset Management (since 02/14/2012)
With a post-graduate degree in fi nancial accounting (DECS) and another in business, administration and fi nance (DESCAF) earned at the École Supérieure de Commerce in Clermont-Ferrand, Catherine Halberstadt has been with Groupe BPCE since 1982. She began her career at Banque Populaire du Massif Central in Marketing Research (1982-1986) before becoming a Communications Offi cer (1986-1992). She was later appointed Human Resources and Organizational Director (1992-1998), Chief Financial Offi cer (1998-2000) and then Deputy CEO (2000-2008). In 2008, she joined Natixis Factor as Chief Executive Offi cer (2008-2010).
Catherine Halberstadt has been Chief Executive Offi cer of Banque Populaire du Massif Central since 2010.
V Chief Executive Officer of Banque Populaire du Massif Central (BPMC) V Member of the Supervisory Board and Audit and Risks Committee of BPCE V Member of the Board of Crédit Foncier V Permanent Representative of Banque Populaire du Massif Central,
V Permanent Representative of BPMC, Member of the Board of i-BP (since 09.01.2010)
V Member of the Supervisory Board of Foncia Groupe (since 11.02.2010)
V Member of the Board of: Natixis (a) (since 05.29.2012), Crédit Foncier (since 05.10.2012)
V Member of the Supervisory Board of: Eurazeo (a), Foncia Group. V Member of the Supervisory Board of Foncia Holding V Chairman of the Eurazeo (a) CSR Committee V Member of the Eurazeo (a) Financial Committee
V Member of the Board of Directors of: Naxos (b) (since May 2006)
V Chief advisor at Kea & Partners (b) (since September 2011)
V Chief Executive Offi cer of the Innovation Factory (b) (since February 2013)
2 CORPORATE GOVERNANCE Additional information on the corporate offi cers’ positions Bernard OPPETIT Chairman of Centaurus Capital Limited
Independent director First appointed: co-opted by the Board on 11.12.2009 and ratifi ed at the CSM of 05.27.2013 Term expires: 2015 AGM (c)
With a degree from the École Polytechnique, he forged his career with Paribas from 1979 to 2000, fi rst in Paris, then New York and fi nally London.
As Deputy Director of the Financial Management division (1980-1987), Bernard Oppetit joined Paribas North America fi rst as a Risk Arbitrage Trader (19871990 ) and then as Global Head of Risk Arbitrage (1990-1995). In 1995, while still heading up Risk Arbitrage, he moved to London to become Global Head of Equity Derivatives (1995-2000).
Bernard Oppetit is also Chairman of Centaurus Capital, a hedge fund group he founded in in 2000.
Key advisory skills: renowned fi nancial markets specialist, entrepreneurial experience in Europe.
Other offi ces held in 2014: Within the Centaurus Capital Group
Centaurus Capital Holdings Limited, Centaurus Global Holding Limited, Centaurus Management Company Limited
V Member of the Board of Tigers Alliance Fund Management (Vietnam, since 07.01.2010)
Address: 42 bd Eugène Deruelle BP 3276 69404 Lyon Cedex 03
A graduate of the IEP de Paris with a DESS in corporate tax law from the Université Paris Dauphine, Ms. Paix has been with Groupe BPCE since 1988.
Inspector and Head of Inspections at Banque Fédérale des Banques Populaires (1988-1994), she joined the Banque Populaire Rives de Paris as Regional Director and then Director of Production and Organization (19942002 ). In 2002, she joined Natexis Banques Populaires, where she was Director of Operations Management and then Director of Cash Management and Operations (2002-2005). In 2006, she became Chief Executive Offi cer of Natixis Factor, then Chief Executive Offi cer of Banque Populaire Atlantique (2008-2011).
Stéphanie Paix has been Chairman of the Management Board of Caisse d’Epargne Rhône-Alpes since end-2011.
V Chairman of the Board of Directors of Banque du Léman (Switzerland) V Member of the Board of Crédit Foncier V Permanent Representative of CERA, member of the Supervisory Board of
Garibaldi Office, SCI Lafayette Bureaux, SCI le Ciel, SCI le Relais (since 05.19.2014)
V Representative of BPA, Chairman of: Ouest Croissance, Ludovic de Besse
V Representative of FNBP, Chairman of the Association Française de la Micro-Finance
V Representative of CERA, member of the Board of Directors of: Compagnie des Alpes (b) (since 10.18.2012), Fondation d’Entreprise CERA, FNCE, Habitat en Région
V Representative of CERA, Treasurer of Fondation Belem (since May 2013)
(a) Listed company. (b) Company outside Groupe BPCE. (d) 2018 AGM convened to approve the fi nancial statements for the year ending 12.31.2017.
Didier PATAULT Chairman of the Management Board of Caisse d’Epargne Ile-de-France
A graduate of the École Polytechnique and the École Nationale de la Statistique et de l’Administration Économique (ENSAE), Didier Patault, after starting out at Caisse des Dépôts et Consignations, has been with Groupe BPCE since 1992.
In 2000, he was appointed Chairman of the Management Board of Caisse d’Epargne des Pays du Hainaut, and then Chairman of the Management Board of Caisse d’Epargne des Pays de la Loire (2004-2008), and fi nally Chairman of the Management Board of Caisse d’Epargne Bretagne-Pays de Loire (2008-2013).
V Chairman of the Supervisory Board of Banque BCP V Member of the Supervisory Board of: BPCE, Caisse d’Epargne Capital
Compliance with rules governing the number of offices held AFEP-Medef code: compliant French Monetary and Financial Code: compliant
V Chairman of the Management Board of Caisse d’Epargne and Prévoyance de Bretagne Pays de Loire (CEBPL)
V Permanent Representative of CEBPL, member of the Board of Directors of: Pays de la Loire Développement, Nantes Atlantique Place Financière, SEMITAN, FNCE
V Permanent Representative of CEBPL, member of the Supervisory Board of GCE Technologies
Board of CERA (since 04.25.2013) V Member of the Supervisory Board of Banque BCP (since 06.17.2013) V Member of the Board (as a qualified person) of Paris Habitat – OPH (since 10.17.2013)
V Permanent Representative of CEIDF, member of the Supervisory Board of IT-CE (since 05.24.2013)
V Chairman and CEO of EDF (a) (until 11.22.2014) V Member of the Board of: EDF International S.A.S. (until 11.25.2014), EDF
V Chairman of the Board of Directors of Edison (until 11.25.2014) V Chairman of EDF Energy Holdings Ltd (until 11.25.2014)
V Chairman of the Board of Directors of Transalpina di Energia (since 02.08.2010)
V Member of the Supervisory Board of: Veolia Eau and Boards A and B of Dalkia (S.A.S.) (until 03.23.2010)
V Member of the Board of Veolia Environnement (a) (since 12.16.2010)
V Member of the Board of South Stream Transport BV (since 11.13.2012)
V Member of the Board of South Stream Transport AG (since 04.12.2012)
(f) Formerly the Appointments and Compensation Committee. (g) Chairman since 02.18.2015.
Philippe SUEUR Chairman of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France
Director First appointed: CSM of 04.30.2009 Term expires: 2015 AGM (c)
Philippe Sueur holds a postgraduate degree in political science and history, a doctorate in law, and is an Associate Professor in Roman Law and Institutional History. He began his career in 1974 as a Lecturer before becoming a Full Professor at Université d’Amiens and then Université de Paris III - Sorbonne Nouvelle and Paris-Nord. From 1992 to 2002, he was Dean of the Faculty of Law, Political and Social Science at Université Paris XIII - Nord. As Mayor of Enghien-les-Bains since 1989, Philippe Sueur has also held various elected positions such as Regional Councilor until 2011, Councilor at Large for the Val d’Oise region since 1994, and Vice-Chairman of the Val d’Oise regional council between 2001 and 2008 and then again since 2011.
Since April 29, 2014, Philippe Sueur has been Vice-Chairman of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France.
V Vice-Chairman: Association Nationale des Maires de Stations Classées et Communes Touristiques (ANMSCCT) - French Association for Mayors of Tourist Municipalities), Val d’Oise regional council
V Member of the Board of: Syndicat des Transports d’Ile-de-France (STIF), Agence Foncière et Technique de la Région Parisienne (AFTRP), Institut des Relations Internationales et Stratégiques (IRIS)
AFEP-Medef code: compliant French Monetary and Financial Codea French Monetary and Financial Code: compliant
(a) Listed company. (b) Company outside Groupe BPCE. (c) 2015 AGM convened to approve the fi nancial statements for the year ending 12.31.2014. (f) Formerly the Appointments and Compensation Committee.
2 CORPORATE GOVERNANCE Additional information on the corporate offi cers’ positions Nicolas de TAVERNOST Chairman of the Groupe M6 Management Board
Attendance rate in 2014 Board of Directors: 88% Appointments and Compensation Committee: 100% Strategic Committee: 100%
A graduate of the IEP in Bordeaux and holder of a DES in public law, Nicolas de Tavernost began his career in 1975 with the cabinet of Norbert Ségard, Secretary of State for Foreign Trade, and then for Post and Telecommunications. In 1986 he took over as Head of audiovisual operations at Lyonnaise des Eaux. In this capacity, he oversaw the plans to create M6. In 1987 he was appointed Deputy CEO of Métropole Télévision M6 where he has served as Chairman of the Management Board since 2000.
V Chairman of Fondation d’Entreprise Groupe M6 V Member of the Board of the Football Club des Girondins de Bordeaux V Member of the Supervisory Board of Ediradio S.A. (RTL/RTL2/FUN RADIO) V Permanent Representative of M6 Publicité, member of the Board of Directors of: Home Shopping Service S.A., M6 Diffusion S.A.
V Permanent Representative of Home Shopping Service, member of the Board of Directors of MisterGooddeal S.A. (until 03.31.2014) V Permanent Representative of Métropole Télévision, member of the Board of Directors of: SASP Football Club des Girondins de Bordeaux, Société Nouvelle de Distribution S.A.
V Permanent Representative of Métropole Télévision, Chairman of: M6 Publicité S.A., Immobilière M6 S.A.S., M6 Toulouse S.A.S. (until 01.01.2014), M6 Bordeaux S.A.S., M6 Interactions S.A.S., M6 Web S.A.S., M6 Foot S.A.S.
V Representative of RTL Group of the Supervisory Board and Vice-Chairman of the Compensation Committee of Atresmedia (formerly Antena3)(a)
V Volunteer member of the Board of the endowment fund RAISE
V Volunteer member of the Board of the endowment fund RAISE (since 11.22.2013)
V Permanent Representative of Métropole Télévision: R Member of the Board of: SASP Football Club des Girondins de Bordeaux, Société Nouvelle de Distribution S.A.
R Chairman of: M6 Publicité S.A., Immobilière M6 S.A.S., M6 Toulouse S.A.S., M6 Bordeaux S.A.S., M6 Interactions S.A.S., M6 Web S.A.S., M6 Foot S.A.S.
(f) Formerly the Appointments and Compensation Committee. (h) Chairman since 05.21.2014.
2 CORPORATE GOVERNANCE Additional information on the corporate offi cers’ positions Pierre VALENTIN Chairman of the Steering and Supervisory Board of Caisse d’Epargne Languedoc-Roussillon
Address: 254 rue Michel Teule BP 7330 34184 Montpellier Cedex 4
Attendance rate in 2014 Board of Directors: 100% Strategic Committee: 0%
Pierre Valentin holds a degree in private law and another from the Institut des Assurances d’Aix-Marseille. An entrepreneur, he began his career in 1978 with Mutuelle d’Assurances du Bâtiment et des Travaux Publics in Lyon. In 1979, he founded the company Valentin Immobilier and joined the Caisse d’Epargne network. In 1984, he joined the Advisory Board of Caisse d’Epargne d’Alès. In 1991, he joined the Advisory Board of Caisse d’Epargne LanguedocRoussillon. Since 2000, he has been a member of the Steering and Supervisory Board of Caisse d’Epargne Languedoc-Rousillon.
V Member of the Board of: Association Maison Protestante d’Alès (formerly Clinique Bonnefon), Pierre et Lise Immobilier (until 06.30.2014)
Management and oversight of corporate governance 2.3 Management and oversight of corporate governance
The information it contains takes into consideration, in particular, Annex I of European Regulation (EC) 809/2004 of April 29, 2004 as well as the 2010 Autorité des Marchés Financiers (AMF - French Financial Markets Authority) report on corporate governance and internal control published on July 12, 2010 and the supplementary report of December 7, 2010, the report on corporate governance and management compensation published each year by the AMF and specifi cally the AMF’s 2014 report, published on September 22, 2014, the activity report from the High Committee on Corporate Governance (HCGE) published on October 21, 2014, and the Guide for compiling registration documents, also published by the AMF on December 10, 2009 and amended on December 17, 2013, the Guide to applying the AFEP-Medef Corporate Governance Code for listed companies, in June 2013, supplemented by the HCGE in December 2014.
The term of offi ce of Natixis directors is currently set at six years (and not four years as recommended by the AFEP-Medef code). This term of offi ce is compliant with Natixis’ laws and bylaws. A proposal will be made at the Annual Shareholders’ Meeting on May 19, 2015 to reduce the directors’ term of offi ce from six to four years.
Two-thirds of the Natixis Audit Committee are not independent members, as recommended by the AFEP-Medef code, in order to represent the different components of the Company’s main shareholders (members from the Caisses d’Epargne and the Banque Populaire banks, in addition to a representative of BPCE). Following the AFEP-Medef code recommendations on the composition of the Audit Committee to the letter would require that Natixis’ Independent Directors sit on more than three specialized Committees, at the risk of diluting the quality of those Committees’ work, in light of the resulting increased workload. That is why Natixis promotes a balance of directors within the Committees, which are, additionally, always chaired by an Independent Director.
2 CORPORATE GOVERNANCE Management and oversight of corporate governance 2.3.1 BOARD OF DIRECTORS
As such, one-third of the members of the Board of Directors are independent.
Based on this review, it determined that Natixis is not the “reference banker” for the companies in which its independent directors exercise their executive duties or corporate offi ces, i.e. IPSEN, JCDecaux, EDF, Centaurus Capital and M6.
The current term of offi ce for Natixis directors is six years. The reduction in the term of offi ce for Natixis directors from six to four years, recommended by the AFEP-Medef code, will be submitted at the Natixis General Shareholders’ Meeting on May 19, 2015.
V Changes made to the Board of Directors since January 1, 2015: R On February 18, 2015, the Board of Directors of Natixis co-opted Anne Lalou to replace Christel Bories for the remainder of her predecessor’s term of offi ce, namely until the end of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending on December 31, 2014.
Among these Internal Rules, which were last amended on December 17, 2014, particular attention should be drawn to the following provisions: V circumstances requiring the Board of Directors’ prior authorization: R the extension of Natixis’ activities to a new core business not currently exercised by the Company; R the appointment or dismissal of the CEO or, where applicable, one or more Deputy CEOs; R any acquisition or increase in shareholdings, as well as any investments, divestments or the formation of joint ventures by Natixis or any of its main subsidiaries, involving an amount in excess of €100 million, in the event that the Group’s structure is modifi ed; R any asset transfers, mergers or demergers in which Natixis is involved.
Members of the Board of Directors and of the Committees, as well as any individual attending the meetings of the Board and the Committees, are bound by a general confi dentiality obligation on their deliberations.
In particular, the director agrees not to perform any transaction during the periods known as “negative windows,” which begin 30 calendar days before the publication dates of the quarterly, halfyear and annual results and ending on the publication date of these fi nancial statements.
Management and oversight of corporate governance 2.3.1.3 Work of the Board of Directors in 2014
The Board of Directors held a total of eight meetings in 2014. The attendance rate was nearly 91% for the year as a whole, a rate identical to 2013.
Each director’s attendance at the Board of Directors’ meetings appears in section [2.2] of this chapter (see directors’ individual factsheets).
At least three days before a Board Meeting, each director received a fi le via a secure website containing the items on the agenda in order to be able to review and analyze the topics addressed.
V Review and approval of 2015 budget V Economic and benchmark reviews / Business review / life of the stock V Review and approval of press releases V Adoption of the Board’s management report V Adoption of the Board of Directors’ report on the use of capital increase authorizations V Regular updates on the Asset Quality Review (AQR) V Reviews on GAPC closure
V Submission of Audit Committee projects in matters pertaining to risk, non-compliance risk and periodic controls
V Reading of the follow-up letters from the ACPR as well as correspondence from the Autorité des Marchés Financiers (AMF - French Financial Markets Authority) and the High Committee on Corporate Governance (HCGE)
V Coface IPO V Disposal to Natixis Assurances of BPCE’s and Muracef’s entire stake in the capital of BPCE Assurance V Capital increase reserved for members of the Mauve 2014 savings plan V Total transfer of assets and liabilities from a Natixis subsidiary to Natixis V Review of strategic plan and strategic projects
During 2014, the Audit Committee comprised fi ve members: On March 1, 2015, these members were as follows (identical to FY 2014): Bernard Oppetit Chairman
Two of the fi ve members are independent members (Ms. Debroux and Mr. Oppetit).
Two-thirds of the Audit Committee are not independent members, as recommended by the AFEP-Medef code, in order to represent the different components of the Company’s main shareholders (members from the Caisses d’Epargne and the Banque Populaire banks, plus a representative of BPCE). (see summary table on compliance with AFEP-Medef code recommendations in section [2.3] of this chapter).
Under the Natixis Board of Directors’ responsibility, the Audit Committee’s primary duties are now: V ch ecking the clarity of information published by Natixis and assessing the relevance of the accounting methods adopted for the creation of Natixis’ individual and consolidated financial statements; and
V a ssessing the quality of internal control, specifically the consistency of the systems for measuring, monitoring and controlling risk, and, as and when needed, proposing implementation of supplementary actions in this sense.
Th e remit of the Audit Committee is: V to monitor the process of preparing financial information (compiling the accounts, management report, etc.); V to monitor the statutory audit of Natixis’ yearly, half-yearly and quarterly parent company and consolidated financial statements, as well as its draft budget, at least two days before they are presented to Natixis’ Board of Directors, as well as the parent company financial documents distributed when the accounts are closed; V to monitor the effectiveness of internal control systems relating to compiling financial information; V to review, with the Statutory Auditors, any risks to their independence; to do this, it must ensure that the amount of fees paid by Natixis and the Group, or the share of those fees in the net sales of the firms and networks, does not, by its nature, undermine the independence of the Statutory Auditors; V to issue an opinion on the choice or renewal of Natixis’ Statutory Auditors and review their audit schedule, the results of their checks and their recommendations, as well as all the follow-up measures taken on these latter; V to issue its opinion on the report presented to it on an annual basis regarding commercial relations between Natixis or one or more of its subsidiaries and all or some of the entities forming Groupe BPCE; The Company’s CEO provides the Audit Committee with any documents and information it needs to perform its duties. The following list is not exhaustive: V parent and consolidated financial, accounting, and regulatory documents prepared periodically by the Company; V summary reports by the Company’s Statutory Auditors; V any audit reports concerning the Company; V accounting policies and methods applied within the Company; V projected parent and consolidated results at the end of March, June, September and December; V consolidated budgets and financial statements of the main subsidiaries, as well as any related documents provided to the Board of Directors or, if applicable, the Audit Committee of the principal subsidiaries.
Since December 17, 2014, Natixis’ Board of Directors has had a Risk Committee which it has entrusted with a portion of the Audit Committee’s powers. For FY 2014, the work of the Audit Committee in its previous format is presented hereunder.
Each director’s attendance at the Audit Committee’s meetings appears in section [2.2] of this chapter (see directors’ individual factsheets).
At least three days before a Committee Meeting, each director received a fi le via a secure website containing the items on the agenda in order to be able to review and analyze the topics addressed.
It also reviewed the activity and results of the Natixis compliance and internal control functions, as well as the audit program of Natixis’ Internal Audit.
2 CORPORATE GOVERNANCE Management and oversight of corporate governance In 2014, the Audit Committee’s duties focused on the following items in particular: Financial position
V Review of the quarterly and half-yearly parent company and consolidated fi nancial statements V Review of 2015 budget V Statutory Auditors’ assignment V Review of the project to list Coface V Regular updates on the Asset Quality Review (AQR)
V Review of the monthly consolidated risk monitoring scorecard (regular updates on credit and market risks and liquidity)
V Changes made to the Board of Directors Committee in 2014: R On May 20, 2014, Christel Bories resigned from her position as Director of Natixis and thereby from her role as Chairman of the Appointments and Compensation Committee.
The role that falls to Natixis’ Compensation Committee is to prepare the decisions that Natixis’ Board of Directors issues with regard to compensation, including Natixis employees who have an impact on the Company’s risk. The Compensation Committee’s powers and operating procedures are described in greater detail in the Internal Rules, the latest version of which was approved on December 17, 2014 by the Board of Directors.
It confers with Natixis’ internal control departments or outside experts as appropriate.
Since December 17, 2014, the Appointments & Compensation Committee has been divided into two separate Committees. The work of the Appointments & Compensation Committee in fi scal year 2014 is detailed hereunder.
The Appointments & Compensation Committee met four times in 2014. Its members’ attendance rate was 95% for the year as a whole (vs. 91% in 2013).
Each director’s attendance at the Appointments & Compensation Committee’s meetings appears in section [2.2] of this chapter (see directors’ individual factsheets).
2 CORPORATE GOVERNANCE Management and oversight of corporate governance In 2014, the Committee focused on the following areas: Executive corporate offi cers
V Deciding on the fi xed compensation of the Chief Executive Offi cer for fi scal year 2014 V Deciding on the fi xed compensation of the Chairman of the Board for fi scal year 2014 V Deciding on the variable compensation of the Chief Executive Offi cer for fi scal year 2013 and paid in 2014 V Deciding on the criteria to be applied in calculating the variable compensation of the Chief Executive Offi cer for fi scal year 2014
V Reviewing Natixis’ compensation policy, including a look at the structure and the amounts of variable compensation by business line
V Variable compensation of the regulated population for previous fi scal years 2013 and 2014 V Analyzing the compensation of the heads of control functions (Risks, Compliance, Internal Audit Department)
V Presenting the existing employee savings plans at Natixis V Analyzing the procedures for the capital increase reserved for employees (Mauve 2014) V Paying out additional profi t-sharing to Natixis’ employees in France
V Making recommendations on a replacement for Steve Gentili V Appraising candidates for the replacement of Christel Bories
Gender balance V Deciding on a policy and a set of targets for the balanced representation of men and women on the Board of Directors
The Appointments Committee is made up of six members. As of March 1, 2015, these members were: Henri Proglio Chairman
Three of the six members are independent (Ms. Lalou and Messrs. Proglio and de Tavernost). The number of independent directors on the Appointments Committee is not greater than half the total number of members as recommended by the AFEP-Medef Corporate Governance Code. It has a balanced composition (50% independent, 50% non-independent and is chaired by an independent director) (see summary table on compliance with AFEP-Medef in section [2.3] of this chapter).
V evaluating the balance and diversity of knowledge, skills and experience that the Board members have, both individually and collectively; V detailing the duties and the qualifications required for serving on Natixis’ Board of Directors, and assessing the time to be spent on that service; V deciding on a policy and a set of targets for the balanced representation of men and women on the Board of Directors. It prepares a policy with the purpose of achieving those targets. Natixis’ target and policy as well as the implementation procedures are made public; V periodically, at least once a year, assessing the structure, size, composition and effectiveness of the Board of Directors with regard to the remits that are assigned to it, and submitting all useful recommendations to the Board; V periodically, a least once a year, assessing the knowledge, skills and experience of the Board of Directors, both individually and collectively, and reporting this to it; V periodically scrutinizing the policies of the Board of Directors on selecting and appointing Natixis’ de facto directors, Deputy CEOs and the Chief Risk Officer and making recommendations thereon.
Qualifi cation as an Independent Director is discussed by the Appointments Committee, which prepares a report for the Board. Each year, based on this report and before the publication of the annual report, the Board of Directors reviews the situation of each of its members based on independence criteria set out in Article 2.3.2 of the Board of Directors’ internal rules.
The primary duties now performed by the Appointments Committee are described above in the section entitled Work of the Appointments and Compensation Committee in 2014.
On April 30, 2009, the Board appointed Laurent Mignon as Chief Executive Offi cer starting May 14, 2009 for a six-year term. Mr. Mignon’s term of offi ce was renewed by Natixis’ Board of Directors on February 18, 2015 for a period of four years, to end after the 2019 General Shareholders’ Meeting called to rule on the accounts for the fi scal year ending on December 31, 2018.
Additionally, pursuant to Article L.511-13 of the French Monetary and Financial Code, the Board of Directors of Natixis appointed two Senior Managers (“Dirigeants effectifs“): Laurent Mignon, Chief Executive Offi cer, and Jean Cheval, Chief Finance and Risk Offi cer.
2 CORPORATE GOVERNANCE Management and oversight of corporate governance V periodically evaluating and checking the effectiveness of the mechanisms and procedures set up to comply with the Order of November 3, 2014 on internal control of banking sector businesses.
On the Chief Executive Offi cer’s recommendation, the Board of Directors may appoint one to fi ve Deputy Chief Executive Offi cers from among the directors or otherwise to assist the Chief Executive Offi cer.
Barring exceptions, it meets weekly under the Chairmanship of the CEO. Except where circumstances prevented them from doing so, the members of the Senior Management Committee were present at all meetings in 2014. Representatives from the business lines or different support functions were invited to present projects or policies falling within their departmental remits.
More generally, the Senior Management Committee studied and approved all of the strategic operations carried out by Natixis, before presenting them to the Company’s Board of Directors, such as the disposal of Natixis’ stake in Lazard.
Beyond the strategic plan, the Senior Management Committee oversaw Natixis’ adaptation to changes in the economic and regulatory environment in the banking and insurance sectors. For the establishment of the European Banking Union and the deployment of the Single Supervisory Mechanism, it supervised the Asset Quality Review and delivery of the stress tests requested by the supervisory authorities. In addition, it ensured that the adaptations required pursuant to Directive CRDIV on governance or adaptation of HR processes relative to material risk-takers were implemented. It also initiated the adaptations required for the bank when the leverage ratio entered into force. Finally, it monitored the work to bring the bank into compliance with the law on banking activity separation and regulation in France, and the Volcker Rule in the United States.
The Senior Management Committee approved the main management decisions and reviewed and approved the budget after in-depth communication with the business lines. It also approved the terms and conditions governing mandatory annual negotiations and the compensation review policy, the appointment of senior executives and managers, as well as all signifi cant projects or investments.
OGMs may also be used to appoint or re-appoint directors and nonvoting members as well as to appoint or re-appoint Statutory Auditors and, if necessary, ratify the co-opting of a member of the Board.
In line with the provisions of Article L.225-105 of the French Commercial Code, one or more shareholders holding the requisite portion of the share capital may, subject to the conditions and time frames set by law, request the inclusion of items or draft resolutions on the agenda of the meeting by means of registered letter with acknowledgment of receipt.
In line with the provisions of Article 27 of the bylaws, each shareholder may, subject to the terms and conditions and at the times fi xed by law, request a copy of the documents needed to allow him to reach an informed opinion on the management and control of the Company. The nature of the documents and the terms and conditions for their dispatch or availability are determined by law and regulations.
2.3.5.2 Contracts binding the Company and the Directors and Senior Management
Fixed compensation refl ects the expected skills, responsibilities and expertise for a particular position as well as the position’s role and weight within the organization. It is determined based on the particularities of each business line in its local market.
Variable compensation is awarded based on reaching predetermined quantitative and qualitative targets.
Likewise, profi t sharing agreements (accords d’intéressement) are also developed in each business (or groupings of businesses) with special metrics refl ecting the specifi c issues at stake in the activities pursued by each business.
The compensation package is supplemented by additional employee benefi ts, in particular in countries where there are no schemes that provide general coverage.
Natixis’ compensation policy is compliant with the regulatory framework specifi c to its sectors of economic activity.
Compensation of employees whose professional activities have a material impact on Natixis’ risk profile (“regulated” categories of staff)
The regulated categories of staff at Natixis are primarily based on the principles set out in Directive 2013/36/EU, known as “CRD IV”, and the Decree of November 3, 2014 and are defi ned based on criteria determined by the European Banking Authority (EBA) in its regulatory technical standard published on December 16, 2013 and approved by the European Commission in Commission Delegated Regulation (EU) no. 604/2014 of March 4, 2014.
Regulated categories of staff at Natixis during the 2014 fi scal year came to a total of 259 employees: Of which 228 staff members identifi ed by qualitative criteria: V directors, i.e. 15 individuals; V members of Natixis’ Senior Management Committee, i.e. 11 individuals; V key staff responsible for control functions (Internal Audit Department, Risk and Compliance) and other support functions who are not members of the management bodies listed above, i.e. 43 individuals; V key staff responsible for important business lines and foreign locations (excluding Asset Management and Insurance), i.e. 27 individuals; V individuals with authority to take, approve or veto a decision on credit risk exposure and who are responsible for market risk exposure exceeding materiality thresholds established in the regulations and who have not already been identified by the criteria above, i.e. 132 individuals.
The rules for paying variable compensation to regulated categories of staff were submitted to the Compensation Committee on February 6, 2015, and subsequently validated by the Board of Directors on February 18, 2015.
The payment of a portion of the variable compensation awarded for a fi scal year is deferred over time and is conditional. Regardless of its form, this payment is staggered over the three fi scal years following the year in which the variable compensation is awarded.
V The non-deferred portion of the variable compensation awarded is paid 50% in cash in March 2015 and the balance in October 2015, indexed to the performance of Natixis shares since their award; V The deferred portion of the variable compensation awarded represents at least 40% of the variable compensation and 70% for the highest earners of variable compensation.
Variable compensation awarded in the form of shares or similar instruments represents 50% of variable compensation awarded to employees who are members of regulated categories of staff. This rule applies to both the deferred and conditional component of variable compensation and the immediately earned portion of the variable compensation.
The acquisition or payment of the deferred component of variable compensation is contingent on satisfying performance requirements linked to the results of the Company and the business line and, where applicable, meeting individual criteria and continuing to be employed by the Company. These conditions are defi ned in a precise and explicit manner when this compensation is awarded.
As a reminder, Article L.511-78 of the French Monetary and Financial Code transposing Directive 2013/36/EU, known as “CRD IV”, into French law caps the variable component at 100% of the fi xed component of the total remuneration for each individual in regulated categories of Natixis staff, unless the General Shareholders’ Meeting allows for a higher percentage, which in any case may not exceed 200%.
This cap does not represent an additional cost for Natixis and does not increase the level of total compensation for its regulated employees. Furthermore, it makes it possible to maintain the fl exibility needed to match variable compensation to real performance, and to hire and retain the employees targeted by this measure by offering them competitive compensation. To this end, we note that Natixis operates on highly specialized labor markets, both outside the European Economic Area where local operators are not subject to regulatory caps on variable compensation and within the European fi nancial community vis-à-vis fi nancial operators unaffected by CRD IV (investment funds, Private Equity fi rms, venture capital fi rms, etc.). Nearly 27% of the Group’s regulated employees for 2014 are located outside the European Economic Area.
The system of corporate governance set up by Natixis provides for a complete review of its compensation policies and adherence to guidelines when implementing these policies.
The policy is developed by the Human Resources Department, in conjunction with the business lines, and is in keeping with the principles defi ned by the regulator, while complying with current social security and tax law.
There are several stages of approval in the decision-making process, starting with the subsidiaries, business lines and divisions, then Natixis’ Human Resources Department and senior management, and fi nally Natixis’ Board of Directors on the recommendation of the Compensation Committee*.
2.4.2. POLICIES AND RULES ESTABLISHED FOR DETERMINING COMPENSATION AND BENEFITS OF ANY KIND FOR MEMBERS OF MANAGEMENT BODIES
The AFEP-Medef code is available for consultation at the Company’s head offi ce and on the Natixis website.
2.4.2.1 Compensation and benefi ts of any kind for the Chairman of the Board of Directors
Note that the overall annual budget for directors’ fees to be allocated to members of the Board of Directors is €500,000 (see the 38th resolution of the Combined General Shareholders’ Meeting of April 30, 2009).
R Members of the Appointments and Compensation Committee: R fixed portion: €3,000 per year (prorated to the term of office),
R variable portion: €1,000 per meeting, capped at five meetings; R Strategic Committee: R Chairman: variable portion: €8,000 per meeting, capped at one meeting
R Member: variable portion: €2,000 per meeting, capped at one meeting * The details on the work of the Compensation Committee are provided in section [2.3.2.3.C] of this chapter.
Member BoD + SC + Appointments and Compensation Committee (ACC) €30,000 36.67 63.33
2 CORPORATE GOVERNANCE Natixis Compensation Policy Furthermore, in accordance with the rules applicable within Groupe BPCE, the portion of directors’ fees going to BPCE directors (including that of the Chairman) is granted and paid to BPCE and not to the directors.
2.4.2.3 Compensation and benefi ts of all kinds for Mr. Laurent Mignon, a corporate offi cer, in connection with his duties as Chief Executive Offi cer of Natixis
The amount of variable compensation for the 2014 fi scal year was therefore set at €1,017,374, i.e. 127.17% of the target variable compensation.
V 11.25% net revenues V 11.25% net income, Group share V 11.25% cost/income ratio V 11.25% Core Tier 1 ratio
The amount of variable compensation for fi scal year 2014 was set by the Natixis Board of Directors, upon the recommendation of the Compensation Committee, at €1,017,374, i.e. 127.17% of the target variable compensation: - €355,374 will be paid in 2015, 50% of which will be indexed to the Natixis share price.
in 2015 in 2016 in 2018 in 2017 65% deferred over 2016-2017-2018, of which 50% is indexed to the Natixis share price
Variable compensation in € Fixed compensation benefits + fringe benefits in €
V 11.25% net revenues V 11.25% net income, Group share V 11.25% cost/income ratio V 11.25% ROTE
It has been stipulated that the shares will only be permanently vested at the end of a four-year period and subject to performance and presence conditions. The performance conditions in question were defi ned relative to Natixis’ ROTE (Return on Tangible Equity) targeted in the “New Frontier” strategic plan.
The CEO benefi ts from the collective personal protection insurance and healthcare scheme in force at Natixis.
It is reiterated that, at its February 19, 2014 meeting, the Board of Directors approved a change to its agreement relating to a severance payment and the establishment of a non-compete agreement. These obligations and agreements were submitted to a vote by the shareholders and approved during the Ordinary General Shareholders’ Meeting of May 20, 2014 (fi fth resolution).
The Monthly Reference Pay is equal to 1/12th the fi xed compensation paid for the last calendar year of business and the average of variable compensation granted over the last three calendar years of activity.
The amount of the payment is equal to: Monthly reference pay x (12 months + 1 month per year of seniority).
The amount of the severance payment, together with the noncompete indemnity , if applicable, received by the Chief Executive Offi cer is capped at twenty-four (24) months of the monthly reference pay (both fi xed and variable).
All of these commitments and agreements will be put to another vote by shareholders at the General Shareholders’ Meeting on May 19, 2015 when renewing Laurent Mignon’s appointment as Chief Executive Offi cer, which was approved by the Board of Directors on February 18, 2015.
Summary of the compensation, stock options and shares granted to each executive corporate officer
R TABLE 2 Summary table of the compensation of each executive corporate officer In the tables below: V the expression “amounts due or granted” refers to compensation and benefits allocated to corporate officers in connection with their duties over the year, irrespective of the payment date; V the expression “amounts paid” refers to compensation and benefits actually paid to corporate officers in connection with their duties over the year, irrespective of the date of allocation.
Member of the Natixis Appointments and Compensation Committee 7,333 7,333 10,000 11,000
In respect of BPCE and its subsidiaries 0 0 0 17,000
In respect of BPCE and its subsidiaries 21,400 30,400 21,300 22,300
In respect of BPCE and its subsidiaries 0 0 0 0
In respect of BPCE and its subsidiaries 6,000 7,500 7,500 7,500
Member of the Natixis Appointments and Compensation Committee 11,917 11,917 4,000 4,000
(4) Housing allowance of €64,959.16 for 2013 and €66,000 for 2014 is included in the fi xed compensation in connection with his corporate offi ce.
(6) Amount paid in 2013 for the variable compensation for fi scal year 2012, or €23,103.
(8) Amount paid in 2014 for the variable compensation for fi scal year 2013, or €215,999.
(10) Variable portion for fi scal year 2013, of which €356,398 (40%) paid in 2014 and the balance (60%) deferred over three years in equal shares of €178,199. The fi nal allocated amount in 2015 will be €190,762 (after application of an index ratio).
(13) Amount paid in 2014 for the variable compensation for fi scal year 2013 or €356,398, for the deferred portion of the variable compensation for fi scal year 2012, or €102,950, for the deferred portion for fi scal year 2011, or €84,861, and for the deferred portion for fi scal year 2010, or €175,880.
R TABLE 4 Subscription or purchase options granted during the period to each executive corporate officer by the issuer and by any group companies
R TABLE 6 Performance shares granted to each executive corporate officer
(a) 30% of the shares purchased are subject to a lock-in requirement for the full term of offi ce as CEO.
Number of shares that became transferable during the period Vesting conditions
R TABLE 8 Group (Natixis, BPCE, Caisse d’Epargne, Banque Populaire) – Record of purchase or subscription options granted
Information on purchase and subscription options 2007 Plan (a) 2008 Plan (a)
Total number of free shares awarded (a) o/w number allocated to: Share vesting date End of lock-in period
(a) No performance conditions are attached to the 90 shares allocated in 2013. The performance conditions attached to the allocation of 31,955 shares in 2014 are detailed in paragraph [2.4.2.3] above.
(b) See paragraph [2.4.2.3] “Severance payments and consideration for non-compete agreement”.
The components of compensation concerned are: V fixed compensation; V annual variable compensation; V annual deferred variable compensation; V multi-annual variable compensation; V extraordinary compensation; V allocation of stock options/performance shares and any other long-term compensation; V start-of-contract indemnities; V contract termination payment: severance payment / non-compete payment; V supplementary pension plan; V directors’ fees; V benefits of any kind.
2 CORPORATE GOVERNANCE Natixis Compensation Policy Components of compensation Amounts Comments
Annual variable compensation can represent a maximum of 156.75% of the target variable compensation. Based on the criteria set by the Board of Directors following the proposal of the Compensation Committee and the achievements observed by the Compensation Committee and the Board of Directors, the amount of variable compensation was calculated as follows: V in respect of BPCE quantitative criteria: €220,150, or 110.07% of the target; V in respect of Natixis quantitative criteria: €509,225, or 141.45% of the target; V in respect of strategic criteria: €288,000, or 120% of the target.
V - €662,000 will be deferred over three years, 50% of which will be index-linked to the Natixis share price, and will be paid in thirds in 2016, 2017 and 2018, provided that the presence and performance conditions are met.
Extraordinary compensation - In 2014 Laurent Mignon did not receive any extraordinary compensation.
Allocation of stock options/ performance shares and any other long-term compensation 31,955 shares
V No stock options were granted to Laurent Mignon during fi scal year 2014. V In order to align shareholders’ interests with those of the Chief Executive Offi cer over time and with a view to the implementation and timetable of the New Frontier strategic plan, based on the positive opinion of the Appointments and Compensation Committee, Natixis’ Board of Directors, at its meeting of July 31, 2014, granted the free allocation of: - 31,955 performance shares to the executive corporate offi cer (the Company’s Chief Executive Offi cer).
It has been stipulated that the shares will only be permanently vested at the end of a four-year period and subject to performance and presence conditions. The performance conditions in question were defi ned relative to Natixis’ Return on Tangible Equity, as targeted in the New Frontier strategic plan. Furthermore, 30% of the shares to be issued at the end of the Vesting Period will be subject to a lock-in period ending with the termination of the offi ce as Chief Executive Offi cer of Natixis.
Contract termination payment: severance payment / non-compete payment; Non-compete indemnity in the event of termination of the Chief Executive Offi cer’s mandate. The non-compete clause is limited to a period of six months and is associated with an indemnity equal to six months of fi xed compensation, as in force at the date on which the CEO leaves offi ce. In accordance with the recommendations of the AFEP-Medef code, upon the departure of the Chief Executive Offi cer, the Board of Directors must make a decision regarding whether to enforce the non-compete clause provided for under this agreement.
The amount of severance, together with the non-compete payment, if applicable, received by the Chief Executive Offi cer is capped at 24 months of the Monthly Reference Compensation (fi xed and variable compensation).
Directors’ fees In 2014 Laurent Mignon received no director’s fees in respect of the 2014 fi scal year as part of his responsibilities within Groupe BPCE.
Benefi ts of any kind €4,138 Laurent Mignon has a company car and received payment of a family allowance in accordance with the plan in force for Natixis’ employees.
The Chairman’s report on internal control procedures is drawn up in accordance with Article L.225-37 of the French Commercial Code. Its purpose is to provide a summary presentation of Natixis’ internal control system as applied to its different business activities.
Natixis’ internal control system covers all the steps taken by the institution to measure, monitor and manage the risks that are inherent to its various activities. The objective is to ensure the effectiveness and quality of the Company’s internal operations, the reliability of accounting and fi nancial information distributed both internally and externally, the security of operations, and compliance with laws, regulations and internal policies.
The internal control system, which covers Natixis’ entire scope of activities, is based on the following organizational principles: V a strict segregation of duties between units responsible for performing transactions and those that approve them, in particular accounting teams; V full independence between the operational and functional units responsible for undertaking and validating transactions, and the units that control them.
V Second-level permanent control, performed by four independent central departments that operate under the responsibility of the Corporate Secretary: R the Compliance and Permanent Control department, which reports to the Corporate Secretary, is notably responsible for managing compliance risk, organizing the fi rst-level permanent control system, and for second-level control of operational risk (compliance and other operational risks); R the IT Systems Security and Business Continuity (ITSSBC ) function, which reports to the Compliance Department, establishes the information systems security and business continuity policies and verifi es that they are correctly applied; R the Risk Department, which reports to the Chief Financial and Risk Offi cer, is responsible for monitoring and managing the risks inherent to the business activities, in particular market risk, credit risk and operational risk; R the Regulatory and Accounting Review team within the Accounting and Ratios department, which reports functionally to the Compliance Department, verifi es the quality and accuracy of accounting and regulatory information.
These controls are carried out by operational or functional departments under managerial supervision. These departments are responsible for: V checking that transaction processing procedures are adhered to and compliant; V justifying account balances for active accounts relating to the transactions they execute.
Operational staff carry out their transactions in compliance with: V the charters and procedures that govern and structure Natixis’ risk processes (such as the procedure governing the credit decision process, the market risk management charter, the charter for measuring, controlling and managing operational risks, the charter for managing compliance risks, etc.); V the charter formally defining areas of responsibility for country managers in Natixis’ foreign operations and organizing relations with Heads of the business lines represented locally; V the Compliance Manual, which was updated in January 2015, and which sets out all the main Compliance principles applicable to Natixis staff. In particular this covers conflicts of interest, antimoney laundering, embargoes, professional ethics, confidential information and inside information, market abuse, information systems security and business continuity.
2 CORPORATE GOVERNANCE Report of the Chairman of the Board of Directors on internal control and risk management procedures To formalize the fi rst-level permanent control process in more detail, in 2010 Natixis launched the First Level Internal Control project, which aims to identify all the level 1.1 and 1.2 controls carried out on all of Natixis’ activities and businesses. The Compliance and Permanent Control department implements this project by helping each operational and functional department defi ne the controls they perform. The fi rst-level controls are centralized in a dedicated tool that is used to consolidate results, identify areas at risk and produce reports. At the end of 2014, the project had been rolled out across 90% of the scope, and 7,850 controls had been identifi ed.
V The Compliance Department’s main responsibilities are to: R ensure a legal and regulatory watch relating to compliance, in conjunction with the legal function; R defi ne standards and methods for assessing compliance, control and reporting risks. These standards are devised in order to ensure market integrity and that customers’ interests take priority, and to prevent confl icts of interest (including independence in third-party account management) as well as to counter money laundering and terrorist fi nancing; R ensure the execution of second-level permanent controls (including controlling compliance with standards and the application of procedures); R establish and maintain a compliance risk map; R implement a system of cooperation with the Risk Department concerning the observation of operational failings that may entail compliance risks and measures taken to remedy them; R issue a written compliance opinion regarding all new activities, structures, processes, products and transactions, as well as signifi cant changes to existing products. This opinion is accompanied by a right of veto or appeal within the New Product Committees set up within Natixis’ business lines and its subsidiaries, or centrally for products common to several business lines; R intervene in an advisory role in order to support activities with a view to ensuring security and compliance with standards; R contribute to employee training in conjunction with the Human Resources Department; R manage IT systems projects dedicated to monitoring and managing compliance risks on a consolidated basis at Natixis group level; R centralize logging and reporting of malfunctions resulting in noncompliance at subsidiary or business-line level, with a view to their consolidation by Natixis; R centralize the reporting of any anomalies within the meaning of the Ministerial Order of November 3, 2014, at subsidiary or business-line level, with a view to their consolidation by the Natixis group and their communication to BPCE; and defi ne the conditions for operating the alert mechanism provided for by this article whilst respecting the confi dentiality of declaring parties; R prepare regular summary reports, notably for Natixis’ and BPCE’s senior management; R oversee the consistency and effectiveness of permanent controls for compliance risk.
The hierarchical reporting line to the subsidiary’s Chief Executive Offi cer or equivalent continues to apply.
This strong functional link of a hierarchical nature is refl ected in: R Natixis’ Chief Compliance Offi cer being required to issue prior approval for the secondment, appointment or removal of a subsidiary’s Compliance manager; R Natixis’ Chief Compliance Offi cer participating in annual performance and career advancement reviews; R the obligation to send information to Natixis’ Chief Compliance Offi cer.
To defi ne these rules, ensure that they are fully known to all Natixis employees correctly applied, the Compliance Department uses a company-wide “Conduct/Ethics/Training” function, rolled out to each core business and each business line, including all subsidiaries, by the Compliance managers.
The system will be further enhanced in 2015, with a view to serving customers’ interests and managing the risks incurred by Natixis.
Second-level permanent controls fall within the remit of the Compliance Department, and focus on: V transaction compliance: this involves checking not only transactions, but also that transaction execution processes comply with applicable banking, financial and market rules; V organizational compliance; V the quality of data transmitted to the Compliance Department (through automated systems and indicators); and
2 CORPORATE GOVERNANCE Report of the Chairman of the Board of Directors on internal control and risk management procedures The areas at risk identifi ed by the controls mainly concern: V anti-money laundering and terrorist financing: a number of shortcomings still present in the customer onboarding/review process and the transaction monitoring system; V relations with customers and counterparties in respect of new regulations (DFA, EMIR, etc.); V transaction reporting, though the system was significantly enhanced in 2014.
In terms of IT Systems Security, the function’s main roles are to defi ne and monitor security standards. The ITSS function supports the business lines in enhancing security for access to applications via dedicated projects, and also monitors the security of Natixis’ IT infrastructure. The implementation of second-level controls notably aims to reinforce information protection, review authorizations and develop cyber-security.
In 2014, Natixis had over 1,000 backup positions for users, a backup data center and crisis meeting rooms.
The Natixis Risk Department is part of the Groupe BPCE mechanism organized into functions, with the relationship between the shareholding central body and its subsidiary Natixis being governed by the Group Risk Charter.
Report of the Chairman of the Board of Directors on internal control and risk management procedures
For more detailed information, see Chapter [3], “Risk Management and Capital Adequacy”.
The Risk Department is responsible for analyzing counterparty credit risk. It conducts this counter-analysis using a formalized credit fi le for each counterparty and benefi ciary group, including all information relevant and useful for decision-making purposes: V information regarding the customer, its business and its environment; V external data: ratings allocated by rating agencies, sector analysis, country risk and sovereign risk analyses, etc.; V internal data regarding commitments, collateral and guarantees; V a summary of all of the credit risks incurred by Natixis and the effects of the proposed transactions on profitability and regulatory ratios.
The credit risk management system has been based on the advanced internal ratings-based approach since 2010.
To date, two types of stress tests have been established: V macroeconomic stress tests according to scenarios drawn up by Natixis’ economic research team; V stress tests specific to certain Natixis business lines.
Credit risk management requires a risk rating, an LGD and commitment or transaction monitoring procedures in accordance with Title II of the Ministerial Order of November 3, 2014.
The various market risk measurements used by Natixis are VaR, stressed VaR (SVaR), Incremental Risk Charge (IRC), overall and specifi c stress tests, qualitative and quantitative operational limits, and loss alerts.
All decisions regarding risks factors are revised annually in Committee Meetings attended by all the parties concerned (Risk Department, Front Offi ce and Results Department) with the objective of ensuring consistency between VaR calculations, results and sensitivities (use of the same risk factors).
A series of stress tests covering all portfolios and specifi c activities per business complete this mechanism. They are calculated daily and have resulted in limits being set for specifi c stress tests.
The structural balance sheet risks of Natixis are managed and monitored on a consolidated basis under the authority of the Asset/ Liability Management Committee (the “ALM Committee”). This Committee is chaired by the Chief Executive Offi cer, and includes members of the Senior Management Committee in charge of Finance and Risks and Wholesale Banking-Finance and Market Solutions, the Head of Risk, the Head of the Single Treasury and Central Bank
Collateral Management Pool, the Head of Financial Management and BPCE’s Head of Asset/Liability Management. The Committee meets every two months and is mainly responsible for: V validating the main asset/liability management rules (including those relating to internal liquidity pricing), agreements, indicators and limits (including liquidity budgets allocated to the business lines as part of the budget procedure) used to monitor, manage and supervise structural balance sheet risks, all within the standard ALM framework set up by BPCE; V validating the overall refinancing policy in conjunction with BPCE ALM; V supervising the main balance sheet aggregates and their developments; V supervising structural balance sheet risks and compliance with limits.
The ALM Committee’s monitoring scope includes: V Natixis’ entire scope of consolidation for liquidity risk, excluding insurance subsidiaries that do not present intrinsic liquidity risks and which are monitored and managed separately in respect of ALM risks; V Natixis’ entire consolidation scope for structural foreign exchange risk; V the banking portfolios of Natixis and its credit subsidiaries for overall interest rate risk.
Under this organizational framework: V the BPCE/Natixis single treasury and central bank collateral management pool, placed under the supervision of BPCE, coordinates the operational management of the Group’s refinancing needs in order to secure and optimize access to liquidity for the entire Group and its businesses; V circulation of cash between both balance sheets is governed by pricing rules and rules on managing conflicts of interest that have been documented and approved by the Group ALM Committee; V subsidiary and non-subsidiary activities without ALM risk management mandates from the ALM Committee transfer management of their risk to the Treasury through individual matching contracts: this primarily involves Wholesale Banking’s financing activities; V subsidiary and non-subsidiary activities that possess ALM risk management mandates match their net needs with Treasury subject to rules and limits set by the ALM Committee. These comprise the market activities and the activities of the specialized credit subsidiaries, which do not have access to the refinancing market.
The largest positions involve exposures to the short end of yield curves and are notably linked to time-lags between Libor reset dates. This risk is measured in terms of the sensitivity of the economic value of portfolios by percentage point of the yield curve and by currency. It is controlled, for the largest portfolios, through limits confi rmed and monitored by the Finance and Risk Department. As regards Treasury, in which most positions are concentrated, this mechanism is rounded out with interest rate and spread stress tests which are also governed by limits. VaR is measured on a daily basis, but is not subject to a limit.
2 CORPORATE GOVERNANCE Report of the Chairman of the Board of Directors on internal control and risk management procedures V the constitution of a management liquidity reserve limited to the most liquid assets and corresponding to all the cash deposited with the central banks (ECB and Federal Reserve), securities and receivables eligible for central bank funding and deposited in the ECB’s Pool 3G and the Fed’s Discount Windows, and all other eligible securities.
The Operational Risk function is rolled out globally on a matrix basis according to activity and location.
The preparation of the consolidated fi nancial statements also relies on: V use of a direct consolidation method, broadly rolled out throughout the Group, allowing for the analysis and control of the consolidation packages of each consolidated company via a formal review process; V preparation of consolidated financial statements on a quarterly basis. This allows for greater control over financial reporting, thus anticipating significant transactions over the fiscal year; V reporting and reconciliation of intra-group transactions at M-1 and then at M, where M is the reporting month, thus increasing the number of reconciliations and contributing to the preparation of quarterly statements;
V use of an automated control process for individual information provided by the consolidated entities through the use of consolidation packages that incorporate accuracy and consistency checks, which must be complied with before the data can be transmitted; V individual analysis of all entries impacting consolidated shareholders’ equity and the preparation of supporting documents for taxes, including proof of deferred taxes, for each consolidated entity, thus contributing to the final calculation of consolidated shareholders’ equity; For the preparation of the consolidated fi nancial statements and part of its regulatory reporting, Natixis has software that enables it to: V produce a local IFRS-compliant reporting package, including, for foreign entities, a reporting period foreign currency conversion feature; V extend its data collection and consolidation processes to regulatory reporting; V guarantee the consistency of data relating to the banking and insurance consolidation scopes; V offer retrieval features that can be used to input data into the various reports; V enable BPCE to access Natixis data through dedicated interfaces; V secure the integration process for consolidation packages received from international entities through the implementation of local first-level controls followed by centralized second-level controls.
Natixis also continued the process begun in 2009 aimed at bringing forward its publication dates.
For accounting, permanent and periodic controls apply to the completion and monitoring of: V accuracy and veracity checks, such as the management/financial account reconciliation procedures (balance sheet and income statement), clearing of suspense items, and more generally the justification of all accounts; V consistency checks through analytical reviews; V checks that income and expenses are allocated correctly; V verification that the presentation complies with accounting rules; V correct processing of specific transactions in line with the relevant principles; V adjustment of anomalies identified at the time of these controls as well as the corresponding analyses and documentation.
For regulatory reporting, permanent and periodic controls apply to the completion and monitoring of: V accuracy and veracity checks, such as the management/financial account reconciliation processes, as management data can come from various sources; V controls of the traceability and completeness of data, throughout the various reporting preparation processes; V compliance and presentation controls in respect of the regulatory requirements specific to each reporting process; V quality controls of the data needed to produce the reports and the quality of the attributes entered into the databases used; V consistency checks between published reports, where possible.
2 CORPORATE GOVERNANCE Report of the Chairman of the Board of Directors on internal control and risk management procedures V formalized documentation, governed by a charter established by Groupe BPCE and specifically containing detailed procedures describing the mechanism’s structure; V risk mapping showing the nature, the frequency of occurrence and the responsibility of the different control levels across all scopes (accounting and regulatory), and internal control risk mapping to guide and determine the frequency of controls; V centralized oversight within the financial or accounting departments, performed by the dedicated Regulatory and Accounting Review team, which also carries out second-level controls.
For Natixis, the system is organized based on: V accounting or regulatory production teams, within the business lines or centralized within the Accounting and Ratios Department, that handle all work related to the correct entry of transactions and the collection of data required for regulatory reporting and the implementation of day-to-day controls; V first-level controls under the hierarchical and/or functional authority of the Accounting and Ratios Department including all monthly and quarterly controls that make these reports more reliable; V independent second-level controls under the hierarchical authority of the Accounting and Ratios Department and the functional authority of the Compliance Department. The Regulatory and Accounting Review team, aside from managing the system, also performs its own controls, including the review of first-level controls; V dedicated tools that allow for the automated reconciliation of account entries and centralization of control results in an internal application.
The work of Natixis’ Internal Audit Department is based on an annual Audit Plan drafted jointly with Groupe BPCE’s General Inspection, which aims to optimize the allocation of audit resources across the scope covered. It is part of a four-year plan that sets out the intervention frequency and adapts resources to the risks to be controlled.
Natixis’ activities are exposed. It devoted a fairly signifi cant share of its resources to assignments of a regulatory nature, as part of the Basel 2 and Solvency 2 certifi cation process undertaken by Natixis, as well as assignments conducted in Natixis’ subsidiaries pursuant to audit agreements entered into with them.
All of this work was carried out in coordination with BPCE’s General Inspection. To this end, seven meetings were held during the year. These meetings provided a forum for addressing issues related to auditing programs and practices (Internal Audit Coordination Committee), as well as topics associated with risk assessment and assignment evaluation (the Risk Assessment Committee).
2 CORPORATE GOVERNANCE Statutory Auditors’ report on the report of the Chairman of the Board of Directors 2.6 Statutory Auditors’ report on the report of the Chairman of the Board of Directors
In our capacity as the Statutory Auditors of Natixis, and in accordance with Article L. 225-235 of the French Commercial Code, we hereby report on the report prepared by the Chairman of your Company in accordance with Article L. 225-37 of the French Commercial Code for the year ended December 31, 2014.
V to certify that this report contains the other disclosures required by Article L. 225-37 of the French Commercial Code, it being specified that we are not responsible for verifying the fairness of these disclosures.
French original signed in Neuilly-sur-Seine and Paris-La-Défense, on March 12, 2015, by
Table 5 – EAD by geographic area and by asset class 442 § d 132
Table 11 – Exposures using ratings issued by an ECAI 444 § e 135
Table 13 – EAD by category of exposure and by rating 452 § e and f 136
Table 15 – Difference between provisions and expected losses (EL) 452 § i 138
Table 17 – Guaranteed exposures by type and internal rating of guarantor (S&P equivalent) 453 § d 138
Table 22 – EAD on derivatives and repurchase agreements 439 § e and f 140 3.4.9 Equity exposures in the banking book Table 23 – Breakdown by key Natixis business line 447 § b 14 1
Table 24 – EAD by type and nature of exposure (excluding impact of thresholds) 447 § c 14 1
Table 25 – RWA by weighting (excluding impact of thresholds) 447 § c 14 1
Table 26 – Unrealized gains or losses 447 § d and e 14 1
Table 27 – Aggregate amount of divestment gains or losses for the period under review 447 § d and e 14 2
Table 33 – EAD by S&P equivalent rating 449 § o (i) 146
Table 35 – Securitization positions according to the main categories of underlying 449 § q 146 3.6 Market risk Table 36 – Regulatory own funds requirements for market risk 445 152
Overview of the sections dealing with risks V Contents of the chapter on risk management
Stress test system V Credit stress test V Market stress test
V Transition from shareholder’s equity to prudential capital after applying transitional arrangements
V Transition from shareholder’s equity to prudential capital at December 31, 2014
V Transition from Basel 2.5 prudential capital and RWA to CRR at December 31, 2013
Table of the PD, LGD, EAD and RWA by Basel asset class
V Table 3 – Exposure and EAD by category of exposure
V Table 13 – EAD by category of exposure and by rating
Tables explaining the changes in RWA for each risk category V Risk-weighted assets table 123
V Exposure to credit risk V Exposure to counterparty risk V Exposure to banking portfolio shares V Securitization
Impairment and forbearance policy V Financials assets and liabilities 222 to 224
3.1.2.1 Risks related to the macroeconomic environment and the fi nancial crisis
Adverse market or economic conditions and increased regulatory requirements may cause a decrease in the net revenues, profitability and financial position of Natixis
In addition to this still uncertain economic backdrop, the fi nancial and banking markets have been particularly affected by other major events, such as the many unconventional economic support programs introduced by the European Central Bank, the transition to sole supervision by the ECB and the associated balance sheet reviews and stress tests.
The global economic outlook appears equally mediocre for 2015 and 2016. Economic decline in Europe, and especially in France (poor economic performance, social discontent and political instability), could also have negative repercussions on provisions for credit losses and Natixis’ solvency. As a reminder, Standard & Poor’s put France’s rating on credit watch negative in October.
In addition, the exceptional measures taken by governments (support measures), central banks (lowering of key interest rates, conditional VLTRO liquidity transactions, and OMT programs to purchase private debt securities, such as Covered Bond and ABS) and regulators to rectify the fi nancial crisis, stabilize the fi nancial markets and support fi nancial institutions, could one day be stopped. Given the uncertainty surrounding growth, this would have an adverse impact on the business conditions of fi nancial institutions.
There are fi ve main categories of risk (credit risk, market, liquidity and fi nancing risks, operational risk and insurance risk) inherent to Natixis’ operations, which are summarized below and described more fully in Chapter [3], paragraph [3.2.3], and in Chapter [2], paragraph [2.5], “Chairman’s report on internal control procedures” (the “Chairman’s report”), particularly with regard to the scale and the impact that these risks could have on the results and assets of Natixis, as well as the organization and control of these risks.
2014 was characterized by a marked increase in geopolitical risks, particularly the Ukrainian crisis and its political and economic ramifi cations, and the fall in the price of oil in the second half of the year. As such, the fi nancial markets reexperienced a degree of volatility in the second half of the year, combined with abundant global liquidity.
Given this context, Natixis maintained a measured and targeted risk profi le on the whole in terms of credit, market and liquidity risks. Natixis also maintained a cautious risk policy over the year focused on targeted customer support.
Should Natixis decide to sell some of its operations, the selling price could be lower than expected and Natixis might continue to bear signifi cant risks stemming from these operations as a result of liability guarantees or indemnities that it might have to grant to the buyers.
Future events may differ from those reflected in the assumptions used by management to prepare Natixis’ financial statements, which may expose Natixis to unexpected future losses
Independent of market changes, any under-performance of Natixis’ Asset Management business may result in a decrease in assets under management (in particular, as a result of redemptions of mutual funds) and in lower fees, premiums and other portfolio management income earned by Natixis.
Despite the risk management policies, procedures and methods in place, Natixis may be exposed to unidentified or unanticipated risks likely to give rise to significant losses
Natixis’ primary business areas contend with fi erce competition in France and in other areas of the world where it is fi rmy established. Heightening this competition is consolidation, whether in the form of mergers and acquisitions or through alliances and cooperation. Consolidation has created a number of fi rms that, like Natixis, have the ability to offer a wide range of products and services. Natixis competes with other entities on many accounts, including transaction execution, products and services offered, innovation, reputation and price. If Natixis is unable to maintain its competitiveness in France or in its other major markets with attractive and profi table product and service offerings, it may lose market share in important areas of its business or incur losses on some or on all of its operations. In addition, downturns in the global economy or in the economies of Natixis’ major markets are likely to increase competitive pressure, as increased price pressure lowers business volumes for Natixis and its competitors. New and more competitive competitors could also enter the market. Subject to separate or more fl exible regulation, or to other requirements relating to prudential ratios, these new market participants would be able to offer more competitive products and services. Technological advances and the growth of e-commerce have made it possible for non-deposit taking institutions to offer products and services that traditionally were banking products, and for fi nancial institutions and other companies to provide electronic and Internet-based fi nancial solutions, including electronic securities trading. These new players may exert downward price pressure on Natixis’ products and services and affect Natixis’ market share.
The potential losses arising from the above-mentioned risks could have a signifi cant bearing on Natixis’ results.
In some of Natixis’ businesses, a prolonged fall in asset prices could threaten the level of activity or reduce liquidity in the market concerned. This situation would expose Natixis to signifi cant losses if it was unable to rapidly close out its potentially loss-making positions. This is particularly true in relation to assets that are intrinsically illiquid. Certain assets that are not traded on a stock exchange or on a regulated market, such as derivatives traded between banks, are generally valued using models rather than market prices. Given the diffi culty in monitoring changes in prices of these assets, Natixis could suffer unforeseen losses.
Unforeseen events, such as a severe natural disaster, pandemic, terrorist attacks or any other state of emergency, could lead to an abrupt interruption of Natixis’ operations and cause substantial losses insofar as they are not covered or are insuffi ciently covered by an insurance policy. These losses could relate to property, fi nancial assets, market positions and key employees. Such unforeseen events may, additionally, disrupt Natixis’ infrastructure, or that of third parties with which it conducts business, and could also lead to additional costs (such as relocation costs of employees affected) and increase Natixis’ costs (in particular insurance premiums). Subsequent to such events, Natixis may be unable to insure certain risks, resulting in an increase in Natixis’ overall risk.
Natixis is subject to signifi cant regulation in France and in several other countries around the world where it operates; regulatory actions and changes could adversely affect Natixis’ business and results
Several supervisory and regulatory regimes apply to Natixis in all the countries where it conducts its business. In addition to reputational risk, failure to comply with these regulations could expose Natixis to signifi cant intervention by regulatory authorities and to fi nes, public warnings by the authorities, suspensions of operations or, in extreme cases, withdrawal of Natixis’ operating authority. The fi nancial services industry has been under increased scrutiny from several regulatory authorities in recent years, and the penalties and fi nes imposed by these regulatory authorities have increased - a trend that may be accelerated in the current fi nancial context. Natixis’ operations and income may be affected by various measures and actions taken by French and European regulatory authorities, by the European Union, by foreign governments, or by other international organizations. Such constraints could limit Natixis’ ability to develop its businesses or to pursue certain operations. The nature and impact of these potential changes in regulatory policies and actions are unpredictable and Natixis has no way of controlling them.
As a multinational banking group performing complex and large-scale cross-border transactions, Natixis is subject to tax legislation in a large number of countries throughout the world, and structures all of its operations in a way that optimizes the effective tax rates. Changes to tax legislation or its application by the competent authorities in these countries may have a signifi cant impact on Natixis’ results. Natixis implemented management processes to create value from the synergies and business capabilities of its different entities. Natixis also endeavors to structure the fi nancial products sold to its customers while optimizing their taxation. The structures of Natixis’ intra-group transactions and fi nancial products sold by Natixis are based on Natixis’ own interpretations of applicable tax laws and regulations, generally on the basis of opinions received from independent tax advisers and, on an ad hoc basis as and when necessary, on rulings or specifi c interpretations from the tax authorities. There can be no assurance that the tax authorities will not seek to challenge such interpretations in the future, in which case Natixis could be subject to tax adjustments.
3 RISKS AND CAPITAL ADEQUACYGovernance and risk management system 3.2 Governance and risk management system 3.2.1 GOVERNANCE
Natixis’ structural balance sheet risks are managed and monitored under the authority of the Asset/Liability Management Committee (the “ALM Committee”) whose membership and duties are described in detail in Chapter [2], section [2.5], “Chairman’s report on internal control procedures” (the “Chairman’s report”) (and in section 3.8, “Overall interest rate risk, liquidity risk and structural foreign exchange risk”).
The ALM Committee’s monitoring scope includes the overall interest rate risk, the liquidity risk and and the structural foreign exchange risk.
The management team of the Risk Department is highly integrated, has short decision-making channels, and cross-business ties via dedicated teams, notably the Chief Operating Offi ce Department, which adopts a comprehensive approach to risks. An Investment Solutions and Services Risk Department coordinates the function and is in charge of the Heads of Risk in the two divisions.
Its operating methods are described in detail in Chapter [2], section [2.5], “Chairman’s report on internal control procedures” (the “Chairman’s report”), and sections [3.4], [3.6] and [3.7] of this chapter.
It plays an essential role within the Committee structure, the highestlevel Committee being Natixis’ Global Risk Committee, which meets once per quarter.
Natixis is defi ned by its strong risk culture, at every level of its organizational structure.
The risk culture is therefore central to the principles that underpin the Risk Department and the bank, and thanks to the Risk Charter it is an integral part of its guiding principles. It is based on three key areas: V harmonizing good practices within the bank through the roll-out of a body of risk policies, standards and procedures that cover all of the bank’s major risks (credit, market and operational) and outline the bank’s strategic vision and risk appetite; V implementing e-learning campaigns, particularly covering operational risks; V promoting the training of every employee in specific subjects, related especially to regulatory changes.
Natixis’ risk monitoring and supervision system is designed to manage the bank’s results, solvency, refi nancing capacity and economic value. The system also ensures compliance with regulatory requirements, while integrating the particularities of the prudential and accounting treatment of the portfolios.
3 RISKS AND CAPITAL ADEQUACYGovernance and risk management system Country Risk: Country risk measures the potential impact of a foreign country’s specifi c economic, fi nancial, political or social conditions on Natixis’ fi nancial interests.
Sovereign Risk: Sovereign risk is a sub-category of country risk, namely the fi nancial risk attached to the State and the central public authorities of a given country.
The Insurance Department, which reports to the Legal Department in the Corporate Secretariat, is tasked with analyzing insurable operational risks and taking out appropriate insurance coverage against them (for further details, please refer to section [3.7.4]). Insurance policies bought from leading insurers provide coverage for potentially signifi cant consequences resulting from fraud, embezzlement and theft, operating losses or the incurring of Natixis’ civil liability or that of its subsidiaries or the employees for which it is responsible.
Non-compliance risk is defi ned by the French regulations as the risk of a legal, administrative or disciplinary penalty, accompanied by signifi cant fi nancial losses, that arises from a failure to comply with the provisions specifi c to banking and fi nancial activities, whether these are stipulated bylaws or regulations, with professional or ethical standards, or instructions from the executive body, notably issued in accordance with the policies of the supervisory body.
Insurance risk is the risk to profi ts of any difference between expected and incurred claims. Depending on the insurance product in question, the risk varies according to macroeconomic changes, changes in customer behavior, changes in public healthcare policy, pandemics, accidents and natural disasters (such as earthquakes, industrial accidents or acts of terrorism or war).
The main difference between the two presentations is the restatement of insurance companies, as explained above.
Revaluation adjustments on portfolios hedged against interest rate risk 233 0 233
In accordance with the provisions of the CRR, and by the national provisions defi ned by the ACPR, prudential capital, which is calculated based on shareholder’s equity as per the accounting balance sheet, comprises three categories, as described below. Each category comprises liability items extracted from the consolidated fi nancial statements and restated by applying direct or above thresholds deductions.
Until 2018, prudential capital is subject to transitional arrangements known as phase-in and grandfathering provisions to support the roll-out of the CRR.
R own credit risk on debts issued and fi nancials instruments (debit value adjustment),
R expected loss on equity positions and shortfall of provisions on expected losses on credit positions,
R revaluation adjustments on defi ned-benefi t pension plan commitments; V deductions subject to the transitional arrangements: R non-bank non-controlling interests,
R bank non-controlling interests, in excess of the thresholds set by regulations,
R deferred tax assets that rely on future earnings, but not related to temporary differences,
R excess of threshold 2 on signifi cant holdings of capital instruments issued by fi nancial entities,
Regulatory treatment 4 Transitional CRR rules Additional Tier 1 instruments Additional Tier 1 instruments 5 Post-transitional CRR rules Ineligible Ineligible 6 Eligible at solo/(sub-)consolidated/solo & (sub-)consolidated Consolidated Consolidated 7 Instrument type (types to be specifi ed by each jurisdiction) CRR Article 52 CRR Article 52 8 Amount recognised in regulatory capital (currency in million, as of most recent reporting date)
14 Issuer call subject to prior supervisory approval Yes Yes 15 Optional call date, contingent call dates and redemption amount The exercise date of the redemption option for the full issue at par at 01.25.2010
The exercise date of the redemption option for the full issue at par at 06.30.2016
16 Subsequent call dates, if applicable At each coupon payment date (01.25 of each year) At each coupon payment date (03.31, 06.30, 09.30 and 12.31 of each year)
19 Existence of a dividend stopper No No 20a Fully discretionary, partially discretionary or mandatory (in terms of timing) Partially discretionary, existence of dividend pushers
Partially discretionary, existence of dividend pushers 20b Fully discretionary, partially discretionary or mandatory (in terms of amount) Mandatory Mandatory 21 Existence of step up or other incentive to redeem No No 22 Non-cumulative or cumulative Non-cumulative Non-cumulative 23 Convertible or non-convertible Non-convertible Non-convertible 24 If convertible, conversion trigger(s) N/A N/A
30 Write-down features Yes Yes 31 If write-down, write-down trigger(s) “Supervisory Event” (non-compliance with regulatory ratios and/or at the discretion of the regulator)
32 If write-down, full or partial Partial Partial 33 If write-down, permanent or temporary Temporary Temporary 34 If temporary write-down, description of write mechanism Mandatory after two profi t-making fi scal years following the end of the “Supervisory Event” (subject to compliance with regulatory ratios), or in the case of dividend distribution, the redemption of the issue or the liquidation of the issuer
Participating or subordinated loans and securities Participating or subordinated loans and securities 36 Non-compliant transitioned features N/A N/A
Additional Tier 1 instruments Additional Tier 1 instruments Additional Tier 1 instruments Additional Tier 1 instruments
The exercise date of the redemption option for the full issue at par at 10.18.2017
The exercise date of the redemption option for the full issue at par at 03.28.2018
At each coupon payment date (10.18, 01.18, 04.18, and 07.18 of each year)
Mandatory after two profi t-making fi scal years following the end of the “Supervisory Event” (subject to compliance with regulatory ratios), but obligatory in the case of dividend distribution, the liquidation of the issuer
3 RISKS AND CAPITAL ADEQUACYCapital management and capital adequacy R ISSUANCE OF TIER 2 CAPITAL INSTRUMENTS
2 Unique identifi er (e.g. CUSIP, ISIN or Bloomberg identifi er for private placement)
XS01709333047 3 Governing law(s) of the instrument French F rench F rench F rench F rench F rench English
Regulatory treatment 4 Transitional CRR rules Tier 2 N/A N/A Tier 2 Tier 2 N/A N/A N/A
Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated 7 Instrument type (types to be specifi ed by each jurisdiction)
EUR 36M EUR 0.4M EUR 5M EUR 152M EUR 175M EUR 208M EUR 24M EUR 6M
9 Nominal amount of instrument EUR 36M EUR 25M EUR 77M EUR 480M EUR 476M EUR 500M EUR 40M EUR 10M
N/A N/A Conditional redemption option at any time, at par and for the full issue if changes occur in tax/regulatory legislation
Coupons/dividends 17 Fixed or fl oating dividend/coupon Floating F loating F loating Fixed F ixed F ixed F ixed F loating 18 Coupon rate and any related index Coupon structured between 95% and 120% of the bond average rate
25 If convertible, fully or partially N/A N/A N/A N/A N/A N/A N/A N/A
26 If convertible, conversion rate N/A N/A N/A N/A N/A N/A N/A N/A
27 If convertible, mandatory or optional conversion N/A N/A N/A N/A N/A N/A N/A N/A
31 If write-down, write-down trigger(s) N/A N/A N/A N/A N/A N/A N/A N/A
32 If write-down, full or partial N/A N/A N/A N/A N/A N/A N/A N/A
35 Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument)
F rench F rench E nglish E nglish F rench E nglish E nglish F rench F rench F rench
N/A N/A N/A N/A N/A N/A N/A Tier 2 Tier 2 Tier 2
EUR 900M EUR 500M EUR 100M EUR 20M EUR 100M EUR 46M EUR 60M EUR 10M EUR 5M EUR 5M
Dated D ated D ated D ated D ated D ated D ated Perpetual D ated D ated
Floating F loating F loating F loating F loating Fixed F ixed F loating F ixed F ixed
M andatory M andatory M andatory M andatory M andatory M andatory M andatory Partially discretionary
M andatory M andatory M andatory M andatory M andatory M andatory M andatory M andatory M andatory M andatory
N o N o N o N o N o N o N o N o N o N o
R TRANSITION FROM SHAREHOLDER’S EQUITY TO PRUDENTIAL CAPITAL AFTER APPLYING TRANSITIONAL ARRANGEMENTS
Total shareholders’ equity - group share 18,872 Reclassifi cation as Additional Tier 1 capital (989)
Prudential fi lters after transitional arrangements Own credit risk: Gain on reclassifi cation of hybrid securities (401)
Total prudential fi lters (916) Deductions after transitional arrangements Dividend proposed for current year and related expenses (1,091)
o/w portion not including tax loss carry-forwards and impact of netting 889
Investments in the share capital of fi nancial sector entities 0
Total deductions (4,304) Total Common Equity Tier 1 (CET1) 12,617 Hybrid capital instruments
3 Accumulated other comprehensive income (and other reserves, to include unrealized gains and losses under the applicable accounting standards)
Public sector capital injections grandfathered until 1 January 2018 483 (2)
6 Common Equity Tier 1 (CET1) capital before regulatory adjustments 16,800 0
18 Direct and indirect holdings by the institution of the CET1 instruments of fi nancial sector entities where the institution does not have a signifi cant investment in those entities (amount above the 10% threshold and net of eligible short positions) (negative amount)
22 Amount exceeding the 15% threshold (negative amount) (36) 48 (1) (144)
25a Losses for the current fi nancial year (negative amount) 36 (1) (a), 472 (3)
o/w: fi lter for unrealized loss 0 467 o/w: fi lter for unrealized gain (726) 468 26b Amount to be deducted from or added to Common Equity Tier 1 capital with regard to additional fi lters and deductions required pre-CRR
28 Total regulatory adjustments to Common equity Tier 1 (CET1) (4,184)
Public sector capital injections grandfathered until 1 January 2018 483 (3)
34 Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interests not included in row 5) issued by subsidiaries and held by third parties 35 o/w: instruments issued by subsidiaries subject to phase out 486 (3) 0 36 Additional Tier 1 (AT1) capital before regulatory adjustments 1,448
38 Holdings of the AT1 instruments of fi nancial sector entities where those entities have reciprocal cross holdings with the institution designed to infl ate artifi cially the own funds of the institution (negative amount)
39 Direct and indirect holdings of the AT1 instruments of fi nancial sector entities where the institution does not have a signifi cant investment in those entities (amount above the 10% threshold and net of eligible short positions) (negative amount)
41 Regulatory adjustments applied to additional Tier 1 in respect of amounts subject to pre-CRR treatment and transitional treatments subject to phase out as prescribed in Regulation (EU) No. 575/2013 (i.e. CRR residual amounts)
o/w: non-signifi cant investments in the capital of other fi nancial sector entities 0 o/w: signifi cant investments in the capital of other fi nancial sector entities (40)
41c Amount to be deducted from or added to Additional Tier 1 capital with regard to additional fi lters and deductions required pre- CRR
43 Total regulatory adjustments to Additional Tier 1 (AT1) capital (292)
44 Additional Tier 1 (AT1) capital 1,156 45 Tier 1 capital (T1 = CET1 + AT1) 13,773
54a o/ w new holdings not subject to transitional arrangements 0 54b o/ w holdings existing before January 1, 2013 and subject to transitional arrangements 0 55 Direct and indirect holdings by the institution of the T2 instruments and subordinated loans of fi nancial sector entities where the institution has a signifi cant investment in those entities (net of eligible short positions) (negative amount)
56 Regulatory adjustments applied to Tier 2 in respect of amounts subject to pre-CRR treatment and transitional treatments subject to phase out as prescribed in Regulation (EU) No. 575/2013 (i.e. CRR residual amounts)
(EU) No. 575/2013 or prescribed residual amount of regulation (EU) No. 575/2013
59 Total capital (TC = T1 + T2) 15,849 59a Risk weighted assets in respect of amounts subject to pre-CRR treatment and transitional treatments subject to phase out as prescribed in Regulation (EU) No. 575/2013 (i.e. CRR residual amounts)
o/ w: adjustment of the 15% threshold, part of the signifi cant investments of the CET1, items not deducted from CET1 (Regulation (EU) No. 575/2013 residual amounts)
73 Direct and indirect holdings by the institution of the CET 1 instruments of fi nancial sector entities where the institution has a signifi cant investment in those entities (amount below 10% threshold and net of eligible short positions)
79 Cap for inclusion of credit risk adjustments in T2 under internai ratings-based approach 48,001 62
80 Current cap on CET1 instruments subject to phase-out arrangements 0 484 (3), 486 (2) & (5)
82 Current cap on AT1 instruments subject to phase-out arrangements 1,452 484 (4), 486 (3) & (5)
83 Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) 0 484 (4), 486 (3) & (5)
R TRANSITION FROM BASEL 2.5 PRUDENTIAL CAPITAL AND RWA TO CRR AT DECEMBER 31, 2013
Basel 2.5 * Insurance Securitization Deductions and investments CVA risk Correlation banks and CCP
Deferred tax assets that rely on future earnings (excluding temporary differences) 263
o/w impact of change in basis subject to transitional arrangements (587)
Amount of Common Equity Tier 1 (CET1) at end of period 12,617
CET1 capital includes a provision for 2014 dividends payable in cash in the amount of €1.1 billion (i.e. €0.34 per share). It also includes the impact of the fi rst application of the prudent valuation for -€0.35 billion, and an increase in the impact of transitional arrangements for -€0.7 billion.
In addition to the aforementioned items, the increase in CET1 capital was primarily due to the favorable impact of the change in the phase in rate applied to on items deducted from Additional Tier 1 (AT1) capital.
Risk-weighted assets amounted to €115.2 billion after the guarantee granted by BPCE (€2.1 billion, down €0.8 billion compared to December 31, 2013), and fell by €4.9 billion over the year.
The -€5.2 billion decrease in credit risks over the year was primarily due to the following: V an increase in outstandings (+€3.4 billion) notably due to changes in activity and the increase in the book value of investments in insurance companies, including the consolidation of BPCE Assurances); V the impact of the dollar rise (+€2.3 billion); V an improvement in risk parameters (improved ratings, better recognition of guarantees received, -€7.1 billion); V acquisitions and disposals of financial investments, including the disposal of Coface and Lazard (-€3.2 billion).
3 RISKS AND CAPITAL ADEQUACYCapital management and capital adequacy TABLE1: EAD, RWA AND OWN FUNDS REQUIREMENTS BY BASEL APPROACH AND CATEGORY OF EXPOSURE
Exposures to institutions and corporates with a short-term credit assessment 1,594 120 10
R TABLE 2: BASEL 3 RWA BY KEY NATIXIS BUSINESS LINE
(c) In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
After taking into account transitional arrangements, at December 31, 2014 the CET1 ratio stood at 11%, the Tier 1 ratio was 12% and the total capital ratio stood at 13.8%.
Natixis is already in a position to calculate and publish its leverage ratio (according to the rules set out in the Delegated Act), and to implement the balance sheet oversight needed to converge towards the target ratio under consideration.
3 RISKS AND CAPITAL ADEQUACYCredit and counterparty risks (including country risk) 3.4 Credit and counterparty risks
The framework laid down by these risk policies makes a distinction between recommendations based on good practices, and strict (qualitative or quantitative) supervisory criteria, any deviation from which affects the decision-making process and the usual system of limit authorizations.
The mechanism is based on: V internal rating methodologies specific to the various Basel asset classes and consistent with Natixis’ risk profile; there is a unique rating procedure and methodology for each asset class; V an IT system used for managing the successive stages of the rating process, from initiation of the process to validation and logging of the complete process;
For Natixis, the Corporate (including structured fi nance), Interbank and Sovereign portfolios, which are handled using dedicated rating tools, have the lowest default rates (Low Default Portfolios). These portfolios are backtested in accordance with their specifi c nature, namely the low number of defaults and the diffi culty in creating and maintaining a PD scale based on internal data.
These checks are carried out through several processes, such as quarterly meetings of the Rating Analysis Committee and the backtesting of the various rating models, which is carried out between once and four times a year depending on the scope.
The severity of the internal ratings compared with the agency ratings is examined. Natixis therefore analyzes all of the internal ratings of counterparties that are also rated by the rating agencies (Standard and Poor’s, Moody’s and Fitch). The degree of alignment of the risk assessments can be determined through these analyses.
3.4.4.2 Monitoring and backtesting of internal LGD, CCF and ELBE under the advanced method
The backtesting indicators defi ned are used both to measure the modeling performance and to validate the model currently used. Two types of indicators are used: V population stability indicators: these analyses are used to validate that the population observed is still similar to the population that was used to build the model. The model may be called into question if there are excessively large distribution differences depending on the segmentation variables or the LGD. All of these indicators are compared against the benchmark indicators (usually those calculated when the model was built or those issuing from external data or agencies). These analyses are applicable to both expert appraisal-based models and statistical models; V the model performance indicators: the model’s performance is measured to validate the segmentation and also to synthetically quantify the differences between the forecast and actual figures. This is achieved by using statistical indicators, which are compared against those calculated during modeling.
A backtesting report is produced once backtesting is complete presenting: V all of the results for the backtesting indicators used; V any additional analyses; V an overall opinion of the results in accordance with the Group’s standards.
The principles used for identifying, measuring and managing credit risk hedging instruments are determined by the recommendations of the Basel Committee accord. The decision on whether a guarantee’s risk-reducing effects make it eligible to be included in risk-exposure calculations is made on a case-by-case basis. Checkpoints are provided for throughout the process. They cover the approval of the transaction, the monitoring of credit risk exposure and the calculation of the resulting capital requirements (predominantly calculated according to IRBA since September 30, 2010).
Natixis may buy credit-default swaps and enter into synthetic securitization transactions in order to reduce all or part of the credit risk exposure attached to some assets by transferring the risk to the market. CDS-protected loans remain on Natixis’ balance sheet, but bear the counterparty risk attached to the credit-default swap sellers, which are generally OECD banks. Transactions with non-bank third parties are fully collateralized in cash.
The business lines carry out day-to-day counterparty risk monitoring and the Risk Department conducts second-level controls. Each month, the Risk Department submits an overview of its monitoring activities to Senior Management and the Risk Committee (to the Audit Committee until December 2014).
Periodic reviews of sector-based risk policies also help to ensure that the risk budgets allocated by the Global Risk Committee chaired by the Chief Executive Offi cer are observed. This risk undergoes sector monitoring by the Risk Department, which, among other things, results in the producing of half-yearly market reviews covering the majority of the business sectors and whose (notably geographic) focus is tailored to the make-up of Natixis’ portfolio. The purpose of this process is to: V monitor new information about each sector (main events and changes in trends); V monitor objective indicators specific to each sector; V assess the change in the risks inherent to each sector; V regularly rate business sectors/sub-sectors, independently of the individual counterparty rating process.
The credit stress test system covers Natixis’ scopes subject to IRBA and IRBF. It is based on choosing scenarios that replicate plausible crisis situations and high degrees of severity, in keeping with market practices, taking the past, market trends and the environment into account so that purely historical or theoretical scenarios are eliminated.
New scenarios were presented to the Global Risk Committee in 2014. These internal credit stress test scenarios are defi ned based on: V macroeconomic assumptions in the form of four stress scenarios applicable to the entire stress scope reviewed in 2013. These consist of one benchmark scenario (which is more or less close to the budgetary scenario) and three crisis scenarios (such as a commodity price shock, a European banking and sovereign crisis related to a rise in French sovereign yields, or a credit crisis in the US against the backdrop of an Asian crisis). They are prepared by the Economic Research team in collaboration with the Risk Department; V specific business line scenarios to take into account risks that would not have been covered by the macroeconomic scenarios. Standard scenarios are therefore defined (an average of three per business line) based on a business line typology (Banks, Corporates, Insurance, Aerospace, etc.).
Natixis also sets aside provisions to cover country risk and sector risk (see Note 5.3 to the consolidated financial statements presented in section [5.1], Consolidated financial statements). These provisions are created on the basis of: V ratings for loans to private individuals and professionals; V sector risk; V geographic risk for other counterparties (corporate entities, sovereigns, etc.).
For the latter, the search for objective evidence of impairment is undertaken through analysis and close monitoring of business sectors and countries. Such evidence typically arises from a combination of micro or macroeconomic factors specifi c to the industry or country concerned. When necessary, an expert opinion is sought to refi ne the results of this review.
Sector-based provisions are determined at a quarterly meeting of the Sector Provision Committee, whose role is to decide, as appropriate, whether to recognize provisions for new sectors or reverse provisions for sectors for which provisions have previously been recognized, in view of the market trends in each sector and based on the market reviews.
The transition from accounting exposures (consolidated scope) to gross exposures and exposure at default in the prudential credit risk scope includes the following: V exclusion of exposures held for trading; V inclusion of netting agreements on market transactions; V restatement of factoring positions to take into account exposure to the risk of default and an exposure to risk dilution; V application of a credit-equivalent conversion factor on financing and guarantee commitments.
Data for 2013 were calculated using the Basel 2 methodology in force at the publication date of the 2013 registration document (fi led on March 14, 2014). Basel 2 – Basel 3 differences on EAD mainly concern: V exposures to clearing houses (listed derivatives); V securitization, which was previously deducted from capital (1,250% weighting).
(a) Average exposure at risk represents the average of the last four quarter-end fi gures (these data are not audited).
(b) In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
Holding companies and conglomerates * In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
Europe * In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014, less other assets and third parties grouped into homogenous risk classes.
Central governments and central banks Central governments and central banks 67,746 457 5,768 73,971
With the exception of other items that do not represent a credit obligation, equities and securitization positions.
Regional governments or local authorities 11 17 9 167 628 832
Exposures at default under standardized approach 1 148 57 611 53 870 * In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
■ TABLE 9: EXPOSURES AND PROVISIONS BY KEY NATIXIS BUSINESS LINE
Breakdown by key Natixis business line of (i) total exposures, (ii) exposures subject to adjustments, and (iii) amount of provisions.
Breakdown by geographic area of (i) total exposures, (ii) exposures subject to adjustments, and (iii) amount of provisions.
* Including central counterparty clearing houses (CCP), third parties grouped into homogenous risk classes and other items.
The following table shows the breakdown of exposure at risk by internal rating (S&P equivalent) for asset classes measured using the internal ratings-based approach (IRB), excluding: V exposures to equities (calculated using a simple weighting); V pool-based exposures (acquired portfolios) and third parties grouped into homogenous risk classes; V securitization positions; V exposures on Groupe BPCE’ affiliates.
R TABLE 18: EXPOSURE BY CREDIT RISK MITIGATION TECHNIQUE These tables show the breakdown of exposures, guaranteed by collateral or protection.
Contracts including margin callsGross positive Net positive (a) Before collateral After collateral
(in millions of euros) Type and nature of exposure Category of exposure
Exposures on institutions and corporates with a short-term credit assessment 242
Equity – standardized * In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
Private Equity held in suffi ciently diversifi ed portfolios 2,467 2,467 2,897
Financial assets at fair value through profi t and loss 1,906 1,875 (31) (31)
Available-for-sale fi nancial assets 1,075 1,250 175 175 * In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
3 RISKS AND CAPITAL ADEQUACYCredit and counterparty risks (including country risk) R TABLE 27: AGGREGATE AMOUNT OF DIVESTMENT GAINS OR LOSSES FOR THE PERIOD UNDER REVIEW
R TABLE 28: FRACTION OF AMOUNTS OF UNREALIZED GAINS OR LOSSES INCLUDED IN CET1
Fraction of amounts included in Tier 1 or Tier 2 capital
* In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
Securitization 3.5 Securitization 3.5.1 MANAGEMENT OF RISKS RELATED TO SECURITIZATION TRANSACTIONS
Natixis also operates a market-making activity aimed at ensuring that Natixis’ securitization products retain a certain degree of liquidity for its investor clients.
Natixis is exposed to securitization activities as an investor, sponsor and originator: V as an investor: through derivative transactions (securitization swaps), through financing transactions for its clients and through its marketmaking activity. In the vast majority of cases, Natixis’ exposure is always the most senior in the structure; V as a sponsor, in connection with the creation and management of Asset-Backed Commercial Paper programs; V as an originator, in other words, as part of its refinancing activities, Natixis may securitize some of its portfolios of loans granted to customers.
Like vanilla fi nance transactions, securitization structures and transactions are reviewed at least once a year, while transactions on the watch list are re-examined at least once a quarter.
R TABLE 29: EAD BY TYPE OF SECURITIZATION IN THE BANKING BOOK
Synthetic securitization 1,248 * In accordance with the Ministerial Order of February 20, 2007 (Basel 2) applicable at December 31, 2013 and as per Natixis’ registration document fi led on March 14, 2014.
3 RISKS AND CAPITAL ADEQUACYSecuritization R TABLE 31: SECURITIZATION POSITIONS ACCORDING TO THE ROLE PLAYED BY NATIXIS
EAD at 12.31.2014 (as %) EAD at 12.31.2014 (a) (as %)
The aim of the market risk policies is therefore not only to provide a risk oversight tool in keeping with the changes in the bank’s activities and targets under the New Frontier plan, but also to strengthen risk governance.
The Risk Department defi nes the principles for measuring risk, submits them to Senior Management for approval and monitors their effective implementation and follow-up. It validates market product valuation models and regularly ensures that models used are consistent with market developments and changes in best practices.
The market risk control mechanism is based on a limit authorization structure that is under the responsibility of the Global Risk Committee and in which the Market Risk Committee, chaired by the Chief Executive Offi cer or his/her delegated representative, plays an essential role.
R All decisions regarding risks factors are revised annually in Committee meetings attended by all parties concerned (Risk Department, front offi ce and P&L division). Quantitative, objective tools are used to measure the relevance of risk factors. The aim is to ensure consistency between VaR calculations, results and sensitivities (use of the same risk factors).
VaR is calculated and monitored daily for all the Group’s trading portfolios. All of the trading portfolios are subject to adequate risk monitoring and supervision systems, in accordance with the market risk policies in force.
A VaR limit is set at an overall level and for each business.
Specific stress tests are also calculated daily in the management tools for all of the portfolios and are governed by limits. They are set on the basis of the same severity standard and are aimed at identifying the main loss areas by portfolio.
This mechanism is based on plausible scenarios drawn from extremely adverse assumptions on the fulfi llment of risk factors leading to the crossing of a loss threshold, and allows Natixis to implement a new risk monitoring and steering tool, identify circumstances that may trigger this loss and adapt the appropriate action plans where necessary.
Through benchmarking, these models are compared with marketplace practices, which reinforces the validation of internal modeling choices.
BPCE guarantees most of the workout portfolio management assets in Paris and New York. The Market Risk Department is nevertheless continuing to manage the risks for all transactions on a standardized and exhaustive basis, whether or not these transactions are guaranteed by BPCE. The portfolios covered by the Guarantee have continued to shrink signifi cantly throughout the year.
The key events were the discontinuing of Workout Portfolio Management on June 30, 2014 and the transferring of the residual positions to Wholesale Banking’s Run-Off Activities.
3 RISKS AND CAPITAL ADEQUACYMarket risks VaR breakdown by risk factors and compensation effect
The breakdown of the VaR by risk factor provides a picture of the monthly contribution of the main risks and the compensation effects in terms of VaR. Throughout the year, interest rate risk continued to predominate over equity, foreign exchange and specifi c interest rate risks.
Interest rate Equity Specific interest rate risk Specific equity risk Foreign exchange Compensation effect
■ STRESSED NATIXIS VAR The Stressed Regulatory VaR level averaged €17.8 million. It peaked at €28.7 million on December 29, 2014 and stood at €25.2 million at December 31, 2014.
Change in regulatory Stressed VaR and End-of-period VaR including the BPCE guarantee.
Regulatory SVaR including the BPCE guarantee Regulatory VaR including the BPCE guarantee
The Operational Risk Department is divided into two control units, one covering risks specifi c to Natixis’ business lines and activities, and the other dealing with the overall risks to which the Company is exposed (loss of access to premises or information systems, or loss of employee availability). The Business Line Risk division is divided into: V Wholesale Banking: covers capital markets activities and financing operations; V Investment Solutions: covers Private Banking activities, Natixis Assurances, Private Equity as well as Natixis Global Asset Management; V Specialized Financial Services: covers the subsidiaries Natixis Payment Solutions, Natixis Interépargne, Natixis Intertitres, Cie Européenne de Garanties et Cautions, Natixis EuroTitres, Natixis Financement, Natixis Lease, and Natixis Factor.
Within the business lines, this system is supplemented by a network of Operational Risk Offi cers responsible for reporting any incidents to the Operational Risk Department, and for providing operational risk data, such as indicators and progress on action plans.
Qualitative evaluation of business line and support function policies and procedures
The bottom-up mapping is based on the company’s processes and takes place in two stages: the fi rst, which is qualitative, whose purpose is to detect and analyze risks, and the second, which is quantitative, whose purpose is their measurement. It is carried out for all of the bank’s activities and its consistency is verifi ed through backtesting, in other words by using the incident history.
To map of extremely risky situations, which are infrequent but have a major impact, the quantitative factors are based on the use of external data related to incidents in the fi nancial industry.
Losses are listed from the very fi rst euro and as they are incurred. A single defi nition of “serious incident” is used throughout the Company. All serious incidents are immediately declared. A departmental investigation is then conducted and a report is drawn up. This contains a factual description of the event, an analysis of the initial cause and the recommended action plans. The business line Operational Risk Committees decide on the implementation of action plans.
Between the 2009-2013 and 2010-2014 periods, the number of serious incidents fell by 30% and their fi nancial impact decreased by 5%.
The sharp drop of 30% in the total number of serious incidents is attributable to a decrease in Investment Solutions incidents (-23 points), particularly in Private Banking, and to an increase in Wholesale Banking incidents (+13 points).
The 5% decline in the fi nancial impact of serious incidents points to the somewhat even breakdown of the impact by business line over the two periods. As shown above, while the number of serious Wholesale Banking incidents remained stable, their relative weight decreased by 13 points. The 14% increase in the Other category is related to a change in methods in 2014.
In each of its operating entities, Natixis has implemented measures to monitor action plans to reduce its exposure to operational risks. These action plans are monitored by the business line and central Operational Risk Committees. A central alert system has been set up to detect actions plans that are taking too long to implement.
The risk analysis for the 2014 fi scal year was extended to fi nancial investments and applied more thoroughly to Wholesale Banking. The Wholesale Banking businesse lines represent the majority of risks under review owing to the extensive nature of the division’s activities and operations in both France and internationally.
Natixis’ risk profi le features two main risk categories: business line risk, concentrated to Wholesale Banking, and overall risk (loss of access to premises or information systems, or the availability of employees). These risks are nevertheless mitigated by the business continuity plan.
V The insurance programs were renewed on January 1, 2014, and have been pooled in whole or in part with Groupe BPCE.
Natixis and its subsidiaries benefit from the guarantees provided by the “combined” Banker’s Blanket Bond (securities and fraud) and Company Civil Liability policies providing coverage of €162 million per claim per insurance year, of which €147 million have been pooled with Groupe BPCE.
The Core Tier 1 ratio’s sensitivity to exchange rate fl uctuations is regularly assessed by the ALM Committee.The Committee sets an acceptable variation range for this sensitivity and a monitoring report is presented during its meetings.
Thus, the purpose of the overall liquidity risk management policy is to: V guarantee that Natixis complies with its financing commitments while ensuring that its funding needs and liquidity funding mismatches traded are in line with the Group’s short- and mediumterm refinancing capacities; V optimize the cost of fund refinancing within the set risk constraints to help reach the profitability objectives; V respect the internal limits set in close cooperation with BPCE and adapted to the Group’s ability to provide for Natixis’ ultimate liquidity needs; V comply with national and international regulations; V contribute to develop the sources of funding of the Group (by geographic area, product and counterparty) and to mitigate it market foot print.
Liquidity risk is controlled, managed and monitored as follows: V management of each business line’s funding needs: to manage the bank’s refinancing needs, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Funding needs is monitored weekly for Wholesale Banking business lines and monthly for other business lines; V management of the bank’s contribution to Groupe BPCE’s net market footprint: the objective is to match the liquidity allocation system with the Group’s strategic ambitions and operational oversight; V supervision of short-term liquidity mismatching, which is measured using liquidity gaps. This indicator is produced daily for a 365-day horizon in intervals of one day, based on all the parent company’s transactions and is extended to the US subsidiaries. It is subject to four permanent limits approved by the ALM Committee and monitored daily, on overnight market exposure at opening, on the 60-day, 150-day and 330-day static liquidity gaps; V supervision of medium-term mismatching, which is measured on the basis of liquidity gaps and asset/liability coverage ratios. These ratios, calculated for all currencies combined and for the US dollar, include minimum hedging ratios approved by the ALM Committee and monitored monthly; V simulations of liquidity stress scenarios: the purpose of these scenarios is to challenge the Group’s ability to continue to respect its commitments and operate in the event of a liquidity crisis. Natixis periodically simulates its contribution to the Group’s earnings based on different crisis scenarios (systemic, specific, combined, etc.) and different levels of intensity (moderate, strong, extreme, etc.) over one-, two- and three-month periods for which assumptions are set by BPCE; V funding structure: the refinancing structure is monitored to ensure that resources are well diversified, by type of counterparty, by market segment and by geographic area, in order to mitigate all concentration risk (see section [3.8.4.3]).
Since mid-2011, Natixis’ refi nancing structure has been rooted in the organization of a cross-entity Natixis-BPCE liquidity pool, placed under the authority of the Group ALM Committee. This platform was implemented in order to secure the Group’s fi nancing and optimize the management and allocation of liquidity within the Group in accordance with pre-defi ned rules, to reduce market fi nancing and refi nancing costs.
The regulation governing liquidity risk applicable to French credit institutions took effect on June 30, 2010 (French decree dated May 5, 2009). The liquidity ratio is designed to ensure that liquid assets with maturities of less than one month are greater than or equal to liabilities falling due within the same period. It is defi ned as the ratio between cash/cash-equivalents and liabilities falling due in less than one month.
In order to give full effect to the uniform regulation, the CRR: V laid down the filing obligations in force during the observation period from January 1, 2014 to the date of first implementation of the prudential requirements; V called for the definition of regulatory or implementing technical standards; V set forth the conditions of implementation of these prudential requirements as from 2015 by a Commission Delegated Act (1) for the LCR, via a legislative proposal to be submitted no later than 2016 for the stable funding ratio.
Natixis oversees and manages its LCR, estimated at over 100% at the end of each month since the end of 2013, based on the interpretation and adaptation of the standard in force by the Group (which is subject to change). Natixis also observes its French regulatory liquidity ratio, which will remain in force until the LCR takes effect in October 2015.
Finally, Natixis regularly estimates its contribution to the Group NSFR based on the interpretation of current literature on the subject, which is also subject to change.
The Delegated Act adopted on October 10, 2014 defi ned liquid assets and the criteria they must meet to be eligible for the liquidity buffer to be used to cover funding needs in the event of a short-term liquidity crisis. The assets in question must be available, unencumbered and subject to various discounts as imposed by the CRR, which are supposed to represent the possibilities and limitations on monetizing these assets.
The liquidity buffer – in the regulatory sense – is the numerator of the LCR (HQLA) ratio and predominantly consists of: V level 1 liquid assets, i.e. cash deposits with central banks (FED and ECB, excluding mandatory reserves at end-December 2014), central bank overnight loans and recoverable time deposits; (1) The Delegated Act was adopted by the European Commission in October 2014. It was rendered permanently applicable by its publication in the Offi cial Journal in January 2015. This act set forth the fi nal calibration of the LCR and its implementation timetable.
From an operational standpoint, Natixis has two liquidity reserves that contribute to the Group’s reserves: V a reserve of liquid assets eligible for central bank collateralized operations to secure intra-day settlements; this relatively stable reserve is made up of securities and loans eligible to central bank tenders, and is located in Paris (about €4 billion in the 3G Pool) and New York (approximately $3 billion at the FBR discount window); V a liquidity reserve established in advance to meet a liquidity crisis similar to the one simulated by the LCR; the amount of this reserve ranges from €20 billion to €30 billion and is reinvested in full with the ECB and the US Federal Reserve, in line with the current policy in order to be able to immediately mobilize the funds if needed.
In addition to these two requirements and those of the business lines, any liquidity surplus raised by Treasury is replaced at central bank at the end of each day or subject to a overnight loan secured by sovereign notes on the repo market.
3 RISKS AND CAPITAL ADEQUACYOverall interest rate, liquidity, structural foreign exchange risks
These amounts, covered under the LCR management policy, were estimated at 4 billion in euro equivalent at December 31, 2014.
Overall interest rate, liquidity, structural foreign exchange risks 3.8.4.6 Encumbered and unencumbered assets
As part of its refi nancing activities, and repurchase agreements in particular, Natixis is required to pledge part of its assets as collateral. It also receives collateral, some of which can be reused as collateral.
At December 31, 2014, Natixis’ encumbered assets amounted to €86,910 million, of which: V €62,389 million in encumbered securities for corporate actions and issues of securities; V €4,547 million in encumbered receivables in mechanisms other than secured bonds; V €551 million in receivables securing secured bond issues; V €19,423 million in encumbered assets in respect of margin calls on derivatives.
Template B – Collateral received Fair value of encumbered collateral received and own debt securities issued
The department advises and assists all employees to prevent compliance risks in the performance of their duties.
It helps establish new standards, policies and procedures. To ensure the proper oversight of new activities and structures, and of new or modifi ed products, the department issues formal notices, helping to ensure the security of Natixis’ activities.
Whenever the risk of compromising a customer’s interests cannot be avoided in spite of the internal procedures in place, Natixis informs the customer of the nature of the confl ict of interest before taking action on the customer’s behalf, allowing the customer to make an informed decision on whether to proceed with the transaction.
Information barriers are put in place and reviewed each time the organizational structure changes in order to prevent the unwarranted circulation of confi dential information. These barriers function as partitions between business lines and departments, setting limits to the circulation of information on a need-to-know basis. As such, information is transmitted only in the customer’s interest and only to employees who absolutely require this information to carry out their duties. These barriers may be organizational, physical or electronic and may be permanent or temporary.
Pursuant to regulations in force, the entry of sensitive transactions into ODEON allows Compliance to rapidly identify issuers to be included on the surveillance list or on the prohibition list as well as employees on the lists of insiders.
Since 2005, Natixis has implemented a procedure that allows employees to report any action or professional activity that they suspect to be improper or incompatible with banking provisions.
This procedure is not intended to replace conventional reporting methods at Natixis, such as the escalation of anomalies to higher levels of the organization. Reports made using this procedure are addressed to the compliance manager and/or Chief Compliance Offi cer.
In all circumstances, employees are required to serve customers with diligence, loyalty, honesty and professionalism and to offer fi nancial products and services that are appropriate to customers’ abilities and needs.
Customer complaints, even of a seemingly minor nature, can compromise the customer relationship and harm Natixis’ reputation.
At the same time, Natixis has established a strict policy governing new client relationships. The procedures are in line with the various regulatory requirements governing money laundering, terrorist fi nancing and international embargoes for the entities in question.
All employees are called upon to exercise vigilance against pressure and solicitation and in situations such as those involving abnormally high or overcharged commissions and informal and private interactions with public companies.
The purpose of the Financial Security Department, which reports to Compliance management, is to organize anti-money laundering and counter-terrorist fi nancing (AML - CFT) measures and to ensure compliance with embargoes and anti-fraud measures, both for Natixis and its subsidiaries. In addition to this standing supervisory task, it may directly spearhead special efforts on behalf of some business lines.
Natixis is fully committed to guaranteeing a secure environment for customers, partners and employees. Natixis’ anti-fraud culture is also continuously reinforced and deployed through regular awarenessbuilding campaigns for employees and customers and specifi c controls of activities that are especially at risk.
In 2014, the SAFIR Compliance system, a fraud surveillance and management tool, was deployed across all capital markets activities. The year also saw new payment fraud attempts through social engineering, which made it necessary to implement ongoing awareness-building initiatives aimed at employees and customers in order to maintain a high level of vigilance.
The major issues currently being addressed are user authorizations, data protection, controls, cyber-security, the standardization of BCP management solutions and awareness-building directed at the business lines.
In terms of advice and support to business lines, all projects submitted to the IT Commitment Committee are required to undergo security analysis. This allows the ITSS-BC Department to establish security requirements in conjunction with the business lines, for which the ITSS-BC Department in turn implements appropriate solutions.
In 2004, three shareholders (Jerry Jones et al.) acting in the name of and on behalf of three investment funds (Oakmark Fund, Oakmark Equity and Income Fund and Oakmark Global Fund) fi led a complaint against Harris Associates L.P., a wholly-owned subsidiary of Natixis Global Asset Management, before the United States District Court for the Northern District of Illinois. The plaintiffs alleged that Harris Associates LP billed services to these three funds at an excessively high rate in light of applicable regulations. These proceedings are among numerous legal claims initiated in recent years against investment advisors. Harris Associates L.P. and the plaintiffs fi led motions for summary judgment.
In a ruling handed down on March 30, 2010, the US Supreme Court vacated the case before the Court of Appeals for the Seventh Circuit so that the Court could determine whether the decision of the District Court in favor of Harris Associates L.P. should be upheld or overturned.
Since March 2008, Natixis and Natixis Funding have been named among the defendants in multiple class-action lawsuits fi led by and on behalf of certain state, county and municipal bond issuers in the US federal courts in New York, Washington D.C. and California. The plaintiffs allege that providers and brokers of municipal derivatives conspired to fi x prices, rig bids and allocate customers between 1992 and the present time. The various plaintiffs have also named more than 30 other US and European banks and brokers as defendants. Some plaintiffs seek to certify a class of all state, local and municipal government entities, independent government agencies and private entities that purchased municipal derivatives from the defendants or through brokers from 1992 to the present, and to recover damages that result from the alleged anticompetitive activities. Most of the federal cases have been regrouped before the United States District Court for the Southern District of New York under the caption “Municipal Derivatives Antitrust Litigation.”
These damages claims arise out of investigations that were performed or are being performed by the US Internal Revenue Service (“IRS”), the Department of Justice (“DOJ”) Anti-Trust division, the US Securities and Exchange Commission (“SEC”) and state prosecutors.
3 RISKS AND CAPITAL ADEQUACYCompliance and reputational risk, Legal risks Criminal complaint coordinated by ADAM
In August 2011, the Commune of Sanary-sur-Mer in France fi led a complaint against Natixis and other defendants before the Administrative Tribunal of Toulon seeking the joint and several payment of €83 million for the loss of the Commune’s planned investments and the loss of future contributions to its budget following the abandonment of the planned construction of a local casino/hotel complex. Regarding the construction project, Natixis had already committed to issuing a bank guarantee of completion in the amount of €20 million. All of the claims fi led by the Commune of Sanary-surMer were dismissed in a ruling handed down by the Administrative Tribunal of Toulon on April 12, 2013. The Commune of Sanary-sur-Mer has appealed this ruling.
In 2012, a complaint was fi led against Natixis Asset Management before the Paris District Court (Tribunal de Grande Instance de Paris) by 187 former employees of CDC Gestion (current name Natixis Asset Management.) The purpose of the complaint is the legal recognition of their rights to the common law profi t-sharing schemes from 1989 to 2001.
In September 2014, the Paris District Court ruled in favor of Natixis Asset Management and dismissed all of the employees’ complaints. The employees have appealed this ruling to the Paris Court of Appeal.
Ixis Corporate & Investment Bank (the predecessor of Natixis) issued EMTNs (Euro Medium Term Notes) indexed to a fund that invested in the Bernard Madoff Investment Securities fund. Renstone Investments Ltd (the apparent predecessor of MMR Investment Ltd) is alleged to have subscribed, via a fi nancial intermediary acting as the placement agent, for these bonds in the amount of $50 million.
In January 2013, Natixis received a compulsory third-party joinder at the request of SEEM. This company seeks a joint sanction against Natixis and particularly Cube Energy SCA for the payment of approximately €23 million, alleging that Cube Energy SCA acted in breach of its duty of loyalty to its partner SEEM. Natixis believes the outcome of this case will be positive for Natixis and the companies in its Group.
In June 2013, Union Mutualiste Retraite fi led three complaints with AEW Europe in relation to the acquisition and management of two real estate portfolios in Germany between 2006 and 2008. The amounts claimed by Union Mutualiste Retraite total €93 million. The case is still in progress.
Natixis considers the accusations of negligence against it to be unfounded and believes that the proceedings it faces are beyond the statute of limitations.
Compagnie Européenne de Garanties et Cautions considers all of these claims to be unfounded.
The fi rst hearing in this case will be held in the Court of Siena in May 2015.
Other risks 3.10 Other risks 3.10.1 RISKS RELATED TO INSURANCE ACTIVITIES
(These data form an integral part of the fi nancial statements certifi ed by the Statutory Auditors)
Concerning securities in other categories, the sensitivity analysis carried out at end-December 2014 showed that a 1-point increase in bond yields would have a negative impact of €86.1 million on equity (taking into account the variation attributable to policyholders and taxation), i.e. 5.9% of equity.
Also, Natixis Assurances fully reinsures the guaranteed minimum payment on unit-linked policies.
The monitoring and management of counterparty risk is carried out in compliance with Natixis’ standards and internal limits, as determined by the Credit Risk Committee, as well as the regulatory constraints imposed on insurance companies. Thus, 73% of the fi xed-income portfolio is invested in securities rated higher than A-.
Natixis Assurances uses reinsurance to limit its exposure to the risk of dispersion of capital guaranteed upon death, personal accidents and loss of autonomy, as well as the frequency of claims for cessation of work, invalidity and loss of autonomy. A reinsurance treaty in the event of epidemics or pandemics has also been put in place in order to limit exposure to the increase in deaths that would ensue.
The annual reinsurance plan seeks to diversify reinsurers and to deal only with parties having a high-quality rating. No reinsurance treaty is entered into or renewed with parties that are non-investment grade (rating of BB+ to D-). In practice, the ratings of reinsurers with which Natixis Assurances does business range from AA to BBB+. The reinsurers that Natixis Assurances works with have a low issuer risk, and the risk of concentration in a given counterparty is limited since Natixis uses several reinsurers.
This business is susceptible to three risks: V Mispricing risk: a portfolio monitoring policy was implemented whereby each policy is given a score based on its track record over three years. Factored in are types of claims, number of claims, their cost and other variables specific to the activity in question (degree of liability, bonuses/penalties for motor insurance, for instance). Corrective measures can range from increasing premiums to terminating the policy upon expiry. This monitoring policy also contributes to detecting potential risks arising from large claims, and to arranging adequate reinsurance coverage;
To safeguard against this risk, the company decided to opt for a 200year return period. Priorities are adapted in step with the development of the business.
(1) The sensitivity of a bond measures the bond’s loss in value in the event of an interest rate hike. For example, bonds with a sensitivity of 3 will see a 3% reduction in their market value if interest rates increase by 1%.
Compagnie Européenne de Garanties et Cautions is the Group’s multiple business line surety and guarantee platform. It is exposed to underwriting risk, market risk and the risk of the reinsurers defaulting, as well as operational risk.
In line with the Solvency 2 Directive, four years ago CEGC began the process of obtaining the Autorité de Contrôle Prudentiel et de Résolution’s (ACPR – French Prudential Supervisory Authority) approval of its internal underwriting risk assessment model for mortgage guarantees for retail customers. The European Directive should come into force on January 1, 2016.
In the second half of 2014, the ACPR conducted a review of the partial internal model, as part of its preliminary approval, with a view to the fi nal application’s fi ling in 2015.
Underwriting risk is the main risk incurred by CEGC. It is essentially the risk of policyholders defaulting, as the commitments given by CEGC to benefi ciaries of guarantees result in direct exposure to policyholders. Provisions are made for these exposures in liabilities through provisions for unearned premium income for performing policies, and claims reserves for policies in default.
Portfolio management is secure and follows the standards regulating the insurance business, in particular in terms of assets representing commitments. These standards cover the type and quality of the assets, the level of portfolio dispersion as well as liquidity levels.
Gross balance sheet value of the provision as a % Fair value as a %
At December 31, 2014, the program covered individual claims exceeding €15 million, with an upper limit of €75 million. If claims are made, the program may be reproduced three times.
CEGC’s operational risk is governed by a risk management system based on a default mapping tool and database tailored to its activities. This database is the standard framework used to catalog incidents and risky situations, and for monitoring corrective action plans based on the methods deployed by Natixis.
The strategic management are monitored under the authority of Senior Management, assisted by Natixis’ Senior Management Committee.
The membership of these various bodies is presented in Chapter [2, Corporate governance]. The Internal Rules of the Board of Directors, including the procedure for calling meetings, can be found in Chapter [2], paragraph [2.3.1], of this registration document.
Subprime ABS CDOs represented gross exposure of €206 million, entirely depreciated, as at December 31, 2014.
Within the closing of the segregated GAPC, subprime ABS CDOs transactions were sold on the 1st half-year 2014.
Value adjustments fell by €94 million during 2014 (excluding the effect of the BPCE guarantee) to €103 million at December 31, 2014, versus €197 million at December 31, 2013.
Exposure in the fi nancial statements at December 31, 2014 was as follows: (in millions of euros) US RMBS
Asset portfolio (fair value option) - - - - - - - - - - - -
Net exposure at 12.31.2014 AAA AA A BBB BB B CCC CC
Two countries which benefi ted from European Union fi nancial assistance successfully exited the programme in 2014: Ireland in January 2014 and Portugal in May 2014.
4.1 MANAGEMENT REPORT AT DECEMBER 31, 2014 178 4.1.1 Note on methodology 178 4.1.3 Consolidated results 181 4.1.4 Analysis by Natixis business line 182 4.3 POST-CLOSING EVENTS 190 4.4 INFORMATION CONCERNING NATIXIS S.A. 191 4.4.1 Natixis S.A.’s parent company income statement 191 4.4.2 Proposed allocation of earnings 191 4.4.3 Payment terms 191
4 OVERVIEW OF THE FISCAL YEARManagement report at December 31, 2014 4.1 Management report at December 31, 2014 4.1.1 NOTE ON METHODOLOGY
The 2013 financial statements are presented pro forma of the disposal of the cooperative investment certificates.
The presentation of the divisions in 2014 takes the following changes into account: V transfer of the SFS division’s stake in CACEIS to the Corporate Center, with pro forma 2013; V consolidation of BPCE Assurances, with retroactive effect at January 1, 2014 and pro forma 2013; V transfer of Capital Investissement’s asset management companies to NGAM with retroactive effect at January 1, 2014. Capital Investissement’s net revenues in the Investment Solutions division are now limited exclusively to income from investment funds; V given the progress made on the reduction of GAPC’s exposures, this ring-fencing structure was closed at June 30, 2014. GAPC was presented as a business in its own right until June 30, 2014, the closing date of this ring-fencing structure, whose residual positions were transferred to Wholesale Banking.
By convention, the rate of return on normative capital remained at 3%.
The conventions applied in determining the earnings generated by the various business lines are as follows: V the business lines record the return on regulatory capital allocated to them; V the return on share capital of the entities comprising the divisions is eliminated; V the carrying cost of goodwill is borne entirely by the Corporate Center; V the divisions are invoiced for an amount representing the bulk of Natixis’ overheads; the uninvoiced portion accounts for less than 3% of Natixis’ total expenses.
In the second half of 2014, Natixis was impacted by the signifi cant depreciation of the euro versus the dollar and the other principal currencies, the continued decline in European yields, and the improvement in the US markets compared to the stability of the European markets. On the economic front, the US economy grew stronger while Europe was once again beset by a low growth and very low infl ation. Finally, oil prices fell by around 50% in the second half of the year.