PRESENTATION OF NATIXIS 3 1.2 History and links with BPCE 6 1.3 2011 Key fi gures 8 1.4 Natixis’ business lines 10 1.6 Natixis and its shareholders 36
SOCIAL AND ENVIRONMENTAL PERFORMANCE 39 2.1 Directions and program of activities 40 2.2 Reporting standards and scope 51 2.3 Labor information 52 2.4 Environmental information 59 2.5 Social information 62
FINANCIAL DATA 183 5.1 Management Report for the year ended 5.2 Consolidated fi nancial statements and notes 202 5.3 Statutory auditors’ report on the consolidated fi nancial statements 334 5.4 Parent company fi nancial statements and notes 336 5.5 Statutory auditors’ report on the company fi nancial statements 385 5.6 Statutory auditors’ special report on related party agreements and commitments 387
LEGAL INFORMATION 395 6.1 Natixis Bylaws 396 6.2 General information on Natixis’ capital 402 6.3 Distribution of share capital and voting rights 407 6.4 Information from Article L.225-100-3 of the French Commercial Code 409 6.5 Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 29, 2012 410
ADDITIONAL INFORMATION 419 7.1 Statement by the Person responsible for the registration document 420 7.2 Documents available to the public 421 7.3 Annual information report 422 7.4 Cross-reference table of registration document 425 7.5 Cross-reference table for the Annual Financial Report 427 7.6 Cross-reference table of Social and Environmental information 428
Presentation of Natixis 1.2 HISTORY AND LINKS WITH BPCE 6 1.2.2 Financial solidarity mechanism 6 1.2.3 BPCE organization chart 7 1.3.1 Income statement 8 1.3.2 Financial structure 8 1.3.3 Net revenues by business 8 1.3.4 Income before tax by business 9 1.3.5 Long-term ratings (as of February 2012) 9 1.3.6 2012 Investor Relations calendar 9 1.4 NATIXIS’ BUSINESS LINES 10 1.4.1 Corporate and Investment Banking 10 1.4.2 Investment Solutions 14 1.4.3 Specialized Financial Services 19 1.4.5 Major contracts 27 1.4.6 Financial investments 30 1.5.1 Description of GAPC (Workout portfolio management) 32 1.5.2 Description and valuation of segregated assets within GAPC 32 1.5.3 Review of credit assets 33 1.5.4 Description of the Guarantee 34 1.5.5 GAPC governance 35 1.6 NATIXIS AND ITS SHAREHOLDERS 36 1.6.1 Key share data at December 31, 2011 36 1.6.2 Breakdown of share capital 1.6.3 Shareholder scorecard 36 1.6.4 Share price information 37 1.6.5 Natixis and its individual shareholders 38
(1) No.2 in terms of number of branches (source: database, bank websites), No.2 in terms of market share in customer savings deposits and customer loans (source: Banque de France Q3 2011), No.2 in terms of market penetration on the individual professional and entrepreneur markets (source: Pépites CSA 20092010 survey).
• Asset fi nancing: aircraft, project, shipping and international trade fi nance
• Equity stakes in unlisted companies for third-party investors: venture capital, expansion capital, transmission capital
Natixis has adopted a sustainable development policy that aims to reduce its carbon footprint and actively participate in social progress, both in its business activities and the running of its operations. This policy is based on a number of international commitments, including: 1 A commitment to the United Nations Global Compact since 2007; 1 Adherence to the Principles for Responsible Investment (PRI) since 2008; 1 Signature of the Equator Principles in 2010.
• Retail and private banking custody with back offi ce functions
(equipment leasing, operational leasing, leasing with option to buy, IT operational leasing, Sofergie loans and long-term leasing)
• S ervices linked to credit insurance: business information, management of receivables and factoring
Natixis was formed in 2006 through the combination of Natexis Banques Populaires and various subsidiaries of the Groupe Caisse d’Epargne, notably Ixis Corporate & Investment Bank (Ixis CIB) and Ixis Asset Management (Ixis AM): 1 Natexis Banques Populaires itself was created from the July 1999 contribution of the operating activities of the Caisse Centrale des Banques Populaires, founded in 1921, to Natexis S.A., a holding company that was formed from Crédit National, founded in 1919 and which had gradually acquired a 100% stake in Banque Française du Commerce Extérieur, founded in 1946. At December 31, 2000, Groupe Banque Populaire held 79.23% of Natexis Banques Populaires following a capital increase largely taken up by retail investors; 1 Ixis CIB and Ixis AM were originally part of CDC Ixis, itself part of the Caisse des Dépôts. The Ixis CIB and Ixis AM businesses were then contributed to the Caisse Nationale des Caisses d’Epargne (CNCE) as part of the transformation of the Groupe Caisse d’Epargne into a major full-service banking group at the end of 2004.
Natixis was formed by the completion of the following contributions: 1 CNCE’s contribution to Natexis Banques Populaires of certain subsidiaries and shareholdings in corporate, investment and service banking businesses as well as a share of the Cooperative Investment Certificates (CCI) issued since 2004 by each Caisse d’Epargne et de Prévoyance; and 1 the contribution to Natexis Banques Populaires by SNC Champion, a vehicule set up by the Banque Fédérale des Banques Populaires (BFBP) and the Banques Populaires, of the rest of the Caisses d’Epargne CCIs not contribud by CNCE and which had previously been acquired by SNC Champion from CNCE. In addition, CNCE and SNC Champion contributed stakes in Ixis CIB and Ixis AM that they had previously acquired from San Paolo IMI.
1 With the formation of Groupe BPCE, BPCE took the place of CNCE and BFBP, becoming the majority shareholder of Natixis.
Groupe BPCE develops a broad range of banking and fi nancial services for a wide variety of customers.
With Banque Populaire and Caisse d’Epargne, its two historic brands, and its expert subsidiaries specialized in their respective businesses, the Groupe BPCE is active in all commercial banking and insurance businesses while also providing corporate investment banking solutions.
Pursuant to Article L.511-31 of the French Monetary and Financial Code (Code monétaire et fi nancier), BPCE shall, as the central body, take any measures necessary in order to, notably, guarantee the liquidity and solvency of Groupe BPCE. Natixis, in its capacity as an institution affi liated with BPCE, is covered by the Groupe BPCE fi nancial solidarity mechanism. Thus, in the event Natixis encounters fi nancial diffi culty, (i) BPCE would fi rstly provide support using its own regulatory capital in accordance with its duty as a shareholder; (ii) should this prove insuffi cient, it would use the mutual guarantee fund created by BPCE, totaling €1.128 billion in January 30, 2012 in assets provided jointly by both
the Banques Populaires and Caisses d’Epargne networks, and which is increased through an annual contribution (subject to the amounts which would be used in the event of a call for funds); (iii) if BPCE’s regulatory capital and this mutual guarantee fund should prove insuffi cient, BPCE would call on (in equal proportions) both the Banques Populaires and Caisses d’Epargne networks’ own guarantee funds and, fi nally (iv) if calls on BPCE’s regulatory capital and these three guarantee funds should prove insuffi cient, additional sums would be requested from all Banques Populaires and Caisses d’Epargne.
Insurance subsidiaries * CCI: Certifi cats Coopératifs d’Investissements (cooperative investment certifi cates).
(a) Excl. GAPC, net income from discontinued operations and restructuring costs. (b) Pro forma data, see section [5.1.1] "Methodology".
After market close (subject to modifi cation) 2012 Second Quarter Results
In this challenging environment, CIB benefi ted from the positive effects of the refocusing of its activities and its improved organisation under the New Deal plan.
The Coverage division covers both coverage and commercial banking activities (conventional loans, fl ows and cash management) for 2,500 clients, including 90% of the top 350 companies in France.
This division provides global coverage of large corporate clients, fi nancial institutions and the public sector for all products and services offered by Natixis, ranging from conventional loans to the most sophisticated deals set up with the business lines.
The Coverage division was extensively restructured in 2011 to provide better service to its clients and develop its advisory activities, primarily with the creation of a Capital Advisory Department and the reinforcement of the Financial Sponsors and Family Offi ces approach.
The new structure combines the coverage of clients both by sector and geographic area (national, regional and international): Coverage develops its expertise in 10 strategic sectors and the CIB division’s presence in the regions is strengthened by the sale of higher value-added products and solid business with large and mid cap companies.
Global Energy & Commodities handles overall client relations in commodities and structures fi nancing solutions tailored to these markets (export pre-fi nancing, reserve-based lending for the oil industry). In 2011, Natixis consolidated its positioning, notably with major traders and producers (in metals and mining; Vale (1), Metinvest, etc.), agriculture (Louis Freyfus, Cocobod, Kernel, etc.) and oil (Glencore, Tullow, etc.).
The debt platform, which combines loan syndication, the primary bond market and GSCS (6), delivered an excellent performance across all types of borrowers. Through this new organisation, Natixis successfully developed a global “originate to distribute” model and transformed its product range into appropriate and tailor-made solutions. The fact that Natixis expanded its historic franchises is proof of this success. The bank is now number two in euro-denominated fi nancial issues (7) and in French corporate issues (8), third in the global euro market (9), and the leader in the euro-denominated catastrophe bonds market (10). Natixis was also voted best bank in the covered bonds market (11) and was recognised for arranging and syndicating the LactalisParmalat Merger & Acquisition Deal of the Year and the Vale (12) Deal of the Year on the emerging markets.
(2) French label “Bâtiment Basse Consommation”, or energy-effi cient building. (3) IFR ‘‘EMEA Loan of the Year 2011’’
(7) Dealogic: Number two bookrunner in volume terms, FIG sector. (8) Dealogic: Number two bookrunner in volume , ‘‘All French Corporate Bonds in Euro’’ ranking. (9) IFR: “All Bonds in Euro” ranking in terms of number of operations carried out.
(10) Trading Risk: ranking in terms of volume and number of Euro-denomonated deals, “Closed insurance-linked securities transactions”. (11) Euroweek ranking, voted by international players. (12) IFR ranking: Lactalis - IFR “EMEA Loan of the Year 2011”. Vale - IFR “Latin America Loan of the Year 2011”. Euroweek ranking: Lactalis - “Merger & Acquisition
The Forex teams offer round-the-clock trading of all major currencies from platforms in Hong Kong, Paris and New York. The Forex division restructured its activity in 2010 to increase its trading capacity. The benefi ts of the new structure were seen in 2011, with higher business volumes and net revenues . In line with the medium-term development plan, spot, swaps and foreign exchange options revenues were balanced.
Since the integration of the Cash and Equity Derivatives activities, the Equity Markets platform has expanded its teams in France and abroad in the interest of broadening the product range offered to its clients.
The ESOP (1) team was integrated with the institutional offering, with a proposal of share ownership, equity buying/selling and hedging products.
Finally, cross-business processes and tools aimed at promoting internal and external cross-selling were implemented along with the creation of an Innovative Solution Platform team, in charge of optimising the marketing of Equity products. These measures complemented the cross-business vision of the Client Management Unit.
In addition to strengthening the sales teams, 2011 saw the client order execution business gain maturity and expand its range of products.
In a challenging environment, Natixis successfully maintained the quality of its services as a whole, in particular the Research team, which increased the number of companies and underlyings monitored.
These developments are highlighted by a certain number of success stories: 1 winning the Barclays tender for a main broker in the brokerage retail business; 1 structuring, coverage and involvement in the implementation of Axa’s Shareplan 2011 investment leverage plan, an employee share ownership plan offered in 42 countries to more than 110,000 Axa Group employees; 1 sale of investment products (Millésime Prestige and Sérénité Premium) reserved for Banques Populaires and Caisses d’Epargne clients in the form of venture capital funds with a partial or full capital guarantee. Under the New Deal between CIB and the shareholder network, this provision of diversified funds is in line with Equity Markets’ product innovation policy and is based on proprietary risk management strategies.
Corporate Solutions offers tailored balance-sheet optimization and risk transfer solutions within the framework of restructuring plans and acquisitions. The Corporate Solutions team is made up of 90 staff in nine countries, targeting a wide client base of international corporations and sovereign funds in Europe, the Middle East, Asia and South America.
In 2011, M&A Advisory Services mainly operated on the French mid cap market. Clients include major French and international groups, SMEs, private equity funds and public entities. The team is particularly experienced in sectors such as Food, Retail, Media, Construction and Renewable Energy. In 2011, Natixis acted as advisor to the Cube Infrastructure fund on the acquisition of Idex, and to the founders of Rue du Commerce and the Apax Partners fund in the sale of their stake in the company to Altarea.
Natixis develops third-party asset management activities offering substantial synergies with CIB and targeting French and international institutional investors. These activities include the management of infrastructure, environmental and sustainable development funds, the management of insurance risk transfer funds (alternative risk transfer) as well as a platform of managed funds and hedge funds. A number of diversifi ed funds are reserved for Banques Populaires and Caisses d’Epargne clients.
The platform will continue to develop in 2012, drawing on the momentum of 2011, while refocusing on its most strategic activities and clients.
The EMEA platform (Europe, excluding France, Africa and the Middle East) combines CIB’s London, Madrid, Milan, Frankfurt, Moscow and Dubai branches.
Investment Solutions plans to leverage its strength in its natural market to further the division’s international expansion. Almost 52% of the people employed (around 4,000 people) by Investment Solutions already work outside France, mainly with Natixis Global Asset Management: over 1,700 people at 15 asset management companies in the US, the world’s leading asset management market, and a global distribution platform employing 500 people throughout the world with a leading position in the US mutual fund segment.
The Asset Management business is structured around the Natixis Global Asset Management holding company. Natixis Global Asset Management ensures the consistency of overall asset management operations and also has responsibility for developing a global distribution platform and overseeing the fi nancial and strategic management of roughly 20 specialized asset management companies in Europe, the US and Asia. All in all, these entities employ more than 3,000 people, including over 1,700 in the US, and boast strong positions in Europe (mainly France) and the US, with a growing presence in Asia and the Middle East.
In 2011, Natixis Global Asset Management pursued its global growth strategy, which was reaffi rmed under Natixis’ strategic plan. The company carried out an investment policy aimed at ensuring the steady development of its asset management expertise and expansion of the distribution platform in the US, Europe and the rest of the world, particularly in emerging markets such as Asia.
Infl ows in the Asia-Pacifi c region (China, Japan) and Australia increased signifi cantly and these geographic areas are promising future growth drivers.
Several local entities were expanded (Tokyo, London) and three new offi ces were opened, in Amsterdam, Stockholm and Madrid.
European asset management companies at end-2011 (assets under management in billions of euros): j Natixis Asset Management (€283.9 billion): money market, Fixed Income, equities and diversifi ed, alternative and structured management, and SRI funds.
j AEW Europe and NAMI AEW Europe (€18.6 billion): management of real estate assets, real estate investment trusts (SCPIs) and real estate mutual funds (OPCIs).
j Natixis Multimanager (€1.9 billion): funds of funds management, a range of absolute return funds.
O Asset Management (€1.8 billion): global macro multi-strategy and international Fixed Income management.
AEW Europe is owned in partnership with Caisse des Dépôts, which has a 40% stake. This subsidiary is a European leader in investment advisory services and third party real estate asset management. AEW Europe is present in nine European countries, notably in Paris and London, and managed €18.6 billion in real estate assets at end-2011, an 8% increase year on year. In 2011, AEW Europe created AEW UK, a London-based platform managing UK real estate assets, in which it has a 50% stake. The partnership between AEW Capital Management – in the United States and Asia – and AEW Europe and its regulated subsidiaries constitutes a global platform occupying the 6th leading positon in the world in terms of AuM.
Finally, Ossiam launched its strategic ETF (Exchange Trade Funds) activity with the introduction of numerous funds listed on the Paris, Frankfurt, London, Milan and Zurich markets.
Together, Natixis’ European asset management companies provide a full range of products and services covering all traditional asset classes – money market, Fixed Income, equities and real estate – rounded out by expertise in high value-added areas such as structured products, socially-responsible investment and multi-management.
Assets under management for the fi fteen US subsidiaries totaled $302.8 billion at end-2011, compared to $291.7 billion in 2010, an improvement of 3.8% despite a negative market effect. Net infl ows climbed sharply compared to 2010, reaching an impressive $17.3 billion. Three entities accounted for the majority of infl ows: Loomis Sayles (Bonds), Harris Associates (Equities and mandates) and Alpha Simplex (Quantitative).
In 2011, several portfolio management teams and individual portfolio managers were once again recognized with awards, in particular those of Loomis and Harris Associates.
US and Asian asset management companies at end-2011 (assets under management in billions of dollars): j Loomis Sayles ($162.6 billion): equities (growth, core, value) and bonds (core to high yield).
Natixis provides a wide range of insurance products for retail customers, independent professionals and, to a lesser extent, corporate clients. Pension and life insurance products, which are mainly distributed by the Banque Populaire network, work in synergy with the other Investment Solutions business lines. The personal protection insurance business has recorded robust growth in the last fi ve years and features a wide variety of solutions distributed by the Banque Populaire and Caisse d’Epargne networks ranging from death benefi t, work cessation and dependency products to payment protection insurance. Lastly, car and home insurance products available to retail customers in the Banque Populaire network are rounded out by a broad offering aimed at the Banque Populaire network’s professional customers.
Natixis Assurances operates in Luxembourg through its subsidiary Natixis Life, and in Lebanon and Tunisia through equity stakes in subsidiaries in partnership with local private banks.
Natixis Assurances completed the renovation of its life-insurance asset management system: the OMEGA platform improves the ability to innovate and to meet client demands for better quality service.
Natixis’ private banking activity is fully dedicated to offering wealth management services to private investors. It operates in France via Banque Privée 1818 and in Luxembourg via the teams of Natixis Private Banking. Private Banking manages assets totaling €18.9 billion.
Private Banking leverages three high-potential distribution channels in order to foster growth: Groupe BPCE networks, Independent Wealth Management Advisors (IWMAs) and direct customers referred by Natixis in particular. In 2011, the business recorded net infl ows of €1.9 billion, which was a genuine feat in a very challenging market.
To provide network advisors with all the products and services they need, the Private banking business line has a team of 30 employees, including private bankers and Heads of Partner Support. In 2011, private banking gross infl ows from the networks reached €884 million, of which €260 million from the transfer of discretionary management from two Banques Populaires.
Business owners and senior executives represent the core target markets in France and abroad of private banking teams in charge of direct customers. These teams work regularly with Natixis’ coverage teams on cross-selling initiatives. Business was strong in 2011 for the wealth management teams thanks to both historic clients and increased synergies with Luxembourg.
To meet the specifi c expectations of this demanding customer segment, Private Banking’s experts constantly seek to provide clients with innovative and customized solutions. To this end, Banque Privée 1818 formed a new management advisory team in 2011 which generated infl ows of €125 million in just six months. It has also developed a family offi ce service for its very high net worth clients which encompasses all fi nancial aspects of wealth management and has expanded its expertise in philanthropy with the introduction of two endowment funds. These products help boost the image of the private banking business line among Ultra High Net Worth clients and the entity’s ranking in this segment of investors.
Underpinned by this strength and experience, Natixis decided in 2008 to restructure this business and focus on private equity structures capable of meeting the needs of external investors. Under Natixis’ Investment Solutions division, alongside Asset Management, Insurance and Private Banking, Private Equity is a long-term alternative investment solution that the bank offers to its clients.
Natixis is positioned in the real economy via a range of fi nancing, growth and sustainable support solutions provided to more than 500 companies, most of which are in France. In this role, it offers a range of high-potential original products in the form of genuinely diversifying long-term investments which are not easily accessible to investors directly.
Natixis’ private equity operations comprise three distinct and complementary business lines, seven asset management companies and almost €3 billion in assets under management. The majority of the 121 employees are seasoned investors in their areas of expertise.
Both Seventure Partners and Masseran Gestion Capital Risque are currently in the process of merging to create a leading player in French venture capital and the main provider of products to BPCE’s two banking network partners.
Funds of funds emerged some 10 years ago and are perfectly suited to the needs and demands of certain investors because they offer a wide variety of underlying assets while limiting risk. This activity covers various strategies in Europe, the United States and Asia and various stages of a company’s life cycle. Investment strategies are varied: primary, secondary and co-investment.
The merger of Dahlia Partners and Masseran Gestion Fund of Funds’ teams was completed in the fi rst quarter of 2012 and will allow Natixis to create a single entity specialized in European funds with a broad base of expertise and critical mass.
Caspian Private Equity. Created in 2008 and based in New York, Caspian Private Equity comprises nine professionals advised by a Strategic Committee. With almost $1 billion under management, Caspian Private Equity invests mainly through two funds.
Financial Services combines settlement and account-keeping services in the fi eld of payments (credit transfers, direct debits, electronic payment transactions, etc.), fi nancial market transactions (retail and private banking custody), employee savings (profi tsharing and incentive plans, etc.) and pension schemes (individual and collective pension plans), special payment vouchers, and collective personal protection insurance.
In 2009, Group BPCE’s “Ensemble” project targeted potential NBI synergies for Natixis of almost €400 million by 2013, more than half to be generated in Specialized Financial Services. At the halfway point, i.e. end-2011, the division’s additional net revenues were already ahead of the 2013 target.
As the No. 4 player on the French market (14.3% market share – source ASF at December 31, 2011), Natixis Factor posted the strongest sales growth of the leading players in France, with annual factoring revenues of close to €25 billion at December 31, 2011, up 18%, i.e. nearly 1,800 contracts signed with clients from the Groupe BPCE, Natixis and brokerage networks.
Natixis Factor has greatly benefi ted from its new IT platform, both in terms of productivity gains and differentiating the entity’s range of products and services.
The company continued working on its internal model, structure and procedures in 2011. Once these measures have been approved by the ACP (French Prudential Supervisory Authority), Compagnie Européenne de Garanties et Cautions will meet the European Solvency 2 requirements for insurance companies.
Natixis Lease provides companies of all sizes and professionals with a range of solutions for fi nancing their equipment and installations, including equipment leasing, real estate leasing, operating leasing, long-term vehicle leasing, IT operational leasing and renewable energy fi nancing.
In 2011’s subdued market, new real estate leasing business was down slightly to €983 million, whereas equipment leasing rose 18% to more than €1.5 billion, thanks in large part to synergies with the Groupe BPCE network. Natixis consolidated its leading position in Sofergie renewable energy fi nancing and recorded new business of €203 million, up 3% from 2010.
It provides the full range of consumer fi nance expertise for Groupe BPCE banks: design and marketing, network coordination, credit scoring, management or carrying of loans, recovery and litigation. Despite an unsupportive consumer fi nancing backdrop during the year, Natixis Financement maintained solid sales momentum, driven largely by the circulation of debit/credit cards on the Caisse d’Epargne and Banques Populaire networks and the gradual adoption by the Banques Populaires of the personal repayment loans management tool.
New business totaled €6.1 billion (€1 billion for revolving credit and €5.1 billion for personal repayment loans).
As a pioneer in solidarity employee savings, Natixis held on to its top spot on this market via Natixis Asset Management, with 56.2% market share (source: Finasol June 2011).
For the second year in a row, the collective pension plan (PERCO) offer posted robust growth notably in the corporate and institutional client segments (up 40% year-on-year), taking the market share of accounts under management beyond 30% (source: AFG at June 30, 2011).
Titres Cadeaux, a joint venture with La Banque Postale, recorded signifi cant annual growth, with almost 85 million in “CA DO CHÈQUE ” gift vouchers issued in 2011 and the marketing of the “CA DO CARTE ” multi-brand pre-payed gift voucher since its launch in June in certain post offi ces and, since the beginning of November, in Caisse d’Epargne branches.
Payment fl ows are processed by specialist subsidiary Natixis Paiements. It handles payment transactions (checks, mass and single transactions, electronic banking, etc.) across the entire range of interbank channels, while also offering affi liated services. Natixis Paiements, a unifi ed payments operator for Groupe BPCE, processes payment fl ows for Banques Populaires, Caisses d’Epargne, major French banking institutions and some 100 other banks and fi nancial establishments.
Its service offer is customizable and à la carte: from the secure provision of offi ce service processing systems to all-inclusive back offi ce services (order routing, transaction accounting, client reporting, securities custody, etc.).
Natixis serves a diversifi ed client base comprising Groupe BPCE’s banking networks, other banking institutions with or without retail networks, fi nancial companies and private banking asset management fi rms.
In a year plagued by declining transaction volumes affecting fi nancial savings fi rms across the Board, Natixis successfully completed the restructuring of its Securities Services business (transfer of activities, IT migrations for the all Caisse d’Epargne banks) with a view to creating one of the leading players in retail custody in Europe.
In addition, Natixis holds a 15% stake in CACEIS and 33.4% in Slib (a software editor which provides innovative software solutions for investment service providers) after the sale of a 33.2% stake to BNP Paribas in 2011.
Natixis holds a 20% stake in each of the Banques Populaires and each of the Caisses d’Epargne through CCIs “Certifi cats
The Banque Populaire banks are 80% owned by their cooperative shareholders, who are also their customers. Natixis owns the remaining 20% in the form of cooperative investment certifi cates (CCIs). The Fédération Nationale des Banques Populaires (FNBP) is the institution providing deliberation, communication and representation for the Banques Populaires banks. Its activities are in line with developing the common interests of the Banque Populaire banks and their cooperative shareholders.
j Banque Populaire launched its new communications campaign, capitalizing on its traditional values as a local bank supporting entrepreneurship and the spirit of initiative. The new image is conveyed by a new tagline “The bank that encourages action” and a modernized logo.
For personal loans, the Banque Populaire banks now draw on the expertise and tools made available by Natixis Financement. Consequently, bank advisors can most adequately respond to customers plans based on their budgets.
Thanks to another strong loan-production year, loan outstandings to individuals grew by 6.3%. At year-end 2011, loan outstandings amounted to €85.9 billion.
Emphasis was placed on balance sheet savings, in the context of liquidity crisis. Accordingly, savings account outstandings grew by 6.6%. Five tranches of BPCE bonds, sold in the form of securities accounts or life insurance, brought in €691 million, three times more than in 2010.
A Wealth Management Agreement underscores the quality of service provided and a growth plan for this business was defi ned through 2015. Exclusive private banking products and services now include Cadencia, highly personalized services dedicated to clients holding at least €150,000. Private banking assets under management totaled €50 billion at year-end 2011.
Loan outstandings to professional customers totaled €34.5 billion at year-end 2011, a 3% increase. Professional customers with dual relationships (professional and family accounts) grew by 1.4%.
Created in 2011 for the Chambers of Trade and Craft Industries, Espace Sherpa offers craftspeople with project proposals online simulations and helps them develop relationships with the bank branch of their choice.
New brands were listed. Over 150 benefi ted from new relationships with their future franchisees within 48 hours with the help of small-business advisors in the regions.
The Atout Libéral line is tailored to meet the needs of each and every profession. The line is enhanced on a regular basis, particularly in the areas of personal protection and employee savings schemes.
The new online sales platform for agricultural products, directetbon. com, was an instant success among producers with 186 e-shops opened at year-end 2011, close to 26,000 visits, and more than 120,000 pages viewed.
The Banque Populaire banks serve 221,000 companies, or 37% of companies with more than 10 employees (1). Payment processing, international business and companies with over €15 million in sales are the targeted areas of growth. In addition, Banque Populaire also has 171,000 institutional and association clients.
The Caisses d’Epargne are 80% owned by cooperative shareholder customers through local savings companies. Natixis owns the remaining 20% in the form of cooperative investment certifi cates. The Fédération Nationale des Caisses d’Epargne is the institution providing deliberation, communication and representation for the Caisses d’Epargne and their cooperative shareholders.
1 PRESENTATION OF NATIXIS Natixis’ business lines 2011 signifi cant events j The only major French bank to pay interest on demand deposits for all customers holding a package of services, Caisse d’Epargne systematized an overall approach to its customers’ needs in 2011.
j French people’s favorite bank (2), Caisse d’Epargne has a new tagline, «The bank. A new defi nition» and a new brand territory actively promoted among each customer segment.
As the reference bank for young adults and the bank for families and seniors, Caisse d’Epargne seeks to provide more advisory services to its customers with a dedicated bank advisor, greater accessibility through multi-channel banking, and more choice with products and services tailored to each customer’s needs and situation.
New consumer loans stood at €5.4 billion, a 1% increase. New real estate loans exceeded €21.9 billion, bringing total outstandings to €96 billion, an increase of 12%.
Caisse d’Epargne continued to roll out a structure to provide dedicated services to Private Banking. The number of private banking customers grew by 4.8% to 320,000. Dedicated Private Banking service areas fostering a special banking relationship were opened or will soon be opened in all the regions.
Commercial payment processing grew by 21% to exceed €63 billion. New loans totaled €2 billion, a 3% increase, and loan outstandings were up 19% to €7.6 billion. International activity is strongly growing.
Caisse d’Epargne launched new centralized cash-management and risk-hedging services and expanded its payment voucher offering.
It increased its technical sales teams and its segment expertise in the areas of renewable energy and healthcare.
As the leading social-economy fi nancial provider (2) with 22.6% of loans, Caisse d’Epargne forged new partnerships with the Centre français des fondations (the Center for French Foundations) and with Fehap (3), increased its actions with major corporate clients, and reinforced its positions in the healthcare sector.
New loans exceeded €1.5 billion, a 23% decrease, and payment processing totaled €23 billion, a 16% increase.
Over one in three people covered by social protection is a client of Caisse d’Epargne, which provides specialised advisors and an offering designed for this client base. In 2011, the webprotexion management service was enhanced with new functions that facilitate the tasks of legal representatives. Savings managed for this client base amounted to €5.5 billion at year-end 2011.
A major player in lending to local municipalities, to their organizations and to public hospitals, Caisse d’Epargne maintained its loan outstandings at €48 billion in a very diffi cult environment. Out of the €420 million obtained from the Caisse des Dépôts, €205 million were distributed in 2011 and €206 million in EIBsupported loans were committed.
The group brought in €1.4 billion in public-private partnership projects, thereby reinforcing its leadership in this sector.
In 2011, Crédit Foncier and the Caisses d’Epargne committed €1,359 million in regulated social-housing loans (PLS, PLI, PSLA) for the 2011 year. The second phase of the €125 million “France Logement Social” EIB pool for constructing and rehabilitating social housing was used at year-end. Medium- and long-term fi nancing for social housing totaled €2.8 billion, increasing loan outstandings to €13.4 billion. Commercial payment processing grew by 10%. Total infl ows at year-end 2011 amounted to €6.4 billion, €3.1 billion of which were invested in Livret A savings accounts.
The main provisions of the memorandum of understanding relating to the issue of cooperative investment certifi cates by Banques Populaires (the “Banques Populaires CCIs”) signed on September 26, 2006 by Natexis Banques Populaires, BFBP and all Banques Populaires, are as follows: Restrictions on the free transferability of Banques Populaires CCIs
During this period, Natixis has undertaken to provide its services at market price and under market terms and conditions. If Banques Populaires consider that the products and/or services provided by Natixis are not competitive, the matter will be referred to BPCE which may, if necessary, commission an expert to carry out an external assessment and, if appropriate, to propose measures to improve the competitiveness of the said products and/or services.
1 Preservation of Natixis’ stake in the event of a change in the share capital of the Banques Populaires: Any decision to undertake a cash capital increase for a Banque Populaire that would not be offset by the redemption of shares as described above must be made concomitantly with a decision to undertake a cash capital increase through the issue of new Banque Populaires CCIs at nominal value, in order to ensure the level of interest represented by the CCIs in the capital of the Banque Populaire is maintained at the level that existed prior to the operation. Natixis must then subscribe for the CCIs to maintain its level of interest. In the event of a capital increase through the incorporation of reserves, the said capital increase must be undertaken either through the simultaneous and equivalent raising of the nominal value of the shares and the CCIs, or through the simultaneous free allocation of shares and CCIs issued at the nominal value.
Under the terms of the Caisses d’Epargne CCI Memorandum of Understanding, Natixis undertakes to sell to BPCE or the relevant Caisse d’Epargne, in accordance with the terms and conditions defi ned below, the Caisses d’Epargne CCIs without the prior authorization of the Special General Meeting of the holders of Caisse d’Epargne CCIs, in the following circumstances: (i) in the event that BPCE’s control over Natixis ceases; (ii) any sale and/or transfer of Caisses d’Epargne CCIs for any reason whatever, including in the event of a merger or spinoff of Natixis; (iii) reform of France’s 1947 law resulting in a substantial change to the rights of CCI holders; (iv) any legislative or regulatory changes or changes in the assessment by the relevant regulators or by Natixis’ Statutory Auditors making it necessary to increase Natixis’ influence or to alter it significantly in order to enable Natixis to continue to consolidate Caisses d’Epargne CCIs. In such an event, Natixis must submit the precise terms of the changes made necessary to BPCE and the Caisse d’Epargne concerned in order for them to be able to determine whether they should incorporate these new aspects of influence into the existing arrangements or whether they should decide to exercise their right to buy back the CCIs.
The subsidiaries and fi nancial investments in the Corporate and Investment Banking (CIB) businesses transferred by CNCE in 2006 provide the following services, in particular, to the Caisses d’Epargne network: 1 custodial services; 1 design and management of customer products (asset management, revolving credit facilities, surety bonds for borrowers, factoring and equipment lease financing, financial engineering and capital market products, local government financing, debt management); and 1 securities and derivatives brokerage.
In the event of a capital reduction through the redemption of shares, the Caisses d’Epargne may redeem, with a view to their cancellation, the number of CCIs required to maintain the stake, without the prior approval of Natixis.
BPCE and Natixis have agreed to implement protective measures to guard against future Natixis losses and the volatility of its results brought on by the GAPC credit portfolio assets, in the form of a guarantee.
More detailed information concerning this guarantee is available in the section [1.5] “GAPC”.
The P3CI mechanism is as follows: 1 a structured bond issuance by Natixis (P3CI) subscribed for in full by BPCE for a total of €6.9 billion; 1 by subscribing for these bonds, BPCE guarantees the regulatory capital requirement of the Cooperative Investment Certificates (CCI s) at €6.9 billion. This guarantee can be implemented via quarterly adjustments of the P3CI nominal value in the event of a drop in the regulatory capital requirement of the CCIs on Natixis’ balance sheet; 1 with this guarantee, Natixis decreased its risk-weighted assets by €25.6 billion (a weighting of 370% applied to the guaranteed amount of €6.9 billion).
To support the development of its corporate clients, both at home and abroad, Coface offers credit insurance solutions aimed at protecting companies against the risk of fi nancial default by their purchasers. In addition to this credit insurance offer, Coface strives to help its clients assess and anticipate risks upstream, allowing them to make informed decisions at the right time. Coface thus offers detailed country, sector and credit risk analysis. This analysis is carried out using its unrivalled global network consisting of 79 countries, in which it operates either directly (66 countries) or via its CreditAlliance network partners.
Coface saw a return to growth and profi tability in 2010. This trend was confi rmed in 2011. Consolidated revenues (strategic scope) at December 31, 2011 reached €1,550 million, up 7.4% year on year (5.6% at constant scope and exchange rates). All of the group’s regional platforms made a positive contribution to this growth. The los s ratio was 55.1% in 2011 versus 55.9% in 2010 and would have been 3.6 points lower had it not been for a major claim made at the end of the year 2011. The cost ratio (excluding reinsurance) improved 2.5 points to 25.2%. Recurring net income, excluding restructuring costs, was up 21% to €121 million.
A NEW PLATFORM-BASED INTERNATIONAL SET-UP TO IMPROVE QUALITY AND PROXIMITY FOR ITS CLIENTS
1 Decision on valuation (transfer to banking book) of segregated assets.
Second half 2009 1 Change in governance and transfer of GAPC out of CIB: GAPC is now directly under Executive Management.
1 Approval and announcement in August 2009 of the principle of the guarantee provided by BPCE to Natixis (the “Guarantee”).
Overall, GAPC’s 2011 net revenues amounted to €42.4 million after factoring in the Guarantee.
Regarding credit assets, the change in the notional amount net of provisions in 2011 stemmed from: 1 asset disposals and amortization; 1 portfolio restructuring; 1 the positive impact of commutations with the monoline insurers.
The credit asset portfolio was assessed line by line by external advisors at the end of the fi rst half of 2009, using the following methodology: 1 measurement of potential losses at completion (maturity) of underlying assets, regardless of any hedging on the basis of micro and macroeconomic assumptions comparable to those used by the US authorities as part of their stress testing of US banks; 1 measurement of the recovery rate of these losses at completion for assets insured by monoline insurers on the basis of a credit analysis specific to each monoline insurer; 1 analysis of the sensitivity of results on the basis of “high stress” assumptions and, as regards monoline insurers, junior treatment of the CDS contracts compared to the financial guarantees.
1 the second for €367 million in respect of the Option.
1.5.4.3 Accounting and prudential consequences of the implementation of the Guarantee
On the other hand, Natixis enjoyed a substantial prudential impact, representing a reduction in its risk-weighted assets and its regulatory deductions, resulting in an increase in its Core Tier 1 ratio at December 31, 2011.
The implementation of the Guarantee was accompanied by a change in governance at the end of summer 2009, resulting in: The establishment of a CSG (Comité de Suivi de la Garantie – Guarantee Monitoring Committee), responsible solely for the GAPC scope covered by the Guarantee: 1 the members of the CSG are the Executive Chairman of BPCE and the Chief Executive Officer of Natixis. The Heads of Finance, Risk, Legal Affairs and Strategy of BPCE and Natixis are systematically invited to the meetings; 1 the CSG meets every quarter and can also be convened at will when circumstances so require; 1 in order to be in a position to properly carry out its responsibilities, the CSG receives regular reports of necessary information and follow-up on issues dealt with by other Committees connected with the Guarantee or the guaranteed assets; 1 the CSG is the decision-making body for all issues relating to the Guarantee. It is notably responsible for monitoring the proper performance of the Guarantee and in this respect may intervene in any decision, or any plans, of the CGAC (Comité de Gestion des Actifs Cantonnés – Segregated Assets Management Committee), likely to have an impact on the Guarantee mechanism and/or the obligations of Natixis or of BPCE.
This change was implemented to achieve two main goals: 1 to provide BPCE’s representatives with increased and effective participation in this Committee’s decision-making; and 1 to provide BPCE, in connection with certain matters relating to the Guarantee or the guaranteed assets, with the right to suspend a decision pending review by a meeting of the CSG.
1 Decisions are taken by the CGAC Chairman (namely the Chief Executive Officer of Natixis) following discussion.
Dec. 10 Jan. 11 Feb. 11 Mar. 11 Apr. 11 May 11 Jun. 11 Jul. 11 Aug. 11 Sep. 11 Oct. 11 Nov. 11 Dec. 11 Jan. 12 Feb. 12
In 2011, the Natixis’ share price decreased by 40.9% (from €3.29 at the end of 2010 to €1.94 at the end of 2011). Over the same period, the Euro zone banking stocks index (DJ Euro Stoxx Bank) declined by around 32.5%. At March 5, 2012, the Natixis share price stood at €2.70.
1 PRESENTATION OF NATIXIS Natixis and its shareholders 1.6.5 NATIXIS AND ITS INDIVIDUAL SHAREHOLDERS
In addition, the following two bodies coordinate relations with individual investors: 1 The Natixis Shareholders’ Club, created in 2007, with almost 20,000 members, for shareholders who want greater access to company news. Any shareholder owning at least one registered share or 50 bearer shares may join the Club. Using the ID and password provided upon registration, Shareholders’ Club members can access a dedicated website containing information relating to the Club’s activities.
1 The Natixis Shareholders’ Consultative Committee (CCAN), created in 2008, that comprises 12 members. This Committee met twice in 2011 and is dedicated to individual investor relations, in particular the preparation of the two main shareholders meetings of the year, the AGM and the Actionaria trade show. Moreover, conference calls are regularly organized to inform the Committee of recent news, in particular following the publication of results.
1 For the eleventh consecutive year, Natixis had a stand at the Actionaria trade show on November 18 and 19, 2011. Shareholders’ Club members were once again personally invited to this event by letter accompanied by an invitation giving them direct access to the trade show. They were also personally welcomed at the Natixis stand.
Social and environmental performance 2.1 DIRECTIONS AND PROGRAM OF ACTIVITIES 40 2.1.1 Sustainable development as a growth driver 40 2.1.2 Managing our direct impact on the environment 45 2.1.3 Responsible purchasing policy 48 2.1.4 Human resources policy and diversity management 48 2.1.5 Community outreach 49 2.2 REPORTING STANDARDS AND SCOPE 51 2.3 LABOR INFORMATION 52 2.3.1 Changes in the workforce 52 2.3.3 Work management 54 2.3.4 Employee relations and social programs 54 2.3.5 Occupational health and safety 56 2.3.7 Diversity and equal opportunity 57 2.4 ENVIRONMENTAL INFORMATION 59 2.4.1 General environmental policy 59 2.4.2 Pollution and waste management 59 2.4.3 Sustainable use of resources 60 2.4.4 Contribution to the adaptation to and the fi ght against global warming 61 2.4.5 Protection of biodiversity 61 2.5 SOCIAL INFORMATION 62 2.5.1 Territorial, economic and social impacts 62 2.5.2 Relations with stakeholders 62 2.5.3 Subcontracting and suppliers 63 2.5.4 Fair practices 63
2 SOCIAL AND ENVIRONMENTAL PERFORMANCE Directions and program of activities 2.1 Directions and program of activities
Mindful of its social and environmental responsibility and with the backing of its employees, Natixis has implemented a sustainable development policy around three major themes: • incorporating social and environmental considerations in its business activities by better identifying and managing the CSR risks of the projects it finances and seizing opportunities for development in the green growth and responsible investment sectors; • minimizing our direct impact on the environment, by reducing consumption of resources, waste production and carbon emissions and by managing supplier relationships responsibly; • driving social progress through its Human Resources policy, in terms of career management, hiring, training, compensation, labor relations and safety.
Natixis’ corporate social responsibility (CSR) strategy and operational practices are guided by a set of international agreements and consultations within the banking industry: • commitment to the United Nations Global Compact confirmed each year since 2007; • adherence to the Principles for Responsible Investment (PRI) since 2008; • signatory of the Equator Principles since 2010.
Through its fi nancing and investment activities, the bank has a major role to play in the development of an environmentally sound economy. Natixis is increasingly involved through its various business lines in the fi nancing of renewable energy projects, green technology and management of anti-global warming investment funds.
In 2011, Natixis expanded its project finance offering to include biomass and offshore wind technologies. It also expanded the scope of its activities to Germany (Global Tech 1, see below), Canada (“Le Plateau“ wind farm in Quebec) and the Middle East (Shams 1 solar thermal power plant in Abu Dhabi).
2SOCIAL AND ENVIRONMENTAL PERFORMANCE Directions and program of activities 2011 Key event Natixis arranged funding for 80 wind farms off the coast of Germany, with a capacity of 1, 300 GWh (the equivalent of the annual consumption of a town of 200,000 people). This project, named Global Tech 1, is remarkable because of the distance between the wind turbines and the coast (96km) and the depth of the foundations (30 to 50 meters depending on location). It will reduce carbon emissions by 730,000 metric tons per year.
Natixis Lease, Natixis’ lease fi nancing subsidiary, continued its expansion in 2011 with the support of shareholder networks and with a strong focus on the PV industry.
Its subsidiary Natixis Energéco was involved in the fi nancing of 28 renewable energy operations, including 20 solar projects, three wind farms, two biomass plants, one hydropower plant and one combined heat and power plant, with a total output of 120MW.
Share of renewable energy in the electricity fi nancing business (as %) 42 48 41
Natixis Environnement & Infrastructures(1) (NEI) and NEI Luxembourg (NEIL) manage six investment funds representing nearly €1.5 billion with teams of specialists in Paris, Luxembourg and Beijing.
In December 2011, the largest PV plant in France was commissioned near Curbans in the Provence-Alpes-Côte d’Azur (PACA) region. With a capacity of 24.5 MW, the plant supplies power to 35,000 people. The EUROFIDEME 2 fund, which is managed by NEI, invested in the construction of the plant in partnership with GDF Suez.
(1) Asset Management Company approved by the AMF. (2) Simplifi ed-procedure FCPR (private equity investment fund). (3) Simplifi ed-procedure FCPR.
Natixis fi rmly believes that extra-fi nancial considerations are a vital ingredient of value creation in investment strategies, whether in terms of identifying opportunities arising from new areas of sustainable development or identifying the risks involved.
In 2007, Natixis Asset Management (Natixis AM), a subsidiary of the Investment Solutions division, put together an extrafi nancial research team in 2007, which advises the various asset management units on environmental, social and governance (ESG) issues. This team of 11 specialists assesses and contributes to the development of the ESG practices of companies via an ongoing dialogue with their management teams and through the responsible exercise of voting rights.
2011 Key event In March 2011, Natixis AM expanded its SRI range with the creation of a sub-fund of the Luxembourg mutual fund IMPACT FUNDS. The new sub-fund, called Impact Funds - Climate Change Emerging Markets, applies the climate change strategy to the emerging markets universe. These countries are particularly vulnerable to climate change and, at the same time, the strong growth of their economies has led to a signifi cant increase in their CO
2 emissions. The fund aims to combine concern for climate change issues with strong performance, with the support of a Scientifi c Climate Change Committee made up of international experts.
(1) Source: 2011 edition of Finansol’s annual survey of solidarity-based fi nance professionals.
Share of SRI and solidarity assets under management relative to Natixis
(a) Source: 2011 edition of Finansol’s annual survey of solidarity-based fi nance professionals. (b) Source: Comité intersyndical de l’épargne salariale (Interunion Employee Savings Committee) as at 06/30/2011 (c) Source: AFG (French fi nancial management association) as at 06/30/2011
Natixis invests in unlisted SME s, through its private equity business.
As a member of the steering Committee of the Sustainable Development Club run by the French Private Equity Association (AFIC) since September 2009, Natixis private equity business has contributed to the development of best practices in the area of sustainable development in the private equity industry in a number of ways. In late 2010, it helped draft a white paper entitled “Private Equity and Sustainable Development”, recommending signing the UN Principles for Responsible Investment and then establishing ESG procedures to be applied to holdings in unlisted companies.
In July 2011, the Management Committee of the private equity business, made up of the senior managers of the various asset management companies in the division, decided to launch an ESG program in 2012, with the aim of making suffi cient headway by early 2013 to be able to include information about the initiative in the FCPR (private equity investment fund) reports for fi scal year 2012.
In this study, the partnership between Natixis and PhiTrust Partenaires is presented as a prime example of a private equity professional focusing exclusively on companies with a social purpose and an obligation to achieve a set result in various sectors such as social integration, social housing, microfi nance, fair trade, innovation or entrepreneurship in Africa.
AEW Europe, a subsidiary of Natixis Global Asset Management, provides real estate investment advisory services and real estate asset management for third parties. The goal of the 2010-2015 fi ve-year sustainable development plan, apart from that of raising employee awareness, is to incorporate new criteria: • when new investment products are launched (building quality requirements); • when buildings are being constructed, with the goal of certification for all new buildings (HQE, BREEAM or LEED (1)); • when existing buildings are purchased, with the systematic performance of environmental assessments and the incorporation of energy efficiency improvements in the budgets; • when improving the performances of the existing portfolio (all properties must be audited by the end of 2013). These assessments serve as the basis for action plans, partnerships with tenants, etc.
2 SOCIAL AND ENVIRONMENTAL PERFORMANCE Directions and program of activities in a number of areas distinguishing between intrinsic performance – independent of the building’s tenants at the time – and quality of use, e.g. as offi ces, shops) and the CO
In order to improve monitoring of building performances, a general information system will be tested at eight sites in 2012. The system will record consumption, technical information and environmental indicators, with a gradual roll-out across all properties managed by AEW Europe from 2013.
The Compliance d epartment protects Natixis’ customers, the bank itself and its employees from any non-compliance risks. It also serves the public interest in combating terrorist fi nancing, money laundering, corruption and fraud. For further details on Compliance, please refer to Chapter [3], section [3.6] “Chairman’s report on the internal control procedures”.
To meet its regulatory obligations, Natixis has implemented a rigorous risk management system in the area of terrorist fi nancing and compliance with embargoes. This ensures that non-compliant transactions are prevented and helps to foster an effective, balanced and secure relationship with each customer.
Natixis is one of the world’s leading fi nancial institutions and operates in all corners of the world. Its reputation is built on solid values of integrity and its teams are recognized for their fair and ethical conduct.
As a signatory of the Equator Principles (EP) since December 2010, Natixis attaches great importance to environmental and social (E&S) considerations when examining and following up new fi nancing projects. To this end, it applies a methodology that is recognized by the market and used by a large number of fi nancial institutions.
(1) FATF: Financial Action Task Force, an intergovernmental body whose purpose is to coordinate policies to combat money laundering and terrorist fi nancing.
(2) ACP: Autorité de Contrôle Prudentiel, the French prudential supervisory authority for the banking and insurance sector.
The business lines analyze the environmental and social aspects of fi nancing projects and categorize them according to their E&S impact, which determines which internal credit approval procedure is used (A = high impact, B = limited impact and C = little or no impact).
The CSR team then carries out a review of the main projects. It validates or amends the analysis carried out by the business line and, if necessary, informs the senior management of the Corporate and Investment Banking division of any particular E&S considerations pertaining to the projects.
More sensitive projects (mainly in category A) must be submitted to a more senior authority for approval.
2011 Key event Natixis took part in the strategic review of the Equator Principles through its active involvement in two workshops: one on the ‘‘Scope of the Equator Principles’’ and the other on ‘‘Reporting and Transparency’’. As a recent EP signatory, the workshops provided Natixis with an opportunity to learn about the challenges facing EP adherents in preparing for the new version of the principles (amendment III). Natixis’ internal processes will be adapted to take account of the approval of this amendment and its conditions.
In general, Coface works closely with its clients and the parties involved in the project to meet the required standards and to mitigate any potentially signifi cant impacts as much as possible. It also communicates on a regular basis with the general public and NGOs (specifi cally those concerned with environmental protection) on these procedures and their application, as well as on current projects where appropriate, while complying with confi dentiality requirements.
With 22,000 employees worldwide, Natixis’ operations have a substantial impact on the environment in terms of both resource consumption and the production of waste and CO
Natixis has had ISO 9001(1) and 14001(2) certifi cation for the operation of its buildings since 2009. These certifi cations recognize the quality and environmental management systems implemented in all central buildings managed by Real Estate and Logistics. In 2011, these certifi cations covered 87% of the buildings managed by Real Estate and Logistics, or 247,000 m².
The ISO 9001 and ISO 14001 certifi cation process has also begun for the technical operation of the data centers.
2011 Key event Over 55% of the hot water used in the staff restaurant of one of Natixis’ main buildings, Liberté 2 (2,200 workstations) building, is now produced by solar energy following the installation of a “solar rug” on the roof of the building combined with a heat pump system.
In conjunction with building management, the Real Estate and Logistics Department also oversees energy consumption, while staff are made aware of the environmentally-friendly practices that help to control water, energy and paper consumption.
Furthermore, the waste-sorting procedures initiated in 2006 have now been adopted throughout the company. They are organized around various actions: • sorting of paper in offices; • recycling of paper; • collection and special disposal of used ink cartridges and batteries (for business and personal use); • recovery of WEEE (Waste Electrical and Electronic Equipment) and cell phones by recycling companies.
A Company Travel Plan was established in 2008. In 2011, the plan included: • a carpool platform (covering 7,000 employees); • shuttles between buildings (4 sites out of 27 in the Île-de-France region) and between the main site and public transport; • bike stands: 123 bike stands at eight of the bank’s buildings in Paris and the Paris region.
Owing to the low number of ads, ideas to improve the carpool platform are currently being discussed.
Number of ads placed on the carpool platform 111 187 204
2SOCIAL AND ENVIRONMENTAL PERFORMANCE Directions and program of activities 2011 Key event European Mobility Week, which is coordinated by the Ministry of Sustainable Development aims to raise public awareness of the need to reduce transport-related carbon emissions, pollution and noise.
-emitting vehicles and since 2007 it has gradually harmonized procedures and choice of vehicles through the adoption of a standardized car policy: • in 2011, the maximum authorized CO
emission rate of the company fl eet of Natixis S.A. and its subsidiaries, excluding Coface and Kompass (in g of CO2/km) 146* 140* 139
Tax on company vehicles (in €) 217,312 174,300 163,360 * The difference versus the fi gures published in the 2010 sustainable development report is the result of a data update campaign in the fl eet management application.
More restrictive rules on the use of air travel were adopted in 2011: • where the destination is served by both rail and air, trains are now compulsory for a number of destinations in France and Europe (depending on journey time); • economy class is compulsory for domestic flights, flights between European countries and intercontinental flights of less than four hours.
However, Natixis encourages the use of conference calls and video and web-conferencing. In 2011, 15,500 video conferences were held (an increase of over 20% on 2010). The use of videoconferencing is expected to increase in 2012 thanks to new videoconferencing rooms, which use high-defi nition technology to create more “real-world” communication.
Following two carbon footprint assessments in 2006 and 2010, Natixis updated the calculations in 2011 (based on the data from 2010). The results and information about the action plan can be found in paragraph [2.4.4].
The “fair purchasing” approach launched in 2010 governs the policy and is based on the pillars of fair quantity, fair quality, fair price, innovation, sustainability and social responsibility. A responsible purchasing framework was formally defi ned in 2007 and updated in 2010. It is aimed at buyers and business introducers and is based on a grid structure that combines various fi elds: • environmental criteria such as management of energy consumption, use of materials and environmental labeling, and relevant social criteria including working conditions, employment of disabled persons and corruption; • a general clause and specific clauses for each type of service (24 categories are identified including consumables and IT equipment); • three levels of criteria: regulatory, required by Natixis, and recommended.
In 2011, a sustainable development survey was carried out on 15 suppliers selected for their importance in the purchasing portfolio. The survey covered four areas (environment, labor and human rights, business ethics and responsible purchasing) with a rating for each area and an overall rating out of 10.
In line with the disability agreement that was signed in March 2011 (refer to paragraphs [2.1.2] and [2.3.7]), a disability representative was appointed at the end of the year to expand the use of Stateapproved suppliers employing persons with disabilities.
As ever, mobility is an integral part of Natixis’ career development policy and is driven by a number of tools and initiatives including the Mobility Charter, job listings on the Natixis intranet (that provides access to all vacancies), career development meetings, career Committees, as well as tools and support for employees taking on new positions. These measures contribute to staff retention and promote professional development, all in accordance with the current and future needs of the Company.
− s trive for excellence; − f ocus on developing a client-centric culture; − d evelop the team’s skills; − p romote collaboration across departments/entities and implement the Natixis strategic vision; − manage change; − encourage performance, commitment and teamwork within one’s team.
For eight years, Natixis has been involved in combating this most important of health issues on two fronts: actively supporting prevention programs in areas where malaria is endemic and funding research carried out by the Institut Pasteur: • in the field, Natixis has supported Plan France since 2005, an association that implements prevention programs in Cameroon, Burkina Faso and Togo. The distribution of 75,100 mosquito nets has helped protect 45,980 children under five and 46,339 pregnant women; • in 2011, the bank continued to support an anti-malaria program targeting 17,000 children and 1,600 pregnant women in Togo. Activities in 2011 mainly involved training of health professionals and raising awareness among local communities (52 beneficiary communities). The latest assessment in the field showed that 89% of children under five now sleep under mosquito nets (vs. 10% in 2004) and that 95% of pregnant women have received preventative treatment against malaria; • in light of these highly positive results, Natixis intends to continue its commitment in this area in 2012, providing further support to efforts to distribute mosquito nets and medication, and to strengthen the capacities of healthcare workers; • Natixis also supports the research program of the Institut Pasteur, including studies on the resistance of parasites to anti-malaria drugs. In 2010 and 2011, the bank funded a study led by Dr. Odile Pujalon, in collaboration with the Institut Pasteur in Cambodia, on the resistance of the Plasmodium falciparum parasite to the latest generation of artemisinin-based therapy.
2SOCIAL AND ENVIRONMENTAL PERFORMANCE Reporting standards and scope 2.2 Reporting standards and scope
The cross-reference table in Chapter [7.6] indicates how the content of this report meets the requests and obligations of these reporting standards.
The social and environmental information refers, with some exceptions, to the French scope which includes Natixis S.A. and its subsidiaries, including in particular fi ve subsidiaries with more than 500 employees each (Natixis Asset Management, Natixis Factor, Natixis Financement, Coface S.A. and Coface Services).
2 SOCIAL AND ENVIRONMENTAL PERFORMANCE Labor information 2.3 Labor information 2.3.1 CHANGES IN THE WORKFORCE
Geographic area 5: Africa, NME, Russia & Others (as %) 5.0 4.5
(a) Pro forma data. (b) With respect to employees under contract, “FTE staff” incorporates workforce participation rates and subsidiary consolidation rates, but excludes employees on long-term leave.
The compensation package is rounded out by additional employee benefi ts, especially in countries without a universal insurance scheme.
Compensation surveys are conducted each year by specialized fi rms in order to measure the relevance of the overall compensation policy.
More than three-fourths of the employees of Natixis Consolidated in France, working at 44 different companies, are covered by the collective bargaining agreements of the banking and insurance industries. There are, however, seven separate agreements within this scope, containing specifi c details depending on the sector in question, particularly with respect to working time.
In addition to these contractual Employee Representative Bodies, all companies of signifi cant size comprising the scope of Natixis Consolidated have their own local Employee Representative Bodies.
The agreement pertaining to ‘‘union and collective bargaining rights within Consolidated’ Natixis’, signed in 2010 by the Management and the majority of the Union Representative Organizations in order to adapt the union and collective bargaining rights system to the scope and structure of the «consolidated company», is a key component in creating a companywide employee representation framework.
As a result of this agreement, the Executive Management of Natixis Consolidated works with union coordinators on the organization of employer-employee communications, and with a contractual collective bargaining body which, in accordance with the employee relations policy adopted by Groupe BPCE, negotiates collective bargaining agreements on matters of general interest to some or all of the companies making up Natixis Consolidated, which are deployed through agreements applied consistently to all employees.
Agreement on the professional integration and retention of employees with disabilities 3/7/2011
Natixis’ allocation to the Natixis S.A. Central Works Council for the funding of social and cultural activities accounted for 1.3% of total payroll costs. Moreover, holiday vouchers were issued to all employees based on a family quotient (number of dependents), and subsidies provided for childcare, both measures combined accounting for about 1% of total payroll costs.
These measures enable the central works council and locallybased works councils to offer all staff a range of social, cultural and recreational activities at attractive prices.
In addition, a mutual assistance scheme exists for employees suffering bereavement or struggling with serious personal or family problems. Annual employee contributions are topped up by the company at twice the amount of the employee contributions.
In 2011, Natixis S.A.’s Committee for Hygiene, Safety and Working Conditions (CHSCT), whose membership changed at the end of the year, continued to work closely with each of its subCommittees responsible for ensuring the application of rules on health & safety and working conditions at each specifi c site (Charenton, Lumière, Austerlitz, Bourse). This organization allows the Committee’s plenary sessions to focus on matters of general interest.
The agreement on the prevention of stress and psychosocial risks, in force since 2010, includes: • a Committee for Hygiene, Safety and Working Conditions (CHSCT); • the continuation of the Stress Observatory questionnaire instigated in early 2009; • the provision of free psychological support by telephone; • a special training offer for managers.
In accordance with its strategic focuses, Natixis’ training policy aims to further the development of the three core businesses in four major areas: increasing the professionalization of staff, advancing major projects, guiding individual career paths, and developing managerial skills.
As partners to the business lines and employees, the teams in charge of training develop comprehensive as well as tailored solutions, offered through one-off initiatives or longer-term programs targeting the development of individual and collective skills. As such, they contribute to the continuous improvement of the company’s competitiveness and help anticipate changing requirements in terms of employment.
To meet the company’s specifi c transformation needs, individual and collective aid (coaching, team cohesion, change management, etc.) was provided alongside these training initiatives. All of these managerial development measures will be continued and expanded in 2012, with the main goal of developing Natixis’ managerial culture.
The a ction plan for older members of staff, defi ned in late 2009 for years 2010 and 2011, promotes the retention of the over55s and the extension of the retirement age by one quarter per year. New action plans for 2012 to 2014 have been developed for the companies in the consolidated scope, drawing on the same guidelines as the previous plan while increasing the number of initiatives, primarily in terms of career management interviews and part-time work, in an effort to meet the expectations of older staff members at the end of their career.
The resulting action plan generated signifi cant results in terms of hiring of employees with disabilities. Employees participated in awareness-raising programs, such as Disabled Persons Employment Week and the two information campaigns conducted in partnership with Agefi ph.
Alongside the three priorities of the Diversity policy, Natixis also promotes non-discrimination in its hiring process by ensuring that the appropriate rules and best practices are applied.
In partnership with the association Nos Quartiers ont des Talents, Natixis set up a skills-sharing program in which Senior Managers sponsor young people from disadvantaged neighborhoods seeking their fi rst job.
Natixis’ website, which has received the ‘‘AccessWeb’’ label, is accessible to persons with disabilities, and employees can turn to the Diversity intranet site launched in 2010 to research, apply and keep abreast of Natixis’ Corporate and Social Responsibility commitments.
Percentage of women on the Senior Management Committee 11 13 11
The 2011 reporting scope includes Natixis and its subsidiaries in continental France and French overseas departments (DOM), excluding the data center. This represents 331,630 (1) m2 of offi ce space and 18,048 workstations.
The company’s organization in terms of environmental matters and certifi cation processes is produced at the section [2.1.2].
IT and offi ce materials, excluding mobile phones (in metric tons) 89 80 52
The total amount of water consumed has been increasing for the past three years. Measures have been taken to optimize water consumption: continuous monitoring of networks for leaks, installation of pressure relief devices and rain gauges to stop automatic sprinkler systems in rainy weather.
Consumption of raw materials mainly concerns paper consumption by Natixis. The fi gures indicated present the consumption of white paper, color paper, desktop publishing, envelopes, internal and external print-outs, etc.
Consumption per workstation (in 500-sheet reams) 19.6 21.2 15.2 2.4.3.3 Energy consumption
Total energy consumption: electricity, hot and cold liquids from offi ce buildings - excluding data center (in MWh) 87,672 97,501 96,012
Total energy consumption of buildings and data centers 138,298 145,541 128,545
Total energy consumption per m2 of usable offi ce space (in MWh) 0.39 0.39 0.29
Total fuel consumption of buildings and data center (in m3) 60 51 59
2SOCIAL AND ENVIRONMENTAL PERFORMANCE Environmental information 2.4.4 CONTRIBUTION TO THE ADAPTATION TO AND THE FIGHT AGAINST GLOBAL WARMING
In 2011, new regulations applicable to companies with more than 500 employees and whose head offi ces are based in France came into force, obliging them to publish the level of greenhouse gas emissions (GHG) generated by their energy consumption.
The activities of Natixis Consolidated France generated 96,000 metric tons of CO
Emissions generated by input are mainly from the purchase of goods and services and represent 55.4% of total emissions. This is a 13% decrease compared with 2009, in line with lower purchasing volumes due to the economic crisis.
The second highest source of emissions is travel, at 18% of total emissions. Home-work journeys and business trips by plane, train, taxi and corporate vehicles are included in this category. The decrease in emissions in this category is partly due to lower business trip.
These two categories are followed by: • the energy consumption of the data centers (11.2%). This data was separated from the energy and liquids of buildings due to its high impact; • the energy and liquid consumption of buildings (8.4%), up marginally due to the integration of buildings that use gas; • property, plant & equipment and maintenance (6.2%), up slightly due to a policy of increased work and maintenance following the acquisition of new buildings; • freight and waste (less than 1%).
Initiatives aimed at limiting energy consumption are already in place at the operational level, these measures needed to be better organized. In 2011, a steering Committee, chaired by a member of the Senior Management Committee, launched discussions on additional measures to be implemented to further limited GHG emissions. The parties involved (property, business travel, purchasing, etc.) put forward detailed proposals in terms of GHG reductions and their associated savings or cost. These measures will then be revised by the Senior Management Committee. The aim is to release a list of the adopted measures during the fi rst semester of 2012.
Natixis’ service operations are predominately located in urban environments and do not have a direct material impact on the natural environment. Nevertheless, preventive measures are taken to avoid any accidental discharges into the atmosphere or sewage systems: regular maintenance of sensitive facilities and reinforcing the water tightness of premises containing potentially polluting substances or contaminants.
Natixis is the corporate, investment and fi nancial services arm of Groupe BPCE. It assists regional development by funding the businesses of the retail, corporate and small and medium-sized enterprises clients of Groupe BPCE’s two banking networks, Banque Populaire and Caisse d’Epargne.
Clients a Companies a Organizations a Authorities a Employees a Retail banking a Completion of questionnaires a Invitations to tender a Product development and management a Contracts
Partner NGOs a Humanitarian organizations a Donations a Skills sponsorship a Voluntary work by employees
Institutionals, regulators a Financial regulatory authorities a Transmission of information and documents for control and audits
Sustainable development in our relations with suppliers is presented in section [2.1.3] ‘Responsible purchasing policy’.
Measures taken to safeguard against all forms of corruption are described in section [2.1.1.3] ‘CSR risk management’.
3.2 STRUCTURE OF THE CORPORATE AND EXECUTIVE BODIES 67 3.2.1 Board of directors at March 1, 2012 67 3.2.2 Executive Management at March 1, 2012 69 3.2.3 Senior Management Committee and Executive Committee 69 3.2.4 List of corporate offi cers’ positions 70 3.3 ROLE AND OPERATING RULES OF THE CORPORATE BODIES 90 3.3.1 Board of Directors 90 3.3.2 Specialized Committees: extensions of the Board of directors 94 3.3.3 Executive Management 97 3.3.4 General Shareholders’ meetings 98 3.4 POLICIES AND RULES FOR DETERMINING COMPENSATION AND BENEFITS OF ALL KINDS PAID TO MEMBERS OF THE CORPORATE BODIES 100 3.4.1 Compensation and benefi ts of all kinds for Board members 100 3.4.2 Compensation and benefi ts of all kinds for the CEO 101 3.5 POTENTIAL CONFLICTS OF INTEREST 109 3.5.1 Competence and integrity of directors 109 3.5.2 Contracts binding the company and the Directors and the Executive Management 109 3.5.3 Confl ict of interest 109 3.6 CHAIRMAN’S REPORT ON THE INTERNAL CONTROL PROCEDURES 110 3.6.1 Internal control mechanisms 110 3.6.2 General organization 111 3.6.3 Control system participants 111 3.6.4 Risk monitoring and Control 117 3.6.5 Internal control procedures relating to accounting and fi nancial information 122 3.7 STATUTORY AUDITORS’ REPORT ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS 125
EU law, the Corporate Governance Code to which reference has voluntarily been made when preparing this report is the Corporate Governance Code for listed companies published in December 2008 by the French association of private sector companies Association Française des Entreprises Privées – AFEP and the French business confederation Mouvement des Entreprises de France – MEDEF (the “AFEP-MEDEF C ode”). The AFEP-MEDEF C ode is available for consultation at the Company’s head offi ce and on the Natixis website.
• On April 30, 2009, Natixis changed its form of governance from a French “société anonyme” (a public limited company) with a Supervisory Board and an Executive Board to a French “société anonyme” with a Board of Directors.
Chairman of the Board of Directors First appointed AGM of 04.30.2009
Member, Appointments and Compensation Committee First appointed: Board Meeting of 02.22.2011
Immeuble Cirius 67 -78 avenue de France 75204 Paris cedex 13
Member, Appointments and Compensation Committee First appointed: Board Meeting of 12.17.2009
Caisse d’Epargne Île-de-France 57 rue du Général de Gaulle 95880 Enghien-les-Bains * Independent director.
Chief Executive Offi cer First appointed: Board Meeting of 04.30.2009, effective May 14, 2009
Permanent representative for Bolloré Participations, member of the Board of: la Cie des Tramways de Rouen, la Société Anonyme Forestière et Agricole (Safa), la Société des Chemins de Fer et Tramways du Var et du Gard, la Société
Plantations des Terres Rouges (1), SDV Gabon, Bolloré Africa Logistics Sénégal (ex SDV Sénégal), Socfi n KCD, Socfi n (ex
Socfi naf), Socfi nasia (1), Socfi nco, Socfi ndo, la Société de Gestion pour le Caoutchouc and les Oléagineux (Sogescol)
Cameroun), Société des Caoutchoucs de Grand Bereby – SOGB (1), Bereby Finance
FRANCE Member of the Board of: Natixis Chief Executive Officer of: Bolloré, Bolloré Participations
Chairman of: VEPB Chief Executive Officer of: Sofi bol, Omnium Bolloré, Financière V
Permanent representative for Bolloré Participations, member of the Board of: la Cie des Tramways de Rouen, la Société
FRANCE Member of Supervisory Board (until 04.30.2010) and member of the Board of: Natixis Chief Executive Officer of: Bolloré, Bolloré Participations
Chemins de Fer et Tramways du Var et du Gard, la Société
Permanent representative for Havas to the Board of: Médiamétrie (until November 13, 2009)
Permanent representative for Bolloré Participations, member of the Board of: la Société Anonyme Forestière et Agricole (Safa), la Société
FRANCE Member of the Supervisory Board of: Natixis Chief Executive Officer of: Bolloré, Bolloré Participations
Chairman of the Board of Directors of: Financière de l’Odet, Direct 8 (previously known as Bolloré Média), Matin
Permanent representative for Bolloré Participations to the Supervisory Board of: la Compagnie du Cambodge
Permanent representative for Bolloré Participations, Member of the Board of: SDV Cameroun (up to 09.16.2010), Bolloré Africa
Permanent representative for Bolloré Participations, member of the Board of: SDV Cameroun, SDV Congo,
of Alcan Packaging and then Chairman and CEO of Alcan Engineered Products. She served successively as a member of Alcan’s expanded Executive Committee, then as a member of Rio Tinto Alcan’s Executive Committee after Alcan was absorbed by Rio Tinto Group on October 25, 2007. In January 2011, Alcan EP was deconsolidated from Rio Tinto. The company was renamed Constellium, with Apollo Management as its majority shareholder, FSI holding 10% and Rio Tinto 39%. Christel Bories was Chief Executive Offi cer of Constellium from January to November 2011.
From January 2007 to January 2009, Ms. Bories was Chairman of the Executive Committee of the European Aluminium
Association (EAA) based in Brussels, Belgium, which represents the aluminium industry in Europe. From 2008 to 2010,
Ms. Bories was a member of the Board of Directors of Swedish company Atlas Copco AB.
Director of: Natixis (1) (since February 22, 2011) Chief Executive Officer of: Constellium (until November 2011)
Member of the Board of Directors of: Atlas COPCo AB (Sweden)
Member of: the Cercle de l’Industrie (Association of the Chairmen of the leading French industrial companies)
BICS Banque Populaire – before conducting the merger that gave rise to Banque Populaire Rives de Paris.
Chief Executive Officer of: Banque Populaire Rives de Paris Chairman and Chief Executive Officer of: Sud Participation S.A.
Chairman of the Board of Directors of: BPCE Achats, Turbo S.A. Vice-Chairman of the Board of Directors of: Fondation d’Entreprise Banque Populaire Member of the Board of: Natixis Private Banking Equity Permanent representative for Banque Populaire Rives de Paris, member of the Board of: i-BP, Banques Populaires’ corporate start-up organisation (Chairman)
Permanent representative for Banque Populaire Rives de Paris, member of the Board of: i-BP, Banques Populaires’ corporate startup organisation (Chairman)
Chairman of the Board of Directors of: Turbo S.A. Member of the Board of: Banque Privée 1818 (since 06.30.2009), Coface, Natixis
Chairman of the Board of Directors of: Turbo S.A. Member of the Board of: Coface, Natexis Assurances,
Permanent representative for Banque Populaire Rives de Paris to the Board of Directors of: i-BP (Chairman) Chairman of: SAS Sociétariat Banque Populaire Rives de Paris
Ms. Laurence Debroux, aged 42, is Chief Financial and Administrative Offi cer and Member of the Executive Board of JC Decaux. Before joining JC Decaux in 2010, Laurence Debroux worked in various positions at Sanofi for 14 years.
She started as Treasury Manager and was subsequently promoted to fi nancial director and then Head of Strategy and member of the Sanofi -Aventis Executive Committee. Previously, Laurence Debroux worked for the Elf Aquitaine Group’s
Member of the Executive Board of: JC Decaux (Chief Financial and Administrative
Chairman of: Sanofi 1 Chief Executive Officer of: Sanofi Aventis Europe,
Mr. Nicolas Duhamel, aged 58, graduated from IEP Paris and holds a bachelor’s degree in law, as well as a DESS in economics. Nicolas Duhamel is a graduate of ENA and was an Inspecteur des Finances (fi nancial inspector) in France’s
Treasury Department from 1984 to 1988, Chief Financial Offi cer for Havas (listed in the CAC 40 index) from 1993 to 1998,
La Poste in 2002 where he was Chief Operating Offi cer, Chief Financial Offi cer and a member of the group’s Executive
Chief Financial Officer and Member of the Management Board of: BPCE Chief Operating Officer of: CE Participations (up to 08/05/2010), BP Participations
Member of the Supervisory Board of: Fonds de Garanties des Dépôts (since March 29,
Chief Financial Officer and Member of the Management Board of: BPCE (since 07/31/2009)
Mr. Stève Gentili, aged 62, Vice-Chairman of the Supervisory Board of BPCE and Chairman of BRED Banque Populaire since 1998. Until 2004, Stève Gentili was head of a large food industry corporation. He also chairs Bureau International du Forum Francophone des Affaires.
Chairman of: Agence Banque Populaire pour la Coopération et le Développement, Bureau International-Forum Francophone des Affaires
Member of the Board of: Natixis Pramex International Milan, Natixis Algeria, BCI Mer Rouge, Thales, Bercy Gestion Finances +, Promépar Gestion, Bred Cofi lease, Prépar Iard
Member of the Supervisory Board of: Prépar-Vie Permanent representative for BRED Banque Populaire to the Board of Directors of: BICEC, BCI – Banque Commerciale Internationale,
Populaire du Quercy et de l’Agenais in 1997, then Chief Executive Offi cer of Banque Populaire de Franche-Comté, du
Member of the Supervisory Board of: BPCE Member of the Board of: Natixis
Permanent representative for Banque Populaire Bourgogne Franche-Comté to the Board of Directors of: i-BP, Banques Populaires’
Member of the Supervisory Board of: Natixis Chief Executive Officer of: Banque Populaire Bourgogne Franche-Comté
Member of the Supervisory Board of: Natixis Chief Executive Officer of: Banque Populaire
Since April 7, 2010, Olivier Klein has been Chief Executive Offi cer (2) in charge of Commercial Banking and Insurance and a member of the Management Board of BPCE.
Member of the Supervisory Board of: SOCFIM, Banque Palatine (since September 2011) Member of the Board of: Crédit Foncier de France, BPCE International and Outre-Mer, Banque Privée 1818, CNP Assurances (1), Sopassur, ENS Lyon, Neptune Technologies, I-BP, Nexity (since October 2011)
Member of the Executive Board of: BPCE – Banque Commerciale and Assurances (since 04.07.2010)
Member of the Board of: Natixis Chairman of the Executive Board of: Caisse d’Epargne Rhône Alpes (up to 06.30.2010)
Member of the Board of: Crédit Foncier de France (since 04.26.2010), BPCE International and Outre-Mer (since 03.17.2010),
Member of the Supervisory Board of: Banque Palatine (since 05.26.2010), GCE Capital
Permanent representative for CE Participations, member of the Supervisory Board of: la Compagnie des Alpes (up to 07.28.2010)
Permanent representative for BPCE, member of the Board of: SAS Ecureuil Vie Développement
Permanent representative for CNCE, member of the Supervisory Board of: la Compagnie des Alpes
Permanent representative for CERA, member of the Supervisory Board of: GCE Business Services, la Société des Trois
Member of the Supervisory Board of: Ecureuil Gestion, Ecureuil Gestion FCP
(1) Listed company. (2) The title of Chief Executive Offi cer is not used in the sense intended by Article L.225-66 of the French Commercial Code.
Mr. Jean-Bernard Mateu, aged 47, is a graduate of École Polytechnique and a graduate engineer of École Nationale Supérieure des Télécommunications de Paris. After successively working as Methods Group Manager at La Compagnie
Bancaire, Sales Development Director then IT Studies Director at Crédit du Nord and General Secretary then Head of
Operations at La Banque Directe (Axa Banque), he joined the Caisses d’Epargne group in 2000. He fi rst joined Caisse d’Epargne de Picardie as a member of the Executive Board in charge of Networks and Sales Development. He then moved on to work as head of the Sales Planning and Supervision Department, then went to the Social Economy and
Social Housing Department at Caisse Nationale des Caisses d’Epargne (now known as BPCE) before becoming Chief
Executive Offi cer of Natixis Financement (formerly Caisse d’Epargne Financement) 2005 – member of Natixis’ Executive
Member of the Board of: Natixis (1) Chairman of the Executive Board of: Caisse d’Epargne et de Prévoyance de Rhône Alpes (CERA) (until 12.05.2011) Chief Executive Officer of: Novacrédit Chairman of the Supervisory Board of: Rhône-Alpes PME Gestion Member of the Board of: Novacrédit, Natixis Paiements, Siparex Associés (since 04.19.2011) Permanent representative for CERA to the Supervisory Board of: GCE Business Services, Société des Trois Vallées Permanent representative for CERA to the Board of: Fédération Nationale des Caisses d’Epargne
Permanent representative for CERA to the Supervisory Board of: GCE Business Services (since 07.19.2010),
Chairman of the Board of Directors: Natixis Global Asset Management Member of the Board of: Sequana, Arkema, Lazard Ltd Chairman of: SAS Coface Holding Permanent representative for Natixis, Member of the Board of: Coface Permanent representative for Natixis, Non-voting member of: BPCE’s Board
Member of the Board of: Natixis Global Asset Management (until 09.01.2010 then Chairman of the Board of Directors),
Coface (until 10.15.2010 then permanent representative for Natixis to the Board of
Chairman and Chief Executive Officer of: Oddo Asset Management (up to 05.13.2009)
Member of the Supervisory Board of: la Banque Postale Gestion Privée
Mr. Bernard Oppetit, aged 55, is Chairman of Centaurus Capital, a fund management company he founded in 2000. Centaurus Capital, a major player in alternative asset management, operates in London and Hong Kong. Before he founded Centaurus Capital, he spent 20 years at the Paribas group, in Paris, New York and then London. From 1995 to 2000, he was global head of Equity Derivatives. Bernard Oppetit is an alumnus of École Polytechnique and a French
Mr. Didier Patault, aged 51 , is Chairman of the Caisse d’Epargne Bretagne Pays de Loire Executive Board and a member of the BPCE Supervisory Board.
He is an alumnus of École Polytechnique and École Nationale des Statistiques et de l’Administration Économique
Permanent representative for CEBPL, member of the Board of: Pays de la Loire Développement, SEMITAN, NAPF , FNCE Permanent representative for CEBPL, member of the Supervisory Board of: GCE Business Services, GCE Technologies
Member of the Supervisory Board of: GCE Capital Member of the Board of: CE Participations (up to 08.05.2010), Natixis Global
Permanent representative for CEBPL, member of the Board of: Pays de la Loire Développement, SEMITAN,
Chairman of the Executive Board of: la Caisse d’Epargne et de Prévoyance de Bretagne Pays de Loire
Member of the Supervisory Board of: GCE Capital, Caisse Nationale des Caisses d’Epargne (from 05.28.2009 to 07.31.2009)
Member of the Supervisory Board of: Natixis Chairman of the Executive Board of: la Caisse d’Epargne et de
Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Pays de Loire,
Chairman of the Board of Directors of: SODERO Participations, la Mancelle d’Habitation, S.A. des
PDL), Ecureuil Vie (up to 02.19.2007), Ixis CIB (up to 05.24.2007)
Member of the Audit Committee of: Compagnie de Financement Foncier SCF,
Mr. François Pérol, aged 48, is a graduate of HEC and the Institut d’Études Politiques de Paris. After graduating from ENA, François Pérol started his career in 1990 at the Inspection Générale des Finances (fi nancial inspection body). In 1994, he became deputy general secretary of France’s interministerial Committee on industrial restructuring (CIRI). In 1996, he was appointed head of fi nancial markets within the French Treasury.
From 1999-2001, he served as General Secretary of the Paris Club, in charge of international debt negotiations. After serving as deputy Corporate Development and Financing Director within the French Treasury in 2001, in 2002 he was named deputy cabinet Director to Francis Mer, the Minister for the Economy, Finance and Industry, then deputy cabinet
Since July 31, 2009, he has been Chairman of the Management Board of BPCE. He is also Chairman of the Boards of
Chairman of the Board of Directors of: BPCE IOM, Crédit Foncier de France
Chairman of the Executive Board of: BPCE (since 07.31.2009), la Caisse
Mr. Henri Proglio, aged 62, has held various general management positions at Générale des Eaux and Vivendi, before serving as Chief Executive Offi cer of Veolia Environnement, and he has served on the Boards of Directors and the
Chairman and Chief Executive Officer of: EDF (1) Chairman of the Board of Directors of: Veolia Propreté (until 03.23.2011), Veolia Transport (until 03.24.2011) Member of the Board of: Dassault Aviation (1), CNP Assurances (1), Veolia Environnement (1), Veolia Propreté, EDF International S.A. (until 05.01.2011), EDF International SAS (since 05.02.2011), EDF Energies Nouvelles (since 09.21.2011)
Chairman and Chief Executive Officer of: EDF Chairman of the Board of Directors of: Veolia Environnement (up to 12.12.2010), Veolia Propreté,
Member of the Supervisory Board of: Veolia Eau and Boards A and B of Dalkia
Chairman of the Board of Directors of: Transalpina di Energia (since 02.08.2010)
Member of the Board of: FCC Espagne (since 05.27.2010) and Edison (since 02.08.2010)
FRANCE Member of the Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis
Chairman and Chief Executive Officer of: EDF (starting 11.25.2009), Veolia Environnement
National Commission for Sectors of Vital Importance (starting in 12.08.2009), the Comité d’Energie
Member and Chairman of the Supervisory Board of: Dalkia France Non-voting member of: Caisse Nationale des
FRANCE Member of the Supervisory Board of: Natixis Chairman and Chief Executive Officer of: Veolia Environnement
Populaire de la Loire in 1998, then Chief Executive Offi cer of Banque Populaire de l’Ouest in 2001. He subsequently became Chairman and Chief Executive Offi cer of i-BP in 2006, before being appointed Deputy Chief Executive Offi cer of Banque Fédérale des Banques Populaires in January 2008. On July 31, 2009, Philippe Queuille became a member of the Senior Management Committee and Deputy Chief Executive Offi cer in charge of operations for BPCE.
Chairman of the Board of Directors of: Albian-IT, i-BP Member of the Board of: Partecis, ICDC (until March 2011), BPCE Achats Permanent representative for BPCE, member of the Board of: Natixis Paiements Permanent representative for BPCE, member of the Supervisory Board of (Chairman): GCE IT-CE (formerly GCE Technologies), GCE Business Services (until December 2011) (absorbed by GCE IT-CE, formerly GCE Technologies)
Chief Executive Officer of: Albiréo (up to October 2010), i-BP (up to March 2010)
Member of the Board of: Partecis, ICDC (since January 2010), BPCE Achats
Permanent representative for i-BP to the Board of Directors of: Natixis Altaïr IT Shared Services (S.A.)
Member of the Board of: Partecis, Crédit Commercial du Sud-Ouest – CCSO (up to 07.09.2009)
Chairman and Chief Executive Officer of: i-BP Member of the Board of: Natexis Paiements
Permanent representative for i-BP to the Board of Directors of: Natexis Altaïr Permanent representative of BFBP to the Board of Directors of: Partecis
Vice-Chairman of the Steering and Supervisory Board of: Caisse d’Epargne Île-de-France Member of the Board of: BPCE AssuranceS, S.E.M.A.V.O. (Société d’Économie Mixte d’Aménagement du Val d’Oise) Vice President of: the French association for mayors of tourist municipalities President of: IFAC (Local Supervisors’ Training Institute) for France and Val d’Oise (non-profi t organisations)
Vice-Chairman of the Steering and Supervisory Board of : Caisse d’Epargne Île-de-France
Vice President of: the French association for mayors of tourist municipalities
Vice-Chairman of the Steering and Supervisory Board of: Caisse d’Epargne Île-de-France
Member of the Supervisory Board of: Natixis Vice-Chairman of the Steering and Supervisory Board of: Caisse d’Epargne Île-de-France
Member of the Board of: the Syndicat des Transports d’Île-de-France (STIF),
Following the merger of Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des Caisses d’Epargne (CNCE) that resulted in the creation of BPCE, Natixis has been partly owned by BPCE since August 1, 2009. As of December 31, 2011, BPCE held a 72.26% stake in Natixis.
As indicated above, Natixis’ Board of Directors, whose members are appointed for six years, had 14 members on March 1, 2012, including: • four members from BPCE, namely Messrs Pérol, Klein and Queuille and BPCE; • three members from Banques Populaires, namely Messrs. Criton, Gentili and Jeannin; • two members from Caisses d’Epargne, namely Messrs. Patault and Sueur; • five independent members, namely Ms. Bories and Ms. Debroux and Messrs. Bolloré, Oppetit and Proglio.
Ms. Christel Bories was Chief Executive Offi cer of Constellium. Ms. Laurence Debroux is Chief Financial and Administrative Offi cer of JC Decaux S.A., the world’s second largest outdoor advertising group and inventor of the “street furniture” concept. Vincent Bolloré manages and controls the Bolloré Group, which occupies leading positions in several industrial, services and media sectors. Henri Proglio is Chairman and Chief Executive Offi cer of EDF. Bernard Oppetit is Chairman of Centaurus Capital.
With respect to the principle of gender parity within the Board of Directors, as set out in the January 27, 2011 Law, Natixis has two women Board members out of a total of 14 as at March 1, 2012. Moreover, the nomination of two additional women as Board member will be put forward during the next General Shareholders’ Meeting on May 29, 2012.
In accordance with Article 9 of the Natixis bylaws, each Board member must own at least one hundred and forty (140) Company shares during their term of offi ce.
When a Board member is appointed, his/her curriculum vitae with a career summary is sent to the other Board members and to the shareholders.
• criteria used to qualify member of the Board of Directors as “independent”: An independent director is a person who has no ties with the management, Company or Group of a nature liable to compromise their freedom of judgment or create a conflict of interest with the management, Company or Group.
– have close family ties with an executive of the Company or its Group; have been an auditor of the Company or a Group company in the previous fi ve years; have been an executive of the Company or one of the Group’s companies in the previous fi ve years; have been a member of the Company’s Supervisory Board/Board of Directors for more than 12 years; receive or have received additional material compensation from the Company or the Group other than their directors fees.
Board members representing major shareholders in the Company in either a direct or indirect capacity may be considered independent if these shareholders do not control the Company within the meaning of Article L.233-3 of the French Commercial Code. However, if a Board member represents a shareholder of the Company that holds, directly or indirectly, more than 10% of the share capital or voting rights, the Board shall, based on a report from the Appointments and Compensation Committee, systematically review the member’s independence, taking into account the structure of the Company’s share capital and the existence of any potential confl icts of interest.
More specifically, the Compliance Charter states that: – all Board members must devote suffi cient time and attention to the performance of their duties and regularly attend the meetings of the Board and Committee(s) of which they are a member. All Board members must ensure that they act at all times in the best interests of Natixis and undertake to defend and promote Natixis’ values; – Board members and Committee members, as well as anyone attending meetings of the Board and its Committees, have a general obligation of confi dentiality with respect to matters discussed at meetings, as well as with respect to any information of a confi dential nature or information presented as such by the Chairman or Chief Executive Offi cer; – each Board member must declare any trading in Company shares in accordance with the provisions of Article L.621-18-2 of the French Monetary and Financial Code. Members must also inform the Company of the number of shares held on December 31 of each year and any fi nancial transactions carried out, so that this information may be disclosed by the Company; – Natixis may also ask each Board member to provide any information in relation to the trading of listed companies’ securities necessary for it to fulfi ll its reporting obligations to all authorities such as stock market authorities, both in France and abroad; – Board members must refrain from carrying out any transactions involving Natixis shares during the 45 days preceding the publication of the Company’s quarterly, interim or full-year results or a General Shareholders’ Meeting and during the two trading days after the date of the event concerned; – Board members must also refrain from acting against the interests of Natixis or the companies that it controls, namely in the event of a transaction in which a Board member or a non-voting member is directly or indirectly involved.
Evaluation of the Board of Directors: At least once a year, an agenda item will be devoted to evaluating the Board’s operation, an account of this assessment will be included in Natixis’ annual report (For 2011, see point 3.3.1.4 – Assessment of the Board’s work in 2011); • Board operating procedures specified in the Internal Rules: In particular, the Internal Rules stipulate that, except in the case of decisions linked to the preparation of parent and consolidated financial statements and management reports (Company and Group), Board members participating in a Board Meeting by videoconference or through the use of telecommunication facilities transmitting at least the member’s voice and whose technical characteristics allow for continuous and simultaneous streaming of the proceedings, shall be deemed present for the purposes of quorum and majority.
The Chief Executive Offi cer attended all meetings, thereby enabling Board members to hear his opinion on important issues and to ask him any questions that they deemed to be relevant.
In accordance with banking legislation, the Board examined the reports on internal control requirements and the assessment and monitoring of risks. It also reviewed the internal control operations carried out and their results, in particular compliance controls. The Board approved the Board of Directors’ report for 2010 as well as the Chairman’s report on the preparation and organization of the
In terms of monitoring activities, the Board approved the Company and consolidated fi nancial statements and received and approved the Natixis strategic plan as well as the budget projections for 2012. It received regular updates on GAPC asset positions.
It was regularly informed of all correspondence from the Autorité de Contrôle Prudentiel (ACP - French Prudential Supervisory Authority ) and the Autorité des Marchés Financiers (AMF - French Financial Markets Authority). The Board also prepared the draft resolutions for submission to the General Shareholders’ Meeting.
In addition to the business reports submitted by Natixis’ Executive Management on the events occurring between Board Meetings and the business trends over the period, the Board received regular updates on measures affecting the Company’s organization.
Over the course of 2011 and in accordance with the bylaws and the Internal Rules, the Board also met to approve the different restructuring operations between subsidiaries prior to the implementation of these operations, namely: • Coface’s new strategy; • the transfer of Natixis Factor, from Coface Holding to Natixis; • the Coccinelle project related to the P3CI issue; • the acquisition by Natixis of all of Natixis Private Equity’s stakes in six asset management companies (Seventure Partners, Naxicap Partners, Dahlia Partners, Dahlia Gestion, Caspian Private Equity, Eagle Asia Management); • the transfer of GCE Capital’s shares in Masseran Gestion, Alliance Entreprendre and BDR Invest to Natixis; • the creation of a joint holding company between Natixis and Natixis Paiements; • various “Transmission Universelle du Patrimoine” transactions (the transfer of all of a company’s assets and liabilities) between Natixis and some of the group’s small structures.
In accordance with current regulations, the Board approved a number of regulated agreements prior to their signing (see the special report by the Statutory Auditors in Chapter 5 “Financial Data” for more detailed information on regulated agreements).
For the third year in a row, Natixis carried out an assessment of the work of its Board of Directors and specialized Committees, in accordance with recommendations set out in the AFEP-MEDEF C ode regarding the correct governance of listed companies.
Among the highlights of the assessment was the view that the delivery time for submitting matters to the Board for consideration had improved compared to the previous year and that it is now satisfactory, thanks in large part to the dedicated website. The documentation provided was deemed complete, or very complete, but sometimes insuffi ciently concise.
Lastly, the Board members unanimously considered that a relationship of trust had been established with the Chairman and Chief Executive Offi cer. Similarly, they found the distribution of duties between the two offi ces to be clear.
Natixis has decided to initiate a training program for its Board members as of the 2012 fi nancial year. This training will be divided into two parts: • a training program aimed at new Board members joining the company. This half-day training session is in particularly aimed at presenting Natixis (its business lines, governance, organization), outlining the main elements of the income statement and the risk management policy, and heightening Board members’ awareness of regulatory aspects and their responsibilities; • an ongoing training program for existing Board members which is composed of various modules, in particular ones on Natixis’ different business lines, the financial markets, the accounting and financial regulations of financial institutions, as well as on issues concerning compliance with internal audits and the responsibilities of Board members.
Natixis’ Board of Directors has three specialized Committees: an Audit Committee, an Appointments and Compensation Committee and a Strategic Committee. Each Committee is chaired by an independent member of the Board of Directors.
The Committee was chaired by independent Board member, Bernard Oppetit, throughout 2011.
The Audit Committee has the following responsibilities: • it assists the Board of Directors in preparing the financial statements and the Company’s management report. Within this context, it monitors the quality of the information issued to shareholders and, more generally, it performs the duties set out by banking regulations; • it examines the parent and consolidated annual and interim financial statements as well as the Company’s budget projections and financial documents distributed when the financial statements are approved; • it monitors the independence of the Statutory Auditors, gives its opinion on their selection or the renewal of their appointment and examines their schedule of works, the results of their audits and their recommendations as well as any actions taken on the basis of these recommendations; • it gives an opinion on the procedures implemented by the Company to ensure compliance with regulations, and monitors the efficacy of internal control and risk management systems; • it gives opinions on the appointment or dismissal of the Head of Group Internal Audit; • it monitors the implementation of actions based on the conclusions of assignments undertaken by Group Internal Audit and the French Prudential Supervisory Authority (ACP); for this purpose, it may receive reports from Group Internal Audit and the ACP in relation to the Company and its subsidiaries; • it approves the Company’s annual internal audit, including audits of subsidiaries, with this program being presented to the Committee at least one week prior to its approval; • it gives its opinion on the report presented to it on an annual basis regarding commercial relations between the Company or one or more of its subsidiaries and all or some of the entities forming Groupe BPCE.
The Company’s CEO provides the Audit Committee with any documents and information it needs to perform its duties. The following list is not exhaustive: • parent and consolidated financial, accounting, and regulatory documents prepared periodically by the Company;
• summary reports by the Company’s Statutory Auditors; • any audit reports concerning the Company; • any internal control reports prepared by the Company for the regulation and control authorities; • accounting policies and methods applied within the Company; • internal control policies and procedures; • projected parent results at the end of March, June, September and December; • consolidated budgets and financial statements of the main subsidiaries, as well as any related documents provided to the Board of Directors or, if applicable, the Audit Committee of the principal subsidiaries.
The Natixis Audit Committee met fi ve times in 2011. The attendance rate was 80% for the year as a whole, compared with 77% in 2010.
Depending on its agenda, the Audit Committee also benefi ted from the presence at its various meetings of the Natixis Chief Finance and Risk Offi cer, as well as the head of Finance, the Head of Risk, the heads of General Audit for Natixis and BPCE, the Corporate Secretary and the head of compliance for Natixis.
In order to enable it to audit the accounts, the Audit Committee is sent a copy of the reports of the Finance Department and the comments of the Statutory Auditors regarding full-year accounts and the review of the half-year and quarterly accounts.
In order to enable it to audit the risks, the Audit Committee is provided a copy at each of its meetings of the consolidated monthly risk monitoring report.
In 2011, the Committee’s duties focused on the following items in particular: • the reappointment of Statutory Auditors; • the review of the monthly risk monitoring report; • the exposure of Natixis’ various business lines to sovereign risk; • market and credit liquidity and risks; • the mechanisms of the CCIs (cooperative investment certificates); • the review of reports on internal control processes and procedure (Article 42 of CRBF rule 97-02) and risk measurement and monitoring (Article 43 of CRBF rule 97-02); • Natixis Assurances’ asset management; • IT expenditures; • risk of non-compliance, business continuity, outsourcing core services/activities; • the proposed audit plan for 2012; • the 2012 annual budget; and
• the acknowledgement of all correspondence from the ACP as well as all correspondence and information from the Autorité des Marchés Financiers and the answers to said correspondence from Natixis.
During 2011, the Compensation Committee was renamed the “Appointments and Compensation Committee” following suggestions made during the assessment of the Committee’s work.
The Committee was chaired throughout the year by Vincent Bolloré, an independent Board member.
3 CORPORATE GOVERNANCE Role and operating rules of the corporate bodies
The Committee is responsible for submitting proposals to the Board of Directors concerning: • the level and terms of compensation paid to the Chairman of the Board of Directors, the CEO and, where applicable, one or more Natixis Deputy CEOs (including fringe benefits, pension plans and health insurance, as well as the allocation of stock options or share purchases); • rules for allocating Board members’ fees to the Board and the total amount submitted for approval by Natixis’ General Shareholders’ Meeting; • the general policy on stock options allocation.
The classifi cation of the status of Board members as independent members is debated by the Appointments and Compensation Committee which prepares a report for the Board of Directors. Each year, based on this report and before the publication of the annual report, the Board of Directors reviews the situation of each of its member based on independence criteria set out in Article 2.3.2 of the Board of Directors’ internal regulations. Furthermore, members are considered to be independent when their position as a member of the Appointments and Compensation Committee does not constitute a confl ict of interest with the company in question (in particular, they are not employees of the company in question).
The Strategic Committee was formed in 2011 following suggestions made by the Board of Directors as part of the assessment of the Board’s work.
The Strategic Committee meets once a year. The members of the Board of Directors and members of the Management Board are invited to this meeting.
In addition, the meetings of this committee allow the Board of Directors to get to know the management team that works with the Chief Executive Offi cer better and improve the Board’s work methods.
On December 31, 2011, Board members included Ms. Aline Bec (Information Systems Purchasing Logistics) and Messrs. Luc- Emmanuel Auberger (Finance and Risks), Alain Delouis (Human Resources), De Doan Tran (Corporate and Investment Banking), Jean- Yves Forel (Specialized Financial Services),
André- Jean Olivier (Corporate Secretariat), Olivier Perquel (Strategy and GAPC) and Pierre Servant (Investment Solutions).
As Natixis’ decision-making body, the Senior Management Committee’s remit is to examine and validate the Company’s core strategy and oversee its management, notably as regards the effective application of the Company’s strategy; its budget; all major projects and investments; its organization and Human Resources; the performance of its business lines and its results; and the control of its activities.
In accordance with Article 15 of the bylaws, the Chief Executive Offi cer is vested with the broadest powers to act on behalf of the Company under all circumstances. He exercises those powers within the limits of the corporate purpose and subject to the powers expressly reserved for shareholders’ meetings and the Board of Directors by law and to the provisions and restrictions stipulated by the Internal Rules. He represents the Company in its relations with third parties.
The Board of Directors may nominate a Secretary selected from among its Board members or otherwise.
Following Natixis’ conversion into a French “société anonyme” with a Board of Directors, a Management Board was set up in early May 2009 in order to examine and validate the Company’s main decisions and steer its management. In 2010, the Board met on a weekly basis without exception, apart from during part of the summer holidays and the end-of-year holiday season. The Board held a total of forty six meetings during 2011. These meetings were chaired by the Chief Executive Offi cer.
The Senior Management Committee also focused on reinforcing Natixis’ role in defi ning Groupe BPCE’s strategy, i.e. the creation of a main long-term leasing operator within Natixis Lease, the launch of new products/services, the development of distribution synergies with the networks, the pooling of resources (IT infrastructures). The Senior Management Committee was also consulted on the main choices of fi nancial policy.
The Senior Management Committee also monitored Natixis’ risk management and control measures.
OGMs may also be used to appoint or re-appoint Board members and non-voting members as well as to appoint or re-appoint Statutory Auditors and, if necessary, ratify the co-opting of a member of the Board.
An authorized proxy (namely the shareholder’s spouse or another shareholder, a partner with whom the shareholder has a civil partnership, or any other individual or legal entity of his/her choice) may always represent a shareholder at shareholders’ meetings. This proxy may not represent another person.
For holders of registered shares, an entry dated D-3 is suffi cient to enable them to attend the meeting.
In line with the provisions of Article L.225-105 of the French Commercial Code, one or several shareholders holding the requisite portion of the share capital may, subject to the conditions and timeframes set by law, request by means of recorded delivery letter the inclusion of items or draft resolutions on the agenda of the meeting.
The Chairman of the Board of Directors waived all fi xed and variable compensation with respect to the performance of his duties at Natixis in 2011, as in previous fi scal years.
Members of the Appointment and Compensation Committee: – fixed portion: €3,000, – variable portion: €1,000 per meeting, up to a maximum of 5 meetings.
The variable compensation to be paid for 2011 was calculated on the basis of quantitative and qualitative criteria defi ned by the Board of Directors in advance, as follows: • quantitative criteria relate to 70% of the variable compensation. These criteria depend on the performance of Groupe BPCE (pre-tax profit) and Natixis net income (group share), net revenues, GAPC’s liquidity budget and RWA); • qualitative criteria relate to 30% of the variable compensation. These criteria are assessed by the Board of Directors and are linked to the continued implementation of the strategic New Deal plan, cross-function projects and performance. This in turn is assessed according to the CEO’s capacity for foresight, decision-making and implementation, investment in compliance and control and risk management systems and management of executive staff.
On February 22, 2012, the Board of Directors, on the advice of the Compensation Committee, decided to pay the CEO gross variable compensation of €670,000, in light of the performance of Groupe BPCE, Natixis and the achievement of his personal targets.
In accordance with applicable “Professional standards concerning the governance and variable compensations of employees whose professional activities have a signifi cant impact on the company’s risk profi le” and with the provisions of Regulation 9702 of February 21, 1997, concerning the internal control of credit institutions and investment fi rms, as amended by the Decree of December 13, 2010, the variable remuneration of Laurent Mignon will be paid as follows: • 37% of this variable compensation will be paid in 2012, 50% of which shall be index-linked to Natixis shares; • 63% of this variable compensation will be deferred for three years, 50% of which shall take the form of Natixis shares.
3.4.2.2 Compensation paid to the CEO in the form of stock options
Under the terms of this commitment, the Chief Executive Offi cer does not receive severance payments if he leaves the Company at his initiative to perform new duties or changes his position within Groupe BPCE. Nor is the severance payment granted if the company experiences major economic diffi culties. Furthermore, in accordance with the provisions of the AFEP- MEDEF C ode of corporate governance, the right to compensation is subject to a certain number of criteria and performance conditions.
Compensation in relation to the fi scal year €1,477,906 (a) €2,007,784
(a) On February 22, 2012, the Board of Directors, on the advice of the Appointments and Compensation Committee, decided to allocate a variable compensation of €670,000 to the Chief Executive Offi cer. In accordance with applicable “Professional standards concerning the governance and variable compensation of employees whose professional operations have a signifi cant impact on the company’s risk profi le” and with the provisions of Regulation 97-02 of February 21, 1997, concerning the internal control of credit institutions and investment fi rms, as amended by the Decree of December 13, 2010, 63% of this variable compensation will be differed for three years and subject to performance criteria linked to Natixis’ results. This deferred portion will be in the form of Natixis securities and cash.
❚ TABLE 3 Table showing directors’ fees and other compensation received by non-executive corporate officers of NATIXIS from January 1 to December 31, 2011
(3) Variable compensation in respect of fi scal year 2010, of which €144,000 (50%) paid in cash (5) in 2011 and the balance deferred (50%) over three years in equal shares of €48,000. For 2012, the fi nal amount paid will be €43,802 (after application of the indexing factor). (4) Variable compensation in respect of fi scal year 2009, of which 75% paid in 2010. 12.5% was paid in 2011 (5) and 12.5% will be paid in 2012. (5) Equals 50% of the 2010 variable compensation (€144,000) and 12.5% of the 2009 variable compensation (€17,500). (6) Variable compensation in respect of fi scal year 2011, of which €129,500 (50%) paid in cash in 2012 and the balance deferred (50%) over three years in equal shares of €43,167.
In respect of BPCE and its subsidiaries 22,407 12,507 22,050 11,400
Member of the Natixis Audit Committee 20,000 22 ,000 (3) 8,000 (3) 6,000 (3)
(1) Part of which from attendance fees due in respect of fi scal year 2009. (2) Part of which from attendance fees due in respect of fi scal year 2010. (3) Before 25% withholding tax. (4) Variable compensation in respect of fi scal year 2010, of which €144,000 (50%) paid n cash in 2011 (5) and the balance deferred (50%) over three years in equal shares of €48,000. For 2012, the fi nal amount paid will be €43,802 (after application of the indexing factor). (6) Mobility bonus. (7) Variable compensation in respect of fi scal year 2011, of which 129,500 (50%) paid in cash in 2012 and the balance deferred (50%) over three years in equal shares of €43,167.
Benefi ts in kind in respect of CNCE then BPCE 5,148 5,148 0 0
❚ TABLE 4 Subscription or purchase options allocated during the period to each executive corporate officer by the issuer and by any group companies
Number of options allocated during the period Exercise price Exercise period
❚ TABLE 6 Performance shares allocated to each executive corporate officer
Philippe Sueur n/a 0 0 2) Natixis CEO in 2011 : n/a n/a n/a
Terms of exercise (for plans with several tranches) n/a n/a n/a
Cumulative number of outstanding subscription options at end of period 6,433,196 12,352,340 4,236,501
Date term of offi ce * Pension plan benefi ts for all personnel.
In accordance with the enforcement decree of EU Directive 2003/71 (Article 14.1 of Appendix 1 of Regulation 809/2004), none of the members of the Board of Directors or the Executive Management has been convicted of fraud, subject to bankruptcy, liquidation or receivership, convicted or punished by offi cial or regulatory bodies, disqualifi ed from acting as a member of administrative, management or supervisory bodies of an issuer, or from participating in the management or conduct of the business of an issuer within the previous fi ve years at least.
3.5.2 CONTRACTS BINDING THE COMPANY AND THE DIRECTORS AND THE EXECUTIVE MANAGEMENT
In accordance with EU regulations, it is hereby stipulated that there are no service agreements binding members of the Board of Directors or Executive Management to the Company that could confer benefi ts according to the terms of such an agreement and that might by their nature compromise the independence of members or interfere with their decision-making.
Natixis was formed from the merger of the Corporate and Investment Banking operations and services of the Banques Populaires and Caisses d’Epargne in 2006, continuing in 2007 with Ixis CIB’s absorption into Natixis. Following a subsequent merger between Banque Fédérale des Banques Populaires and Caisse Nationale des Caisses d’Epargne in 2009, Natixis’ core shareholder is now BPCE. For further details about Natixis’ history, please refer to Chapter 1, “Presentation of Natixis”.
Natixis’ internal control system complies with the principles on which the CECEI (France’s Credit Institution and Investment Firms Commission) issued its approval to Natixis as well as the governance rules defi ned within Groupe BPCE. This system is also consistent with the legal and regulatory framework applicable to Natixis and which is notably set out in amended CRBF rule 97-02 (the “CRBF rule”). In particular, this rule provides for the implementation of an internal control system on a consolidated basis and which comprises arrangements to ensure: • permanent control regarding the compliance, security and validation of transactions, as well as compliance with other requirements related to the monitoring of risks of any nature resulting from transactions; • periodic checks in the form of investigations and audits implemented centrally and, if necessary, locally, and which concern the compliance of transactions, compliance with procedures and the effectiveness of permanent control mechanisms.
Natixis is subject to the control of its majority shareholder and central body, BPCE, which oversees compliance with risk monitoring requirements on a consolidated basis. As such, structures and systems for coordinating the permanent and periodic control mechanism, and thus for ensuring overall consistency, were introduced when BPCE was formed on July 31, 2009. In the same way, Natixis’ risk, compliance and audit functions are incorporated into Groupe BPCE’s corresponding functions.
Natixis’ internal control system is organized according to the following bodies of rules: • a set of charters and procedures for governing and managing Natixis’ risk processes (such as the procedure governing the credit decision process, the market risk management charter, the charter for measuring, controlling and managing operational risks, the charter for managing compliance risks, etc.); • Natixis’ audit charter; • the general IT/data security policy establishing the governance rules for the security and continuity of IT systems, as well as the security principles to be applied; • the charter formalizing areas of responsibility for country managers in Natixis’ foreign operations and organizing relations with heads of the business lines represented locally; • the “compliance manual” which defines all best practices applicable to Natixis’ employees (especially concerning preventing conflicts of interest, countering money laundering, employee professional ethics, protection of confidential information, etc.).
Although responsibility for first-level internal control lies firstly with operational or functional departments, second-level permanent controls and periodic controls are carried out by independent central functional departments (whose heads as defined in Articles 7 and 11 of the CRBF rule, report directly to Natixis’ executive body as defined in Article 4 of the same rule); • Concerning the scope of internal control, Natixis organizes its control functions on a global basis so as to ensure consistency of the internal control mechanism throughout the whole Company. The internal control system thus covers all risks and extends to all business lines and subsidiaries within Natixis. Local permanent and periodic control functions within subsidiaries or business lines report to Natixis’ corresponding central control departments, either on a functional basis in the case of subsidiaries or on a hierarchical basis in the case of business lines. The “risk”, “compliance” and “audit” functions constitute distinct business functions; • Natixis structures its control mechanism in a manner consistent with the principles set out by BPCE, with the objective of ensuring a consolidated approach to risk under the framework of control exercised by the shareholder group and central body, as well as satisfying the consolidated monitoring requirements set out in the CRBF rule.
First-level permanent controls are an essential component of Natixis’ internal control system.
• The Compliance Department ensures the development of best practices for preventing and managing compliance risk at Natixis, thereby helping to prevent financial loss and the associated reputation risk. It acts in accordance with instructions prescribed by BPCE and its scope of action covers Natixis, its subsidiaries and branches.
At Natixis, the Code of Conduct refers to the set of rules applicable to the professional conduct expected of our employees when providing investment services. These rules are set out in the AMF’s General Regulation and are meant to safeguard the integrity of the markets and the primacy of the client’s interests.
To defi ne these rules and to ensure that they are fully known to all Natixis employees, the Compliance function introduced a company-wide effort, “Conduct/Ethics/Training”, deployed to each core businesses and each business line, including all subsidiaries, by the Compliance Offi cers.
The challenges addressed in 2011 included stepping up training initiatives and the oversight of personal transactions and tailoring detection of confl icts of interest to changes within the organization.
In 2011, the main initiatives were: • the project to update CIB’s “Know Your Customer” procedures; • the transfer to CIB of the task of issuing opinions on relationship forming as part of an on-boarding mechanism, after analysis of the anti-money laundering risk posed by clients classified as low or medium risk, a function that previously fell within SECFIN’s remit; • at the end of the year, SECFIN organized the operating activities that it still conducts on behalf of CIB into a unit created specifically for this purpose. This unit is designed to handle opinions on relationship forming for high-risk clients, the detection of unusual transactions and reporting on suspicious transactions; • the updating and validation of anti-money laundering, knowyour -customer and anti-terrorist financing procedures, in particular those related to activities performed on behalf of CIB; • in the area of combating terrorist financing, Natixis signed an agreement with BPCE in December that specifies the services that SECFIN provides to all the entities of Groupe BPCE. This primarily relates to forwarding anti-terrorism and Politically Exposed Persons lists to the banks, regional caisses and BPCE subsidiaries so that they can take the necessary precautions in this regard before entering into a business relationship. Finally, we note that there was increased intensity in 2011 in the oversight of embargoes due to events associated with the “Arab Spring”; • in the area of fraud, SECFIN consolidated its network of reporting agents within the business lines and instituted a Committee that meets quarterly and serves as forum for dialog and harmonization of the anti-fraud mechanism. Fraud or attempts a fraud in any Natixis business line will result in an investigation and will then be the subject of warnings issued to all reporting agents and relayed to all Customer Relationship Officers. Furthermore, the work conducted together with the Risk Department has led to progress in mapping and anti-fraud measures; • as to training in combating money-laundering offered to all employees of the business lines, a special effort has been made in classroom instruction. Training available via e-learning continues in parallel along with the design and roll-out of a module dedicated to combating fraud in 2011.
Permanent second-level controls, for which the Compliance Department has responsibility, focus on: • transaction compliance: this involves checking not only transactions, but also that transaction execution processes comply with applicable banking and financial rules, and market rules; • organizational compliance; • the quality of data transmitted to the Compliance Department (through automated systems and indicators); and
• the application of procedures. This control involves ensuring that procedures exist and are effectively applied (in accordance with Article 40 of rule 97-02), and are compliant with the rules governing the various types of risk.
Finally, several projects are underway to strongly delineate the distinction between the control mechanisms set up by the Operational Risk and Compliance functions. This relates primarily to incidents, mapping and controls.
The Head of ITSS and Business Continuity (Head of ITSS and BC) works for Natixis and its subsidiaries in France and abroad. His/her role includes: • ensuring at all times that security policy is appropriate to the risks incurred and to regulations; • promoting security policy and ensuring its compliance at all levels; • if necessary, identifying the security services to be implemented; • verifying and monitoring compliance with this policy and ensuring overall tracking across the whole of Natixis.
In 2011, ITSS activities and business continuity focused on: Governance of the function
In 2011, ITSS-BC rolled out the organization provided for in the charter on IT Systems Security and Business Continuity introduced as the result of new orientations of the New Deal strategic plan. In connection with a unifi ed function, the Heads of ITSS in the divisions lent their assistance to steering and leading the ITSS function within their specifi c areas of responsibility in order to better serve business needs.
A campaign to review ITSS objectives was conducted to make provision for the security directives issued by BPCE.
Natixis’ continuity mechanism is placed under the responsibility of Natixis’ head of ITSS and BC. Work in 2011 focused on: • keeping the business continuity arrangement in working order. Natixis has over 1,500 backup positions for users, an IT backup site and crisis meeting rooms. A campaign focused on updating Impact Analysis Assessments was conducted with 28 user backup drills, around 30 IT backup tests and 5 crisis management drills. Furthermore, two telecommuting exercises involving nearly 500 employees were conducted; • plan review. Above and beyond first-level business continuity planning controls, a second-level control campaign was conducted focused on the four most critical business lines: CIB France, EuroTitres, Natixis Financement and Natixis Paiements; • monitoring and supervision. The monitoring and support unit set up to coordinate and steer the various crisis units and to inform executive crisis unit members in the event of a crisis was contacted for several incidents that did not cause any harm. This unit demonstrated its effectiveness, especially in handling the crisis in Japan (Fukushima). Furthermore, an alert tool was successfully tested and will be rolled out in 2012; • coverage of flood risk. A plan that specifically focuses on the Seine reaching flood stage was included by the business lines and support functions.
The Audit Plan may be revised during the year at the request of Executive Management or if required by circumstances.
Its role and methods of operation are set out in a charter. It deals with all issues relating to the organization and planning of control services, as well as highlighting areas of emerging or recurring risk within the scope of consolidation and reports any signifi cant dysfunctions observed in the executive body. It also supplies the executive body with updates on ongoing controls performed by internal or external control functions or regulators, and ensures that the conclusions from these undertakings are taken into account by the operational business lines.
Its scope of action extends to the following risks: • credit risk; • market risk; • overall interest rate, liquidity and structural foreign-exchange risk; • operational risk; and covers all entities consolidated by Natixis.
The main missions of the Risk function are to: • propose a risk policy for Natixis in line with the company’s strategy, and monitor its regular application and updates;
In accordance with Articles 17 ter and 38 of amended rule 9702, alert procedures for serious incidents were introduced with alert levels set by type of risk. In 2011, the alert system was implemented after observation of a backtesting exception concerning regulatory VaR over 20%. The requisite information was transmitted to the Risk Management Committee and French Prudential Supervisory Authority.
For more detailed information, see Chapter [4 ], "Risk Management" .
The Risk Department is responsible for analyzing counterparty credit risk. It conducts this counter-analysis using a formalized credit fi le for each counterparty and benefi ciary group, including all information relevant and useful for decision-making purposes: • information regarding the client, its business and its environment; • external data: ratings allocated by rating agencies, sector analysis, country risk and sovereign risk analyses, etc.; • internal data regarding commitments, collateral and guarantees; • a summary of all of the credit risks incurred by Natixis and the effects of the proposed transactions on profitability and regulatory ratios.
Furthermore, these authorizations can be exercised only when the commitment of interest satisfi es the different criteria set out in the risk policy of each business line.
In addition, Natixis regularly conducts methodological work aiming at assessing the relevance of its credit stress tests.
Credit risk management requires a risk rating, an LGD and commitment or transaction monitoring procedures in accordance with title II of the CRBF rule and the French ministerial order of February 20, 2007.
An IT system allows for an overall consolidation of limits and credit exposures across a scope covering all of Natixis’ exposure to credit risk and most of that of its subsidiaries.
The Risk Department provides Executive Management and the bank’s business line managers with reports analyzing Natixis’ risks: trend analyses, scorecards, the results of stress tests, etc.
As regards limit excesses, the dedicated monthly Committee Meeting analyzes changes in limit excesses using specifi c indicators (number, total, duration, business lines concerned, etc.), and examines signifi cant excesses and monitors their correction.
3CORPORATE GOVERNANCE Chairman’s report on the internal control procedures and the business line concerned, in accordance with both the counterparty watch list and alert procedures.
Quarterly monitoring of watch-listed counterparties and the process for determining specifi c additions to and reversals of provisions are examined concomitantly. It relies on preparatory committees organized by the Risk Department and the managers of the various business lines within the bank.
The Committee is organized by the Risk Department and chaired by the Chief Executive Offi cer and assembles members of the Senior Management Committee in charge of the business lines, Finance and Risk, the Head of Risk and the heads of the support functions concerned.
The search for objective evidence of impairment is undertaken using analysis and close monitoring of business sectors and countries. When necessary, an expert opinion is sought to improve the result obtained.
Market risk control is primarily the responsibility of businessline front offi ces, which ensure the limits allocated to them are managed and monitored on a continuous basis every day.
The duties and organization relating to the control of Natixis’ market risks are described in the Natixis Market Risk Management Charter, which is approved by Natixis’ Global Risk Committee.
The Risk Department: • defines risk measurement and fair value adjustment methods and submits them to the Market Risk Committee for approval; • suggests limits or examines limit requests (VaR, stress tests, operational limits, loss alerts); • takes over alert functions for areas at risk relating to the business lines or to Executive Management; • is responsible for the daily analysis and measurement of risks, daily reporting, and notifying front office and the management of any excesses; • approves the pricing models used by front office in its management tools.
The operational breakdown of the mechanism described in the Natixis market risk regulation charter is specifi ed in procedures.
The delegation system was improved to smooth decision-making between two Committee Meetings. The system is based on double signature according to levels of delegation (front offi ce and risks) and determining factors such as VaR limit levels, stress tests, operational factors, type of indicators (quantitative, qualitative), percentage increase compared with limits, type of transaction.
In line with the recommendations of the “Lagarde” report, the Market Risk Department ensures that each trader is aware of his/ her own limits; each trader has to send an e-mail confi rming his/ her attachment to the desk concerned and agree to their limits. The limit notifi cation procedure has been changed accordingly.
In mid-2009, BPCE granted a guarantee on most of the workout portfolio management assets in Paris and New York. Nevertheless, the Market Risk Department continues to manage risks on all transactions on a standardized and exhaustive basis, whether these transactions are guaranteed or not by BPCE. Overall VaR and stress tests taking into account the effects of this guarantee are now produced on a daily basis.
The various measures of market risk used by Natixis are VaR, overall and specifi c stress tests, qualitative and quantitative operational limits, and loss alerts.
A series of stress tests covering all portfolios and specifi c activities per business complete this mechanism; they are calculated daily.
Since May 2011, with the creation of a single treasury and central bank collateral management pool, BPCE and Natixis have been coordinating the operational management of their treasuries in order to secure and to optimize access to liquidity for the entire group and their businesses.
The largest positions concern exposures to the short end of yield curves and are notably linked to time-lags between LIBOR reset dates. This risk is measured in terms of the sensitivity of the economic value of portfolios by percentage point of the yield curve and by currency. It is controlled, for the most important portfolios, through limits confi rmed and monitored by the Finance and Risk Department. As regards Treasury, on which most positions are concentrated, this mechanism is rounded out with daily VaR measurements governed by limits and stress tests.
ALM Committee. They are monitored monthly for Treasury and quarterly for Natixis’ entire scope of consolidation; • simulations of liquidity stress scenarios: the purpose of these scenarios is to measure Natixis’ ability to withstand different crisis scenarios (systemic, specific, combined, etc.) over a three-month period, with assumptions revised periodically and approved by the ALM Committee; • Liquidity stress resiliency exercises: their purpose is to measure the group’s ability to continue to meet its commitments and to pursue its business activities in the event of a crisis. From time to time, Natixis simulates its contribution to group earnings under different crisis scenarios (systemic, specific, combined, etc.) and for different degrees of severity (moderate, high, extreme, etc.) over a three-month period.
The consolidation process is operationally autonomous, but linked with that of BPCE.
These controls are conducted using the various accounting systems in place throughout Natixis.
From an organizational standpoint, the 2011 fi scal year was dedicated to: • completing the implementation of the New Deal “Support Functions” project, which in 2011 culminated in the attachment of the Accounting Control team (financing) to the Accounting Department; Capital Markets Accounting, reporting to the Accounting Department and responsible for first-level monthly production and control work, centralizes all contract, economic performance and accounting data reconciliation work, with these tasks being gradually carried out via a single reconciliation system;
In our capacity as Statutory Auditors of Natixis and in accordance with Article L.225-235 of the French Commercial Code, we hereby report on the report prepared by the Chairman of your company in accordance with Article L.225-37 of French Commercial Code for the year ended December 31, 2011.
It is the Chairman’ s responsibility to prepare, and submit to the Board of Directors for approval, a report on the internal control and risk management procedures implemented by the company and containing the other disclosures required by Article L.225-37 of French Commercial Code, particularly in terms of corporate governance.
It is our responsibility: • to report to you on the information contained in the Chairman’ s report in respect of the internal control and risk management procedures relating to the preparation and processing of the accounting and financial information, and
• to attest that this report contains the other disclosures required by Article L.225-37 of French Commercial Code, it being specified that we are not responsible for verifying the fairness of these disclosures.
On the basis of our work, we have nothing to report on the information in respect of the company’ s internal control and risk management procedures relating to the preparation and processing of accounting and fi nancial information contained in the report prepared by the Chairman of the Board in accordance with Article L.225-37 of French Commercial Code.
This is a free translation into English of a report issued in French and is provided solely for the convenience of English-speaking readers. This report should be read in conjunction with, and is construed in accordance with, French law and professional auditing standards applicable in France.
3 CORPORATE GOVERNANCE Statutory auditors’ report on the report prepared by the Chairman of the Board of Directors
The information provided in the following sections is an integral part of the fi nancial statements certifi ed by the Statutory Auditors: • 4.2.5.1 Natixis’ general risk management system; • 4.2.5.2 Natixis’ Risk Department; • 4.2.5.3 Credit risks (only for data mentioned as certified); • 4.2.5.4 Market risks (only for data mentioned as certified); • 4.3 Overall interest rate, liquidity and structural foreign exchange risks; • 4.6. Insurance risks; • 4.7 Sensitive exposures according to Financial Stability Board Recommendations.
Natixis operates in an environment that presents inherent risks, some of which it cannot control. Certain risks to which Natixis is exposed are identifi ed below, it being emphasized that it is not an exhaustive list of all risks taken by Natixis in relation to its business or in consideration of its environment. The risks set out below, as well as other currently unidentifi ed risks or which are currently considered immaterial by Natixis, may have a material adverse impact on its operations, fi nancial position and/ or results. The scale and impact that these risks could have on the results and assets of Natixis, as well as the organization and control of these risks, are more fully described in subsequent sections of Chapter [4] “Risk management“.
Natixis’ sensitive exposures are detailed in section [4.7], in accordance with the recommendations of the Financial Stability Forum.
Given the uncertainty of the global economic outlook for the short and medium term, further widespread economic deterioration in France and the rest of the world could also have negative repercussions on provisions for credit losses and capital adequacy.
Governments (including governments of countries where Natixis entities are established) have responded to the fi nancial crisis by adopting, or are currently in the process of submitting to Parliament, a certain number of regulatory measures implementing major changes to the existing framework (Basel 3 (CRD 4 ), Solvency 2, Dodd-Frank Wall Street Reform and Consumer Protection Act, Foreign Account Tax Compliance Act, European market infrastructures (EMIR), MiFID 2, Vickers Report, etc.). Other measures are currently under review, particularly regarding systemic institutions. The analysis and interpretation of these measures, which arise from diverse sources, may generate new pressures for Natixis in its efforts to comply with all of the new regulations.
The implementation and observation of these measures could result in: • an increase in capital and liquidity requirements; • a structural increase in refi nancing costs; • an increase in some of Natixis’ costs (compliance costs…); • a change in tax laws in Natixis’ countries of operation.
In addition, a certain number of exceptional measures taken by governments (support measures), central banks (lowering of key interest rates) and regulators to remedy the fi nancial crisis, stabilize the fi nancial markets and support fi nancial institutions have recently been, or soon could be, suspended or stopped, which given the uncertainty regarding growth could have an adverse impact on the business conditions of fi nancial institutions.
Finally, any structural banking sector reforms in certain countries (segregation of retail banking and CIB businesses, etc.) represent factors of instability for banking institutions.
Since the inception of BPCE, Natixis’ medium-to-long-term funding requirements have been met by Groupe BPCE through BPCE S.A. In the event market conditions deteriorate in the future, BPCE, which obtains fi nancing on the international debt markets among other sources, may have diffi culty issuing debt instruments under reasonable terms and conditions.
As indicated above, Natixis holds 20% of the share capital of Banques Populaires and Caisses d’Epargne, in the form of CCI s . These CCI s are non-voting securities, with different rights from those attached to cooperative shares issued by Banques Populaires and Caisses d’Epargne. Although Natixis is entitled to participate in meetings of the cooperative shareholders (“sociétaires”) of Banques Populaires and Caisses d’Epargne, it is not entitled to vote at these meetings and has no control over decisions requiring approval by the shareholders of Banques Populaires and Caisses d’Epargne.
Market risk (For further information, please refer to sections [4.2.5.4] and [3.6.4]).
In the second half of 2009, Natixis implemented a new strategy aimed at simplifying and clarifying its governance, increasing synergies with retail networks, reinforcing the integration of teams and “customer focus”, and improving the method of operation of support functions. While Natixis believes that these strategic directions provide a number of opportunities, it will continue to face uncertainties given the current state of the global economy, and there is no guarantee the targets of this new strategy will be reached.
A market downturn is liable to cause a decline in the volume of transactions that Natixis executes for its customers and as a market maker, leading in turn to a decline in its net revenues from these operations. In addition, as management fees that Natixis charges its customers are in many cases based on the value or performance of the portfolios, any market downturn that reduces the value of these portfolios or increases the amount of redemptions would reduce the revenues Natixis receives from its asset management and private banking businesses.
Intense competition, both in Natixis’ home market of France, its largest market, and internationally, could adversely affect Natixis’ net revenues and profitability
Pillar I sets minimum capital requirements. It aims to ensure that banking institutions hold suffi cient capital to provide a minimum level of coverage for their credit risk, market risk, and operational risk. To calculate its capital requirement, the fi nancial institution may use standardized methods or, with the prior approval of the French Prudential Supervisory Authority (ACP - Autorité de Contrôle Prudentiel), its own internal models.
It consists of: • analysis by the bank of all of its risks, including those already covered by Pillar I; • calculation by the bank of the amount of economic capital it needs to cover those risks; • comparison by the banking supervisor of its own analysis of the bank’s risk profile with the analysis conducted by the bank, to inform its choice of prudential measures, which may take the form of capital requirements greater than the minimum requirements or any other appropriate technique.
Thus, Natixis’ operations are subject to a system of country limits that regulates the geographic diversifi cation of activities. This system, which has been in place for several years for emerging countries, was extended to developed countries in 2011.
Pillar III is concerned with establishing market discipline through a series of reporting requirements. These requirements – both qualitative and quantitative – are intended to improve fi nancial transparency in the assessment of risk exposure, risk assessment procedures and capital adequacy.
Natixis is subject to consolidated regulatory reporting to the French Prudential Supervisory Authority (Autorité de Contrôle Prudentiel - ACP). To this end, Pillar III disclosures are prepared on a consolidated basis.
In accordance with the decree of February 20, 2007 credit risk exposure can be measured using two approaches: • the “standardized” approach, based on external credit ratings and specific risks weightings according to Basel categories of exposure; • the “internal ratings based” (IRB) approach based on the financial institution’s internal ratings system, which consists of two categories: – the Foundation IRB approach, for which banks use only their probability of default estimates,
Regulatory capital is determined in accordance with CRBF Regulation No. 90-02 of February 23, 1990 relating to capital, meaning it is divided into three categories: Tier 1 capital, Tier 2 capital and Tier 3 capital. Deductions are made from these categories relative to statutory consolidation data.
• Minority interests include shares of minority interests in stakes held by Natixis.
• Capital resulting from the issue of subordinated securities or loans (perpetual subordinated securities).
• Capital subject to the conditions of Article 4d of CRBF Regulation No. 90-02 of February 23, 1990 pertaining to capital (redeemable subordinated securities).
• Positive difference between the sum of value adjustment and portfolio-assessed impairment and expected losses calculated using internal ratings-based approaches.
Tier 3 capital comprises subordinated debt with a maturity of over fi ve years that are only used to hedge market risk. Natixis is not affected by these instruments.
They include: • financial investments representing more than 10% of the share capital of a credit institution or investment firm, as well as subordinated loans and any other element constituting capital; • securitization positions with a rating of less than BB-; • total expected losses for equity exposure; • positive difference between expected losses calculated using internal ratings-based approaches and the sum of value adjustments and portfolio-assessed impairment relating to the exposures concerned.
50% are deducted from Tier 1 capital and 50% from Tier 2 capital.
Regulatory capital and risk-weighted assets are calculated in accordance with the French decree of February 20, 2007 as amended on October 19, 2007, September 11, 2008, October 29, 2009, August 25, 2010, December 29, 2010 and November 23, 2011, relating to regulatory capital requirements applicable to banks operating within the Basel 2 and Basel 2.5 (CRD3) frameworks.
The main shareholding resulting in a capital deduction was the €0.35 billion stake in CACEIS.
CFDI is the only Natixis subsidiary subject to management ratios (solvency, large exposures, monitoring of the shareholding) on an individual basis . Natixis S.A. and other French subsidiaries having the status of credit institutions are exempt from compliance with these requirements on an individual basis, by authorization of the French Prudential Supervisory Authority (Autorité de Contrôle Prudentiel - ACP).
Core Tier 1 capital includes a provision for distribution of 2011 cash dividends of €0.3 billion (i.e. 10 euro cents per share). It benefi ted from higher prudential fi lters on unrealized and deferred losses excluding CCI s (+€0.1 billion), the increase in minority interests (€0.1 billion capital increase for BP Développement)
CCI risk-weighted assets decreased by €0.5 billion due to the reduction in recyclable reserves (-€2.6 billion), offset by the Banque Populaire and Caisse d’Epargne capital increases (+€0.6 billion) and the capitalization of non-distributed earnings (+€1.4 billion).
Market risks increased by €4.6 billion, mainly because of the entry into force of the Basel 2.5 (CRD3) reform (+€6.2 billion), which was partly offset by the reduction in positions.
The Core Tier 1 ratio rose from 7.9% at December 31, 2010 to 8.3% at December 31, 2011, while the Tier 1 ratio stood at 11.3% at December 31, 2011 versus 11.4% at December 31, 2010.
The calculation of economic capital requirements is conducted and covers four areas of risk: credit, market (trading, ALM, investment portfolios and Private Equity, etc.), operational and business-related.
New regulations relating to liquidity risk took effect on June 30, 2010 (French decree dated May 5, 2009). The liquidity ratio is designed to ensure that liquid assets with maturities of less than one month are greater than or equal to liabilities falling due within the same period. It is defi ned as the ratio between cash/ cash-equivalents and liabilities falling due in less than one month.
The regulations on controlling large exposures were revised on December 31, 2010 (CRBF Regulation No. 93-05 as amended by the decree of August 25, 2010). It aims to prevent an excessive concentration of risks for sets of counterparties that are related in a way that if one encountered fi nancial problems, the others would also be likely to have fi nancing or reimbursement diffi culties. The regulation is underpinned by a continuous obligation: all risks associated with a single counterparty cannot exceed 25% of the bank’s capital. Natixis complied with this requirement over 2011.
Natixis’ general risk management system is managed in accordance with banking regulations and governance guidelines laid down by its central shareholder, BPCE.
middle office or an accounting control department, or, where appropriate, by both acting together; • second-level controls (within the meaning of Article 6-a of CRBF Regulation No. 97-02) are carried out by dedicated bodies acting independently from operational departments; • third-level controls, also known as periodic controls, are carried out by the Internal Audit Department.
Similarly, it makes proposals to the executive body concerning principles and rules in the following areas: • risk acceptance procedures; • limit authorizations; • risk assessment; • risk supervision.
Risk policies are tailored to each business line according to their development objectives and strategies.
Individual credit risk is managed within a particular framework constituted by these risk policies, country limits and rules of diversifi cation per unit of risk.
The Global Risk Committee validated the risk policies of the main businesses and subsidiaries in 2011. Risk policies are adapted over time in line with the strategy pursued.
• information systems that give an overview of outstanding loans and credit limits.
The internal rating system is an integral part of Natixis’ credit risk monitoring and control mechanism. It covers all the methods, processes, tools and controls used to evaluate credit risk. It takes into account fundamental parameters, including one-year counterparty default probability, which is expressed as a rating, and loss given default (LGD), which is expressed as a percentage.
Pursuant to regulatory requirements, all counterparties in the banking book and the related exposures must have an internal rating when they: • carry a loan or are assigned a credit limit; • guarantee a loan; • issue securities used as collateral for a loan.
The mechanism is based on: • internal rating methodologies specific to the various Basel asset classes and consistent with Natixis’ risk profile; • an IT system used for managing the successive stages of the rating process, from initiation of the process to validation and logging of the final rating; • procedures and controls that place internal ratings at the heart of the risk-management system, from transaction origination to ex-post analysis of defaulting counterparties and the losses incurred on the relevant loans; • periodic reviews of rating methodologies, the method of calculating LGD and underlying risk parameters.
With respect to country risk, the system is based on sovereign ratings and country ratings that cap ratings that can be given to non-sovereign counterparties. These ratings are reviewed annually, or more often if necessary.
Since September 30, 2010 Natixis has used internal rating methods specifi c to the different asset classes approved by the French Prudential Supervisory Authority (ACP), and that use the advanced internal ratings-based method (IRBA) to rate corporate, sovereign, banking, specialized lending and some categories of consumer fi nance exposures.
Natixis checks whether default probability scales are consistent with actual default rates in its portfolio. Statistics and the results of these checks are reviewed by oversight Committees in charge of monitoring and imposing corrective measures or adjustments wherever necessary, such as the enrichment or redefi nition of models, or the modifi cation of reference samples.
The business lines carry out day-to-day counterparty risk monitoring and the Risk Department conducts second-level controls. Each month, the Risk Department submits an overview of its monitoring activities to Executive Management and the Audit Committee.
Natixis manages the risks associated with securitization positions through two mechanisms. The fi rst involves the daily identifi cation of all declines in ratings affecting the Group’s securitization positions as well as the associated potential risks and, if necessary, deciding on an appropriate course of action. The second is underpinned by a quantitative (ratings, valuations) and qualitative analysis of securitization positions for the purpose of segmenting the portfolio on the basis of risk levels. The results of these analyses are written up and discussed in a quarterly presentation at the Group’s Watch List and Provisions Committee.
The limits governing country exposure (country caps) are examined annually (as a minimum) and approved by the Natixis Global Risk Committee in light of the countries’ ratings and situations. Where there has been a signifi cant change in a country, an analysis is presented to the Credit Risk Committee in order to adapt the monitoring and procedures relative to the country in question.
Loans showing a deterioration in the level of risk are identifi ed as they occur and are reported immediately to the Risk Department and the business line concerned, in accordance with the counterparty watch list, individual provision and alert procedures.
Macroeconomic stress testing is regularly applied to the Natixis consolidation scope to evaluate the risk generated in the event of adverse economic and fi nancial data. The results are presented quarterly at each Global Risk Committee.
Natixis also participated in various exercises in relation to the stress tests organized by the European regulator, the European Banking Authority. The results of these as they relate to Groupe BPCE have been published.
For the latter, the search for objective evidence of impairment is undertaken using analysis and close monitoring of business sectors and countries. Such evidence typically arises from a combination of micro or macroeconomic factors specifi c to the industry or country concerned. When necessary, an expert opinion is sought to refi ne the results of this review.
Category of exposure December 2011 December 2011 2011 average (a) December 2010
SME s recorded in the corporate entities category 6,941 6,471 5,885 4,657
SME s recorded in the corporate entities category 2,072 2,025 2,037 1,939
The increase in exposure at risk in 2011 refl ects the rise in “Banks and investment fi rms” exposure, which is primarily attributable to short-term deposits with Groupe BPCE, offset by a decrease in exposure to “Securitization” and “Sovereigns”. The drop in
French and European Union counterparties account for 75.2% of Natixis’ exposure.
Banks and investment fi rms 17.8% 9.5% 4.0% 1.0% 32.3% 30.2%
(a) Of which 18.6% in exposure to Groupe BPCE, compared with 11.8% at end-2010. (b) “Local government” is included under “Administrations” in the reference framework for business sectors as at 12.31.2011 .
Maturity 3 months Maturity 1 year Maturity 2 years Maturity 5 years Maturity >5 years
SME s recorded in the retail customer category - - 2,025 2,025
(Data certifi ed by the Statutory Auditors in accordance with IFRS 7)
❚ IMPACT OF RISK-REDUCTION TECHNIQUES ON DERIVATIVES OTHER THAN CREDIT DERIVATIVES (DATA AS AT DECEMBER 31, 2011)
Other exposure recorded in the corporate entities category 6,121 589 3,492 5,688
SME s recorded in the retail customer category - - - 0
Financial collateral encompasses securities and other instruments constituting tangible collateral in accordance with lines b) to f) of Article 338.3 of the French decree of February 20, 2007.
❚ EXPOSURES COVERED BY PERSONAL COLLATERAL BY CATEGORY OF EXPOSURE AS AT DECEMBER 31, 2011
Presentation of banking book and trading book securitization positions by weighting, approach and method (including securitization positions deducted from capital )
PRESENTATION OF BANKING BOOK SECURITIZATION POSITIONS (INCLUDING SECURITIZATION POSITIONS DEDUCTED FROM CAPITAL )
❚ BREAKDOWN OF SECURITIZATION POSITIONS ACCORDING TO THE MAIN CATEGORIES OF UNDERLYINGS
Asset liquidity is also an important component of market risk. In the event of insuffi cient or non-existent liquidity (for example due to a reduction in the number of transactions or a major imbalance in the supply and demand of certain assets), a fi nancial instrument or any other tradable asset may be unable to be traded at its estimated value. The lack of liquidity may lead to reduced access to capital markets, unforeseen cash or capital requirements, or legal restrictions.
Market risk affects Natixis’ trading and investment portfolios. In investment portfolios, market risk encompasses: • the overall interest rate risk associated with asset and liability management, which is the risk to earnings arising from asset and liability mismatches in the bank book or in the insurance business; • the risk associated with investment operations, which depends directly on fluctuations in the value of invested assets in securities portfolios; and
The Risk Department defi nes the principles for measuring risk, submits them to the Executive Management for approval and monitors their effective implementation and follow-up. It validates market product valuation models and regularly ensures that models used are consistent with market developments and changes in best practices.
(1) Incremental Risk Charge whose aim is to cover default and migration risks.
As part of changing regulatory standards (Basel 2.5), Natixis implemented a stressed VaR model (SVaR), which is calculated based on a fixed econometric model over a continuous 12-month period that defines the charge that the bank’s current VaR model would generate under a representative crisis scenario relevant to its portfolio, and has calculated an IRC (Incremental Risk Charge) that estimates the migration and default risks of market instruments. The IRC is based on a one-year capital horizon at a 99.9% confidence level. These indicators are calculated on a daily basis.
The regulator has authorized Natixis to use these new indicators in order to determine its capital requirement as at December 31, 2011.
3. Stress tests to measure potential losses on portfolios in extreme market conditions. Natixis’ mechanism is based on two categories of stress tests: overall stress tests and dedicated stress tests for each business.
• Hypothetical stress tests are used to simulate variations in market parameters on all activities, on the basis of plausible assumptions concerning one market’s predicted response compared with another’s, depending on the nature of the initial stress. Stresses are determined through a joint effort involving the Risk Department, the front office and Natixis economists.
4. Operational indicators are used to manage activity on an overall and/or homogenous business basis, by focusing on more directly observable criteria (sensitivity to changes in the underlying and to volatility, correlation, nominal, diversification indicators, etc.). Limits corresponding to these qualitative and quantitative operational indicators thereby complement VaR, stress test and loss alert limits. They are determined in accordance with the latter limits.
The 99% 1-day VaR level for Natixis’ trading portfolios averaged €11 million. It peaked at €16.9 million on December 5, 2011 and stood at €14.5 million at December 30, 2011.
The chart below presents the trading VaR history between December 31, 2010 and December 31, 2011 for the entire scope, for GAPC after accounting for BPCE’s guarantee, as well as for CIB.
❚ OVERALL NATIXIS VaR – TRADING PORTFOLIO (1 DAY VaR 99%)
Overall VaR including the BPCE guarantee GAPC VaR GAPC including the BPCE guarantee VaR CIB
The following table presents VaR fi gures after accounting for the BPCE guarantee: (in millions of euros)
The following chart shows results of backtesting (comparison of potential losses, as calculated ex-post by VaR, with actual P&L impacts) on the regulatory scope. These results can be used to check the solidity of the VaR indicator: VaR VaRP&L
One backtesting exception was observed in 2011 following the price update of a Greek security that had been incorrectly valued for several weeks due to a technical error. In accordance with Articles 17ter and 38 of CRBF rule 97-02 governing loss alerts, the Audit Committee and ACP were notifi ed of this exception which exceeded VaR by more than 20%.
The historic stress test replicating the 1987 stock market crash gave the maximum loss (-€84 million at December 31, 2011).
❚ OVERALL STRESS TESTS AS AT DECEMBER 31, 2011 (INCLUDING THE BPCE GUARANTEE)
In flu en tia l i ss ue r d ef au lt
Regulatory capital requirements as at December 31, 2011, were as follows: (in millions of euros) Regulatory capital requirements
Natixis is also exposed to the risk of an operational failure or interruption by one of its clearing agents, foreign exchange markets, clearing houses, custodians or other financial intermediaries or external service providers that it uses to execute or facilitate its securities transactions. As its interconnectivity with its customers grows, Natixis may also be increasingly exposed to the risk of operational failure of its customers’ information systems. Natixis cannot guarantee that such breakdowns or interruptions in its systems or in those of other parties will not occur or, if they do occur, that they will be adequately resolved.
The Insurance Department, which reports to the Legal Department in the Corporate Secretary’s offi ce, is tasked with analyzing insurable operational risks and taking out appropriate insurance coverage against them (see section [4.4] for further information). Insurance policies bought from leading insurers provides cover for potentially signifi cant damages resulting from fraud, embezzlement and theft, operating losses or the implication of Natixis’ civil liability or that of its subsidiaries or the employees for which it is responsible.
The procedures for monitoring and managing these risks are described in this very section.
The Operational Risk Department is divided into two control units, one covering risks specifi c to Natixis’ business lines and activities, and the other dealing with the overall risks to which the company is exposed (loss of access to premises or information systems, or the availability of employees). The business line risk division is divided into: • The Corporate and Investment Banking business line: covers capital market activities for CIB and workout portfolio management assetsn (GAPC), and financing for CIB activities; • The Investment Solutions business line: covers Private banking activities, Natixis Assurances, Capital Investment as well as Natixis Global Asset Management; • The Specialized Financial Services business line: covers subsidiaries Natixis Paiements, Natixis Interépargne, Natixis Intertitres, Cie Européenne de Garanties et Cautions, Natixis EuroTitres, Natixis Financement, Natixis Lease, Retail Services and Natixis Factor.
Losses are listed from the very fi rst euro and as they are incurred. A single defi nition of “serious incident” is used throughout the Company. All serious incidents are immediately declared . A departmental investigation is then conducted, and a report detailing the facts and recommended action plans is drawn up. The Operational Risk Committees decide on the necessary action plans.
The control mechanism is consistent with the standard method, as defi ned by banking regulations, applied to all of Natixis’ operational divisions.
The majority of actual risks are in the Execution category and are due to processing errors inherent to all of Natixis’ activities.
Fair value or adjusted value or presumed cost Net unrealized gain or loss Gross unrealized gains Gross unrealized losses
Assets Fraction of amounts included in Tier 1 or Tier 2 capital
Prudential restatement of unrealized gains or losses on available-for-sale equity instruments (39)
Prudential restatement of unrealized gains or losses on available-for-sale equity instruments as a percentage of upper Tier 2 capital 20
4 RISK MANAGEMENT Overall interest rate, liquidity and structural foreign exchange risks 4.3 Overall interest rate, liquidity and structural foreign exchange risks
Natixis’ structural balance sheet risks are managed and monitored under the authority of the Asset/Liability Management Committee (ALM Committee) chaired by the Chief Executive Offi cer, and comprised of the members of the Senior Management Committee (in charge of Finance and Risks, and Corporate & Investment Banking), the Head of Risk, the Head of Financial Management and BPCE’s Head of Asset/Liability Management. The Committee meets every two months and is mainly responsible for: • validating the main asset/liability management rules (including those governing internal liquidity pricing), agreements, indicators and limits (including liquidity budgets allocated to the business lines under budgetary procedure) used for monitoring, managing and supervising structural balance sheet risks, all within the standard ALM framework set up by BPCE; • validating the overall refinancing policy; • monitoring the main balance sheet aggregates and their developments; • monitoring structural balance sheet risks and compliance with limits.
This risk is measured in terms of the sensitivity of portfolios’ economic value by basis point on the yield curve and by currency. For the the largest portfolios it is controlled through limits approved and monitored by the Risk Department. As regards Treasury, in which most positions are concentrated, this mechanism is rounded out with daily VaR measurements governed by limits and stress tests.
Liquidity risk is the risk that Natixis will be unable to honor its commitments to its creditors due to the mismatching of maturities between assets and liabilities. This risk could arise, for example, in the event of massive withdrawals of customer deposits or a crisis of confi dence or an overall market liquidity crisis. As a corporate and investment bank, this risk for Natixis results primarily from mismatched positions between transactions with contractual maturities, as Natixis does not have stable and permanent
Liquidity risk is controlled, managed and monitored in the following manner: • management of each business line’s liquidity consumption: to manage balance sheet growth, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Consumption is monitored weekly for CIB business lines and monthly for other business lines; • supervision of short-term mismatching: this is measured on the basis of liquidity gaps. In order to manage estimated shortterm liquidity requirements, this indicator is produced daily for a three-month horizon in intervals of one day, based on all the parent company’s contractual transactions. It is governed according to two permanent limits (one on overnight market exposure and the other on the two-month static liquidity gap) approved by the ALM Committee and monitored daily; • supervision of medium-term mismatching: this is measured on the basis of liquidity gaps and asset-liability hedging ratios. These ratios include minimum hedging ratios approved by the ALM Committee and monitored monthly for Treasury and quarterly for Natixis’ entire scope of consolidation; • simulations of liquidity stress scenarios: the purpose of these scenarios is to measure the group’s ability to continue to respect its commitments and continue to operate in the event of a liquidity crisis. Natixis periodically simulates its contribution to the group’s earnings based on different crisis scenarios (systemic, specific, combined etc.) and different levels of intensity (moderate, strong, extreme, etc.) over a three-month period.
Natixis’ structural foreign exchange risk for the most part concerns structural positions in the US dollar due to the consolidation of foreign branches and subsidiaries funded in this currency.
4 RISK MANAGEMENT Overall interest rate, liquidity and structural foreign exchange risks 4.3.2.4 Operational foreign exchange risk
• The main risks analyzed are: – internal or external fraud; – reduction in property values; – liability risk (civil operating and professional liability, as well as managers’ and executive corporate offi cers’ civil liability); – damage to operating assets (buildings and contents, IT hardware and data), as well as loss of banking business due to such damage.
• The “Overall Banking”, “Company Civil Liability” (operational and professional) and “Management Civil Liability” insurance policies taken out by Natixis on behalf of the parent company and all its subsidiaries were renewed on July 1, 2010 and then extended until and including December 31, 2011.
As such; Natixis and all its subsidiaries benefit from the following guarantees: – “combined” Overall Banking (values and fraud) and Company Civil Liability policies providing coverage of €100 million per claim and/or per period of insurance; – a “Civil Operating Liability” insurance policy providing coverage of €50 million per claim; – Civil Liability Insurance policies covering directors and corporate offi cers, and providing coverage of up to €100 million per claim and per period of insurance.
• Coverage for the buildings housing Natixis’ operations in France, their contents, IT risks and the resulting loss of banking business is provided by the “All Risks & Resulting Loss of Banking Business” group insurance policy taken out by BPCE S.A., which came into effect on January 1, 2011 (reconstruction and/ or replacement cost, capped at €250 million per claim).
• Coverage for intangible computer damage (damage to data without physical damage to the hardware containing it) and resulting loss of banking business is provided by the “Intangible Computer Damage/Loss of Banking Business” group insurance policy taken out by BPCE S.A., which came into effect on January 1, 2011, for coverage of up to €65 million per claim and per year.
Insurance premiums for all these policies cost a total of €11.7 million over the whole of 2011.
4 RISK MANAGEMENT Legal risks 4.5 Legal risks 4.5.1 LEGAL AND REGULATORY ISSUES AND CONSTRAINTS
Natixis is subject to significant regulation in France and in several other countries around the world where it operates; regulatory actions and changes in these regulations could adversely affect Natixis’ business and results
Several supervisory and regulatory regimes apply to Natixis in each of the countries where it conducts its business. In addition to reputational risk, failure to comply with these regulations could expose Natixis to signifi cant intervention by regulatory authorities and to fi nes, public warnings by the authorities, suspensions of operations or, in extreme cases, withdrawal of Natixis’ operating authority. The fi nancial services industry has been under increased scrutiny from several regulatory authorities in recent years, as well as an increase in the penalties and fi nes imposed by these regulatory authorities, a trend that may be accelerated in the current fi nancial context. Natixis’ operations and its income may be affected by various measures and actions taken by French regulatory authorities, by the European Union, by foreign governments or international organizations. Such constraints could limit Natixis’ ability to develop its businesses or to pursue certain operations. The nature and impact of these potential changes in regulatory policies and actions are unpredictable and Natixis has no way of controlling them.
As a multinational banking group performing complex and large-scale cross-border transactions, Natixis is subject to tax legislation in a large number of countries throughout the world, and structures all of its operations in a way that optimizes the effective tax rates. Changes to tax legislation or its application by the competent authorities in these countries may have a signifi cant impact on Natixis’ results. Natixis implemented management processes to create value from the synergies and business capabilities of its different entities. Natixis also endeavors to structure the fi nancial products sold to its customers by optimizing their taxation. The structures of Natixis’ intra-group transactions and fi nancial products sold by Natixis are based on Natixis’ own interpretations of applicable tax laws and regulations, generally on the basis of opinions received from independent tax advisers and, on an ad hoc basis as and when necessary, on rulings or specifi c interpretations from the tax authorities. There can be no assurance that the tax authorities will not seek to challenge such interpretations in the future, in which case Natixis could be subject to tax adjustments.
Natixis’ profitability and business outlook could be adversely affected by reputational and legal risk
Like many banking groups, Natixis and its consolidated subsidiaries are involved in litigation before courts and can be investigated by regulatory authorities.
The fi nancial consequences, assessed at December 31, 2011, of those deemed likely to, or those that have in the recent past had a material impact on Natixis’ fi nancial situation and/or that of Natixis and its consolidated subsidiaries as a whole, their profi tability or their business, have been included in Natixis’ consolidated fi nancial statements.
The most signifi cant litigations are described below. Their inclusion in the list does not indicate that these litigations will necessarily have an impact on Natixis and/or its consolidated subsidiaries. The other litigations are deemed not liable to have a material impact on Natixis’ fi nancial situation or profi tability and/ or that of Natixis and its consolidated subsidiaries as a whole, or have not reached a stage where it can be determined whether they will have such an impact.
In August 2004, three shareholders acting in the name of and on behalf of three investment funds (Oakmark Fund, Oakmark Equity and Income Fund and Oakmark Global Fund) fi led a complaint against Harris Associates L.P., a wholly-owned subsidiary of Natixis Global Asset Management, before the United States District Court for the Northern District of Illinois. The plaintiffs alleged that Harris Associates L.P. billed services to these three funds at an excessively high rate in the light of applicable regulations. These proceedings are among numerous legal claims initiated in recent years against investment advisors. Harris Associates L.P. and the plaintiffs fi led motions for summary judgment.
Both parties fi led written arguments and appeared before the Court of Appeals on September 10, 2007.
On November 13, 2009, Maximus Master Fund Limited and its portfolio manager, Anakena, fi led a complaint against Natixis before the Commercial Court of Paris seeking the payment of €59.9 million in damages, and alleging that Natixis had abused its rights as the majority investor by asking the fund to redeem
4RISK MANAGEMENT Legal risks its investment in the middle of the fi nancial crisis. In a ruling handed down on January 27, 2012, the Commercial Court of Paris dismissed all of the claims fi led by Anakena and Maximus and ordered them to pay €10,000 to Natixis in accordance with Article 700 of the French Civil Proceedings Code. On February 13, 2012, Anakena and Maximus fi led an appeal against the ruling issued on January 27, 2012.
Complaint filed by Natixis shareholders against BPCE, Natixis and Messrs Philippe Dupont and Charles Milhaud
On December 31, 2009, 735 Natixis shareholders fi led a complaint with the Commercial Court of Paris against BPCE, Natixis and Messrs Philippe Dupont and Charles Milhaud, seeking payment of roughly €4 million, alleging the dissemination of misleading information and the breach of market rules. The claims fi led by minority shareholders were dismissed in a ruling handed down on November 22, 2011.
On December 27, 2011, the Region of Tuscany informed Natixis that it is seeking the termination with retroactive effect of the swaps set in place by Natixis with the Region in 2002 as well as the novation of one of these swaps. For the time being, it is too early to assess the validity of the claims fi led by the Region of Tuscany which have yet to be quantifi ed.
In addition, following an investigation carried out between April 2010 and April 2011, a ruling by the AMF’s Enforcement Committee on July 4, 2011 ordered a former subsidiary of Natixis to pay a fi nancial sanction of €250,000. The Committee’s grievances against the subsidiary are (a) the abusive use of information linked to an order pending execution during a facilitation transaction, (b) the failure in its duty by giving priority to its proper interest in the performance of the contentious transactions, and (c) its failure to report suspicious transactions to the AMF. The Enforcement Committee also believes the former subsidiary to have failed in its obligation to provide its compliance function with a suffi ciently effective tool to allow it to detect any instances of market abuse. Natixis has not appealed against this ruling.
On January 5, 2012, a complaint was fi led against Natixis Asset Management before the Paris District Court (Tribunal de Grande Instance de Paris) by 187 former employees of CDC Gestion (current name Natixis Asset Management.) The purpose of the complaint is the legal recognition of their rights to the common law profi t-sharing schemes from 1989 to 2001. The date for the hearings has not yet been set.
To deal with this risk, ABP Vie has only sold policies without a minimum guaranteed rate in recent years: more than 90% of the policies have a 0% minimum guaranteed rate. The minimum guaranteed rate averages 0.2%.
Concerning securities in other categories, the sensitivity analysis carried out at end-December 2011 showed that a 1-point increase in bond yields would have a negative impact of €29 million on equity (taking into account the variation attributable to policyholders and taxation), i.e. 2.9% of equity.
The annual reinsurance plan seeks to diversify reinsurers and to deal only with parties having a high-quality rating. No reinsurance treaty is entered into or renewed with parties that are noninvestment grade (rating of BB+ to D-). In practice, the ratings of reinsurers with which Natixis Assurances does business range from A- to AAA (a small number of reinsurers may not be rated or may be rated lower, but their shareholders are deemed to be high-quality). The reinsurers that Natixis Assurances works with have a low issuer risk, and the risk of concentration in a given counterparty is limited since Natixis uses several reinsurers.
Traditionally, Coface distinguishes between frequency risk and event risk: • frequency risk represents the risk of a sudden and significant increase in delinquency from a multitude of debtors. This risk is measured for each entity by monitoring the ratio of missed loan payments by business sector (domestic credit), by country (export credit), or by product line (deposit, single risks). Loss ratios for the different underwriting centers are also monitored at the consolidated Coface level. Missed payments are monitored weekly and analyzed monthly; • event risk represents the risk of abnormally high losses recorded for the same debtor or group of debtors, or of an accumulation of losses for the same country.
In addition to monthly monitoring at the level of each underwriting center, Coface has implemented a system based on: • the centralization of declarations of intent to file a claim exceeding a certain amount (currently €0.5 million for all Coface entities); • the Large Exposures Committee, which sets the maximum outstanding risk accepted by Coface out of the 400 greatest risks for Coface (maximum loss in a stressed scenario of €15 million and severity greater than €35 million) and allocates ceilings for each emerging country; • a system for rating major corporate and country risks; • a scoring system for minor risks; and
• a system for the statistical assessment of “severities” (maximum losses that may be recorded in the event of claims) by debtor, group of debtors or emerging country.
Investment grade risks, measured by scores of 6 or higher on a scale of 0 to 10, account for 85% of insurance outstandings.
Coface maintains a diversifi ed credit risk portfolio, in order to minimize the risk that a default by a debtor, a slowdown in a particular sector of activity or an adverse event in a given country might exert a disproportionate impact on its overall claims expense. Furthermore, the fact that the great majority of Coface’s risks are short-term (94% of total outstandings) allows it to reduce the risk covered for a debtor or a group of debtors relatively quickly after recognizing a decrease in their solvency.
(in millions of euros) Number of limits Number of buyers outstanding
• liquidity risk: a significant portion of Coface’s held-for-sale securities are invested in the money market (41% at end 2011). The majority of Coface’s other equities and Fixed Income products are listed on OECD markets. Consequently, Coface considers that its securities portfolio as sufficiently liquid to meet its commitments; • sovereign debt exposure: Coface’s financial investment portfolio is only very marginally invested in euro zone peripheral country sovereign debt. Coface’s net exposure to sovereign bonds issued by Greece, Ireland, Portugal and Spain totaled only €11 million after a 70% of Greek sovereign debt impairment , i.e. 1% of its total bond portfolio.
Underwriting risk is monitored in two ways: at the consolidated level through the use of several statistical tools, scores and risk indicators, and individually (i.e. by counterparty) via special
CEGC uses a default mapping tool and database tailored to its activities and developed on the basis of business line processes. This database is the standard reference framework used to catalogue incidents and high-risk situations and to monitor corrective action plans, according to the methodology implemented by Natixis.
Reinsurer default risk is governed by counterparty concentration and rating limits.
4RISK MANAGEMENT Sensitive exposures in accordance with the recommendations of the Financial Stability Forum 4.7 Sensitive exposures in accordance with the recommendations of the Financial Stability Forum
Natixis was exposed to the following risks at December 31, 2011.
Value adjustments fell by €513 million (excluding the effect of the BPCE guarantee) to €1.573 billion during 2011 from €2.086 billion at year-end 2010.
Exposure in the fi nancial statements at December 31, 2011 was as follows: (in millions of euros)
CMBS Net exposure as at 12.31.2010 Change in value in 2011 Other changes Net exposure as
Financial Data 5.1 MANAGEMENT REPORT FOR THE YEAR ENDED DECEMBER 31, 2011 184 5.1.3 Consolidated results 186 5.1.4 Analysis by Natixis Business 188 5.1.5 Refi nancing 198 5.1.6 Post closing events 199 5.1.7 Information concerning Natixis S.A. 199 5.2 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 202 5.3 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 334 5.4 PARENT COMPANY FINANCIAL STATEMENTS AND NOTES 336 5.5 STATUTORY AUDITORS’ REPORT ON THE COMPANY FINANCIAL STATEMENTS 385 5.6 STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND COMMITMENTS 387
5 FINANCIAL DATA Management Report for the year ended December 31, 2011 5.1 Management Report for the year ended December 31, 2011 5.1.1 METHODOLOGY
The data included in the management report have been restated to take into account the following: • the SFS division is pro forma of the changes in scope which took place in 2010 (consolidation of GCE Paiements at September 1, 2010) and at January 1, 2011 (consolidation of Océor Lease and Cicobail) through the incorporation of the annual financial statements of these three entities at January 1, 2010. A reconciliation with consolidated net income published at December 31, 2010 is provided in the notes; • the consolidation as of April 1, 2011 of GCE Car Lease (the SFS division’s leasing business) and Sélection-R (the Investment Solution division’s private banking business) was not recognized pro-forma in respect of 2010 due to the insignificant nature of their contribution to the various aggregates. This was also the case for the disposal of the 33.2% stake in SLIB (a securities services business within the Specialized Financial Services division) to BNP Paribas at October 31, 2011 and the inclusion of six credit insurance companies in the COFACE scope of consolidation; • the other conventions applied in determining the earnings generated by the entities making up the various business lines are as follows: – the business lines record the return on regulatory capital allocated to them,
– the return on share capital of the entities comprising the divisions is eliminated,
– the divisions are invoiced for an amount representing the bulk of the Group’s overheads; the uninvoiced portion accounts for less than 3% of the Group’s total expenses.
Based on the income generated in fi scal year 2011, the General Shareholders’ Meeting scheduled for May 29, 2012 will propose a dividend payout of €0.10 per share, i.e. 24% of earnings available for distribution. Earnings available for distribution, consisting of net income (group share), less net interest on deeply subordinated notes, amounted to €1,301 million in 2011, down 4% compared to 2010.
In the Equities business, the Innovative Solution Platform team was created to boost the business’s distribution capacity and to enhance its customer visibility.