Our work also involved assessing the reasonableness of the assumptions and data used by management to estimate the amount of provisions recognized at the reporting date. In particular, we engaged specialists in tax law to conduct a critical review of analyses of the tax risks identified by Natixis S.A. and the related provisions.
We also carried out confirmation procedures with Natixis S.A.'s legal advisors regarding ongoing proceedings.
Finally, we checked that the provisions thus measured were correctly recognized and verified the related disclosures in the notes to the parent company financial statements.
We considered financial instruments not quoted on an active market to be a key audit matter due to the material nature of the exposures and the use of judgement in determining their value.
Financial instruments not quoted on an active market are recognized within securities held for sale and securities held for trading, which represented assets of €91 billion at December 31, 2017.
We familiarized ourselves with the internal control procedures governing the valuation and recognition of financial instruments that are not quoted on an active market; for example, we spoke with the departments in charge of first- and second-level controls and acquired information on the work carried out during the closing of the accounts.
We have no matters to report as to the fair presentation and the consistency with the parent company financial statements of the information given in the Board of Directors’ management report, and in the other documents addressed to shareholders with respect to the financial position and the parent company financial statements.
Regarding information on factors that your Company considered likely to be material in the event of a public takeover or swap bid, provided pursuant to Article L. 225-37-5 of the French Commercial Code, we verified the consistency of the information with the source documents that were sent to us. On the basis of our work, we have no matters to report regarding this information.
STATUTORY AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE PARENT COMPANY FINANCIAL STATEMENTS
As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditor exercises professional judgement throughout the audit and furthermore: identifies and assesses the risks of material misstatement of the parent company financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence that he considers to be sufficient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control; evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the parent company financial statements; assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, subsequent circumstances or events may cause the Company to cease to continue as a going concern. If the Statutory Auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the parent company financial statements or, if such disclosures are not provided or are inadequate, to issue a qualified opinion or a disclaimer of opinion.
evaluates the overall presentation of the parent company financial statements and assesses whether these statements represent the underlying transactions and events in a manner that achieves fair presentation.
We provide the Audit Committee with a report that presents inter alia the extent of the audit and the programme of work carried out, as well as the conclusions arising from our work. We also make it aware, when appropriate, of any significant weaknesses we have identified in the internal control system in terms of procedures for preparing and processing accounting and financial information.
We also provide the Audit Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537/2014, confirming our independence within the meaning of the rules applicable in France as laid down in particular in Articles L. 822-10 to L. 822-14 of the French Commercial Code and in the French Code of Ethics (code de déontologie) for statutory auditors. Where appropriate, we discuss any risks to our independence and the related safeguard measures with the Audit Committee.
The preparation of the consolidated financial statements also relies on: the use of a direct consolidation method, rolled out throughouta the Group, allowing for the analysis and control of the consolidation packages of each consolidated company via a formal review process; preparation of consolidated financial statements on a quarterlya basis. This allows for greater control over financial reporting within tight time frames; reporting and reconciliation of intra-group transactions at M-1a and then at M, where M is the reporting month, thus increasing the number of reconciliations and contributing to the preparation of quarterly statements; use of an automated control process for individual informationa 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; individual analysis of all entries impacting consolidateda 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 financial statements and part of its regulatory reporting, Natixis has software that enables it to: produce a local IFRS-compliant reporting package, including,a for foreign entities, a reporting period foreign currency conversion feature; extend its data collection and consolidation processes toa regulatory reporting; guarantee the consistency of data relating to the banking anda insurance consolidation scopes; offer retrieval features that can be used to input data into thea various reports; enable BPCE to access Natixis data through dedicateda interfaces; secure the integration process for consolidation packagesa received from international entities through the implementation of local first-level controls followed by centralized second-level controls.
The fact that most subsidiaries have their own management and control functions means that internal control procedures are decentralized and are tailored to the organization of each of the consolidated entities, relying on a multi-tier accounting control process: a first-level control where permanent and local controls ina operational business lines are integrated into the operating process and formalized in detailed control programs; an intermediate level overseen by each entity’s financial ora compliance or risk departments where second-level controls, independent of operating processes, are performed to ensure the reliability of accounting and regulatory reporting processes and verify the existence and quality of the first-level controls; a final level of control carried out by the Internal Audita Department as part of its regular audits.
These controls are conducted using the currently diversified accounting systems which are due to be streamlined for a significant part of Natixis’ consolidated scope.
For regulatory reporting, permanent and periodic controls apply to the completion and monitoring of: accuracy and veracity checks, such as thea management/financial account reconciliation processes, as management data can come from various sources; controls of the traceability and completeness of data,a throughout the various reporting preparation processes; compliance and presentation controls in respect of thea regulatory requirements specific to each reporting process; quality controls of the data (in accordance with the BCBS 239a program) needed to produce the reports and the quality of the attributes entered into the databases used, allowing the proper breakdown of accounting or management data; consistency checks between published reports, wherea possible and relevant.
The accounting and financial reporting control system is primarily based on the following fundamental principles: separation of the accounting production and control functions;a and the standardization of control processes within the Group’sa different business lines and entities: methods, software, reporting and frequency; It also draws on: the application of the principles defined by BPCE, i.e. thea scopes governed by the two-level control processes and implementing the coordination of the control teams; two kinds of assignments (operational or organizational) to bea carried out either as part of the account closing process or in periodic assignments; formalized documentation as part of the “Accounting anda financial information quality control framework” drawn up by Groupe BPCE. It includes procedures that describe in detail the organization of the system; risk mapping showing the nature, the frequency of occurrencea and the responsibility by control level across all scopes (accounting and regulatory); centralized oversight within the financial or accountinga departments, performed by the dedicated Regulatory and Accounting Review team, which also review first-level controls and performs second-level controls; a risk-based approach, enabling the Review teams to guide anda determine the frequency of their controls given the quality of the internal control processes.
For Natixis, the system is organized based on: accounting or regulatory production teams, within the businessa 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; first-level controls under the hierarchical and/or functionala authority of the Accounting and Ratios Department including all monthly and quarterly controls that make these reports more reliable;
FINANCIAL DATA Internal control procedures relating to accounting and financial information 389Natixis Registration Document 2017 independent second-level controls under the hierarchicala 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; dedicated tools that allow for the automated reconciliation ofa account entries and centralization of control results using an internal application.
In addition to the operational control tasks delegated to it, the Regulatory and Accounting Review team also fulfills the following duties in respect of the organization of the control function within the Group: definition of the control policy applicable to Natixis and itsa subsidiaries: organizational and operational principles of permanent internal control for accounting, fiscal and regulatory matters, in accordance with the policy established by Groupe BPCE; coordination of the control system within the subsidiaries,a working with the Review officers appointed by each of the local financial, compliance or risk departments. This takes place through quarterly revision committee meetings, themed workshops, and bilateral cooperation with international entities and platforms; monitoring and implementing an accounting and regulatorya control environment within each entity by collecting and operating a set of periodic reporting dashboards. The results of these dashboards are then sent to each entity, including a process for alerting the accounting or finance officers.
Work in 2018 will be focused on: implementing the production process and the associateda control environment relative to IFRS 9, applicable as of January1, 2018; continuing the progress of the project to streamline thea information systems used for market transactions (back office systems); continuing the progress of the project to streamline and pool ofa data used by the various overview systems, which are set to be used for the first time in 2018 to produce certain prudential reports; finalizing the overhaul of the Natixis Factor overview systems,a particularly in the areas of risk and financial management; in the Asian entities, deploying specialized accounting anda reconciliation tools; adjusting the production and control processes in accordancea with IFRS 16, relative to leases; continuing initiatives committed to strengthening second-levela controls in accounting and regulatory matters.
MANAGEMENT OF ESG RISKS 6.3 IN OUR BUSINESS LINES 406 Compliance risks6.3.1 406
INTERNAL MOBILIZATION AND 6.4 MANAGEMENT OF OUR DIRECT IMPACTS 412 Managing our direct environmental impact6.4.1 412
REPORT BY ONE OF THE 6.6 STATUTORY AUDITORS, A DESIGNATED INDEPENDENT THIRD-PARTY BODY, ON THE CONSOLIDATED SOCIAL, ENVIRONMENTAL AND SOCIETAL INFORMATION CONTAINED IN THE MANAGEMENT REPORT 436 I Certificate of inclusion of ESR information436
II Reasoned opinion on the fairness of the ESR information 437
Drawing on a strong, widely recognized range of expertise, Natixis' objective in terms of ESR requires the commitment of all of its various business lines (CIB, Asset Management, Insurance, Services) and functions, and incorporates all aspects of ESR: environmental, social/societal and economic.
Our environmental and social responsibility policy rests on three key pillars: onboarding, risk management and green and sustainable business development.
to contribute to the energy transition and develop a sustainable economic model with our clients
Define a common ESG investment framework and develop the integration of ESG criteria in our investment policies to be adapted by each investment business .
Onboarding: • Publish our Code of Conduct and lay down the relevant rules regarding ESR • Take ESR criteria into account in our compensation policy • Offer trainings on ESR issues • Develop solidarity initiatives
Since 2017, Natixis’ ESR policy has been steered by a dedicated department reporting to Natixis’ Corporate Secretariat, a member of the Natixis Senior Management Committee.
The ESR team, consisting of seven permanent employees, has integrated the CSR function in place at Natixis since 2004. It is backed by a network of officers and works in coordination with BPCE's Sustainable Development Department.
It is also responsible for all regulatory and strategic ESR reports: registration document, carbon assessment, mobility plan, etc. Finally, it is charge of relations with international and external stakeholders with questions regarding Natixis’ ESR policy (customers, employees, ESG rating agencies, NGOs, etc.).
operational hub comprises experts who help issuers and investors all around the world by offering them solutions and expertise in green, sustainable financing. Its expertise is applied to all asset classes: structuring and origination of loans and investment solutions in partnership with the business lines, which have appointed Green Captains, and in coordination with the ESR Department.
At the same time, ESR governance is being established in the different business lines, for example with the creation of a Green Hub in the Corporate & Investment Banking business line. This
The Asset Management business line has had ESR officers for several years now (e.g. at Natixis Asset Management, Natixis Assurances, AEW Europe). Other business lines of the Specialized Financial Services division (Natixis Lease, Natixis Interépargne) and Insurance division (BPCE Assurances) also initiated an ESR approach in 2017 and designated ESR managers in charge of preparing an ESR road map specific to their business.
Natixis’ ESR strategy is based on a set of international agreements and consultations within the banking industry, including: The United Nations Global Compact since 2007;a
The United Nations Principles for Responsible Investmenta (UN-PRI) since 2008; The Equator Principles since 2010.a
Adopted in 2015 by the 193 Member States of the United Nations at the Sustainable Development Summit in New York, the SDGs form the 2030 Agenda for sustainable development, a set of 17 global targets aimed at combating inequality, exclusion and injustice, fighting climate change, protecting biodiversity and ending extreme poverty.
Natixis implements several programs to promote gender equality in the workplace.
Natixis actively participate to the financing of renewable energies in France and Worldwide, and that is a major part of its ESR strategic plan.
Natixis helps develop local employment through its international operations: more than 5,000 Natixis employees work in its offices abroad. Virtually all of these employees are recruited locally.
Natixis finances sustainable infrastructures (clean transportation, green buildings...) and through its subsidiary AEW Europe, provides eco-responsible real estate management.
Natixis committed to ending financing in the coal industry and the financing of oil coming from tar sands or from the Arctic region.
Mirova launched the “Land Degradation Neutrality Fund” in order to finance projects that significantly contribute to land degradation neutrality.
In 2017, Natixis drafted its Code of Conduct, a shared framework defining the main guidelines to be followed by employees in their relations with the Company's stakeholders: our customers, teams and shareholders, as well as society at large (see Chapter 1).
The Code of Conduct stresses that Natixis endeavors to meet environmental challenges and to make a positive social and societal impact.
In its effort to reduce its direct environmental impacts, Natixis signed the Paris Climate Action Partnership Agreement in 2015, and each employee is called on to help reduce the Company's resource consumption.
All aspects of the new Code of Conduct, published in first-quarter 2018, will be implemented in detail, notably including ESR, and will be addressed in training courses given to all Natixis employees.
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY Strategic outlines and organization of the ESR policy 397Natixis Registration Document 2017
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY Business line contributions to green and sustainable growth 399Natixis Registration Document 2017
The event also paved the way for the Paris Agreement to enter the real economy, by inviting the participation of corporations and the finance industry.
Responsible finance has a broader objective, namely to meet the challenges of establishing a sustainable society on both the social and/or societal fronts, for example by bringing solidarity-based products to market.
Natixis has long been committed, alongside its customers, to the development of a sustainable global economy. Drawing on its different business lines, it boasts a panel of expertise covering all the challenges and issues of environmental and social responsibility, and several ESR franchises are development drivers in accordance with its new strategic plan: renewable energy financing, a range of responsible investment solutions incorporating ESG criteria, development of green bonds, and sustainable real estate.
SUPPORTING THE DEVELOPMENT OF THE ENERGY TRANSITION 6.2.1 AND COMBATING CLIMATE CHANGE
Renewable energy is on the rise and constantly setting new records in terms of installed capacity: 161 GW were installed in 2016 (153 GW in 2015), totaling 2,017 GW in installed capacity, i.e. 9% more than in 2015 according to the International Energy Agency.
In 2016, renewable energy made up 62% of new electrical facilities, confirming its growing share of the global energy mix. This trend was driven by energy policies and the decline in production costs, making renewable energy increasingly competitive with coal-fired electrical power. Today, 24.5% of global electricity generation comes from renewable energy sources, and should increase to 28% by 2021. Future growth will also be led by the growing share of electricity in the global energy mix.
China has consolidated its position as the undisputed leader in solar PV power, representing nearly half of additional capacities, and in wind power, with China claiming over 40% of new installations. For its part, France ranks among the Top 10 countries equipped with renewable energy facilities, having recently recorded a modest improvement in its ranking (+0.6 GW in solar power and +1.6 GW in wind power).
At end-2017, renewable energy accounted for almost 75% of the loans granted by GIP in the electricity sector.
Flagship projects funded in the United Arab Emirates Natixis played a key role in financing the two largest solar PV projects in the world, totaling $1.3 billion: the Mohammed bin Rashid Al Maktoum solar park in Dubai (800 MW) and the Sweihan solar plant in Abu Dhabi (1,177 MWp).
These transactions are located in France and will add 373.5 MW to the following sectors: wind power: 107 MW;a solar power: 266.5 MW.a 2017 Key Events
The “Sofergie” portfolio of project finance and leasing activities arranged by Natixis represented more than 26 GW at end-2017, which can be broken down as follows: GEOGRAPHIC BREAKDOWN OF THE RENEWABLE ■ ENERGY PORTFOLIO AT 12.31.2017
In addition to these financing activities, Natixis’ responsible investment subsidiary Mirova invests in energy transition projects via the Mirova-Eurofideme 3 fund managed by Mirova's Renewable Energy Infrastructure team.
Mirova-Eurofideme 3 completed three new innovative deals in France this year: it helped Corsica's No. 1 renewable energy producer, Corsicaa Sole, finance the construction of six solar PV plants in Corsica (37 MWc), some of which will be combined with storage capacities to extend their electricity production time and provide the stability required by the manager of the island network;
Energy Investor of the Year, Europe At the end of 2017, Mirova-EuroFideme 3 had a total of 16 investments for a total of approximately €240 million (out of the fund’s €350 million capacity) since its inception, helping to finance nearly 680 MW in renewable energy projects.
As a result, Mirova was named “Energy Investor of the Year, Europe” by Infrastructure Investor magazine in March 2017, and took the “Best Green Strategy” award for the third straight year at the Infrastructure, Land Planning & Real Estate Summit in June 2017.
And, in the latest Global Real Estate Sustainability Benchmark (GRESB) survey, Logistis, AEW UK Core Fund, ERAFP and PBW 1, four funds managed by AEW Europe, were awarded the Green Star 2017 ranking for their environmental performance.
Mirova, Natixis’ subsidiary specializing in responsible investment, offers various investment strategies aimed at combating climate change and protecting the environment: development of environmental equity strategies (Europe anda Global); introduction of environmental themes in multi-thematica strategies (Euro, Europe and Global); support for the development of Green Bonds;a measurement and monitoring of the carbon impact of equitya and fixed income strategies.
The new entity, renamed Mirova-Althelia, has set its sights on becoming the European leader in natural capital investment, i.e. protection of the Earth's ecosystem, biodiversity, soil and maritime resources. At end-2017, Mirova-Althelia managed AuM of €100 million in the Althelia Climate Fund.
Natixis Assurances is fulfilling its role in the transition to a lower-carbon economy by working to establish best practices. Climate change is an issue that concerns society and the economy as a whole, but also generates particularly high insurance risks that need to be addressed now.
In 2017, Natixis Assurances joined the anti-global warming initiatives announced on December 7 by the French Insurance Federation.
For two years now, Natixis Assurances has no longer directly invested its general-purpose funds in the coal industry, in accordance with Natixis’ exclusion policy.
In addition to renewable energy financing via Natixis Energeco, Natixis Lease has already established an electric car offer with Natixis Car Lease. The goal is to roll out ESR offers in the other business lines as well: equipment leases, real estate leases, operating leases, etc.).
Natixis examines ESG criteria closely when preparing its investment strategies, designed to provide investors with value-creating solutions over the long term.
The consideration of ESG criteria, which have structured the investment policy enacted by Natixis Asset Management and Mirova from the beginning, is gradually being adopted by Natixis’ Asset Management and Insurance business lines.
Natixis Asset Management relies on proprietary extra-financial research expertise, developed and conducted by 12 dedicated experts working at Mirova.
The analysts perform a review of ESG opportunities and risks, assessing both the incorporation of sustainable development priorities in an issuer's business model and consideration of the associated ESG risks.
The purpose of this policy is to encourage issuers to improve their ESG practices by initiating a constructive dialog with them and exercising Natixis Asset Management's voting rights at General Shareholders’ Meetings: in 2017, Natixis Asset Management participated in 1,528j Annual General Shareholders’ Meetings with a voting rate of 99.8%. In the same year, 282 companies were the focus of individual dialog initiatives, while 124 companies were the focus of collaborative engagement initiatives. In addition, through the collaborative platform launched by Mirova (of which it is a member), Natixis Asset Management continued its efforts to initiate dialog on complex issues calling for close monitoring of the practices used by the companies in question: social impacts: working conditions and human rights,j particularly in the supply chains of several major textile manufacturers and companies in the Information and Communication Technology (ICT) sector; direct environmental impacts: Natixis Asset Managementj maintains a dialog with companies exposed to the risk of exploration in the Arctic Ocean; co-construction and promotion of RI/ESG standards witha SRI professionals: active involvement in over 15 Market Committees and dedicated working groups; support of academic research, signing of numerous Investor Statements, etc.
Through its six asset management companies, Natixis provides a comprehensive range of products and services across the Private Equity business worldwide. Three of these companies specialize in direct investment in unlisted companies: Naxicap Partners and Alliance Entreprendre (growth capital and leveraged buyouts in France and in Europe), and Seventure Partners (venture capital in France). Three companies offer advisory and investment management services: Euro-Private Equity in Europe, Caspian Private Equity in the United States and Eagle Asia Management in Asia.
Since 2015, Euro Private Equity and Naxicap Partners have been signatories of the Principles for Responsible Investment (PRI). In addition to the PRI, Naxicap Partners made a commitment to the IC20 (2020 Carbon Initiative) to contribute to the COP21 goal of limiting global warming to two degrees. The aim is to reduce the greenhouse gas emissions of its investments and to publish the direct and indirect carbon footprint of companies held in its portfolios by 2020.
Euro Private Equity established a responsible investment policy outlining its commitments as an asset management company, including its due diligence, post-investment and reporting commitments.
It works in partnership with Mirova, an affiliate of Natixis Investment Managers, to help it integrate ESG criteria into its investment policy. For Euro Private Equity, Mirova played an advisory role in the drafting of its ESG charter and development of an assessment grid to check the ESG commitment of the relevant portfolio managers.
Green bonds raise funds earmarked for environmental and/or social projects. Since 2013 we have seen exponential growth in this market, backed by international climate agreements and the concerted efforts of governments and the private sector: total issue volumes increased from $36 billion in 2014 to over $140 billion in 2016.
With this strong increase has come a more diversified range of issuers (public entities, banks, private entities) and formats (senior non-preferred, hybrids, etc.) and more participation from outside France, particularly with the arrival of India and of China (China accounted for over half of green bond issues in 2016). 2017 saw a strong movement towards market standardization, with a rise in the listing segments on international exchanges and the publication of guidelines by various regulators.
Lastly, the Natixis and Mirova Green & Sustainable research teams have developed special expertise in Green Bonds and published a series of studies in the field.
Green Bond CMBS in New York The NY Corporate & Investment Banking branch arranged the first Green Bond CMBS (Commercial Mortage Backed Security), using the LEED Platinum environmental certification on a recently renovated Wall Street building to obtain green certification from German research firm Oekom.
Another example of financial engineering expertise employed to efficiency improvements in individual homes, with loans that are issue green bonds was the securitization of PACE (Property repaid through the property tax bill. The bank securitized PACE Assessed Clean Energy) bonds in the United States by the bonds in California and Florida to issue, as the Sole Structuring Natixis New York branch for its client, Renew Financial. The Agent, $206 million in green bonds rated GB1 (Green Bond 1: PACE program is a tax incentive mechanism offered in certain Excellent) by Moody’s.
It helps develop local employment through its international operations: nearly 5,000 Natixis employees work in its offices, branches and subsidiaries abroad (see section 6.4.3). Virtually all of these employees are recruited locally.
Compliance and strict adherence to professional rules of conduct are vital concerns at Natixis. Through its preventative and monitoring activities, the Compliance Department contributes to the trust afforded by its customers, the markets and the regulators.
For more information on these initiatives, see Chapter 3.10 of this registration document.
In 2007, Natixis signed the United Nations Global Compact, which states in Principle 10: “Businesses should work against corruption in all its forms, including extortion and bribery.” Natixis has therefore made a public commitment to combat corruption. Consequently, Natixis denounces corruption in all forms and in all circumstances. It tolerates no act of corruption from its employees or any persons acting for or on its behalf.
As a signatory of the Equator Principles since December 2010, Natixis applies an industry-wide methodology recognized by 89 member banks and financial institutions, aimed at evaluating the E&S risks of the projects it finances and assessing the quality of the management systems used by its clients to manage, minimize, and remedy the impacts they cause as best they can.
This methodology applies to the financing of investments in new projects or the extension of existing projects. For Natixis it mainly concerns the infrastructure, energy (oil, gas), electricity and renewable energy, mining and metals sectors around the world.
A summary of key issues used to assess a project is part of Natixis’ credit approval process.
Natixis is aware that it provides a wide range of transactions and financing solutions to its clients, and applies the same level of diligence to the E&S risks underlying certain types of transaction that fall outside the scope of the Equator Principles.
With the goal of establishing lasting relations with its clients, the purpose of this assessment is to raise awareness among the business lines – before a credit decision is made – of all the situations that can give rise to reputational risk, and where necessary to envisage appropriate measures.
BREAKDOWN OF THE 212 TRANSACTIONS BY SECTOR ■ (CONSOLIDATED DATA FOR 2015, 2016 AND 2017)
To date, ESR policies have been set up for financing activities in the following sectors, based on the guidelines set out below: Defense: very specific criteria apply to each transaction,a setting out rules for the types of equipment accepted and the eligibility conditions of import and export countries. These criteria are an addition to Natixis’ exclusion policy (see next inset); Nuclear: compliance with the strictest international securitya rules (IAEA, etc.), reliability of technologies, demonstration by the host country and the operator of their capacity to control and operate their nuclear industry, based on specific criteria; Oil, gas and mining industries: selection of operations thata demonstrate their operators’ ability to manage the environmental, social, health and safety aspects of their activities, in adherence with current regulations, international standards (IFC, World Bank) and industry recommendations and best practice. Oil sands and oil projects in the Arctic are excluded (see next inset); Mobile assets used for offshore oil and gas production:a adherence to maritime and sector-specific regulations; selection of assets according to operator quality, their country of establishment (ensign) and the certifying body according to well-established and recognized classifications; Palm oil: traceability and compliance with best practice anda applicable standards.
Exclusion policies are announced to the public and implemented in different sectors: Controversial weapons: Since March 2009, Natixis hasa refused to finance, invest in or offer services to companies involved in manufacturing, storing or trading antipersonnel mines and cluster bombs.
This policy applies to the financing of these companies, toa proprietary investment, as well as to third-party asset management by Natixis Asset Management; Coal sector: Since October 2015, Natixis has undertaken toa stop financing coal-fired power plants and thermal coal mining around the world. Natixis also no longer provides general-purpose corporate financing to companies for which coal-fired power plants or thermal coal mining account for over 50% of their activity.
It should be noted that the amount of Natixis’ exposure to coal-industry financing has fallen steadily since the undertaking made in October 2015. At the end of 2017, financing of thermal coal mines amounted to zero and was residual in coal-fired power plants.
It also committed to stop financing companies whose activities are mainly based on the production of oil derived from oil sands.
Furthermore, it has stopped financing oil exploration and production projects in the Arctic.
Discontinued financing and investment in the tobacco industry This decision, announced by Natixis in December 2017, applies to tobacco producers, wholesalers and traders, as well as tobacco product manufacturers. It is applicable to all Natixis business lines worldwide: Corporate & Investment Banking, Specialized Financial Services, Insurance and Asset Management.
Launched in 2014, the duty of care project is overseen by Natixis’ ESR Department and involves several other departments as well: Purchasing, Human Resources, Logistics, Compliance and Legal.
In September 2017, Natixis' Purchasing Department joined forces with BPCE Procurement, the Groupe BPCE economic interest group dedicated to purchasing. Natixis is working alongside BPCE Procurement as part of a concerted approach in the bancassurance industry, with the help of three other banking groups, to map out ESR risks in purchasing activities. This tool, scheduled for delivery in late March 2018, will be used to measure the following risks, by country and by category of purchase: Fair practices and ethics
Based on the resulting risk map and purchases made by Natixis, the next target will be purchasing categories presenting the highest levels of risk.
Existing suppliers for Groupe BPCE (including Natixis) in these categories will be assessed for their ESR performance, with the results shared with the suppliers. Based on the results, an improvement plan can be established, subject to review at the six-month point.
To get the duty of care plan up and running, training courses will be provided by BPCE Procurement to help buyers become familiar with the new tools (risk mapping, ESR assessment, implementation of appropriate risk prevention or mitigation plans).
Furthermore, an indicator will be defined to monitor the percentage of calls for tender including an ESR assessment of bidding suppliers.
To map out risks associated with its employees and establishments, Natixis set up two other working groups comprising the Logistics and Human Resources Departments.
Environmental risks associated with Natixis’ operations have been ruled out, as its business is not likely to generate serious adverse impacts on the environment. Furthermore, the bank already applies strict environmental regulations in Europe and the US, and has launched several initiatives to limit its impact (e.g. certified buildings, use of resources, waste management, eco-friendly business travel, etc.).
In terms of human rights risks, the HR working group used the UN definition of Human Rights: “Human rights are rights inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, religion, or any other status. Human rights include the right to life and liberty, freedom from slavery and torture, freedom of opinion and expression, the right to work and education and many more. Everyone is entitled to these rights, without discrimination.”
These issues are already strictly governed by a number of prevailing regulations in France, including in particular labor law, the personal and property safety policy, and the Professional Risk Assessment Document.
Natixis also has several establishments outside France, however, and it is necessary to ensure that employees and service providers working outside France and Europe are not subject to major occupational health and safety risks.
Using the map of country risks established by the Procurement working group, efforts were begun to identify the human rights, safety and environmental risks incurred by our employees/service providers in all 48 of the bank's countries of operation.
In addition to these due diligence procedures, Natixis has launched a project to measure the social and environmental risks impacting its customers at the beginning of the banking relationship. Developed with the aid of an external consultant, the aim of the project is to build an environmental and social risk analysis tool that can be used to assign customers to appropriate duty of care categories. The tool will be based on questionnaires specific to each sector and gradually rolled out to existing and new customers. E&S risk assessment processes and governance will be defined in 2018 for the purpose of implementing the new tool.
The whistleblowing system is available to any person holding an employment contract with Natixis, and to employees of external service providers or sub-contractors.
As a financial institution and major economic player, Natixis is exposed to climate risk in the running of its operations and business activities.
Incorporating climate risk is a key priority for the bank, given its potential impact on our organization and our financing and investment activities.
Natixis has taken a series of measures to adapt to the consequences of climate change: Climate risks liable to have a direct impact on Natixis area addressed in the Business Continuity Plan (BCP), which includes the management of extreme weather events (e.g. storms, heatwaves, flooding of the Seine, etc.) that could affect the company’s premises around the world. Maximum impact is estimated in the operational risks map, and results in a VaR figure (95% and 99% Value at Risk) that factors in scenario analyses and external data, the quality of the BCP and insurance.
In accordance with Article 173, Provision VI of the Energy Transition for Green Growth Act, establishing new ESG reporting obligations, certain Natixis subsidiaries have conducted an extensive effort to measure the carbon footprint of their portfolio.
method co-developed by Mirova and Carbone 4 to calculate the carbon footprint of portfolios.
Natixis Asset Management has also published a carbon report in the annual report of its main funds since December 31, 2016, in accordance with the requirements of the Energy Transition Act.
CRIS aims to provide physical risk indicators, covering individual issuers and portfolios, based on seven direct climate hazards and nine indirect climate hazards, 60 sector vulnerability profiles and 210 sovereign vulnerability profiles. The method is applicable to multi-asset investment portfolios (stocks and corporate bonds, infrastructure and sovereign bonds).
Direct impact: Each year, Natixis measures its carbon footprint (see Chapter 6.4.1.2) and takes a number of measures to limit its own impact on the climate, namely: carbon neutrality of power consumption via renewable energya supply contracts; energy-efficient buildings;a eco-friendly business travel;a reduced paper consumption;a waste management.a
Indirect impact generated by its business lines: In addition, Natixis draws on its investment and financing operations as its key means of action in the fight against climate change, both in terms of risk management and business opportunities. Natixis applies a low-carbon strategy in all its business lines: Corporate & Investment Banking, Specialized Financial Services, Asset Management and Insurance.
Green growth financing: Natixis is a market leader ina renewable energy and sustainable infrastructure financing, and in green bonds (see Chapter 6.2.3).
Climate risk management of projects financed by Natixis:a As a signatory of the Equator Principles, Natixis incorporates climate change in its environmental impact assessments of its major projects: borrowers are required to present an analysis of the possible alternatives to their projects, and to report annually on the project's CO2 emissions once it is in operation.
Without waiting for regulations to change, Natixis will begin applying a new internal mechanism in 2018 aimed at incorporating environmental risks and promoting greener financing compared to more traditional financing operations.
The mechanism's practical details will be clarified after an impact study is performed, based as much as possible on existing market taxonomies. The ultimate goal is to better integrate physical and transition risks associated with the expected enhancement of public climate policies in an effort to achieve the goals of the Paris Agreement.
Natixis, like any company, has an impact on the environment in terms of both resource consumption and the production of waste and carbon emissions. To reduce this impact, Natixis has adopted an environmental policy that rests on four main pillars: managing buildings in an environmentally sustainable manner, managing resource consumption, combating global warming, preventing and sorting waste, and managing mobility.
Natixis signs the “Objectif 100 Hectares” Charter On March 2, 2017, Natixis signed the “Objectif 100 Hectares” Charter aimed at developing and promoting green spaces in Paris. The goal is to establish a new urban planning model allowing more room for nature, with the ambitious target of covering 100 hectares of roofs, walls and building fronts in the capital city with plant life. Natixis has undertaken to: develop urban farming and landscaping projects for both existing and future Natixis buildings in Paris;j promote eco-friendly green spaces in built-up areas, contributing to biodiversity and water management in Paris, with aj “zero phyto” (pesticide-free) and low-water approach to upkeep; share knowledge on the subject with other partner companies, employees and project stakeholders.j
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY Internal mobilization and management of our direct impacts 413Natixis Registration Document 2017
To this end, 17 exercises were conducted in 2017, notably including simulations such as: accidental spills of pollutants,a proliferation of bacteria.a
The main technical managers in the Real Estate and Logistics Department have also received training in Groupe BPCE’s regulatory and environmental charter, which specifies the regulatory and environmental obligations to be observed for each type of outfitting and renovation operation. This charter also contains standards relating to environmental certifications.
The Real Estate and Logistics Department ensures optimum resource management by closely managing the various resources used: energy (electricity, heating and cooling utilities), water and paper. Each 14001-certified building has a budget for its energy consumption, which is monitored on a monthly basis.
Natixis has optimized the energy consumption of its buildings for several years with the roll-out of various measures: a re-lamping policy with the use of LED light bulbs;a installation of motion sensor lighting systems;a heating and cooling systems that give greater consideration toa temperatures outside the building.
Total energy consumption of buildings and data centers (in MWh) 56,885 59,099 58,352
Energy consumption: electricity, heating and cooling utilities in office buildings – excluding data centers (in MWh) 55,806 57,397 55,151
Energy consumption of the data centers (in MWh) 1,079 1,702 3,201
Natixis recorded a 4% reduction in the energy consumption of its buildings in 2017 (vs. an increase in 2016).
Water consumption decreased slightly in 2017 after climbing in 2016 due to several leaks in the buildings.
Percentage of recycled and/or eco-certified paper (as a %) 100 100 99
Several Natixis business lines have taken steps to optimize or reduce paper consumption on behalf of customers: Natixis Intertitres was the first player on the payment vouchera market to use 100% recycled paper to print its Chèque de Table® restaurant vouchers and accompanying documents. It has also offered a restaurant voucher card, Apetiz, since 2014. Apetiz is a more eco-friendly and sustainable prepaid payment solution with a three-year validity period, which reduces the quantity of packaging and number of deliveries; As part of the digital transformation of its services, Natixisa Interépargne launched its e-statements and 100% of its processing of employee incentives and profit-sharing is now paperless. It will be extending these services to all its customers via its Premium Digital offer; Launched in 2015, the Centre d’Expertise et de Relation Clienta (CERC – Center for Expertise and Customer Relations) in Villeneuve d’Ascq has decided to go paperless by developing an entirely digital management process.
Purchases and services 56,413 48,724 45,296 2017 carbon emissions were up significantly compared to previous years.
At the same time, however, a decrease in carbon emissions was recorded as a result of reduced energy consumption in Natixis buildings in 2017, despite the increase in headcount and m2 taken into consideration (298,697 m2 in 2017 versus 291,555 m2 in 2016).
The carbon assessment established by Natixis covers a broad scope, including Scope 1, 2 and 3 emissions.
Scope 3 was the largest source of emissions, with purchases of supplies (paper, stationery, furniture, etc.) and services (intellectual services, multiple technical maintenance services, IT assistance, employee meals, etc.). Scope 3 also includes staff travel, real estate, computer hardware, freight and waste.
A preliminary assessment showed that, on a same-scope basis (i.e. in the buildings located in the Greater Paris area and continuously occupied by Natixis since 2010), energy consumption fell 28% from 2010 to 2016. Scope 1 and 2 emissions generated by these buildings were also reduced by 25%.
Ordinary industrial waste – not sorted (in metric tons) 578 534 116
In the ISO 14001 certified scope of operation managed by the Real Estate and Logistics Department (74% of the surface area occupied in France), the main waste products are sorted and then recycled: paper and boxes, batteries, cartridges and WEEE.
The mobility plan is a document submitted to the Transportation Authority, identifying the initiatives undertaken by the company to encourage alternative means of transportation to individual cars.
By implementing a mobility plan for the Greater Paris area, along with five other plans for its main regional areas of operation, Natixis was able to announce new measures to streamline the organization of business travel while observing three primary objectives: reducing the need for travel;a optimizing car or motorcycle travel;a encouraging the use of public or “soft” modes ofa transportation.
Launch of the Greater Paris Area mobility plan This inter-company mobility plan covers more than 20 different companies and will apply to 26 Natixis, BPCE and subsidiary sites starting in 2018. In addition to its existing initiatives, Natixis made the following four key commitments: development of infrastructures to encourage bike travel;j installation of charging stations for electric cars and motorcycles;j development of telecommuting;j launch of a carpooling application.j
Since 2014 Natixis also committed to a policy of gradually eliminating the use of diesel cars. The car policy no longer offers diesel cars to Natixis managers. This policy was expanded in 2015 to include company cars used by sales staff.
This includes rules on travel that have an environmental impact: when a destination can be reached by both rail and air, trainsa are now compulsory for a number of destinations in France and Europe (depending on journey time); In 2017, travel by train was made compulsory between Paris and Bordeaux; economy class is compulsory for domestic flights, flightsa between European countries and intercontinental flights of less than four hours; the use of taxis and the reimbursement of per kilometera expenses are governed by rules on specific use (approval by manager, exceptional circumstances); Natixis also prefers that its employees use “green taxis” (hybrid vehicles) for travel;
Air travel increased significantly in 2017, driven by the expansion of international business.
In 2017, Natixis’ Purchasing Department joined forces with BPCE Procurement to create an economic interest group and share thoughts and ideas on responsible purchasing: The socially responsible purchasing policy is a source of strategic and operational leverage for implementing the BPCE and Natixis ESR policy. The main objective of the policy is to promote more eco-friendly products and services that provide guarantees, and even added value, at the social and societal levels.
The aim of the charter is to encourage the suppliers of the signatory banks to implement duty of care measures as part of their overall ESR approach. The charter sets a series of commitments that both parties are required to observe, based largely on the basic principles of the United Nations Global Compact in the areas of human rights, labor, the environment and anti-corruption.
In today's constantly and profoundly changing environment (regulatory changes, digitization, competition, societal changes),
In the interest of supporting the transformation of the business lines, the Human Resources Department strives to develop strategic workforce planning, maintain quality employer-employee communications, address the human aspects of change management, support the internationalization of the Natixis business lines, and offer a more agile and
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY Internal mobilization and management of our direct impacts 421Natixis Registration Document 2017
Support Departments and others: headcount up +3.7%. Natixis implemented the Atlas Project in 2016, which called for internalizing some of the services provided by external companies by creating a new activity in Portugal (Porto). A total of 640 jobs will be created over three years (o/w 530 Natixis contracts – 130 signed in 2017). Natixis has also committed to hiring 150 new Information System Department employees in France.
The Managed Scope covers all of Natixis and its subsidiaries around the world, for which HR information systems contain data on employees by name. This scope applies to directly or indirectly owned companies in which Natixis holds at least a 50% interest. The indicators provided in Chapter 6.4.3 pertain to staff in the Managed Scope.
Work management 84.6% of employees in the Natixis France (managed scope), working at 29 different companies, are covered by the collective bargaining agreements of the banking and insurance industries. There are, however, seven separate agreements across the whole scope, containing specific details depending on the sector.
A groupwide employment framework, quality employer-employee communications, and the ability to reach agreements form a solid framework for change management and transformation.
This framework currently consists of: compensation measures, through a single Natixis employeea savings plan, a supplementary collective pension plan, a profit-sharing mechanism, and consistent salary measures; internal transfer and career management opportunities;a actions to promote hiring young people while retaining oldera employees; a single mutual healthcare plan for all Natixis Francea employees, established under an agreement signed in October 2017 with all unions. As of January 1, 2018, all Natixis employees in France will be covered by the same plan (guarantees, premium structure, manager, and conditions for coverage of the premium by the employer); measures to address employees with disabilities, including aa groupwide policy covering the professional integration and retention of employees with disabilities, and an allocation for children with disabilities.
A BPCE Agreement, applicable to Natixis, was signed in January 2016, covering the professional path of employee representatives. This agreement reflects the importance placed on employer-employee communications and the career path of employee representatives.
Within the Natixis scope, strategic communications with representative unions were increased, with the creation in 2017 of the Strategy and Transformation Dialog Committee aimed at establishing a better understanding of strategic choices and the transformation of the business lines.
Nine agreements applicable to the Natixis France scope were signed in 2017: 2017 Natixis agreement
% of employees covered Signing date 2017-2019 Agreement on the professional integration and retention of employees with disabilities 100 01.30.2017
Amendment No. 2 to extend the Agreement on employment 100 03.13.2017
Amendment to the Agreement on the Natixis Consolidated Committee 100 03.17.2017
Agreement on the allocation of additional profit-sharing in respect of fiscal year 2016 100 09.18.2017
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY Internal mobilization and management of our direct impacts 423Natixis Registration Document 2017
Under the collective bargaining agreement signed in June 2017, replacing the agreement on employment of September 2013, Natixis formally defined an SWP mechanism aimed at anticipating the bank's changing needs in terms of workforce roles and skills to further its development.
The agreement covers four areas: management of jobs and transformations, with the aim ofa developing a forward-looking view of role changes and defining support measures for employees in “sensitive” positions; mobility, career management and training, with the aim ofa helping each employee adapt to changes and grasp new career opportunities; structural change management, with the aim of establishinga a common framework to support employees during restructuring operations with impacts on employment; inter-generational cooperation and transmission of skills,a with the aim of promoting the hiring of young employees and developing a “responsible” policy for older staff.
Internal mobility is a contributing factor to the Company's performance and forms the core of Natixis’ career management system.
The Mobility and Hiring Team, created in 2014, was further developed in 2017: the team was entrusted with filling over 85% of job openings in 2017, for a total of 757 hires (i.e. 94% of all hires completed). Over 4,000 résumés are managed in the internal job pool.
The HR Department renewed its “Get into the move” mobility awareness campaign in 2017: Today, over half of job openings are reserved for internal transfers (58.9% within the Natixis France managed scope).
Job openings filled through internal transfers (as a %) 58.9 50.3 54.3 14.2 13.8 23.6 51.5 15.5 20.1 13.0 6.6 5.6 27.6 11.6 17.7
No pro-forma data including cross-functional transfers either in France or internationally.(b)
Natixis internationalization moves forward, an ambitious program has been implemented to help employees make the cultural adjustment. The program includes a variety of initiatives, such as: their intercultural skills. Over 40 STAs have been conducted since the program was launched in early 2016; the development of Short-Term Assignments (STAs) with thea aim of sharing practices among employees and developing the establishment of a vast English program promotinga English as a working language, with initiatives and training tailored to the employee's needs; training programs to promote interculturalism among teams.a
The compensation policy strictly complies with regulations in Natixis’ countries and sectors of operation, including CRD IV, SRAB (Separation and Regulation of Banking Activities), Volcker, AIFMD, UCITS V, MiFID II and Solvency.
Natixis also encourages its employees in France to contributea to collective performance via incentives, profit-sharing and employee savings mechanisms (employee savings plan and collective pension plan). In 2017, Natixis subsidiaries encouraged their employees to take part in the ESR performance of their entities via their incentive agreements. The indicators used in these agreements range from reducing paper consumption to recycling to management of e-mail usage.
In the US, compensation levels and promotion lists are reviewed to ensure equal treatment. In Milan, Natixis monitors compensation with a view to promoting gender equality. In Madrid, a study was conducted on salary differences between men and women, which concluded that no gaps existed for equivalent positions. Lastly, in accordance with UK law, Natixis London will publish a report on gender pay gaps in 2018.
Information on the compensation policy, especially for employee categories whose professional activities have a significant impact on the risk profile of Natixis, is set out in the annual report on compensation policies and practices published each year before the General Shareholders' Meeting.
Mandatory employee profit-sharing (in millions of euros) * 51.2 45.9 32.4
All Natixis employees are asked to complete an internal survey every two years. Each survey gives rise to action plans implemented across the Company. Over 10,000 employees participated in the last survey conducted in late 2016. This survey was designed to measure employee engagement and the impact of HR policies, and to identify areas for improvement in the Company as a whole and specific to each entity.
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY Internal mobilization and management of our direct impacts 425Natixis Registration Document 2017
In 2017, Natixis stepped up its efforts to develop quality of life at work, in line with the four objectives of the 2016 Quality of Life in the Workplace agreement: ensuring conditions that enable employees to deliver high-quality work, improving the quality of relations and cooperation, improving well-being in the workplace, and better addressing the human aspects of transformation projects.
Other initiatives were taken to improve well-being in the workplace, including for example the opening of a concierge service in Charenton, provision of two new services (emergency and occasional childcare) in addition to the proposal of cribs, funded since 2015 by Natixis, and an information platform called “My Family Solutions.”
Several international initiatives are also worthy of note: Throughout the EMEA region, “wellness/health days” or “wellness weeks” were organized in the course of the year. These initiatives were widely approved by all participating staff.
Natixis takes first place in the Quality of Life in the Workplace category at the “Victoires des Leaders du Capital Humain” Awards Natixis received the top award for its “Work & Life at Natixis” program, deemed to be practical, collaborative, visible and central to the Company's strategy. Created by the Leaders League and “Décideurs Magazine”, this award acknowledges best practices adopted by companies on the CAC 40, the SBF 120, ISEs and growing companies.
Designed to simplify work on a daily basis and to facilitate cooperation among teams and job mobility, the Easy program is a collection of initiatives such as the testing of new workspace arrangements and deployment of new tools to promote more interactive, collaborative and agile working methods.
In the interest of preventing stress and psychosocial risks, Natixis has undertaken a number of initiatives within the scope of Natixis France to encourage a proactive policy to prevent stress at the workplace and psychosocial risks. A collective bargaining agreement was signed in 2010 and is a cornerstone of this preventive policy.
geographic criteria. The results are presented each year to the CHSCT.
On the medical front, Natixis S.A. has a Full-Service Medical Department to provide its staff with complete medical care. Natixis also has a social service staffed with full-time social workers.
Natixis S.A.’s offices, and all eligible subsidiaries (50-employee threshold), have a CHSCT which, in cooperation with Management and occupational healthcare services, plays an active role in all areas that involve health, security and working conditions.
Various initiatives, such as preventive campaigns organized by Natixis’ staff physician, and provision of a 24/7, 365-day-a-year psychological support service available from the office or home, are in place to improve health and well-being in the workplace.
Internal mediation pilot program In 2017, Natixis tested an internal mediation service to resolve interpersonal conflicts. A team of mediators (dubbed the “Feedback & Mediation Team”), made up of six non-HR employees, was created and trained by the French Mediation Institute.
Severity of workplace accidents(b) (by number of days of incapacity per thousand hours worked) 0.17 0.11 0.14
Severity rate: (number of days lost due to temporary incapacity/hours worked) x 1,000, source INSEE(b)
It is not possible to isolate days of sick leave related to occupation illness.(c)
Noteworthy international initiatives included: In Frankfurt, “Health Day” was organized in September 2017 and included a host of activities: prevention of back pain, eye exams, shiatsu massage, meditation, balanced nutrition, etc. Natixis Frankfurt also offers preventive health assessments with, if necessary, the provision of special chairs and office equipment, and medical supervision.
In Milan, a partnership was set up with a cancer research association that provides information and training sessions.
In Moscow, as of 2017 Natixis employees receive two annual medical exams.
In 2017, Natixis focused on continuing its initiatives to promote diversity in four key areas: gender equality in the workplace, continued employment of older employees, hiring of young
Within the scope of Natixis France, seven companies have established a collective bargaining agreement on gender equality in the workplace. Within the scope of Natixis S.A., a 3-year agreement (2017-2019) calls for the implementation of concrete initiatives centered on six priorities: hiring and employment, compensation and wage equality, career development and promotions, professional training, the work/life balance and parenting, communication and awareness-raising.
The progress achieved by Natixis was recognized by certification body AFNOR, which granted Natixis “Professional Equality” certification in early 2017. This certification will be subject to regular audits.
First Annual Shadowing Day Natixis invited 20 female students from business and engineering schools to take part in Shadowing Day: each student shadowed a female mentor to see what a typical day working at Natixis is like. There was a twofold objective for Natixis: raising the awareness of young women about occupations in the financial industry and encouraging them to pursue jobs that are still predominantly held by men.
Natixis participated in the third survey conducted by Financi’Elles (an industry federation of internal networks promoting diversity) on “Confidence and Diversity” given to managers in the banking, finance and insurance sector. 21% of Natixis’ male and female managers took part in the survey, which revealed that global perceptions are improving on the issues of diversity, but improvements still need to be made, particularly regarding stereotypes. After the survey, the Senior Management Committee committed to an action plan including the establishment of a sponsorship program for high-potential women by company directors.
Natixis’ Senior Management supports the WINN (Women in Natixis Network) – a network created in 2012 of women in executive positions. CEO Laurent Mignon has been the sponsor of WINN since its inception.
In the Asia-Pacific Region, Natixis refers to diversity and equal opportunity in all the handbooks across the region and in its induction process as well.
Percentage of women on the Executive Committee 21.4 20.5 12.1 0 0 n/a 100 0 n/a 0 0 n/a 100.0 0 n/a
Percentage of women in the workforce working part-time (a) 89.4 89.7 90.9 88.3 89.3 90.9 100 100 100 100 0 100 89.2 90.0 91.7
With respect to governance, Natixis has six women on its Board of Directors, out of a total of 14 members, and two of the Special Committees (Audit Committee and Strategic Committee) are chaired by women.
Under the Agreement on Employment and SWP signed in 2017, in line with the Agreement on Employment of 2013, Natixis has set quantified targets and plans to implement mechanisms to promote the retention of older staff members and end-of-career adjustments.
AGE PYRAMID FOR NATIXIS FRANCE ■ The average age of Natixis employees in France in 2017 was 43.9.
Natixis gives students and recent graduates opportunities to learn about the diversity of its professions and, to this end, participates in several forms and has established long-term partnerships promoting closely monitored relations with targeted schools and universities.
This partnership has strengthened the relations maintained between Natixis and Université Paris-Dauphine for several years now, with Natixis serving as a partner of the Master's in Investment Banking and Capital markets since its inception.
Since 2011, Natixis has been committed to a policy to promote the hiring, professional integration and retention of employees with disabilities. Championed by the Mission Handicap team and its network of experts in the business lines, the policy has led to two company agreements, has strengthened cooperation with management and delivered tangible results.
Keeping this initiative going over the long term, a third Disability agreement covering Natixis France for the 2017-2020 period was signed with all employee unions.
Developing a hiring plan by participating in specialized hiringa forums, establishing partnerships with schools and universities, and developing application pools. In 2017, Natixis hired 20 employees with disabilities; Promoting the use of disability-friendly companies bya diversifying the list of approved services and partners. The number of calls for tender in this sector has significantly increased, primarily by renewing co-contracting, on-site service and supply contracts (see section 6.4.2).
Natixis also took part in the first annual HandiTech Trophy awards organized under the aegis of the Minister of State for Disabled People and the Minister of State for the Digital Sector, both of whom report to the Prime Minister, and handed out the “Employment” award to AsperTeam, the first company to offer comprehensive support to people with autism.
The direct ratio is the ratio of disabled workers to all staff.(a)
Launch of the “Vodeclic” training platform In the interest of encouraging self-training and helping employees become adept at using office and collaborative applications, an innovative training platform called Vodeclic was rolled out in 2017.
The platform provides employee tutorials on hundreds of office and collaborate software programs and applications, training exercises using case studies, evaluations to validate lessons learned, and a program that can be customized to each employee's needs.
In 2017, Natixis employees in France received over 225,000 hours of training. 96.7% of employees took one or more training courses.
The annual evaluation is a valuable tool for assessing employee performance. It now covers the leadership model and serves to revise and establish employee target year-round.
In 2017, 47% of employees had a professional evaluation and 96% of employees were evaluated during the 2016-2017 campaign.
Natixis is involved in several solidarity and general-interest projects to benefit the community.
Gustave Roussy, the leading cancer treatment center in Europe, has always strongly associated care with fundamental and clinical research, earning it world-renowned expertise in therapeutic innovation in cancer research.
Natixis has been a sponsor of the “Passeurs d’arts” association since 2016. In France, less than 3% of children have access to music programs, Passeurs d’Art creates children's orchestras predominantly in underprivileged neighborhoods to promote music education.
Natixis works with the Clubhouse France association to provide help to people suffering from serious mental disorders. The association serves as a link between the medical treatment and work experience of people suffering from serious mental disorders through an innovative and non-medical mutual aid program: the Clubhouse, which provides support services and activities to promote their social and professional re-integration.
Each year, Natixis organizes a request for student solidarity projects: the C.A.M.P.U.S. Awards, to encourage student socio-cultural, socio-athletic and sustainable development initiatives. For the Sixth Annual C.A.M.P.U.S. Awards in 2017, 10 projects, presented by teams from universities, engineering and business schools, were awarded financial support from Natixis (prize money of €5,000, €3,000 and €1,500).
For the eighth year running, Natixis entered a team into the “Course du Cœur” charity road race to support the Trans-Forme association in its public awareness campaign on organ donation. Staff and their families also turned out in large numbers for the 30th edition of the Telethon of the Financial Community. The amounts paid to the AFM were matched in full by the company.
In 2017 Natixis organized the sixth annual “The Boost” event, a call for projects to support individual or collective initiatives led by employees. Projects are selected by an employee vote on the Natixis Intranet and cover a variety of environmental, humanitarian, cultural and athletic initiatives. Since its creation in 2011, “The Boost” has enabled the support of nearly 25 projects in and outside France.
Across all international platforms, Natixis establishes partnerships with general-interest associations and mobilizes employee support, beginning in the EMEA region: In London, Natixis has created a Solidarity Committee allowing the Company and its employees to support various charitable local, national and international organizations (Spitafields Crypt Trust, Cancer Research UK, SOS village d’enfants, etc.). The Committee also organizes solidarity operations involving employees, such as preparation and distribution of meals to the homeless, and provides bins to collect food and clothing donations.
The Milan branch participates in a local Marathon to support charities and makes donations to several non-profit organizations as DYNAMO CAMP, ACRA and VIDAS. Natixis Milan also has a partnership with Italian research association AIRC.
In Moscow, Natixis employees participate in a solidarity race for children with disabilities.
432 Natixis Registration Document 2017 the Susan G. Komen Breast Cancer Foundation;a the Red Cross in the US and Mexico, to help the victims of thea hurricane in Houston and the earthquake in Mexico; the “Seeds por progress” association, which supportsa education for children in rural coffee-growing communities in Nicaragua.
Lastly, Natixis continues to expand its contributions to charitable causes in the Asia Pacific region, with an increase in staff volunteering activities: participation in charity runs in support of environmental causesa in Hong Kong, China, Japan and Australia; the establishment of "Hong Kong Volunteering Month"a encouraging employees to volunteer in support of underprivileged communities or environmental protection; participation in the Hong Kong Coastal Cleanup for the thirda year running.
The information in this document covers the 2017 fiscal year. The reporting period considered is one full calendar year, running from January 1 to December 31.
around the world, on which HR information systems contain data on employees by name. The HR indicators used for the ESR approach pertain to staff under contract. This scope excludes Financial investments. The list of entities in this scope is presented below.
The following changes in scope took place in 2017: • Within the Natixis Worldwide scope, the Investment Solutions division was split into two new divisions: Asset & Wealth Management and Insurance.
• The headcount includes all employees who have an active employment contract with a Natixis legal entity (managed scope). Interns, apprentices and beneficiaries of a VIE (International Volunteer Program) assignment are not considered. Expatriates and seconded employees are accounted for in their entity of origin; • Hires include external recruitment on permanent employment contracts or fixed-term employment contracts, transfers from Groupe BPCE and the conversion of all other types of contract (work-study placements, internships, VIE, etc.) into permanent employment contracts or fixed-term employment contracts, and conversions of fixed-term employment contracts into permanent employment contracts.
• Purchasing that includes sustainable development criteria takes into account contracts within which a sustainable development clause has been signed by the vendor.
GRI: the Global Reporting Initiative, a multi-stakeholder association that develops and disseminates an internationally recognized sustainable(1) development reporting framework.
Companies in which Natixis directly or indirectly holds at least a 50% interest.(2)
The Board of Directors is responsible for drawing up a Management Report including the CSR Information provided for in Article R. 255-105-1 of the French Commercial Code, in accordance with the standard applied by the Company (hereinafter the “Standard”), a summary of which is provided in the Management Report. This Standard is available from the Company’s registered office on request.
Our independence is defined by regulatory texts, the French code of ethics (code de déontologie) of our profession and the requirements of Article L. 822-11 of the French Commercial Code. In addition, we have implemented a system of quality control including documented policies and procedures regarding compliance with the ethical requirements, French professional standards and applicable legal and regulatory requirements.
for in Article L. 225-102-4 of the French Commercial Code (vigilance plan) and by Act no. 2016-1691 of December 9, 2016 on the prevention of corruption (the Sapin II Act).
It is not our responsibility, however, to assess any other applicable legal provisions, including in particular those provided
Our work was performed by a team of five people over a period of approximately four weeks between December 2017 and March 2018. We called upon our CSR experts to help us perform this work.
We performed our work in accordance with the order dated May 13, 2013, defining the conditions under which the independent third party performs its engagement; in accordance with the professional code of the Compagnie nationale des commissaires aux comptes (France’s National Association of Statutory Auditors) relating to this assignment, and pursuant to the international standard ISAE 3000 for the conclusion on the fairness of the information(1).
We familiarized ourselves with the presentation of the sustainable development Standards, in accordance with the social and environmental consequences linked to the company’s activities and to its commitments, and, where applicable, to the resulting initiatives or programs, on the basis of meetings with the managers of the departments concerned. We compared the CSR Information set out in the management report with the list provided for by Article R. 225-105-1 of the French Commercial Code. In the event that some consolidated information was missing, we checked that explanations had been provided in accordance with the provisions of Sub-Paragraph 3 of Article R. 225-105 of the French Commercial Code. We verified that the CSR Information covers the scope of consolidation, i.e., the company, its subsidiaries as defined by Article L. 233-1 and the controlled entities as defined by Article L. 233-3 of the French Commercial Code, within the limitations set out in the methodological note accompanying the CSR Information presented in the management report.
Based on this work, we hereby certify that the CSR Information required is included in the management report.
ISAE 3000 – Assurance engagements other than audits or reviews of historical financial information.(1)
Regarding the ESR Information that we considered to be the most important(1): and initiatives), implemented analytical procedures on the quantitative information, checked the calculation and consolidation of the data on the basis of spot checks, and ascertained that they were coherent and consistent with the other information provided in the management report; at the level of the consolidating entity, we consulted thea documentary sources, and held meetings in order to corroborate the qualitative information (organization, policies at the level of a representative sample of entities selected bya us(2) on the basis of their activity, their contribution to the consolidated indicators, their location and a risk analysis, we conducted interviews to verify that procedures are properly applied, and we performed tests of details, using sampling techniques, in order to verify the calculations and reconcile the data with the supporting documents. The sample selected in this way represented 69% of staff between 23% and 100% of the other quantitative information published.
For the remaining consolidated ESR Information, we assessed its consistency based on our understanding of the company.
Quantitative social indicators: Global staff at 31/12/2017, Total number of hires, Total number of departures including redundancies, Percentage(1) of women in the senior executive category, Percentage of women in the Executive Committee, Total number of training hours. training hours. Quantitative environmental indicators: Energy consumption: electricity, heating and cooling utilities in office buildings - excluding data centers (in MWh), Energy consumption of data centers, Energy consumption of buildings and data centers, Carbon footprint assessment. Qualitative societal indicators: SRI and solidarity assets under management (in billions of euros). Qualitative information: Adherence to international agreements (contribution to SDG), climate risks, organization of employer-employee communication, duty of care (management of risks related to duty of vigilance).
Changes in the capital over the last five 7.2.6 fiscal years 449
Ownership of shares by members of 7.3.2 management and supervisory bodies 450
Changes in the shareholder base over the 7.3.5 past three years 452
STATUTORY AUDITORS’ SPECIAL 7.6 REPORT ON RELATED-PARTY AGREEMENTS AND COMMITMENTS 468 Agreements and commitments submitted for the approval of the General Shareholders’ Meeting 468
Agreements and commitments already approved by the General Shareholders’ Meeting 469
Registered office: 30, avenue Pierre Mendès France – 75013 Paris 542 044 524 Paris Trade Registry.
Chapter I: Form of the Company – Name – Registered Office – Duration – Corporate Purpose
Article 1 – Legal form – Name – Registered office and duration
The name of the Company is “Natixis”. The Company’s registered office is in Paris (13th district), at 30, avenue Pierre Mendès France.
The share capital has been set at €5,021,289,259.20 divided into 3,138,305,787 fully paid-up shares of €1.60 each.
The Company may, under the conditions stipulated by the legislative and regulatory provisions in force, request of any organization or authorized intermediary communication of all information regarding the holders of securities conferring immediately or in the future voting rights in its Shareholders’ Meetings, in particular their identity, nationality, address, the number of securities they own and the restrictions to which these securities may be subject.
The Company is managed by a Board of Directors, composed of at least three (3) directors and no more than eighteen (18) directors,
LEGAL INFORMATION Natixis bylaws 441Natixis Registration Document 2017 subject to the departures stipulated by law in the event of a merger.
When it has been established, in accordance with the regulations in force, that the percentage of the capital owned by employee shareholders exceeds the threshold established by law, a director is appointed by the Ordinary General Shareholders’ Meeting from among the candidates designated for this purpose by the Supervisory Board of the employee mutual fund(s). The director appointed in this capacity is not taken into account in calculating the maximum number of directors referred to in the first paragraph of this Article.
The director appointed in this capacity sits on the Board of Directors and is entitled to vote. He is subject to the same rights and obligations as the Company's other directors.
The Board of Directors convenes as often as the11.1 Company’s interests and legal and regulatory provisions so require, upon notice from its Chairman, either at the registered office or at any other location indicated in the notice, which may be sent by email.
The Board may also be convened by the Chairman at the request of at least one-third of the directors, or at the request of the
An emergency is defined as an exceptional situation (i) subject to short notice, imposed by a third party on pain of foreclosure, where non-compliance might incur damages for the Company or one of its main subsidiaries, or (ii) requiring a rapid response from the Company which is incompatible with the application of the usual notice periods for the Board of Directors.
In addition to the operations referred to by law and12.2 regulations in force, the Internal Rules of the Board of Directors will determine the decisions which will be subject to the prior approval of the Board of Directors.
The designated persons report to the Board of Directors under the conditions determined by the latter.
On the proposal of the Chief Executive Officer, the Board of Directors may appoint one to five individuals selected from among the directors or outside their ranks, in charge of assisting the Chief Executive Officer, with the title of Deputy Chief Executive Officer.
When a Deputy Chief Executive Officer is a director, his term in office shall not exceed his term on the Board.
Deputy Chief Executive Officers may be dismissed at any time by the Board of Directors on the proposal of the Chief Executive Officer.
Non-voting members receive the same information as the directors, and are convened to all meetings of the Board of Directors. They sit on the Board of Directors in an advisory capacity.
In accordance with Article R.225-85 of the French Commercial Code, the right to take part in the General Shareholders’ Meeting is subject to the registration of the shares in the accounts in the name of the shareholder or broker registered on his behalf on the second business day preceding the General Shareholders’ Meeting at twelve midnight, Paris time (D-2), or in the accounts of registered shares kept by the Company, or in the accounts of bearer shares kept by the authorized brokers.
With respect to holders of bearer shares, proof of their status as a shareholder must be provided directly to the centralizing body of the meeting by their authorized intermediaries that hold their bearer share accounts. The intermediaries do so by producing a certificate that must be attached to the voting form or admission card request in the name of the shareholder or the name of the registered intermediary acting on behalf of the shareholder. A certificate is also delivered to shareholders who wish to attend the meeting in person and who have not received an admission card by D-2, twelve midnight, Paris time.
Shareholders may vote by post or by proxy in accordance with the legal and regulatory provisions in force. In accordance with the decision of the Board of Directors, shareholders may participate in General Meetings by means of video-conferencing and may vote using all means of telecommunications and remote transmission, including the Internet, in accordance with the applicable regulations at the time of their use. This decision is disclosed in the notice of meeting published in the French official gazette (Bulletin des Annonces Légales Obligatoires – BALO).
The proxy or vote cast before the meeting by this electronic method, as well as the receipt that is issued for it, will be considered irrevocable written documents that are enforceable in all cases, with the stipulation that in the event of the disposal of shares before the second business day preceding the meeting at zero hour, Paris time, the Company will, as a result, invalidate or change, depending on the case, the proxy or vote cast before that date and time.
It discusses, approves, rejects or adjusts the financial statements and determines the profit to be distributed.
Furthermore, at the end of each fiscal year, an inventory is drafted of the Company’s various assets and liabilities and
LEGAL INFORMATION General information on Natixis’ capital 445Natixis Registration Document 2017
FORM AND TRANSFER OF SHARES 7.2.1 (CHAPTER II, ARTICLE 4 OF THE BYLAWS)
The share capital was set at €5,021,289,259.20 on March 1, 2018, divided into 3,138,305,787 fully paid-up shares of €1.60 each.
The Board of Directors of Natixis, at its meeting ona February 18, 2015, by virtue of the authorization granted by the General Shareholders’ Meeting of May 21, 2013, resolution seventeen, resolved to award 95,144 free performance shares to the members of the Senior Management Committee, of which 27,321 to the Chief Executive Officer of Natixis. These shares will vest at the end of a vesting period that runs until February 17, 2019, inclusive, contingent upon the meeting of presence and performance criteria.
The Board of Directors of Natixis, at its meeting on July 28,a 2016, by virtue of the authorization granted by the General Shareholders’ Meeting of May 24, 2016, resolution nineteen, decided to award 151,283 free performance shares to the members of the Natixis Senior Management Committee, of which 47,463 to the Chief Executive Officer of Natixis. These shares will vest at the end of a vesting period that runs until July 27, 2020, inclusive, contingent upon the meeting of presence and performance criteria.
The Board of Directors of Natixis, at its meeting on April 10,a 2017, by virtue of the authorization granted by the Combined General Shareholders’ Meeting of May 24, 2016, resolution twenty, decided to award 3,012,307 free shares to the recipients designated by the Board of Directors. These shares will be permanently vested in part on March 1, 2019, and in part on March 1, 2020, subject to presence and/or performance conditions (systematic performance conditions applicable to “regulated” categories of staff).
The Board of Directors of Natixis, at its meeting on May 23,a 2017, by virtue of the authorization granted by the Combined General Shareholders’ Meeting of May 24, 2016, resolution nineteen, decided to award 79,369 free performance shares to the members of the Natixis Senior Management Committee, of which 29,911 to the Chief Executive Officer of Natixis. These shares will vest at the end of a vesting period that runs until May 22, 2021, inclusive, contingent upon the meeting of presence and performance criteria.
The vesting period for the final tranche of the award of a total of 6,119,373 free shares, as resolved by the Board of Directors on February 22, 2012, for the 2012 Plan (by virtue of the authorization granted by the Combined General Shareholders' Meeting of May 27, 2010, resolution eighteen), and the vesting period for the first two tranches of the award of a total of 1,724,325 free shares, as resolved by the Board of Directors on
In a ruling made on March 3, 2017, by virtue of the authority granted to him by the Board of Directors, the Chief Executive Officer of Natixis acknowledged that the number of shares to be issued to the beneficiaries of the 2012 Plan came to 225,808 new shares and that the number of shares to be issued to the beneficiaries under the 2013 Plan came to 59,850 new shares.
Resolution No. Purpose of authorization Amount authorized Duration Date used Amount used 05.24.2016 19 To award free shares under the LTIP 0.2% / 0.03%(c)
05.24.2016 20 To award free shares for payment of a portion of variable compensation 2.5% / 0.1%(c) of share capital 38 months €4,930,627(b)
05.23.2017 13 To carry out a reduction in the share capital by canceling treasury shares 10% of the shares making up the Company's share capital 26 months
None None 05.23.2017 14 To carry out a capital increase, through the issue – with preferential subscription rights maintained – of shares and/or securities providing access to the Company's share capital or entitling holders to the allotment of debt securities €1.5bn 26 months
None None 05.23.2017 18 To carry out a capital increase through the incorporation of premiums, reserves, retained earnings or other items €1.5bn(a) 26 months
None None 05.23.2017 19 To increase the number of securities to be issued in the event of capital increases with or without preferential subscription rights 15% of initial issue(a)
None None 05.23.2017 20 To carry out a capital increase through the issue of shares or securities giving access to the Company's share capital, reserved for members of employee savings plans with waiving of preferential subscription rights in favor of said members €50m(a) (b) 26 months
meaning of Article L.225-180 of the French Commercial Code. This authorization involved a maximum of 10,000,000 shares (i.e. 15,400,000 shares following the adjustment resulting from the September 2008 capital increase).
Natixis scope of consolidation Total number of options granted/shares subscribed for
LEGAL INFORMATION General information on Natixis’ capital 449Natixis Registration Document 2017
Number of shares at the start of the fiscal year Number of shares created during the fiscal year Number of shares at the end of the fiscal year Share capital (in euros)
The table below gives details of the amount of additional paid-in capital for each of the transactions impacting the capital.
Shares issued in respect of the capital increase reserved for employees 9,951,325 15,922,120 24,291,184.33
Shares issued in respect of the capital increase reserved for employees 7,989,447 12,783,115.20 13,390,313.18
OWNERSHIP OF SHARES BY MEMBERS OF MANAGEMENT 7.3.2 AND SUPERVISORY BODIES
Board members, including natural and legal persons, owned 71% of Natixis’ capital at December 31, 2017 (almost all of this being owned by BPCE).
The ownership of shares by directors who are individuals is not material (please see the preceding pages for details of stock options granted by the Company to certain employees and directors).
Under the share buyback program authorized by the General Shareholders’ Meeting of May 23, 2017, Natixis owned 1,431,936 treasury shares at December 31, 2017.
The table below shows the number and percentage of shares held as treasury shares at December 31, 2016, and December 31, 2017.
In accordance with the provisions of Articles L.225-197-1 et seq. of the French Commercial Code: the Natixis Board of Directors, at its meeting on February 22,a 2012 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 27, 2010, resolution eighteen), decided to grant 6,119,373 free shares to certain employees of Natixis and its subsidiaries; the Natixis Board of Directors, at its meeting on February 17,a 2013 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 27, 2010, resolution eighteen), decided to grant 1,724,325 free shares to certain employees of Natixis and its subsidiaries; the Natixis Board of Directors, at its meeting on November 6,a 2013 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 21, 2013, resolution seventeen), decided to grant 90 free shares to the Chief Executive Officer of Natixis; the Natixis Board of Directors, at its meeting on July 31, 2014a (by virtue of the authorization granted by the General Shareholders’ Meeting of May 21, 2013, resolution seventeen), decided to grant 31,955 performance shares to the Chief Executive Officer of Natixis; the Natixis Board of Directors, at its meeting on February 18,a 2015 (by virtue of the authorization granted by the General Shareholders’ Meeting of May 21, 2013, resolution seventeen) decided to award 95,144 performance shares to the members of the Natixis Senior Management Committee; the Natixis Board of Directors, at its meeting on July 28, 2016a (by virtue of the authorization granted by the General Shareholders’ Meeting of May 24, 2016, resolution nineteen), decided to award 103,820 performance shares to the members of the Natixis Senior Management Committee and 47,463 to the Chief Executive Officer of Natixis.
In the interest of aligning Natixis employees with the growth and earnings of Natixis over the long term, from 2013 to 2016 inclusive, the Natixis Board of Directors agreed on the principle of using the authorization granted by the General Shareholders’ Meeting to carry out a capital increase reserved for the employees of the Natixis Group, without their preferential subscription right under the Mauve employee share ownership plan.
The Mauve plan is reserved for Company employees included in the scope determined by the Board of Directors and comprising Natixis S.A. and the subsidiaries of its Corporate & Investment Banking, Insurance and Asset & Wealth Management and Specialized Financial Services business units (excluding Financial Investments) enrolled in the Natixis Employee Savings Plan and in the Natixis International Employee Savings Plan. The scheme is also available to the retirees and pre-retirees of the companies included in this scope.
Of which 0.95% held through capital increases reserved for employees, 0.68% of which held outside of employee savings plans by employees (a) and former employees and 0.69% of which held under the BPCE Actions Natixis employee share ownership plan, including bearers of Groupe BPCE shares.
LEGAL INFORMATION Information from Article L.225-37-5 of the French Commercial Code 453Natixis Registration Document 2017
Article L.225-37-5 of the French Commercial Code requires companies whose securities are admitted for trading on a regulated market to make available and explain certain information, where said information may have an impact in the event of a public offer.
Draft resolutions of the Combined 7.5 General Shareholders’ Meeting of May 23, 2018
REPORT OF THE BOARD 7.5.1 OF DIRECTORS ON THE RESOLUTIONS SUBMITTED TO THE SHAREHOLDERS’ MEETING
Twenty-one resolutions will be submitted to the shareholders at the Combined General Shareholders’ Meeting to be held at 3 p.m. on May 23, 2018, at Palais Brongniart, 28 place de la Bourse – 75002 Paris.
These resolutions can be categorized into two groups: the first seventeen resolutions (resolutions one to seventeen)a require the approval of the Ordinary General Shareholders’ Meeting: (i) approval of the financial statements and appropriation of earnings, (ii) approval of related-party agreements, (iii) approval of the items constituting the total pay and benefits of any kind granted to the Chairman of the Board and the Chief Executive Officer relating to the 2017 fiscal year, (iv) approval of the principles and criteria for determining, distributing and granting the fixed, variable and non-recurring items constituting the total pay and benefits of any kind of the Chairman of the Board and the Chief Executive Officer for 2018, (v) overall budget for compensation paid in fiscal year 2017 to the employees referred to in Article L.511-71 of the French Monetary and Financial Code, (vi) ratification of the co-opting of one director, (vii) the appointment of four (4) directors following their resignation to encourage the staggering of directors’ terms of office, (viii) acknowledgment that the mandate of a principal Statutory Auditor and a substitute Statutory Auditor have expired and (ix) trading by the Company in its own shares; the following four resolutions (resolutions eighteen toa twenty-one) require the approval of the Extraordinary General Shareholders’ Meeting and concern (i) delegation of authority to the Board of Directors to decide whether to increase share capital through the issue of shares or securities providing access to the Company’s share capital reserved for members of employee savings plans without preferential subscription rights in favor of said members, (ii) the amendment of Article 19 (Statutory Auditors) of the Company’s bylaws, (iii) delegation of authority to the Board of Directors to make the necessary amendments to the bylaws in order to ensure that they comply with legislative and regulatory provisions and (iv) powers to complete formalities related to this Combined General Shareholders’ Meeting.
In resolutions one and two, the General Shareholders’ Meeting is asked to approve the Natixis 2017 parent company and consolidated financial statements, respectively.
Detailed comments on the parent company and consolidated financial statements are provided in the Natixis 2017 registration document.
Resolution three covers the appropriation of the corporate earnings of Natixis: payment of an ordinary dividend, paid in cash at €0.37 per share. Natixis’ parent company financial statements as at December 31, 2017, show net income of €1,678,182,285.17 After taking into account retained earnings of €1,107,367,314.03 and as the legal reserve exceeds 10% of the share capital, distributable earnings amount to €2,785,549,599.20
Resolution three proposes to: pay a total dividend of €1,160,823,288.06;a allocate the remaining distributable earnings to retaineda earnings, i.e. €1,624,726,311.14(1).
For individual beneficiaries who are residents for tax purposes in France who hold shares outside a stock saving plan, these dividends are subject to income tax: This amount is estimated based on the amount of share capital at December 31, 2017. It will be adjusted depending on the number of shares(1) entitled to dividend payouts.
LEGAL INFORMATION Draft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 455Natixis Registration Document 2017 a single flat-rate withholding tax (PFU tax) of 12.8%, the fiscala base of which is the gross amount of the dividends (Article 200 A of the French General Tax Code); or at the express and irrevocable option of the beneficiary whena declaring his/her income, at the progressive income tax scale following the application of an allowance of 40% of the gross amount of dividends (Article 158-3-2° of the French General Tax Code).
Only one agreement has been authorized and entered into since the last General Shareholders’ Meeting. On August 1, 2017, the Board of Directors authorized the signature of an adhesion rider to the group insurance policy under Article 82 of the French General Tax Code, subscribed by BPCE with Arial CNP Assurance for company directors of Groupe BPCE who do not benefit from the “Pension plan for company directors of Groupe BPCE” or the “Natixis pension guarantee” pension plan.” This rider was signed on October 17, 2017. It indirectly concerns Laurent Mignon as Chief Executive Officer.
Since the start of 2018, no agreement has been approved under the procedure set out in Article L.225-38 of the French Commercial Code.
Opinion on the components of compensation paid or granted in respect of the fiscal year ended December 31, 2017, to each executive corporate officer (resolutions five and six)
Resolutions five and six cover components of compensation paid or granted in respect of the fiscal year ended December 31, 2017, to each of the Company’s executive corporate officers, i.e.: François Pérol, Chairman of the Board of Directors, and Laurent Mignon, Chief Executive Officer.
Compensation and benefits of any kind for the Chairman of the Board of Directors in 2017
Compensation and benefits of all kinds for Laurent Mignon in connection with his duties as Chief Executive Officer of Natixis in 2017
Laurent Mignon’s fixed compensation was €960,000 fora) fiscal year 2017. His annual variable compensation in respect of 2017 was calculated on the basis of quantitative and strategic criteria first reviewed by the Compensation Committee then validated by the Board of Directors, and submitted to a vote at the General Shareholders’ Meeting on
7 LEGAL INFORMATIONDraft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 456 Natixis Registration Document 2017 €1,140,074 will be deferred over three years, 50% ofj which will be indexed to the Natixis share price, and will be paid in thirds in 2019 (100% in cash), 2020 (50% in cash and 50% indexed to the Natixis share price or in shares) and 2021 (100% indexed to the Natixis share price or in shares), provided that the presence and performance conditions are met.
With respect to strategic criteria, the Board noted progress made with the digital transformation (acquisition of fintechs Dalenys, PayPlug and S-Money, along with the development, in collaboration with Groupe BPCE, of a number of digital projects such as the digitalization of the client experience). As for the development of Natixis' collaboration with Groupe BPCE networks, synergies over the 2014-2017 period amounted to €446 million, exceeding the initial target. Furthermore, in 2017 Natixis' collaboration with Groupe BPCE networks was strengthened by Natixis' Assurances acquisition of 40% of BPCE Assurances from Macif (25%) and Maif (15%). Once this transaction was completed, Natixis Assurances became the sole shareholder of BPCE Assurances serving network customers.
In addition, the Board took under consideration steps made in 2017 to transform Natixis, including the launch of the new strategic plan, which envisions a new reworking of the organization's business model and operating methods.
It should be noted that payments in respect of annual variable compensation for 2017 will only be made after the vote at the General Shareholders’ Meeting on May 23, 2018.
In keeping with the principle of the Chief Executive Officer'sc) eligibility to receive free performance shares, at its meeting on May 23, 2017, the Board of Directors of Natixis allocated 29,911 free performance shares, i.e. 0.00095% of share capital at the allocation date, to the Chief Executive Officer of Natixis under the 2017 Plan for the Natixis Senior Management Committee. The performance shares allocated should vest after four years, as long as the continued service requirement and performance criteria are met. This allocation corresponds to 20% of his gross annual fixed compensation.
Thirty percent of the shares issued to the executive corporate officer at the end of the vesting period will be subject to a lock-in period ending upon the termination of his office as Chief Executive Officer of Natixis.
As a reminder, at its February 10, 2016, meeting, the Board of Directors approved a change to the personal protection insurance and supplemental health insurance of CEO Laurent Mignon, with the intention of bringing his situation in line with that of the other members of BPCE's Management Board. Of particular note is the implementation of a scheme to maintain compensation for a period of 12 months in the event of temporary incapacity to work, a scheme benefiting the other members of the BPCE Management Board. In 2017, €17,157 was declared in benefits in kind.
LEGAL INFORMATION Draft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 457Natixis Registration Document 2017
For fiscal year 2018, Laurent Mignon’s fixed compensation remains unchanged from the previous fiscal year and amounts to €960,000 gross.
Target set at 120% of fixed compensation, with a range of between 0% and 156.75% of the target, i.e. a maximum of 188.1% of fixed compensation.
Methods for paying the Chief Executive Officer’s annual variable compensation comply with applicable regulations, especially regulatory provisions relating to control over compensation, as set out in European Directive CRD IV of June 26, 2013, and its enactment into French law in the French Monetary and Financial Code, by the Ordinance of February 20, 2014, and the Ministerial Decree and Order of November 3, 2014. In particular, the payment of a fraction of the variable compensation awarded is deferred over time and is conditional. This payment is staggered over at least the three fiscal years following the year in which the variable compensation is awarded.
Overall budget for compensation paid to the employees referred to in Article L.511-71 of the French Monetary and Financial Code during the fiscal year ended December 31, 2017 (resolution nine)
The definition of regulated categories of staff at Natixis is primarily based on the principles set out in Directive 2013/36/EU, known as CRD IV, and the Decree of November 3, 2014, and is determined according to criteria set 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
Regulated categories of staff at Natixis during the 2017 fiscal year came to a total of 321 employees: Of which 266 staff members identified by qualitative criteria: directors, i.e. 15 individuals;a members of Natixis’ Senior Management Committee,a i.e. 12 individuals; key staff responsible for control functions (Internal Audita Department, Risk and Compliance) and other support functions who are not members of the management bodies listed above, i.e. 57 individuals; key staff responsible for important business lines and foreigna locations (excluding Asset Management and Insurance) who have not already been identified by the criteria mentioned above, i.e. 41 individuals; individuals with authority to take, approve or veto a decision ona credit risk exposure and who are responsible for market risk exposure exceeding materiality thresholds and who have not already been identified by the criteria above, i.e. 141 individuals.
Of which 55 employees identified using quantitative criteria: employees whose total gross compensation allocated duringa the previous fiscal year exceeded €500,000 or placed them among the 0.3% of the highest earning employees, and who have not already been identified using qualitative criteria.
The functions concerned include senior bankers, heads of structured finance activities and, regarding capital market activities, structured product engineers and heads of sales.
In accordance with current regulations, Natixis has established a strict regulatory framework for the variable compensation of employees belonging to regulated categories of staff. A significant share of this compensation is indexed to the performance of Natixis shares, with payment deferred to a later date and contingent upon meeting presence and performance criteria.
annual report on compensation policies and practices published each year before the General Shareholders' Meeting.
Resolution ten proposes that the shareholders ratify the co-opting of Bernard Dupouy as a Director of the Company, which took place at the Board of Directors’ Meeting of August 1, 2017, replacing Michel Grass who has resigned, for the duration of the latter’s remaining term of office, until the end of the General Shareholders’ Meeting called in 2019 to approve the financial statements for the fiscal year ended on
Appointment of four directors following their resignation to encourage the staggering of directors’ terms of office (resolutions eleven to fourteen)
The Board of Directors recalls that the terms of office of eleven (11) of directors (out of the fifteen (15) currently serving directors) will expire at the end of the General Shareholders’ Meeting convened to approve the financial statements for the fiscal year ended December 31, 2018.
Consequently, under resolutions 11 to 14, the shareholders are asked to reappoint : Bernard Oppetit, Chairman of Centaurus Capital Limited (seea Bernard Oppetit’s résumé in Chapter 2, section 2.2 of the 2017 Natixis registration document); Anne Lalou, Managing Director of the Web School Factory anda of the Innovation Factory (see Anne Lalou’s résumé in Chapter 2, section 2.2 of the 2017 Natixis registration document); Thierry Cahn, Chairman of the Board of Directors of Banquea Populaire Alsace Lorraine Champagne (see Thierry Cahn’s résumé in Chapter 2, section 2.2 of the 2017 Natixis registration document); Françoise Lemalle, Chairman of the Steering and Supervisorya Board of Caisse d'Epargne Côte d'Azur (see Françoise Lemalle’s résumé in Chapter 2, section 2.2 of the 2017 Natixis registration document);
LEGAL INFORMATION Draft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 459Natixis Registration Document 2017 as directors, following their resignation, for a period of four (4) years terminating at the end of the General Shareholders’ Meeting convened in 2022 to approve the financial statements for the fiscal year ended December 31, 2021.
Acknowledgment that the mandate of a principal Statutory Auditor and a substitute Statutory Auditor have expired, and non-renewal of said mandates (resolutions fifteen and sixteen)
In resolution fifteen, shareholders are asked not to renew the statutory auditor’s mandate of the firm Mazars S.A. which expires at the end of the next General Shareholders’ Meeting, as Natixis complies with its legal obligations in terms of number of auditors (Article L.823-2 of the French Commercial Code).
Resolution seventeen asks the General Shareholders’ Meeting to renew, for a period of 18 months, the authorization to buy back shares allocated to the Board of Directors.
Delegation of authority to the Board of Directors to decide whether to increase share capital through the issue of shares and/or securities providing access to the Company's capital reserved for members of employee savings plans with waiving of preferential subscription rights in favor of said members (resolution eighteen)
This capital increase would be deducted from the overall ceiling of €1.5 billion decided by the General Shareholders’ Meeting of May 23, 2017, in resolution fourteen.
This delegation voids, as applicable, any unused part of the delegation granted in resolution twenty by the General Shareholders’ Meeting on May 23, 2017, with the stipulation that the Mauve 2018 share ownership plan in progress at the time of this meeting had been approved by the Board of Directors at its meeting of November 7, 2017, based on resolution twenty adopted by the Combined General Shareholders' Meeting of May
A summary of the methods for determining the issue price are included in the table appended to this report.
Henceforward, the appointment of a substitute Statutory Order is only mandatory when the principal Statutory Auditor is natural person or a single-person company.
LEGAL INFORMATION Draft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 461Natixis Registration Document 2017
Other information and comments 17 Authorization to trade in shares of the Company 18 months
Possible objectives for share buybacks by your Company: Implementing option plans to buy a shares of the Company or similar plans
Generally, honoring obligations a related to stock option programs or other share allocations to employees or directors of the issuer or a related company
Tendering shares in connection with a acquisitions, mergers, spin-off or asset transfers
Your Company may at a no time hold a number of shares representing more than 10% of its share capital adjusted by transactions affecting it subsequent to this Shareholders’ Meeting
For liquidity contracts, a the 10% ceiling is calculated net of the number of shares resold during the authorization period
Overall amount allocated a to the buyback program: approximately €3.1 billion
Can be used to develop employee a shareholding in France and abroad
- 70% of the Reference Price* where the lock-up period provided for under the plan is 10 years or more * Overall ceiling General ceiling for capital increases carried out under resolutions fourteen to twenty of the General Shareholders’ Meeting of May 23, 2017, i.e. one and a half billion euros (€1.5 billion).
“Preferential subscription right” refers to the right of each shareholder to subscribe to a number of new shares proportionate to their existing interest in the capital for a period of at least five trading days after the opening of the subscription period. This right is detachable and exchangeable for the duration of the subscription period.
7 LEGAL INFORMATIONDraft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 462 Natixis Registration Document 2017
AGENDA AND DRAFT RESOLUTIONS 7.5.2 OF THE COMBINED GENERAL SHAREHOLDERS’ MEETING OF MAY 23, 2018
Approval of the agreements covered by Articles L.225-38a et seq. of the French Commercial Code; Approval of the total compensation and benefits of any kinda paid or granted to the Chairman of the Board of Directors relating to the 2017 fiscal year; Approval of the total compensation and benefits of any kinda paid or granted to the Chief Executive Officer relating to the 2017 fiscal year; Approval of the principles and criteria for determining,a distributing and granting the fixed, variable and non-recurring items constituting the total pay and benefits in kind of the Chairman of the Board of Directors for fiscal year 2018; Approval of the principles and criteria for determining,a distributing and granting the fixed, variable and non-recurring items constituting the total pay and benefits in kind of the Chief Executive Officer for fiscal year 2018; Overall budget for compensation paid to the employeesa referred to in Article L.511-71 of the French Monetary and Financial Code during fiscal year 2017; Ratification of the co-opting of Bernard Dupouy;a
Appointment of Bernard Oppetit as a director, following hisa resignation to encourage the staggering of directors’ terms of office; Appointment of Anne Lalou as a director, following hisa resignation to encourage the staggering of directors’ terms of office; Appointment of Thierry Cahn as a director, following hisa resignation to encourage the staggering of directors’ terms of office; Appointment of Françoise Lemalle as a director, following hisa resignation to encourage the staggering of directors’ terms of office; Noting of expiry of the mandate of the firm Mazars S.A.,a principal Statutory Auditor, and non-renewal of said mandate; Noting of expiry of the mandate of Franck Boyer, substitutea Statutory Auditor, and non-renewal of said mandate; Authorization to be granted to the Board of Directorsa concerning the trading by the Company in its own shares; Extraordinary business
The resolutions submitted to voting by the General Meeting are as follows: Ordinary business
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the report of the Statutory Auditors on the parent company financial statements for the fiscal year ended on December 31, 2017, hereby approves the said parent company financial statements as presented, including the balance sheet, income statement and notes to the financial statements, as well as the transactions reflected in these financial statements or summarized in these reports.
LEGAL INFORMATION Draft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 463Natixis Registration Document 2017
It is specified that dividends are not payable on shares owned by the Company. In the case where, during the payment of these dividends, the Company comes to own some of its own shares, the amounts corresponding to unpaid dividends that would have been payable on these shares will be recognized as retained earnings.
Resolution seven (Approval of the principles and criteria for determining, distributing and granting the fixed, variable and non-recurring items constituting the total pay and benefits in kind of the Chairman of the Board of Directors for fiscal year 2018)
The General Shareholders' Meeting, deliberating pursuant to the quorum and majority requirements for ordinary business, pursuant to Article L.225-37-2 of the French Commercial Code, hereby approves the principles and criteria for determining, distributing and granting the fixed, variable and non-recurring items constituting the total pay and benefits in kind of the Chairman of the Board of Directors, as set out in the corporate governance report, presented in Natixis’ 2017 registration document in Chapter 2, Section 2.4 and Chapter 7, Section 7.5.1.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, consulted in accordance with Article L.511-73 of the French Monetary and Financial Code, hereby approves the overall budget for compensation of any kind in the amount of €175.69 million, paid during the fiscal year ended December 31, 2017, to employees referred to in Article L.511-71 of the same Code.
Resolution ten (Approval of the co-opting of Bernard Dupouy as a director)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, hereby ratifies the co-opting by the Board of Directors at its meeting on August 1, 2017, of Bernard Dupouy as a director, to replace Michel Grass, who resigned, for the remainder of his term of office, i.e. until the end of the General Shareholders’ Meeting convened in 2019 to approve the financial statements for the year ended December 31, 2018.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, and taking due note of the report of the Board of Directors, hereby resolves to reappoint Bernard Oppetit as a director, following his resignation, in order to encourage the staggering of directors’ terms of office, for a period of four (4) years terminating at the end of the General Shareholders’ Meeting convened in 2022 to approve the financial statements for the fiscal year ended December 31, 2021.
Anne Lalou has indicated that she accepts this new term of office and that she does not hold any position nor is she the subject of any measure likely to prevent her from exercising this function
Thierry Cahn has indicated that he accepts this new term of office and that he does not hold any position nor is he the subject of any measure likely to prevent him from exercising this function
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business and noting the expiry of the mandate of substitute Statutory
LEGAL INFORMATION Draft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 465Natixis Registration Document 2017
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the report of the Board of Directors and in accordance with the provisions of Articles L.225-209 and seq. of the French Commercial Code, hereby authorizes the Board of Directors, with the right to sub-delegate said powers, to buy back the Company’s shares or to arrange for them to be bought back and: Resolves that these shares may be purchased to:1)
implement any Company stock option plan in accordancej with the provisions of Articles L.225-177 and seq. of the French Commercial Code or any similar plan, or award or transfer shares to employees in connection withj their share of Company profits or implement any Company or group employee savings plan (or similar plan) under the conditions provided for by law, in particular Articles L.3332-1 and seq. of the French Labor Code, or freely award shares in accordance with the provisions ofj Articles L.225-197-1 and seq. of the French Commercial Code, or in general, honor obligations related to stock optionj programs or other share awards to employees or directors of the issuer or a related company based on the provisions of Articles L.225-180 and L.225-197-2 of the French Commercial Code, or remit shares in connection with the exercise of rightsj attached to securities convertible into the Company's shares, by way of redemption, ordinary conversion, exchange, presentation of a warrant or any other manner; or cancel all or a portion of the shares bought back accordingly, or tender shares (for exchange, payment or another reason) inj connection with acquisitions, mergers, spin-offs or contributions, or promote Natixis shares in the secondary market or thej liquidity of Natixis shares through an investment service provider in connection with a liquidity contract that meets the terms of the compliance charter recognized by the Autorité des Marchés Financiers.
the number of shares that the Company holds at any timej whatsoever does not exceed 10% of the shares comprising the Company’s share capital on the date in question, pursuant to Article L.225-210 of the French Commercial Code; Resolves that the acquisition, sale or transfer of the shares3) may take place at any time, except in public offer periods, within the limits authorized by current legal and regulatory provisions, by any means, on regulated markets, multilateral trading platforms, with systematic internalizers or over the counter, including by means of the acquisition or sale of blocks of shares (without limiting the portion of the buyback program that may be realized by this means), by a tender or exchange offer, by using options or other forward financial instruments traded on regulated markets, multilateral trading platforms, with systematic internalizers or over the counter, or by the tendering of shares subsequent to the issue of securities giving access to the Company's capital by means of conversion, exchange or redemption, by exercising a warrant or by any other means, either directly or indirectly via an investment services provider.
The maximum purchase price under this resolution will be ten (10) euros per share (or the equivalent value of this amount on the same date in any other currency). This maximum price applies only to purchases decided from the date of this meeting and not to forward transactions entered into by virtue of an authorization given at a previous General Shareholders' Meeting and providing for purchases of shares subsequent to the date of this meeting. The shareholders delegate to the Board of Directors, in the event of a change in the par value of the share, capital increases by capitalization of reserves, free share awards, stock splits or reverse stock splits, distribution of reserves or of any other assets, redemption of capital, or any other transaction affecting the share capital, the power to adjust the maximum purchase price indicated above to take into account the impact of these transactions on the share value; Resolves that the aggregate amount allocated to the share4) buyback program authorized above may not exceed €3,138,305,787; Fully empowers the Board of Directors, with the right to5) sub-delegate said power, to decide upon and implement this authorization, to specify its final terms and conditions if necessary and to determine its procedures, in order to carry out the buyback program and, in particular, to place any stock market order, enter into any agreement, allocate or reallocate the shares acquired to meet the objectives sought in accordance with the applicable legal and regulatory provisions, establish the terms and conditions according to which the rights of holders of securities or options will be protected, if appropriate, in accordance with legal, regulatory or contractual provisions, make any filings with the AMF and any other competent authorities, and complete all other formalities and, in general, do whatever is necessary.
7 LEGAL INFORMATIONDraft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 466 Natixis Registration Document 2017
This authorization is granted for a period of eighteen (18) months from this meeting. It voids from this day, as applicable, any unused part of any prior delegated power given to the Board of Directors for the purpose of trading in the Company’s shares, particularly that given by the shareholders in resolution twelve of the Combined General Shareholders’ Meeting of May 23, 2017.
LEGAL INFORMATION Draft resolutions of the Combined General Shareholders’ Meeting of May 23, 2018 467Natixis Registration Document 2017 in the event that free shares or securities giving access toj capital are granted, determine the nature, characteristics and number of shares or securities giving access to capital to be issued, the number to grant to each beneficiary, and to set the dates, deadlines, procedures and granting conditions for these shares or securities giving access to capital, within the applicable legal and regulatory limits and in particular to choose either to completely or partially replace the granting of these shares or securities giving access to capital at discounts relative to the Reference Price provided for above, or to apply the equivalent value of these shares or securities to the total amount of the contribution, or to combines these two options, in the event that new shares are issued, apply, ifj applicable, to reserves, retained earnings or issue premiums, the amounts necessary to pay up said shares, record the completion of capital increases up to thej amount of shares that will be effectively subscribed to, if applicable, apply the cost of the capital increase againstj the related share premiums and deduct the amounts required to bring the legal reserve from this amount to a tenth of the new capital resulting from these capital increase, sign any agreements, carry out directly or indirectlyj through a representative any transactions and formalities, including carrying out formalities due to the capital increases and amending the bylaws accordingly, in general, enter into agreements to ensure the proposedj issues are successfully completed, take any measures and decisions and carry out any formalities that are appropriate for the issue, listing and financial servicing of securities issued under this delegation of authority and the exercise of associated rights or those due to the capital increases; Resolves that this delegation voids, from this day, the8) unused part of any similar prior delegated power given to the Board of Directors by the shareholders in the Combined General Shareholders' Meeting of May 23, 2017, under resolution twenty, with the stipulation that the Mauve 2018 share ownership plan in progress at the time of this meeting had been approved by the Board of Directors at its meeting of November 7, 2017, based on resolution twenty adopted by the Combined General Shareholders' Meeting of
One or several primary Statutory Auditors and, if applicable, one or several substitute Statutory Auditors, are appointed by the General Shareholders’ Meeting in accordance with the law. They are vested with the duties and powers conferred upon them by the laws in force.
General Shareholders' Meeting called to approve the financial statements for the fiscal year ended December 31, 2017
Code, to assess the benefits resulting from these agreements and commitments prior to their approval.
We performed the procedures we considered necessary to comply with the professional code of the Compagnie Nationale des Commissaires aux Comptes (France’s National Association of Statutory Auditors) relating to this assignment. Our work consisted in verifying that the information provided to us is consistent with the underlying documents from which it was extracted.
In accordance with Article L. 225-40 of the French Commercial Code, we were informed of the following agreements and commitments approved by the Board of Directors.
Enrollment of Natixis in the insurance policy taken out by BPCE with Arial CNP Assurances
Directors concerned at the date on which the agreement was signed: François Pérol, President of the BPCE Management Board,a Chairman of the Natixis Board of Directors,
Laurent Mignon, Chief Executive Officer of Natixis anda member of the BPCE Management Board,
Thierry Cahn, member of the BPCE Supervisory Board anda member of the Natixis Board of Directors,
This agreement allows Natixis EuroTitres and Caceis to benefit from additional activity related to services rendered to Banque Palatine clients under the pricing conditions applicable to the services of Groupe BPCE entities.
Michel Grass, Member of the Board of Banque Palatine andj Natixis
These agreements were approved again by the May 19, 2015 General Shareholders' Meeting.
Director concerned at the date on which the agreement was signed: Laurent Mignon, Chief Executive Officer of Natixis.j
470 Natixis Registration Document 2017 4. Memorandum of Understanding and agreements relating to the new partnership agreements between the CNP and BPCE groups
New business tranche 2 reinsurance treaty entered into bya ABP Vie and CNP Assurances in the presence of BPCE and Natixis: quota share reinsurance of 90% of the new business from former CNP customers by CNP Assurances.
Tranche 2 reinsurance matching agreement entered into bya ABP Vie, CNP Assurances and BPCE, in the presence of Natixis, the aim of which is to determine the procedures for the management of events: the provision to CNP Assurances of the list of customersj covered by BPCE, in accordance with the frequencies and procedures provided for in said agreement, as from the recognition of a market shock (interest-rate shock or behavioral shock); and the implementation of the tests required for the properj operation of the determination and information exchange mechanisms provided for in said agreement.
EuroCroissance matching agreement entered into by CNPa Assurances, BPCE, and ABP Vie in the presence of Natixis, the aim of which is to determine the procedures for the management of events (procedures similar to those in the tranche 2 reinsurance matching agreement).
Directors concerned at the date on which the agreement was signed: François Pérol, President of the BPCE Management Board,j Chairman of the Natixis Board of Directors, and member of the CNP Assurances Board of Directors,
On June 25, 2014, the Board of Directors authorized the sale of 79,989,067 Coface shares, with the option of increasing this number to a maximum of 91,987,426 shares sold if the green-shoe option was fully exercised, as part of a retail public offering in France and a global offering for institutional investors both in and outside France.
The global offering was underwritten by a group of financial institutions: headed by Natixis and J.P. Morgan Securities Ltd in thea capacity of global coordinators (“the Global Coordinators”); and including BNP Paribas, Credit Suisse Securities (Europe)a Limited, Deutsche Bank AG, London Branch, Morgan Stanley & Co. International plc (the “Joint Lead Managers and Joint Book-Runners” together with the Global Coordinators), as well as Banco Santander S.A., Crédit Agricole Corporate and Investment Bank, Commerzbank Aktiengesellschaft, ING Bank N.V. and Banca IMI S.p.A. (the “Co-Lead Managers”, and the Underwriters, together with the Joint Lead Managers and Joint Book-Runners).
6. The “3a2” debt issuance program in the United States implemented by BPCE and the amendment to the agreement relating to the guarantee granted to the BPCE bondholders by the Natixis New York Branch Office on April 9, 2013.
On February 17, 2013, the Board of Directors approved the guarantee given to BPCE by the Natixis NY Branch Office. This guarantee was granted in Natixis’ corporate interest, in the event
This amendment was approved at the Ordinary General Shareholders' Meeting of May 20, 2014.
The income recognized by the Natixis New York branch in respect of this agreement amounted to €737,934 for the fiscal year ended December 31, 2017.
472 Natixis Registration Document 2017 7. Reciprocal financial guarantee pertaining to the “Neptune” Deal between Natixis S.A. and Natixis Real Estate Capital Inc.
On February 24, 2010, the Board of Directors approved a financial guarantee agreement between Natixis and Natixis Real Estate Capital Inc., mirroring the Neptune guarantee and covering all GAPC assets held by Natixis Real Estate Capital Inc.
This agreement was approved by the May 26, 2011 General Shareholders' Meeting.
On August 25, 2009, the Board of Directors approved a preliminary agreement between Natixis and BPCE for the purpose of protecting Natixis against future losses and any earnings volatility caused by assets ring-fenced by its Workout Portfolio Management structure (GAPC).
governance arrangements set up in respect of the GAPCa guarantee (specifically including draft operating charters for the Guarantee Supervision Committee and Workout Portfolio
The purpose of this amendment was to clarify the application of certain of the Guarantee’s provisions to covered assets subject to a write-down.
This amendment was approved by the May 26, 2011 General Shareholders' Meeting.
Alain Lemaire, Member of the BPCE Management Board,j Member of the Natixis Board of Directors.
Nicolas Duhamel, Member of the BPCE Management Board,j Permanent Representative Member of the Natixis Board of Directors.
Didier Patault, Member of the BPCE Supervisory Board,j Member of the Natixis Board of Directors.
As the premium was immediately recognized in the balance sheet, its revaluation led to the recording of income amounting to €5,902,269 for the 2017 fiscal year.
There was no activation of guarantees in the 2017 fiscal year.
On May 11, 2011, the Board of Directors approved an agreement on the Chapel Deal between Natixis and BPCE. The Chapel Deal is part of GAPC (workout portfolio management), within a structured product called Sahara that provides a closer reflection of the rating of high-quality assets held by GAPC. These securities are covered by the “Neptune” Guarantee entered into with BPCE in 2009. To re-establish the equivalent of the Neptune Guarantee, from which Natixis benefited via Sahara, it was proposed that BPCE should guarantee the Chapel security via a total return swap (TRS) at the same time as the Chapel assets were bought back by Natixis.
LEGAL INFORMATION Statutory Auditors’ special report on related-party agreements and commitments 473Natixis Registration Document 2017
This agreement was approved by the May 29, 2012 General Shareholders' Meeting.
Directors concerned at the date on which the agreement was signed: François Pérol, President of the BPCE Management Board,j Chairman of the Natixis Board of Directors.
The expenses recognized by Natixis in respect of this agreement amounted to €33,340,383.00 for the fiscal year ended December 11. Agreement providing for the distribution of Natixis products and services to the regional banks acquired from HSBC by the Banque Populaire Group
On December 18, 2008, the Supervisory Board approved an agreement providing for the distribution of Natixis products and services to the regional banks acquired from HSBC by the Banque Populaire Group, pursuant to which Natixis was to be the exclusive supplier to these banks for the businesses concerned by the agreement as from 2009. The agreement also stipulated that the conditions established between Natixis and the Banque Populaire Group should apply to these banks.
12. “Click’n Trade” service and partnership agreement between IXIS CIB, CNCE and Banque Palatine
Likewise, IXIS CIB has been required to enter into letters of joint and several commitment and guarantee with its US subsidiaries, namely Natixis Municipal Products Inc. (formerly CDC Municipal Products Inc.), Natixis Derivatives Inc. (formerly CDC Derivatives Inc.), Natixis Financial Products Inc. (formerly CDC Financial Products Inc.), Natixis Funding Corp. (formerly CDC IXIS Funding Corp.) and Natixis Commercial Paper Corp. (formerly CDC IXIS Commercial Paper Corp.).
In the case of joint and several guarantees entered into with CDC Finance-CDC IXIS, the IXIS CIB creditors for transactions secured under these guarantees that were entered into before the expiry of the respective guarantees may, in accordance with the letter
The expenses recognized by Natixis in respect of these agreements came to €697,455 for the fiscal year ended
To the best of my knowledge, the financial statements were prepared in accordance with applicable accounting standards and provide a true image of the assets, the financial position and the income of the Company, and all businesses entering in the scope of consolidation, and the management report presents a true picture of changes in the business, of the income and of the financial position of the Company and all the businesses included
8.1. Existing or planned material tangible fixed assets 238 to 240 8.2. Environmental issues that may affect the issuer’s utilization of the tangible fixed assets 392 to 419 9. Income and Financial position
9.1. Financial position 100 to 108; 118 to 146; 151 to 162; 10. Treasury and Capital resources
12. Trend information 14 to 29; 13. Profit forecasts or estimates N/A
14.1. Administrative bodies 36 to 84 14.2. Administrative, management, and supervisory bodies and Executive Management conflicts of interest 15. Compensation and benefits
Registration document page number 15.2. Total amounts paid accrued by the issuer to provide pension, retirement or similar benefits 317 to 321 16. Administrative and management bodies practices
20.8. Legal and arbitration procedures 167 to 169 20.9. Significant changes in the issuer’s financial or commercial situation 190 21. Additional information
24. Documents available to the public 477 25. Information on holdings 323 to 329
Pursuant to Article 28 of Commission regulation No. (EC) 809/2004 of April 29, 2004, the following information is incorporated by reference in this registration document: the parent company and consolidated financial statements fora the year ended December 31, 2016, presented respectively on pages 351 to 390 and 204 to 348, the Statutory Auditors’ report thereon, respectively pages 391 to 392 and 349 to 350, and the Group management report, on pages 188 to 202 of the registration document filed with the AMF on March 21, 2017 under number D.17-0195; the parent company and consolidated financial statements fora the year ended December 31, 2015, presented respectively on pages 338 to 372 and 206 to 335, the Statutory Auditors’ report thereon, respectively pages 373 to 374 and 336 to 337, and the Group management report, on pages 190 to 204 of the registration document filed with the AMF on March 10, 2016 under number D.16-0127; All other chapters of reference documents filed under numbers D.17-0195 and D. 16-0127 that are not mentioned above are either of no material interest to investors or covered elsewhere in this registration document.
Heading Registration document page number 1. Parent company financial statements 344 to 381 2. Consolidated financial statements 194 to 337 3. Management report (see 8.5 for detail)
Analysis of financial positiona 100 to 105; 118 to 146; 151 to 162; Key financial and non-financial performance indicatorsa 12-13; 399 to 432
Financial risks relating to the effects of climate change and the presentation of the company’s measuresa to reduce these effects through a low-carbon strategy in all aspects of its business.
Objective and policy for hedging transactions for which hedge accounting is used. a 231-232
ADDITIONAL INFORMATION Cross-reference table for the management report 481Natixis Registration Document 2017
Summary of authorizations to increase the Company’s share capital and their use during fiscal 2017 8. Information relative to the locations and activities in each country or territory 323 to 329 9. Key characteristics of the internal control and risk management procedures relating to the preparation and processing of accounting and financial information 10. Labor, social and environmental information 391 to 435 11. Vigilance action plan 408 to 410
8 ADDITIONAL INFORMATIONCross-reference table between articles of the CRR, Basel Committee/ EBA tables and statements, and the Pillar III report 482 Natixis Registration Document 2017
Cross-reference table between articles 8.6 of the CRR, Basel Committee/ EBA tables and statements, and the Pillar III report
Article 435 (1) (EBA) MRA - Qualitative disclosure requirements related to market risk 8.1. Market risk management 100 140
Article 436 (b) EU LI1 - Differences between accounting and regulatory scopes of consolidation and mapping of financial statements with regulatory risk categories
Article 458 (BCBS March 2016) CCyB1 – Geographical distribution of credit exposures used in the countercyclical buffer
Article 451 (BCBS March 2016) LR1 – Comparison of accounting exposures and leverage exposures
Article 438 (c) (f) (EBA) EU OV1 - Overview of RWA Table 11 53
NX01 - EAD, RWA and EFP by approach and by Basel exposure class
Art. 453 (d) NX17 - Secured exposure by rating and by type of guarantor
CRR Article Basel Committee/ EBA tables and statements Reference in Pillar III report
(EBA) EU CR1 - Credit quality of assets Table 18 64
(EBA) EU CR4 - Standardized approach – credit risk exposure and Credit Risk Mitigation (CRM) effects
(EBA) EU CR6 - IRB – Credit risk exposures by portfolio and PD range
Article 453 (g) (EBA) EU CR7 - Internal rating – Effect on RWA of credit derivatives used as CRM techniques
Art. 452 (j) NX16 - Average weighted PD and average weighted LGD by geography
(EBA) EU CCR1 - Analysis of counterparty credit risk (CCR) exposure by approach
8 ADDITIONAL INFORMATIONCross-reference table between articles of the CRR, Basel Committee/ EBA tables and statements, and the Pillar III report 484 Natixis Registration Document 2017
Art. 449 (k) NX33BIS - Banking book EAD by agency Table 42 95
Art. 445 (EBA) EU MR1 - Market risk own funds requirements
Article 455 (e) (EBA) EU MR2 – A - Market risk under internal models approach
Article 446 (BCBS) ORA – General qualitative data on operational risk management
Article 448 (BCBS) Table A – IRRBB management policies and objectives 9.4. Management of structural interest rate risk
(BCBS) Table B – NII sensitivity Table 58 (IRRBB – Table B) 118 159
Article 450 (BCBS) REMA – Remuneration policy First update of the Pillar III report
Table 10 (NX01): EAD, RWA and EFP by approach and by Basel exposure class 52 135-136
Table 12 (NX03): Exposures and EAD and by Basel exposure class 54 136
Table 14 (NX11 BIS): EAD by exposure class and by agency – Standardized approach 56
Table 15 (NX17): Secured exposures by rating and by type of guarantor 56
Credit risks Table 16 (EU CR3): Credit risk mitigation techniques – Overview 62
Table 17 (EU CR7): IRB – Effect on RWA of credit derivatives used as CRM techniques
Table 20 (EU CRB – C): Geographical breakdown of exposures 66
Table 21 (EU CRB – D): Concentration of exposures by industry or counterparty type 67
Table 28: Backtesting of LGDs and PDs by exposure class 75 131
Table 29 (CRE): Main internal models: PD, LGD and CFF 76 132
Table 31 (EU CR6): IRB – Credit risk exposures by portfolio and PD range 77 to 80
Table 34 (NX24): Equity EAD by type and nature of exposure 81
Counterparty risk Table 36 (EU CCR1): Analysis of counterparty credit risk (CCR) exposure by approach 85
Table 37 (EU CCR3): Standardized approach of CCR exposures by regulatory portfolio and risk weight
Table 41 (EU CCR2): Credit valuation adjustment (CVA) capital charge 91
Table 48 (SEC3): Securitization exposures in the banking book and associated regulatory capital requirements – bank acting as originator or as sponsor
Table 49 (SEC4): Securitization exposures in the banking book and associated capital requirements – bank acting as investor
Table 52 (EU MR4): Comparison of VaR estimates with gains/losses 105 145
Liquidity risk Table 54: Liquidity ratio (LCR) at 12.31.2017 114 156
Other disclosures Table 59: Encumbered and unencumbered assets at 12.31.2017 (in millions of euros) 119 160
Appendices Appendix 1: Transition from the accounting balance sheet to the regulatory balance sheet at December 31, 2017
Capital requirements and risk-weighted assets 10 Information on the composition of regulatory capital, Reconciliation of accounting and regulatory data 37-38; 44
Other risks 31 Other risks: insurance sector risks, operational risks and legal risks, IT Systems Security and business continuity plans 32 Analysis of losses related to operational risk, including litigation and compliance
Art. R.225-105 The report of the Board of Directors or the Executive Board presents (…) the way in which the Company takes into account the social and environmental consequences of its activity, as well as its social commitments in terms of sustainable development
Art. R.225-105-1-II 1°(g) g) Promotion and respect of the International Labor Organization’s fundamental conventions: On protecting freedom of association and the right to collective a bargaining
Taking into account noise pollution and all types of pollution specific a to a particular activity
The use of raw materials and measures taken to make more efficient a use of them
Art. R.225-105-1-I 3°(a) 3/Corporate social information a) The Company’s territorial impact on the local population
Purchasing policies that take into account social and environmental a issues
Art. R.225-105-2 The independent third-party organization called to give its opinion (…) on social and environmental information that appears or should appear on the report
ABS Asset-backed security, i.e. an instrument representing a pool of financial assets (excluding mortgage loans), its performance linked to that of the underlying asset or pool of assets.
Afep-Medef French Association of Private Sector Companies- French Business Confederation (Association Française des Entreprises Privées- Mouvement des Entreprises de France).
Back office An administrative department at a financial intermediary that performs support and post-trading functions.
A supervisory framework aimed at better anticipating and limiting the risks borne by credit institutions. It focuses on banks’ credit risk, market risk and operational risk. The terms drafted by the Basel Committee were adopted in Europe through a European Directive and have been applicable in France since January 1, 2008.
Combined ratio Measure of an insurance company’s profitability expressed in terms of the ratio of total costs (incurred losses + expenses) divided by total revenue,
Ratio of Common Equity Tier 1 (CET1) capital to risk-weighted assets. The CET1 ratio is a solvency indicator used in the Basel 3 prudential accords.
Cost/income ratio A ratio indicating the share of net revenues used to cover operating expenses (the company’s operating costs). It is calculated by dividing operating costs by net banking income.
CRD III An EU Directive under which the proposals of the Basel Committee were enacted into French law in July 2010 and enacted as of December 31, 2011. In July 2009, the Basel Committee published a new set of proposals known as Basel 2.5 on the topic of market risk. The aim was to better account for default and credit migration risk on assets in the trading book (both tranched and untranched assets) and to reduce the procyclicality of value at risk.
Dodd-Frank Act The Dodd-Frank Wall Street Reform and Consumer Protection Act, more commonly known as the Dodd-Frank Act, is the US law on financial regulation adopted in July 2010 in response to the financial crisis. It is an extensive piece of legislation covering numerous subjects including the creation of the Financial Stability Oversight Council, the management of systemically important financial institutions, the regulation of the highest-risk financial activities, a framework for derivatives markets and reinforced regulation of rating agencies. US regulators (Securities and Exchange Commission, Commodity Futures Trading Commission, etc.) are currently developing precise technical standards with regard to these various provisions.
DVA Debit Valuation Adjustment, which is symmetrical to the CVA and represents the expected loss, from the counterparty’s perspective, on liability valuations of derivative financial instruments. It reflects the impact of the entity’s own credit quality on the valuation of these instruments.
Earnings per share The company’s net income (excluding returns on hybrid securities recognized as equity instruments) divided by the weighted average number of shares outstanding.
ECAI External Credit Assessment Institution, i.e. a credit rating agency that is registered or certified in accordance with EU regulation, or a central bank that issues credit ratings.
ELBE Expected Loss Best Estimate, i.e. the institution’s best estimate of expected loss for the defaulted exposure. This estimate takes into account current economic circumstances, exposure status and an estimate of the increase of the loss rate caused by possible additional unexpected losses during the recovery period.
A financial institution’s exposure in the event of a counterparty’s default. EAD covers on- and off-balance sheet exposures. Off-balance sheet exposures are converted into balance sheet equivalents with the help of internal or regulatory conversion factors (drawdown assumption).
FBF Fédération Bancaire Française (French Banking Federation), a professional body representing all banking institutions in France.
Calculated using a discounted cash-flow model, contract by contract, including parameters such as swaps curve, and revaluation spread (based on the BPCE reoffer curve).
ICAAP Internal Capital Adequacy Assessment Process, a practice required under Pillar II of the Basel Accords to ensure that firms have sufficient capital to cover all their risks
IFRIC 21 International Financial Reporting Interpretations Committee (IFRIC) - IFRIC 21, adopted by the European Union in June 2014, is an interpretation of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets.”
IRB Internal-ratings based, referring to the Internal Ratings-Based Approach, the measurement of credit risk on the basis of credit ratings as defined by EU regulations.
ROE for business lines is calculated based on normative capital to which are added goodwill and intangible assets for the business line. Capital is allocated to Natixis business lines on the basis of 10% of their Basel 3 average risk-weighted assets. Business lines receive interest on the normative capital allocated to them. By convention, the interest rate on normative capital is maintained at 3%.
This ratio is calculated based on the rules set forth in the Delegated Act, without phase-in except for DTAs on tax-loss carryforwards and with the hypothesis of a roll-out for non-eligible subordinated notes under Basel 3 by eligible notes. Repo transactions with central counterparties are offset in accordance with IAS 32 rules without maturity or currency criteria. The ratio is presented after canceling transactions with affiliates, pending ECB authorization.
Natixis ROE Results used for ROE calculations are net income (Group share), deducting DSN interest expenses on preferred shares after tax. Equity capital is average shareholders’ equity Group share as defined by IFRS, after payout of dividends, excluding average hybrid debt, and excluding unrealized or deferred gains and losses recognized in equity (OCI).
Net book value Calculated by taking shareholders’ equity Group share, restated for hybrids and capital gains on reclassification of hybrids as equity instruments. Tangible net book value is corrected for goodwill on associates, restated goodwill and restated intangible fixed assets.
This ratio is intended to strengthen the longer-term resilience of banks through additional incentives meant to encourage banks to finance their operations using more structurally stable resources. This long-term structural liquidity ratio, applicable to a one-year period, was formulated to provide a viable structure for asset and liability maturities.
NRE French Law on New Economic Regulations (Loi sur les nouvelles Réglementations Économiques)
Net income (excluding returns on hybrid securities recognized as equity instruments) divided by shareholders’ equity (restated for hybrid securities), used to measure the profit generated on capital.
Share An equity security issued by a corporation, representing a certificate of ownership and conferring on its possessor (the “shareholder”) proportional rights in the distribution of any profits or net assets as well as a voting right at the General Shareholders’ Meeting.
Solvency II European Directive on insurance and reinsurance undertakings intended to ensure that they comply at all times with their commitments towards policyholders in view of the specific risks incurred by such businesses. It aims to achieve an economic and prospective assessment of solvency based on three pillars – quantitative requirements (Pillar I), qualitative requirements (Pillar II) and information for the public and the supervisor (Pillar III). Adopted in 2014, it was enacted into national law in 2015 and came into force on January 1, 2016.
Methodology for assessing and measuring the risks for each bank. SREP gives the prudential authorities a set of harmonized tools to analyze a bank’s risk profile from four different angles: business model, governance and risk management, risk to capital, and risk to liquidity and funding. The supervisor sends the bank the SREP decisions at the end of the process and sets key objectives. The bank must then “correct” these within a specific time.
SRM Single Resolution Mechanism: An EU-level system to ensure an orderly resolution of non-viable banks with a minimal impact on taxpayers and the real economy. The SRM is one of the pillars of the European Banking Union and consists of an EU-level resolution authority (Single Resolution Board - SRB) and a common resolution fund financed by the banking sector (Single Resolution Fund – SRF).
Debt securities that are ranked below senior debt in terms of repayment priority.
The risk associated with assets that are financed by liabilities with different maturities. Because banks’ traditional activity is to make longer-term use of liabilities with short maturities, they naturally tend to incur transformation risk, which in turn is a source of liquidity and interest rate risks. Positive term transformation occurs when assets have a longer maturity than liabilities. Negative term transformation occurs when assets are financed by liabilities with longer maturities.