RISK MANAGEMENT 111 3.1 Risk factors 113 3.2 Pillar III 123 3.3 Overall interest rate, liquidity and structural foreign exchange risk 151 3.4 Insurable risks 153 3.5 Legal risks 154 3.6 Insurance risks 157 3.7 Sensitive exposures in accordance with the recommendations of the Financial Stability Forum 161
FINANCIAL DATA 167 4.1 Management Report for the year ending 4.2 Consolidated fi nancial statements and notes 186 4.3 Statutory Auditors’ report on the consolidated fi nancial statements 328 4.4 Parent company fi nancial statements and notes 330 4.5 Statutory Auditor’s report on the parent company fi nancial statements 379 4.6 Statutory Auditor’s Special Report on Related Party Agreements and Commitments 381
SOCIAL AND ENVIRONMENTAL INFORMATION 387 5.1 Human Resources 388 5.2 Sustainable development and diversity 393 5.3 NRE Appendices – Labor information 397 5.4 NRE Appendices – Environmental information 410
This registration document was filed with the French Financial Markets Authority on April 5, 2011, in accordance with Article 212-13 of the general regulations of the Financial Markets Authority. It may be used in connection with a financial transaction only if accompanied by a transaction note approved by the Financial Markets Authority. The document has been prepared by the issuer and its signatories incur liability in this regard.
Copies of the present registration document are available free of charge from Natixis,
Immeuble Arc de Seine, 30, avenue Pierre Mendès France, 75013 Paris, France.
Presentation of Natixis 1.2 HISTORY AND NATIXIS’ LINKS WITH BPCE 5 1.2.2 The fi nancial solidarity mechanism 6 1.2.3 BPCE organization chart 6 1.3.1 Income statement 7 1.3.2 Financial structure 7 1.3.3 Net revenues by businesses 7 1.3.4 Income before tax by business 8 1.3.5 Long term ratings (as of march 2011) 8 1.4 NATIXIS’ BUSINESS LINES 9 1.4.1 Corporate and Investment Banking 9 1.4.2 Investment Solutions 12 1.4.3 Specialized Financial Services 17 1.4.5 Major contracts 28 1.4.6 Financial Investments 31 1.5.1 Description of GAPC (Workout portfolio management) 33 1.5.2 Description and valuation of segregated assets within GAPC 33 1.5.3 Review of credit assets 34 1.5.4 Description of the Guarantee 34 1.5.5 GAPC governance 36 1.6 NATIXIS AND ITS SHAREHOLDERS 37 1.6.1 Key share data at December 31, 2010 37 1.6.2 Breakdown of share capital at December 31, 2010 37 1.6.3 Shareholder scorecard 37 1.6.4 Share price information 38 1.6.5 Natixis and its individual shareholders 38
Natixis has a long-lasting commitment to its clients – corporates, fi nancial institutions and institutional investors, and to the customers of Groupe BPCE’s two banking networks, i.e. personal banking, professional, and small and medium-size businesses.
à Coface - Credit insurance - Factoring - Services: company ratings/information and management of receivables
à Banque Privée 1818 à Natixis Private Banking - Asset and financial management expertise for private investors, in France and abroad
à Natixis Factor - Management and optimization of customer receivables - Factoring and financing - Business information and collection
à Natixis Intertitres - Employee savings plans - Pension plans - Collective non-life and provident insurance - Employee share ownership - Special payment vouchers
à EuroTitres Department - Retail and private banking custody with back office functionsPrivate equity
In parallel to these contributions, each Banque Populaire issued CCIs representing 20% of their capital in favor of Natexis Banques Populaires, which has since become Natixis.
On February 26, 2009, the BFBP Board of Directors and the CNCE Supervisory Board approved the terms and condition of the combination of their two central institutions leading to the creation of the number two banking group in France.
● With the formation of Groupe BPCE, BPCE took the place of CNCE and BFBP, becoming the majority shareholder of Natixis.
● Natixis has been affiliated with BPCE since July 31, 2009 (not inclusive) replacing the dual affiliation of Natixis with CNCE and BFBP.
Groupe BPCE is the 2nd ranking banking group in France with more than 8,000 branches, 36 million customers, 8 million cooperative shareholders and 125,000 employees.
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 BPCE benefi ts from the Groupe BPCE fi nancial solidarity mechanism. Thus, in the event Natixis encounters diffi culty, (i) BPCE would fi rstly provide support using its own regulatory capital under its shareholder duty as; (ii) if this were insuffi cient, BPCE would use the mutual guarantee fund created by BPCE, the fund being initially funded for a total of €920 million in assets provided jointly by the two
Banque Populaire and Caisse d’Epargne networks and which is set to grow through an annual contribution (subject to the amounts which would be used in the event of a funds call); (iii) if BPCE’s regulatory capital and this mutual guarantee fund were insuffi cient, BPCE would call on (in equal proportions) each of the two Banque Populaire and Caisse d’Epargne networks’ own guarantee funds and, fi nally (iv) if calls on BPCE’s regulatory capital and these three guarantee funds were insuffi cient, additional sums would be requested from all Banques Populaires and Caisses d’Epargne.
It should be pointed out that the guarantee fund referred to above consists of a Groupe BPCE internal guarantee mechanism activated at the initiative of the BPCE Executive Board or the French banking regulator, which may request that it be used if it deems it necessary.
1PRESENTATION OF NATIXIS 2010 Key fi gures 1.3 2010 Key figures 1.3.1 INCOME STATEMENT
(a) Restated for the reclassifi cation within equity of interest expenses of the Deeply Subordinated Notes.
(b) Excl. GAPC, net income of discontinued operations and restructuring costs.
(a) Change in the prudential treatment of CCIs as from end-2010. CCIs are now weighted at 370% in RWA.
1PRESENTATION OF NATIXIS Natixis’ business lines 1.4 Natixis’ business lines 1.4.1 CORPORATE AND INVESTMENT BANKING
The structure of Coverage was changed to enhance the sector approach, particularly for Coverage France, where sectors and regions were combined to create three sector-oriented divisions. From a more general standpoint, greater focus was placed on developing overall business with each client, subject to strict capital consumption restrictions.
ALL CIB OPERATIONAL SUPPORT FUNCTIONS WERE GROUPED TOGETHER AND ATTACHED TO SOOF (SUPPORT FUNCTIONS, ORGANIZATION, OPERATIONS AND FINANCE)
This new structure is geared to: ● establishing growth drivers for Natixis’ CIB activities in France and abroad; ● promoting and developing cross-selling within CIB and other Natixis business lines; ● stepping up CIB’s progress towards a business model focused on the optimal distribution of originated risk.
1 PRESENTATION OF NATIXIS Natixis’ business lines 1.4.1.2 Debt and Financing
Debt and Financing designs structured fi nancing, advisory and investment solutions for Natixis’ corporate and institutional clients. The department is divided into fi ve global business lines, employs close to 500 people and operates on all of the Bank’s international platforms.
Strategic and Acquisition Finance delivers fi nancial engineering and leverage fi nance solutions. As an expert in acquisition fi nance, the business line arranged the takeovers of Marc Orian by Histoires d’Or, B&B Hotels by Carlyle, and Cerba Lab and Mont-Blanc Materne by LBO France.
FIC&T offers clients investment and hedging products in the fi xed income, credit, foreign exchange and commodity markets of OECD countries, and is also positioned in emerging markets.
The primary bond issuance business line, which is now part of the debt platform, delivered an excellent performance in 2010 across all types of issuers. Underpinned by a strong reputation, a team of experts and worldwide trading capacity, Natixis served as bookrunner for over 176 bond issues. The Bank consolidated its ranking as a leading player, taking 5th place in euro-denominated fi nancial and covered bond issues (source: IFR) (5) and leading the French and Italian markets. Natixis is also a leader in the French Agencies segment and is No. 2 in French corporate issues. A number of key deals were carried out in 2010, with Natixis participating in the year’s largest highyield issue on the euro market. On the international stage, the Bank notably took part in the Alantia SpA issue, totaling €1.5 billion (dual tranches). Natixis also served as lead advisor to the Dutch government on a €6.4 billion issue over 10 years. On emerging markets, Natixis cemented its presence by organizing a benchmark issue on behalf of the Kingdom of Morocco, which marked the issuer’s return to the euro market after a three-year absence.
The Forex teams offer round-the-clock trading of all major currencies from platforms in Singapore, Paris and New York. As volumes fell for the second year in a row, the Forex function was restructured with a view to increasing trading capacity. In 2010, the vanilla and semi-exotic option business revived, in line with the medium-term development plan.
The Commodities (cash and derivatives) business, which joined FIC&T in 2009, was boosted by the inception of a groupwide integrated sales platform in 2010, the primary aim of which is to automate cross-selling. 2010 also saw Commodities expand international trading capacity.
In emerging markets, Natixis offers a full range of fi xed income, credit and forex products, and is geographically positioned so as to support the expansion of the Bank’s other businesses. Natixis is expanding its emerging activities both at the local level (Moscow, Shanghai, Ho-Chi-Minh City) as well as in Paris and New York.
Natixis has a wealth of experience in equity markets, in the brokerage, derivatives and primary market fi elds. 2010 witnessed the creation of an integrated Equities division housing around 450 employees and encompassing all equity brokerage and derivatives activities with the goal of establishing a single platform handling multiple fl ow products.
The equity brokerage platform, located in Paris, London, Frankfurt and New York, covers some 900 institutional and corporate clients. It comprises over 50 sector-based analysts commanding a strong reputation in the industry. Our analysts were once again acknowledged by the fi nancial community in 2010, with fi ve sector teams ranked in the European Top 10 by the Thomson Reuters Extel Europe survey.
On the primary equity market, Natixis took part in 25 deals in 2010 – operating under the dual “Natixis” and “Lazard-Natixis” banner – and confi rmed its leading position in France.
Natixis lead-managed a large number of fund-raising deals for Vivalis, Théolia, Compagnie des Alpes and Vilmorin, and convertible or exchangeable bond issues for OL Groupe, Artemis/PPR and Gecina. Finally, Natixis expanded further on the international market via recapitalization deals (Banca Carige, Deutsche Bank, etc.) and IPOs (AIA, Enel Green Power, Rusal).
Late 2010 saw the M&A Advisory business join Corporate Solutions. M&A advisory services have mainly been offered on the French mid cap market. Clients include major French and international groups, SMEs, private equity funds and public entities. The team has extensive experience in sectors such as food and beverages, business-to-business services, media, real estate, public infrastructures and utilities, and renewable energies.
Corporate Coverage stepped up its sales initiatives in certain sectors, in support of specialized business lines. The Bank also maintained its policy of winning back fi nancial institutional clients by offering them an expanded product range.
1 PRESENTATION OF NATIXIS Natixis’ business lines 1.4.1.8 North America platform
Economic research, headed by Patrick Artus, provides indepth expertise combining contextual overviews, economic and fi nancial forecasts, an analysis of fi xed income and equity markets, country assessments and investment strategies. With 350 stocks tracked in Europe and 60 in the US in 23 industrial sectors, Natixis boasts one of the market’s leading equity research departments. The credit research teams analyze credit market trends and recommend ideal market/sector weightings for clients’ credit portfolios. Finally, quantitative research supports the Bank’s fi nancial innovation process and ensures that it remains competitive on today’s fast-changing markets by developing pricing and risk management models.
Natixis has merged all of its investment activities into one core business, centered on Asset Management, a fi eld in which Groupe BPCE has global ambitions, and rounded out by insurance activities, private banking and private equity, all of which are areas in which Natixis aims to accelerate growth.
Investment Solutions has internationally-acknowledged asset management expertise, as well as distribution structures adapted to the specifi c features and regulations of the various markets in which it operates. The new model enables the Banque Populaire and Caisse d’Epargne networks to strengthen their positioning on the fi nancial savings segment in France and to tap into new growth potential internationally.
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 Natixis Global Associates’ global distribution structure 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 2,800 people, including 1,700 in the US, and boast strong positions in Europe (mainly France), the US and a growing presence in Asia and the Middle East.
Natixis Global Asset Management’s growth strategy has been reaffi rmed under Natixis’ strategic plan to transform a primarily Franco-American player into a global force. Under this plan, deals that would transform the company are being considered. In 2010, the company began to reinvest in order to ensure the steady development of the range of asset management expertise and of the distribution platform in the US, Europe and the rest of the world, particularly in emerging markets such as Asia where infl ows are positive and growing quickly.
Natixis Global Associates, the global distribution platform which covers the US, Europe (excluding France), the Middle East, Asia and Australia, posted very strong infl ows over the year. Assets under management generated by the platform increased by 5% to €135.2 billion in 2010 versus €128.1 billion in 2009. Several local development entities were strengthened and a new offi ce covering Nordic countries was opened in Sweden.
European asset management companies at end-2010 (assets under management in billions of euros)
0 Asset Management. The reinforcement of Natixis Asset Management’s sales in Europe and the development of synergies with the Investment Solutions division remain major priorities. Once again during 2010, Natixis Asset Management received numerous distinctions both for its innovative initiatives such as “Impact climate change” and the performance of its UCITS marketed by the networks and CNP.
AEW Europe, one of Europe’s leading providers of real estate investment advisory services and asset management, is present in 11 European countries, notably in Paris and London, and manages €16.7 billion in real estate assets. It is owned in partnership with Caisse des Dépôts, which has a 40% stake.
All in all, Natixis’ European asset management companies provide a full range of products and services covering all traditional asset classes – money market, fi xed income, equities and real estate – rounded out by expertise in high valueadded areas such as structured products, socially-responsible investment and multi-management.
Assets under management for the 15 US subsidiaries rose 10.1% to $291.7 billion at end-2010 versus $264.9 billion in 2009. Assets under management increased by $26.8 billion, mostly due to Loomis Sayles and a strong positive market effect.
All the group’s US asset management companies directly provide distribution services for institutional clients in the US In the retail banking segment in particular, they enjoyed the support of Natixis Global Associates in 2010, which distributes products, provides advisory and structuring capabilities, and also offers related services that can be tailored to differences in markets and distribution channels. Natixis Global Associates supplies both volume retailers and private investment advisors. Natixis Global Associates also assists US asset management companies in developing sales of their products in the AsiaPacifi c region, in Singapore, Taipei, Japan and Australia.
In 2010, several portfolio management teams and individual portfolio managers were once again given awards, in particular those of Loomis, Harris Associates and AEW Capital Management.
− Reich & Tang Asset Management ($12 billion): US small- and mid-caps, international core and high-yield bonds, money market.
− Absolute Asia Management ($1.2 billion): Asian equities (excluding Japan), emerging Asian equities.
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 health and benefi t protection insurance and property & casualty insurance businesses have recorded robust growth in the last fi ve years and feature a wide variety of solutions distributed by the Banque Populaire and Caisse d’Epargne networks and 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 were rounded out by a broad offering aimed at the Banque Populaire network’s professional customers.
Insurance revenues jumped 27% year-on-year to nearly €4.9 billion in 2010.
Natixis continued to renovate its asset management system by transferring over 20% of its life insurance business to the new OMEGA platform. This move improves the ability to innovate, to meet client demands for better quality service and to respond to multi-channel distribution issues.
As an expert in wealth management and fi nancial solutions, private banking offers a range of products and services tailored to the demands of high net-worth French and international clients. This offering covers not only legal and tax engineering, wealth management advisory services, life insurance and asset management (discretionary management, advised management, UCITS, structured products, etc.) but also lending, which is essential to any wealth structuring solution. The offer is built on a simple principle, namely the search for the best-performing solutions, whether created by Natixis teams, Groupe BPCE entities or external players recognized for their serious commitment to providing quality services.
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 2010, the business recorded net infl ows of €1.1 billion, which was a genuine feat in a persistently challenging market.
As Groupe BPCE’s partner of choice, private banking focused on supporting the networks of Banque Populaire, Caisse d’Epargne and BPCE International et Outre Mer. It stepped up efforts geared to providing the private banking teams of regional banks with all the wealth management and fi nancial solutions they need to meet customer needs. In this capacity, it provides Groupe BPCE networks with a platform of products and services that covers all stages of wealth management (discretionary management, fund picking, life insurance policies, etc.). Each of the components that make up the range of private banking solutions can be chosen separately. To provide network advisers with all the products and services they need, the business line has a team of 20 employees, including private bankers and Heads of Partner Support. In 2010, private banking net infl ows from the networks reached €570 million.
● Natixis proposes a range of high-potential original products in the form of genuinely diversifying long-term investments which are not easily accessible to investors directly.
The combination of corporate fi nancing requirements, a grounding in the real economy, strong experience and expertise, and returns on current investments all point to major long-term growth potential in this business, thus meeting all stakeholder needs.
Investment Solutions’ private equity operations comprise three distinct and complementary business lines, fi ve asset management companies and €2.3 billion in assets under management. The majority of the 105 employees are seasoned investors in their areas of expertise.
With 48 employees, 15 years’ experience and €825 million in assets under management, Naxicap is one of France’s leading providers of expansion capital on the SME segment. It ensures regional coverage through fi ve offi ces around France. This approach enables it to build solid and lasting partnerships founded on close relations with business owners and a strong understanding of the challenges they face. Naxicap fi nances
FUND OF FUNDS WITH THREE FIRMS: DAHLIA PARTNERS IN EUROPE; CASPIAN PRIVATE EQUITY IN THE US; EAGLE ASIA PARTNERS IN ASIA
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. Various strategies are based on geographic coverage, investment stages and investment strategies (primary, secondary and co-investment): ● Dahlia Partners: In 2006, Natixis created this business and launched the first fund of funds for €300 million in partnership with the European Investment Fund. Dahlia works with all types of investments, with 60% of the portfolio invested on the primary market, 30% on the secondary market and the rest in co-investments. Through the state-owned France Investissement structure, Dahlia created a €100 million venture capital fund in association with CDC Entreprises. The management of a mandate dedicated to an insurance company brought the total under management up to €500 million.
Specialized Financing offers a range of services to retail, professional and corporate customers designed to optimize their cash management or to support their investment projects: factoring, sureties and guarantees, leasing, consumer loans, fi lm and audiovisual fi nancing.
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 t-sharing and incentive plans) and pension schemes (individual and collective pension plans), special payment vouchers, and collective health and benefi t protection schemes.
Natixis has confirmed almost €400 million in potential NBI synergies by 2013 under its “network synergies” plan, more than half of which are set to come from Specialized Financial Services.
As the No. 3 player on the French market (13.7% market share – source ASF at December 31, 2010) and despite a slower-thanexpected recovery from the crisis, Natixis Factor continued to increase sales in 2010, signing nearly 2,000 contracts with clients from Groupe BPCE, Natixis and the brokerage networks. Annual factored revenues climbed 23% to €21 billion in 2010.
The new IT production tool is now operational and geared up to meet all of its targets in 2011, both in terms of productivity gains and differentiating the business’s range of products and services.
Compagnie Européenne de Garanties et Cautions – licensed as an insurance company subject to Art. 15 of the French Insurance Code – is Natixis’ guarantee and surety platform for multiple business lines.
Natixis Lease provides companies of all sizes and professionals with a range of solutions for fi nancing equipment and installations, including equipment leasing, real-estate leasing, operating leasing, long-term vehicle leasing, IT operational leasing and renewable energy fi nancing.
Natixis consolidated its leading position in Sofergie renewable energy fi nancing and recorded new business of €198 million, up 19% from 2009.
The vehicle fl eet leasing business posted a 21% increase in new business in 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 unattractive consumer fi nancing backdrop during the year, Natixis Financement maintained solid sales momentum, thanks largely to the launch of debit/credit cards on the Caisse d’Epargne and Banque Populaire networks.
New business increased by 8% to €5.8 billion in 2010 (€1 billion for revolving credit and €4.8 billion for personal repayment loans).
On July 1, 2010, Natixis Financement entered into a joint venture with BNP Paribas Personal Finance to develop a joint IT platform.
The employee savings offer tailored to SMEs and professionals, distributed by the Banques Populaires and Caisses d’Epargne networks, turned in a strong performance with over 10,000 new contracts.
Natixis’ payments business combines management of payment tools and systems with services to retail customers.
Payment fl ows are processed by specialist subsidiary Natixis Paiements, which handles payment transactions (checks, mass and single transactions, electronic banking, etc.) across the entire range of interbank channels, while also offering affi liated services. The merger of GCE Paiements and Natixis Paiements on September 1, 2010 created a unifi ed payments operator for Groupe BPCE, which processes payment fl ows for Banques Populaires, Caisses d’Epargne, major French banking institutions and some 100 other banks and fi nancial establishments.
In electronic banking, Natixis is developing a full array of services for the distribution networks, ranging from product design to technical and marketing support. Natixis contributes to the development of professional and retail markets and prepares the systems needed to launch new products (contactless payments, multi-visual cards, debit/credit cards, prepaid cards, e-commerce, ...). For example, it helped launch Banque Populaire and Caisse d’Epargne’s “personalized visual” bank card offerings and set up the new Systempay e-commerce platform. Natixis managed over 16 million cards and processed nearly 2 billion card transactions in 2010 (+5% year-on-year).
Natixis serves a diversifi ed client base comprising Groupe BPCE’s banking networks, banking institutions with or without retail networks, fi nancial companies and private banking asset management fi rms.
In a year plagued with declining transaction volumes affecting fi nancial savings fi rms across the board, Natixis: ● successfully completed several phases in the restructuring of the Securities services (transfer of activities, IT migrations for the first Caisse d’Epargne banks), with a view to creating one of the leading players in retail custody in Europe; ● took over processing of lines of UCITS shares held by clients of a major banking institution, such that it now processes all the institution’s securities via its information system.
Through its subsidiary SLIB, Natixis produces innovative software solutions enabling European fi nancial institutions to facilitate back-offi ce processes such as clearing, settlement and risk management.
In 2010, SLIB expanded its range of risk management solutions, built up its client base in the UK and won a competitive tender from AFTI* for the automated online collection of voting instructions sent in by shareholders prior to general meetings.
* Association française des professionnels des titres (French association of securities professionals).
Commercial banking lies at the heart of Groupe BPCE and is centered on two banking networks fi rmly anchored in the regions where they operate, i.e. the Banques Populaires network, including Casden Banque Populaire and Crédit Coopératif, and the Caisses d’Epargne network. A number of other institutions round out the Group’s offering, namely Crédit Foncier, a major player in real-estate fi nance, Banque Palatine, the corporate and private bank, Crédit Maritime Mutuel, a specialist in the coastal economy, and others with complementary acumen or regional expertise.
Groupe BPCE’s commercial banks harness the full range of their expertise and the support of specialist subsidiaries to deliver the services, advice, and fi nancing and investment solutions sought by clients. Firmly entrenched in their respective regions, the commercial banks provide clients with a combination of the local knowledge needed to grasp regional issues and the local decision-making needed to ensure a fast response.
Outside metropolitan France, Groupe BPCE’s commercial banking operations extend to French overseas departments and territories, the Indian Ocean, the Mediterranean basin, central Africa, and central and eastern Europe. The Group plans to gradually expand this international footprint via organic growth and targeted acquisitions of medium-sized banks.
With Cartego, launched in 2010, customers can customize their bank card with any picture they want. This new feature is already à great success among customers of all ages.
CASDEN Banque Populaire has more than a million cooperative shareholders, including nearly 900,000 TSMT* customers from the French Ministry of National Education, Research, and Culture. It has 109 regional offi ces, nearly 5,000 educational correspondents in schools, and a group of personal advisors, some of whom, according to the banks, are specifi cally responsible for national education customers. In collaboration with CASDEN, Banque Populaire banks provide special training to better meet the needs of this specifi c clientele.
In 2010, for the fi rst time in its history, CASDEN launched an institutional press campaign in France to increase brand awareness among its target customers.
The Banque Populaire network signifi cantly increased the number of revolving credit consumers, doubling its account subscriptions compared to 2009, with 230,000 new accounts, 201,000 of which were generated through Facélia, the new debit/credit card.
For the fi rst time, fi ve tranches of BPCE bonds were marketed as a life insurance or securities accounts. They collected a total of €207 million.
Banque Populaire private banking serves wealthy customers with €150,000 to €1 million in assets and high net worth customers with more than €1 million in assets. It targets professionals, self-employed professionals, and business owners.
Clients are offered a monthly newsletter, a Synthèses magazine, and a special website.
The year saw the development of a Wealth Management Agreement that underscores the quality of service provided. A premium non-life insurance offer was designed with Natixis
Assurances and the entire UCITS private banking line was overhauled with Natixis Asset Management.
With its customers including nearly 56,000 farmers, one out of every two franchisers, and a craftsman and small retailer penetration rate of 26.4%, Banque Populaire is truly the reference banking institution among small businesses.
At the end of 2010, outstanding small business loans totaled €31 billion, which was stable compared to 2009, and assets and deposits were at €10.3 billion, representing an increase of 5.2%.
As a partner of the main networks assisting entrepreneurs and leading distributor of business start-up loans, with a market share of 26.4%, the Banque Populaire network fi nances more than 70,000 projects each year. With Crédit Coopératif, they provide microloans through ADIE (Association pour le Droit à l’Initiative Economique), a leading provider of microloans in France. Since 2004, about 20,000 loans have been issued, totaling more than €54 million. Through partnerships with Socama (small business mutual guarantee companies) and the European Investment Fund, they facilitate projects for entrepreneurs and buyers of small businesses without requiring a personal guarantee.
As a longstanding partner of the chambers of trade and craft industries (Chambres de Métiers et de l’Artisanat), the Banque Populaire banks have joined forces with the National Entrepreneurship Week (Semaine Nationale de la Création Reprise d’Entreprises Artisanales), providing advisory services to many people with plans for new businesses. As the bank of future craftsmen and small retailers, they have a special offer for apprentices, who account for 20,000 of their customers.
As the reference banking institution among both franchisees and franchisers and a longstanding partner of the French Franchise Federation, the Banque Populaire banks have an active policy of enlisting new partners into the franchise network. More than one hundred of them are able to offer their members privileged relationships with local branches. In 2010, the Banque Populaire banks supported projects involving more than 200 different brands. Already associated with the Chamber of Commerce and Industry (CCI) for the Challenge du Commerce et des Services (small business challenge), they supported the fi rst ever Trade Organization Discussion. In 2010, they launched an offer geared toward small retailers set up as franchises.
The Banque Populaire banks provide active support to young self-employed professionals. By providing help with setting up business, fi nancing, services, and electronic banking packages, the Atout Libéral line is tailored to the needs of each and every profession, with a particularly strong focus on the healthcare industry.
As a pioneer in employee savings plans for self-employed professionals, the Banque Populaire banks offer the only intercompany group plan for pension savings dedicated to selfemployed professionels. In 2010, they offered an innovative Biohealth property fund (FCPI), an innovation mutual fund geared toward healthcare professionals.
In 2010, the Banque Populaire banks celebrated 20 years of commitment to farmers. About 18% of French farmers are customers of the Banque Populaire network, which is aiming to become number two in terms of market share.
The Banque Populaire banks offer social and tax advice for farmers, with simulation tools that integrate all available programs, precautionary savings solutions, employee savings plans, pension savings plans, economic risk insurance, weather insurance, and animal epidemic insurance.
With a strong presence in the fi eld, the Banque Populaire banks have established partnerships with many farming and ranching organizations. Each year, they award the National Farming and
Fishing Award to reward the ability of farmers to undertake and promote their production.
The Banque Populaire banks are the fi nancial partner of 38% of companies with more than 10 employees. With 167 business centers and a thousand employees, the banks serve nearly 221,000 corporate clients, representing a net increase of 2.8%. Their main areas of focus include new customer acquisition, payment processing, and international business support.
In terms of loans, the Banque Populaire banks continued to provide medium- and long-term support to businesses with a 3.4% increase in outstanding loans, for a total of €16.6 billion in 2010. They have also been active in distributing other sources of business fi nancing, including real estate leases (for which Groupe BPCE is the market leader), non-real estate leases (in partnership with Natixis Lease, ranked 4th in France), and receivables fi nancing (with Natixis Factor). Natixis Factor provides customers with company information, credit insurance, receivables management, and factoring.
With the support of Natixis, the Banque Populaire banks have launched a new foreign exchange and commodity hedging offer. Plans for 2011 include broader international cash management and the targeted development of export documentary credit.
With a strong presence in supplementary health insurance companies, pension funds and employee benefi t savings funds, they promote their development and projects through increased consolidation.
These strategic initiatives fuelled dynamic activity in 2010, in particular with a 2.2% increase in the client base of active retail customers. Customer savings and deposits rose by 2% to reach €319 billion at year-end 2010. Loan outstandings grew by 10.9% and amounted to €104 billion.
The year saw two major launches, with one point in common: to give customers the freedom to choose based on their needs. Izicarte, a Visa payment card, allows customers to opt for payment by cash debit or credit for each purchase. It also offers an extended guarantee.
Bouquet Liberté, which replaces the Satellis packages, allows each customer to build his or her own banking services package in addition to essential account keeping services.
The launch in 2010 of a full set of services available via smart phone, iPhone, Blackberry and Android are part of this strategy.
In June 2010, Caisse d’Epargne launched a full program designed for young adults between 18 and 30 years old. It builds on a close relationship between each young adult and an appointed advisor in the branch.
Communication is not forgotten with a new area called Direct Ecureuil Jeunes 18-30 ans on www.caisse-epargne. fr, a presence on Facebook and on Twitter, partnerships with MSN and seloger.com, the Caisse d’Epargne blog lesgrandespremières.fr, completely dedicated to young adults, and a widespread advertising campaign.
Caisse d’Epargne is also the third largest distributor of 0%-interest loans with more than 47,000 0%-interest loans distributed in 2010.
Caisse d’Epargne continued to roll out a structure that provides private banking customers with special treatment. These customers are served by a customer manager for day-to-day business and by a private banking account manager for their wealth management needs. Dedicated Private Banking areas are open in the largest population centers. Seven were opened in 2010 in Versailles, Lyon, Grenoble, Nice, Reims, Dijon and Besançon, and 14 others are planned for 2011.
The number of Caisse d’Epargne small business customers exceeded 235,000, including shopkeepers, craftman, selfemployed professionals and very small businesses.
The momentum continued in the franchise and trade association business. New partnerships were formed with Yves Rocher, Les Echos de la Franchise and some twenty major brands.
As regional development banks, the Caisses d’Epargne aim to be “the Bank of the Decision-Makers of France’s regions” and are providing themselves with the means to do so. As such, regional development banking offers a network of 120 business centers that work with all economic players participating in local and regional development: businesses, the social economy, institutions, the public sector, social housing organizations, semi-public entities and professional real estate companies. Through its overall banking approach, Caisse d’Epargne supports all players in the regional economy. Accordingly, decisions are made quickly and take into account the specifi c characteristics of the local economic environment. New business lines are emerging, such as technical sales to support the account managers. A dedicated executive manager in each Caisse d’Epargne oversees the entire regional development banking function.
The business was sustained with average demand deposits of €5.1 billion, a 63% increase, and surplus infl ows amounting to €1.2 billion. Regional development banking loan outstandings grew by €7.1 billion to reach €51.8 billion at year-end 2010.
Caisse d’Epargne forged partnerships with HEC Entreprendre, Croissance Plus and Deloitte in the context of Deloitte Fast 50, which assesses growing companies.
Since 2010, Caisse d’Epargne has offered its customers a practical and competitive cash management solution: a simple Internet connection provides corporate customers a global view of their subsidiaries’ cash position or the cash positions of their secondary locations.
Financing to investors and to the real estate service sector totaled €1.3 billion.
Caisse d’Epargne strengthened its presence at major professional events and opened an Internet area on the www. caisse-epargne.fr portal dedicated to real estate professionals. With ambitious objectives for 2011, the Caisses d’Epargne want to be a driving force in the regions by promoting synergies between economic players and organizing fi nancial arrangements.
Loan production exceeded €1.6 billion, nearly double the production reported in 2009. Likewise, managed infl ows exceeded €19.5 billion this year.
Caisse d’Epargne originated €16 billion in new loans for the regional public sector and for the public health and social services sector, including €7.5 billion in short-term loans and €8.5 billion in medium and long-term loans. Loan outstandings, Crédit Foncier included, amounted to €46 billion at year-end 2010. Debt-management transactions totaled €2.5 billion.
Caisse d’Epargne provides free of charge to each of France’s 36,500 French town councils and 2,600 districts a personalized socio-economic and fi nancial analysis and a reference document to facilitate debates on budgetary initiatives. The distribution of the Baromètre fi nancier des communes et communautés (AMF/Caisses d’Epargne/CSA fi nancial barometer of districts and communities), the analysis from Impacts fi nanciers d’une réforme de l’organisation territoriale (ADF/Caisses d’Epargne/ KPMG report on the fi nancial impact of regional reform), and the organization of special information days are examples of how the Caisse d’Epargne helps decision-makers in territorial public institutions and local authorities anticipate issues, obtain information and exchange ideas.
(3) National Federation of Catholic Education Management (Fédération nationale des organismes de gestion de l’enseignement catholique).
Caisse d’Epargne is a shareholder in over 500 local public companies and takes part in the governance of several of them. Conversely, several local public companies are cooperative shareholders of Caisse d’Epargne.
In 2010, Caisse d’Epargne and Crédit Foncier were awarded €820 million in tenders from the French government for loans for the construction of social housing (PLS) and loans for the fi rst-time rental of social housing (PSLA), and they obtained a new €125 million pool of funding from the European Investment Bank.
Caisse d’Epargne’s medium and long-term fi nancing of social housing projects totaled €2.5 billion, an increase of 38%, bringing the total of loan outstandings to €11 billion at year-end 2010.
The bank offers a full range of loans, enhanced in 2010 by ratecapped structured loans, thereby offering more of a hedge against interest rate risk to social housing organizations.
Caisse d’Epargne is the leading private operator in the social housing sector. Habitat en Région (Regional Housing), formed in 2010 as an association, groups together 15 social housing enterprises and seven HLM (habitation à loyer modéré) cooperatives, subsidiaries of the Caisses d’Epargne providing rent-subsidized housing.
This development facilitates a collective response to major social housing challenges while preserving the identity and decision-making autonomy of the network operators, which guarantees solutions tailored to the needs of the regions.
In 2010, enterprises, members of Habitat en Région, delivered 5,000 new housing units, including 1,500 dedicated to promoting home ownership and the sale of subsidized housing, and began work on 6,000 new housing units.
● The Erilia Group is one of the leading national players in social housing with over 47,000 housing units, retirement homes, student housing and accommodation for seasonal workers. Erilia is very involved in urban renewal projects, particularly in the South of France, in the Rhône-Alpes region, on the Atlantic coast and in Ile-de-France.
In order to best manage the properties, Logirem and SIA are also property developers.
Banques Populaires CCIs are freely tradable. However, the sale of Banques Populaires CCIs must be approved beforehand by the Board of Directors of the Banque Populaire concerned.
Banques Populaires CCIs may be repurchased from Natixis on the initiative of each Banque Populaire, without the prior authorization of the Special General Meeting of CCI holders and with the prior authorization of BPCE, in the event of BPCE’s control of Natixis ceasing or of reform of the 1947 law involving a substantial alteration of the rights of Banques Populaires CCI holders.
The buyback value of Banques Populaires CCIs will be calculated using the method of valuation used when they were issued, particularly as regards the calculation of net assets, and must take account of the profi tability of the Banques Populaires and of the proportion of the net assets to which the Banques Populaires CCIs entitle the holder. If Natixis and the Banque Populaire cannot reach agreement, this buyback value shall be determined by an expert.
Natixis and the Banques Populaires have agreed to maintain existing industry and commercial relations for a period of at least 10 years from the subscription date of Banques Populaires CCIs and, in particular, the provision of the following services: ● provision of IT infrastructure; ● provision of industrial services (custodial services, payment systems, operational management of currency accounting); ● design and management of customer products on behalf of Banques Populaires (asset management, the whole range of insurance products (life, health and benefit protection, fire, accident and other risks), factoring and lease financing, financial engineering, expansion capital, employee benefits planning (and particularly company savings schemes), international financial engineering, credit insurance and commercial information (Coface).
Upon the expiry of the 10-year period, either of the parties may terminate these existing commercial and industry relationships subject to providing one year’s prior notice and, if necessary, complying with specifi c contractual provisions governing these relationships.
Natixis is required to maintain its 20% stake in the capital of each Banque Populaire
The memorandum of understanding pertaining to the issue of CCIs by the Banques Populaires requires Natixis to maintain the level of its equity stake in the Banques Populaires under the following terms: ● Mechanism for regulating the capital of Banques Populaires possessing variable capital: The Banques Populaires are entities with variable capital (except BRED). In order to maintain the level of Natixis’ interest, a carrying structure was set up for each Banque Populaire in the form of a subsidiary of the Banque Populaire concerned, the said subsidiary being administered and managed by the issuing Banque Populaire. The carrying structure regulates the variability of the share capital by subscribing for a unit of the share capital each time a unit of the share capital is redeemed and, conversely, by requesting redemption of a unit of the share capital each time the Banque Populaire issues a new unit of share capital.
● 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.
In 2010, maintaining the 20% stake in the capital of each of the Banques Populaires represented an investment of €183,332,498.50 for Natixis.
In the event that the right to buy back Caisse d’Epargne CCIs is exercised under cases (ii) or (iv), BPCE enjoys a preferential right over the Caisse d’Epargne concerned as regards the exercise of the promise of sale.
As part of the development of their industry and commercial cooperation, Natixis and Caisse d’Epargne have agreed to maintain their existing industry and commercial relationships described above for at least 10 years.
Coface offers solutions for the management of trade receivables that companies hold on other companies. Credit insurance is Coface’s core business, which accounts for more than 80% of its revenue and involves protecting companies against the risk of fi nancial default by their clients. Coface also provides companies with information on their trading partners so that they may evaluate their clients’ fi nancial situation and ability to honor their commitments. Coface also offers clients receivables management services, which facilitate the monitoring and collection of unpaid receivables, together with factoring products to fi nance their trade receivables.
No. 7 worldwide in business information (source: Coface Marketing Intelligence Unit – July 2010).
Coface has now implemented a new IT application for managing credit insurance risks, called Atlas. This application is available to all entities worldwide. Atlas interfaces with all Coface’s IT business information tools, thus improving risk management and the quality of service provided to Coface’s clients.
Among the other highlights of 2010, Coface created a new Risk Management Department in order to meet the requirements of the new Solvency II regulations on the insurance industry. The new department is geared to evaluating and preventing risks. As such, it is responsible for conducting permanent controls, centralizing incidents and losses, following up corrective measures and updating risk mapping for all business lines.
Coface’s international development strategy also led it to consolidate its credit insurance network by obtaining a license for its Moscow-based subsidiary “ZAO Coface Rus Insurance Company” from FSSN (Russia’s insurance regulator). In doing so, it became the fi rst international credit insurer to obtain such a license in Russia.
In 2008, Natixis established a division, known as GAPC (Gestion Active des Portefeuilles Cantonnés – Workout Portfolio Management) in order to (i) isolate the assets that were most impacted by the crisis and those that are no longer felt to fi t the new strategic direction of Natixis and (ii) progressively offl oad these assets by means of active management that ensures the proper balance between speeding up the return of capital and the resale price of the assets. The assets held by GAPC, the organization of GAPC as well as the governance structure put in place are described below.
● Approval of the plan to refocus Corporate and Investment Banking (CIB): CIB’s operations were split into a segment known as “CIB continuing activities”, consisting of the operations to be pursued, and another containing the assets to be run off within GAPC. This separation was intended to ensure optimal proactive management of the assets segregated within GAPC, to protect the operations retained within “CIB continuing activities”, and to highlight the performance of the operations within “CIB continuing activities”.
● Change in governance and GAPC spun out of CIB: GAPC henceforth reports to executive management.
● Approval and announcement in August 2009 of the principle of the guarantee provided by BPCE to Natixis (the “Guarantee”).
● Formal approval of the Guarantee by the corporate bodies of BPCE and of Natixis and the implementation of the Guarantee in November 2009 (retroactive effect to July 1, 2009).
The identifi cation of assets which were segregated was primarily done on the basis of three criteria: (i) assets or operations that did not or no longer offered synergies with the CIB continuing activities with regard to CIB’s new direction laid out in 2009; (ii) assets or operations offering poor returns on the capital or cash tied up; (iii) assets or operations with excessive risk profi les or offering insuffi cient liquidity.
GAPC’s fi nal scope thus includes the following proprietary investment operations: structured credit, mortgage portfolios of the ABM Corp. subsidiary based in New York, credit correlation portfolios (at end-2010 only the counterparty risk component remained as all market risk had been disposed of), portfolios of complex interest rate and equity derivatives, as well as fund-linked structured products. At December 31, 2010, these operations represented €16.7 billion of risk weighted assets, before the effect of the Guarantee.
Complex derivatives (interest rate) 4.0 1.4 6.9 1.5 * Net of provisions.
Although correctly valued, the GAPC credit asset portfolio remains notably exposed to the volatility of these assets with a potential impact on the income statement and capital adequacy ratio of Natixis. In order to deal with this risk, which Groupe BPCE is better equipped to manage than Natixis alone,
The Guarantee covers the credit assets, except for complex credit derivative portfolios and RMBS portfolios insured by the US Agencies (FNMA known as Fannie Mae, FHLMC known as Freddie Mac) but including the hedging of risks on counterparties not providing collateral.
The scope of the Guarantee, in net value terms, amounted to €25.2 billion (excluding “CDPC”) at December 31, 2010, down €6.6 billion at December 31, 2009 (see 4.1 – Management Report) as a result mainly of amortization and disposals.
The implementation of the Guarantee triggered two payments to BPCE: ● the first for €1.183 billion in respect of the financial guarantee (including €1.035 billion for the assets recognized as loans and receivables (L&R) and €148 million for available-for-sale assets (AFS)) compared to €1.249 billion in provisions; and
In 2010, the impact on the Natixis fi nancial statements was -€247 million. Over this period, disposals represented a €1.082 billion nominal amount for assets covered by the fi nancial guarantee, and a €4.733 billion nominal amount for assets under the TRS, with a net impact on results before the Guarantee of €188 million.
The terms and conditions of the agreements constituting the Guarantee were deemed reasonable and balanced from a fi nancial perspective for Natixis by Mediobanca.
The implementation of the Guarantee did not have an initial impact on Natixis earnings. Subsequently, the consequences will be as follows: ● changes in the value of the portfolio guaranteed, from June 30, 2009, by the TRS will be offset by the TRS up to 85%; ● the Option will be measured at fair value through profit and loss primarily on the basis of the change in the value of the portfolio guaranteed by the two TRS; ● the equivalent value of the €1,183 million payment in consideration for the financial guarantee will be amortized almost symmetrically with the reversal of the provisions for writedown that were funded for this portfolio at June 30, 2009 and the amortization of reclassification discounts.
The retention of existing governance structures and Committees as regards accounting, fi nancial, risk, asset and liability management (ALM) and other issues: ● arrangements regarding ad hoc reporting (regular reporting and reporting of warnings) and specific monitoring of risks of GAPC assets covered by the Guarantee between the BPCE and Natixis Risk Departments; ● arrangements, which provide for procedures for getting the advice and assessment of the BPCE Risk Department on procedures implemented within Natixis regarding the GAPC assets, including in addition procedures to access information on the control of system reliability and model validation.
This change was implemented to achieve two main goals: ● provide BPCE’s representatives with increased and effective participation in this Committee’s decision making; and
● 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.
1PRESENTATION OF NATIXIS Natixis and its shareholders 1.6 Natixis and its shareholders 1.6.1 KEY SHARE DATA AT DECEMBER 31, 2010
(a) Calculated on the average number of shares (excluding treasury shares) during the period and after accounting for net interest payments on the Deeply Subordinated Notes.
1 PRESENTATION OF NATIXIS Natixis and its shareholders 1.6.4 SHARE PRICE INFORMATION
Jan. 10 Feb. 10 March 11March 10 April 10 May 10 June 10 July 10 Aug. 10 Sept. 10 Oct. 10 Nov. 10 Dec. 10 Jan. 11 Feb. 11
In 2010, the Natixis share decreased by 1.3% (from €3.55 at the end of 2009 to €3.5 at the end of 2010). Over the same period, the Euro zone banking stocks index (DJ Euro Stoxx Bank) declined by around 27%. At the end of March 2011, the Natixis share stood at €3.99.
− features Natixis press releases and fi nancial news in the “Shareholders and Investors” section,
− includes all editorial content and documents for shareholders and, in particular, all issues of the Shareholder Newsletter in the “Individual Shareholders’ Corner”.
In addition there is: ● a Natixis Shareholders’ Club, 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 and where members may update their contact details; ● a Natixis Shareholders’ Consultative Committee (CCAN) that comprises 12 members and met twice in 2010. Moreover, conference calls are regularly organized to inform the Committee of recent news and discuss various topics.
● Like every year, Natixis had a stand at the Actionaria trade show on November 19-20, 2010. Shareholders’ Club members were once again personally invited to this event by letter accompanied by an invitation and were personally welcomed at the stand.
This section is an extract from the Chairman of the Board’s report on the Board’s composition, the preparation and organization of its work and the internal control and risk management procedures implemented by Natixis including information regarding the mandates off corporate offi cers and their compensation.
● This report was prepared in application of Article L.225-37 of the French Commercial Code.
The information it contains takes into consideration, in particular, annex I of European Regulation (EC) 809/2004 of April 29, 2004 as well as the 2009 French securities regulator Autorité des Marchés Financiers – AMF report on corporate governance and internal control published on July 12, 2010 and the complementary report of December 7, 2010, and the Guide for compiling registration documents, also published by the AMF on December 10, 2009, updated on December 20, 2010.
● 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 Chairman of the Board: Board Meeting of 04.30.2009 Term expires: 2015 AGM (b)
Chairman of the BPCE Executive Board 50, avenue Pierre Mendès France 75201 Paris cedex 13
Director Permanent representative: Mr. Nicolas DUHAMEL Date of birth: 08.13.1953 First appointed: Co-opted by the Board Meeting of 08.25.2009 and ratifi ed by AGM of 05.27.2010 Term expires: 2015 AGM (b)
Member of BPCE Management Board 50, avenue Pierre Mendès France 75201 Paris cedex 13
Ms. Christel Bories* Date of birth: 05.20.1964 Natixis shares held: 1,000
Member, Compensation Committee First appointed: Board Meeting of 02.22.2011 Term expires: 2015 AGM (b)
Chairman & CEO, Alcan Engineered Products 17, place des Refl ets 92097 Paris La Défense
Member, Audit Committee First appointed: Board Meeting of 04.01.2010 Term expires: 2015 AGM (a)
Chief Executive Offi cer of Banque Populaire Bourgogne Franche-Comté Member of BPCE Supervisory Board 5 avenue de Bourgogne – BP 63 21802 QUETIGNY CEDEX
Chief Executive Offi cer – Commercial Banking Member of BPCE Management Board 50, avenue Pierre Mendès France 75201 Paris cedex 13
Mr. Jean-Bernard Mateu Date of birth: 04.28.1964 Natixis shares held: 1,093
Chairman, Executive Board, Caisse d’Epargne Rhône Alpes 42 bd Eugène Deruelle – BP 3276 69404 Lyon cedex 03
Mr. Bernard Oppetit* Date of birth: 08.05.1956 Natixis shares held: 1,000
Director First appointed: Co-opted by the Board Meeting of 11.12.2009 and ratifi ed by AGM of 05.27.2010 Term expires: 2015 AGM (b)
Mr. Henri Proglio* Date of birth: 06.29.1949 Natixis shares held: 1,000
Chief Executive Offi cer – Operations of BPCE Member of BPCE Management Board 50 avenue Pierre Mendès France 75201 Paris cedex 13
Mr. Philippe Sueur Date of birth: 07.04.1946 Natixis shares held: 3,500
Member, Compensation Committee First appointed: Board Meeting of 12.17.2009 Term expires: 2015 AGM (b)
(a) A brief curriculum vitae of each of Natixis corporate offi cers as well as a list of the offi ces held in 2010 and in previous years appears in the section 2.2.4.
2CORPORATE GOVERNANCE Structure of the corporate and executive bodies 2.2.2 EXECUTIVE MANAGEMENT AS OF MARCH 1, 2011
Chief Executive Offi cer First appointed: Board Meeting of 04.30.2009, effective May 14, 2009 Term expires: 05.14.2015 (a)
(a) A list of the offi ces held by the Chief Executive Offi cer in 2010 and in previous years appears in the section 2.2.4.
❚ MEMBERS OF THE EXECUTIVE COMMITTEE (COMEX) AS OF MARCH 1, 2011
Mr. John Hailer Investment Solutions – Natixis Global Asset Management US and Asia
INTERNATIONAL Chairman of: Nord Sumatra Investissements, Financière du Champ de Mars, Financière Nord Sumatra, Champ de Mars Investissements Vice-President of: la Société des Caoutchoucs de Grand Bereby (SOGB), Bereby Finances, Generali (since 04.24.2010) Member of the Board of: BB Group, Centrages, Champ de Mars Investissements, Financière Nord Sumatra, Generali (since 04.24.2010), Intercultures, Liberian Agricultural Company (Lac), Mediobanca, Plantations Nord Sumatra Limited, Plantations des Terres Rouges, SDV Gabon, Bolloré Africa Logistics Sénégal (formerly SDV Sénégal), Socfi n KCD, Socfi naf Cy Ltd (up to 04.01.2010), Socfi nal, Socfi nasia, Socfi nco, Socfi ndo, la Société de Gestion pour le Caoutchouc and les Oléagineux (Sogescol) Managing Director of: Nord Sumatra Investissements, Financière du Champ de Mars Permanent representative for Bolloré Participations, Member of the Board of: SDV Cameroun (up to 09.16.2010), Bolloré Africa Logistics Cameroun (since 09.16.2010), SDV Congo, SAFA Cameroun, Socapalm (Société Camerounaise de Palmeraies), Palmcam (Société des Palmeraies du Cameroun), SPFS (Société des Palmeraies de la Ferme Suisse – Palm’or) (up to 06.09.2010), Société des Caoutchoucs de Grand Bereby – SOGB, Bereby Finance Co-Manager of: Brabanta
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, Havas, Havas Média France Chairman of: Bolloré Production, Véhicules Électriques PininfarinaBolloré (VEPB) Chief Executive Officer of: Omnium Bolloré, Financière V, Sofi bol Member of the Board of: Batscap, Bolloré, Bolloré Participations, Compagnie des Glénans (up to June 11, 2009), Direct 8 (formerly Bolloré Média), Direct Soir, Financière Moncey, Financière de l’Odet, Financière V, Havas, Havas Média France, Matin Plus (formerly Compagnie de Bangor), Omnium Bolloré, Sofi bol, VEPB Permanent representative for Bolloré Participations, member of the Board of: la Société Anonyme Forestière et Agricole (Safa), la Société des Chemins de Fer et Tramways du Var et du Gard, la Société Industrielle et Financière de l’Artois, la Société Bordelaise Africaine, la Compagnie des Tramways de Rouen, IER Permanent representative for Bolloré Participations to the Supervisory Board of: la Compagnie du Cambodge Permanent representative for Bolloré to the Board of: Fred et Farid Permanent representative for Havas to the Board of: Médiamétrie
INTERNATIONAL Chairman of: Champ de Mars Investments, Financière du Champ de Mars, Financière Nord Sumatra, Nord Sumatra Investissements Vice-President of: la Société des Caoutchoucs de Grand Bereby (SOGB), Bereby Finances Member of the Board of: BB Group, Centrages, Champ de Mars Investissements, Financière Nord Sumatra, Intercultures, Liberian Agricultural Company (Lac), Mediobanca, Plantations Nord Sumatra Limited, Plantations des Terres Rouges, SDV Gabon, SDV Sénégal, Socfi n KCD, Socfi naf Cy Ltd, Socfi nal, Socfi nasia, Socfi nco, Socfi ndo, la Société de Gestion pour le Caoutchouc and les Oléagineux (Sogescol) Managing Director of: Nord Sumatra Investissements, Financière du Champ de Mars Permanent representative for Bolloré Participations, member of the Board of: SDV Cameroun, SDV Congo, SAFA Cameroun, Socapalm (Société Camerounaise de Palmeraies), Palmcam (Société des Palmeraies du Cameroun), SPFS (Société des Palmeraies de la Ferme Suisse – Palm’or), Société des Caoutchoucs de Grand Bereby – SOGB, Bereby Finance Co-Manager of: Brabanta
INTERNATIONAL Chairman of: Plantations des Terres Rouges Managing Director of: Nord Sumatra Investissements Vice-President of: Société des Caoutchoucs du Grand Bereby (SOGB), Bereby Finances Member of the Board of: BB Group, Centrages, Compagnie Internationale de Cultures, Liberian Agricultural Company (LAC), Mediobanca, Plantations Nord Sumatra Limited, Plantations des Terres Rouges, Red Lands Roses, SDV Gabon, SDV Sénégal, Socfi n, Socfi naf, Socfi nal, Socfi nasia, Socfi nco, Socfi ndo, Socfi ninter, Société de Gestion pour le Caoutchouc et les Oléagineux (Sogescol) Managing Director of: Nord Sumatra Investissements Permanent representative for Bolloré Participations, member of the Board of: SDV Cameroun, SDV Congo
Mr. Jean Criton, aged 63, Chief Executive Offi cer of Banque Populaire Rives de Paris. After studying law and political science, Jean Criton, began his professional career in internal audit of the Banques Populaires Group. He has worked for the group throughout his career: after several years with the central body, he occupied management functions in three regional Banques Populaires banks – Banque Populaire du Centre, Banque Populaire Nord de Paris and BICS Banque Populaire – before conducting the merger that gave rise to Banque Populaire Rives de Paris.
Member of the Supervisory Board of: BPCE Member of the Board of: Natixis Chief Executive Officer of: Banque Populaire Rives de Paris Chairman and Chief Executive Officer of: Sud Participation S.A.
Member of the Board of: Banque Privée 1818 (up to 09.30.2010), Coface (up to 09.13.2010), Natixis Assurances (up to 09.13.2010), Natixis Private Banking, (up to 09.13.2010) Natixis Private Equity, Société Marseillaise de Crédit (up to 09.21.2010), Banque Populaire’s corporate foundation Permanent representative for Banque Populaire Rives de Paris, member of the Board of: i-BP, Banques Populaires’ corporate start-up organisation (Chairman) Chairman of: SAS Sociétariat BP Rives de Paris.
Member of the Supervisory Board of: BPCE (since 07.30.2009) Member of the Board of: Natixis (since 11.12.2009) Chief Executive Offi cer of: Banque Populaire Rives de Paris Chairman and Chief Executive Officer of: Sud Participation S.A.
Chairman of the Board of Directors of: Turbo S.A. Member of the Board of: Banque Privée 1818 (since 06.30.2009), Coface, Natixis Assurances, Natixis Private Banking, Natixis Private Equity, Société Marseillaise de Crédit (SMC), Banque Populaire corporate foundation Permanent representative for Banque Populaire Rives de Paris, member of the Board of: i-BP (Vice President), Chairman of: SAS Sociétariat Banque Populaire Rives de Paris
Chairman of the Board of Directors of: Turbo S.A. Member of the Board of: Coface, Natexis Assurances, Natexis Private Banking, Natexis Private Equity, Société Marseillaise de Crédit (SMC), Banque Populaire corporate foundation Permanent representative for Banque Populaire Rives de Paris to the Board of Directors of: i-BP (VicePresident ) Chairman of: SAS Sociétariat Banque Populaire Rives de Paris
Member of the Board of: Coface, Natexis Assurances, Natexis Private Banking, Banque Populaire corporate foundation 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
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: Turbo S.A. Member of the BoardBoard of: Natexis Private Equity, Coface, Natexis Assurances, Natexis Private Banking Permanent representative for Banque Populaire Rives de Paris to the Board of Directors of: i-BP Chairman of: SAS Sociétariat Banque Populaire Rives de Paris
Chairman of: Sanofi 1 (up to 07.24.2009) Chief Executive Officer of: Sanofi Aventis Europe (up to 07.28.2009), Sanofi Aventis Participations (up to 07.24.2009) Member of the Board of: Sanofi Pasteur Holding (up to 09.11.2009) Managing Directof of: Sanofi 4 (up to 09.11.2009), Sanofi Aventis North America (up to 07.24.2009) Director of: Merial Ltd (since 03.02.2009), Zentiva NV (from 04.03.2009 to 09.22.2009)
Mr. Nicolas Duhamel, 57, 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 Ministry for the Economy until 1984. He then held fi nancial posts in several companies: Head of France Telecom’s Treasury Department from 1984 to 1988, Chief Financial Offi cer for Havas (listed in the CAC 40 index) from 1993 to 1998, Deputy Chief Executive Offi cer of Vivendi Universal’s Publishing division until 2001.Nicolas Duhamel moved to Groupe La Poste in 2002 where he was Chief Operating Offi cer, Chief Financial Offi cer and a member of the group’s Executive Committee. Since July 31, 2009, he has been Chief Executive Offi cer* and a member of the management Board of BPCE in charge of fi nance.
Chief Financial Officer and Member of the Management Board of: BPCE Chief Operating Officer of: CE Participations (up to 08/05/2010), BP Participations (up to 08/05/2010), CE Holding Promotion (since 06/30/2010) Member of the Supervisory Board of: Fonds de Garanties des Dépôts (since March 29, 2010) Member of the Board of: BPCE IOM Permanent representative for BPCE on the Boards of: Natixis, Crédit Foncier de France, CE Holding Promotion (since 06/30/2010) Chairman of the CFF Audit Committee
Chief Financial Officer and Member of the Management Board of: BPCE (since 07/31/2009) Permanent representative for BPCE on the Board of: Natixis (since 08/25/2009) Chief Operating Officer of: CE Participations (since 07/31/2009), BP Participations (since 07/31/2009) Member of the Board of: Financière Océor (since 07/15/2009) Permanent representative for CE Participations on the Board of: Crédit Foncier de France (since 10/15/2009) Chairman of the CFF Audit Committee (since 10/15/2009)
Chief Operating Officer: Groupe La Poste Member of the Executive Committee: Groupe La Poste * 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. Stève Gentili, aged 61, Chairman of BRED Banque Populaire since 1998. Until 2004, Stève Gentili was head of a large food industry corporation. He also chairs Agence des Banques Populaires pour la Coopération et le Développement (ABPCD) and Natixis Pramex International.
Member of the Supervisory Board of: BPCE Member of Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis Chairman of the Board of Directors of: BRED Banque Populaire, Natixis Pramex International, SPIG, Natixis Institutions Jour Chairman of the supervisory Board of: Banque Internationale de Commerce-BRED (BIC-BRED) Chairman of: BRED Gestion, Cofi bred, Agence Banque Populaire pour la Coopération et le Développement, Bureau International-Forum Francophone des Affaires Vice-Chairman of the Board of Directors of: BP Participations (up to 05.14.2009) Member of the Board of: Coface, Natixis Algeria, Natixis Pramex International Milan, Société Marseillaise de Crédit, Thales, BGF+, Promépar Gestion, BRED Cofi lease, Prépar Iard Member of the Supervisory Board of: Prépar-Vie Representative to BRED Banque Populaire to the Board of Directors of: BICEC, BCI (Banque Commerciale Internationale)
Member of the Supervisory Board of: Natixis Chairman of the Board of Directors of: BRED Banque Populaire, BRED Gestion, Natixis Pramex International, Spig, Natixis Institutions Jour Chairman of the Supervisory Board of: Banque Internationale de Commerce – BRED Chairman of: Compagnie Financière de la BRED (Cofi bred), Vice-Chairman of: Banque Fédérale des Banques Populaires Member of the Board of: Bercy Gestion Finances +, BRED Cofi lease, Coface, Natixis Algeria, Natixis Pramex Italia Srl, Prepar Iard (société anonyme), Promepar Gestion (société anonyme), Société Marseillaise de Crédit 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, Njr Invest
Member of the Supervisory Board of: Natixis Chairman of the Board of Directors of: BRED Banque Populaire, Natixis Pramex International, BRED Gestion Chairman of: Agence Banque Populaire pour la Coopération et le Développement, Bureau international – Forum francophone des affaires, Compagnie Financière de la BRED (Cofi bred) Vice-Chairman of the Supervisory Board of: Banque Internationale de Commerce-BRED (BIC-BRED) Vice-Chairman of: Banque Fédérale des Banques Populaires Member of the Board of: Coface, Natexis Algeria, Pramex International Milan, BGF+, BRED Cofi lease, Prépar IARD, Promépar Gestion Member of the Supervisory Board of: Prépar-Vie, LFI Permanent representative for BRED Banque Populaire to the Board of: BICEC, BCI Permanent representative for Cofibred to the Board of: LFI
Mr. Bernard Jeannin, aged 62, Chief Executive Offi cer of Banque Populaire Bourgogne Franche-Comté He holds a master’s degree in Economic Science and joined Groupe Banque Populaire via Banque Populaire FrancheComté in 1972. After a period in the Loans Department and in operations (notably branch management), he joined senior management and successively held the posts of central director in charge of human resources, then commitments and lastly general control. In 1992, he was appointed Deputy Chief Executive Offi cer of Banque Populaire BretagneAtlantique, in charge of development and subsidiaries. He subsequently became Chief Executive Offi cer of Banque Populaire du Quercy et de l’Agenais in 1997, then Chief Executive Offi cer of Banque Populaire de Franche-Comté, du Mâconnais et de l’Ain in 2001. He was appointed Chief Executive Offi cer of Banque Populaire Bourgogne FrancheComté in 2002, at the time of its creation through the merger of Banque Populaire Bourgogne and Banque Populaire de Franche-Comté, du Mâconnais et de l’Ain.
Member of the Supervisory Board of: BPCE Member of the board of: Natixis Chief Executive Officer of: Banque Populaire Bourgogne Franche-Comté Member of the board of: Natixis Assurances, (up to 20/09/2010) Natixis Lease (up to 22/09/2010), Natixis Paiements (up to 06/10/2010), Banque de Savoie (up to 25/02/2010), BP Participations (up to 05/08/2010), IPMPE Permanent representative for Banque Populaire Bourgogne Franche-Comté to the boards of directors of: i-BP, BPCE Domaine (since 18/06/2010), Banques Populaires’ corporate start-up organisation
Member of the supervisory board of: Natixis Chief Executive Officer of: Banque Populaire Bourgogne Franche-Comté Member of the board of: Natixis Assurances, Natixis Paiements, Natixis Lease, C.A.R, IPMPE, Institution de Prévoyance du Groupe Banque Populaire Permanent representative for Banque Populaire Bourgogne Franche-Comté to the board of directors of: i-BP
Mr. Olivier Klein, aged 54, graduated from ENSAE and holds an advanced degree in fi nance from HEC. He has held various responsibilities within BFCE and notably created and managed the investment bank specialized in M&A and private equity. He joined Groupe Caisse d’Epargne in 1998 and became Chairman of the Management Board of Caisse d’Epargne Ile-de-France Ouest in 2000. He was subsequently appointed Chairman of the Management Board of Caisse d’Epargne Rhône-Alpes in 2007. Olivier Klein is Chairman of the national retail banking commission for the Caisses d’Epargne banks. He is also a member of the boards of Natixis and Coface and an associate professor of Economics and Finance at HEC. Since April 7, 2010, Olivier Klein has been Chief Executive Offi cer* in charge of Commercial Banking and Insurance and a member of the Management Board of BPCE
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) Chairman of the Board of Directors of: Rhone-Alpes PME Gestion (up to September 2010) Member of the Board of: Crédit Foncier de France (since 04.26.2010), BPCE International and Outre-Mer (since 03.17.2010), Banque Privée 1818 (since 09.30.2010), CNP Assurances (since 04.22.2010), Sopassur (since 04.22.2010), ENS Lyon, Neptune Technologies, Coface (up to 09.30.2010), Natixis Global Asset Management (up to 09.30.2010), Natixis Financement (up to 09.30.2010), Member of the Supervisory Board of: Banque Palatine (since 05.26.2010), GCE Capital (since 04.06.2010), Socfi m (since 05.10.2010) Permanent representative for CE Participations, member of the Supervisory Board of: la Compagnie des Alpes (up to 07.28.2010) Permanent representative for CERA, member of the Supervisory Board of: la Société des Trois Vallées, CGE Business Services (up to in July 2010) Permanent representative for BPCE, member of the Board of: SAS Ecureuil Vie Développement (since 04.15.2010) and GCE Business Services, I-BP
Chairman of the Executive Board of: Caisse d’Epargne Île de France Ouest * 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. Yvan de La Porte du Theil, aged 61, is an advisor to the Chairman of BPCE’s Executive Board, and from July 2009 to April 2010 was Chief Executive Offi cer, and member of the BPCE Executive Board in charge of Banques Populaires. After graduating from IAE Nantes (Institut d’Administration des Entreprises) and Institut de Contrôle de Gestion de Nantes, Yvan de la Porte du Theil joined Banque Populaire. In 1982, he was appointed Deputy CEO of Banque Populaire Val de France. In 1993, he joined Chambre Syndicale des Banques Populaires, where he worked as Central Director in charge of development, communication and international affairs (1993-1995), then as Deputy CEO (1995-1999), and Executive Vice President for development, international affairs, organisation and technologies (2000). He was CEO of Banque Populaire Val de France from 2002 until August 2009.
Member of the Executive Board of: BPCE – Banques Populaires network (up to 07.04.2010) Member of the Board of: Natixis (up to 05.27.2010) Chairman of the Board of Directors of: Banque Tuniso-Koweitienne (BTK) Chairman of the Supervisory Board of: M.A Banque (since 05.26.2010) Vice-Chairman of the Board of Directors of: Fransabank Member of the Board of: Coface, BPCE IOM, Banque des Mascareignes (since 18.03.2010), Société Marseillaise de Crédit (up to 09.21.2010), Banque Privée 1818 (up to 09.30.2010) Member of the Supervisory Board of: Foncia Groupe Permanent representative for BPCE, member of the Board of: BP Participations, Informatique Banques Populaires Permanent representative for BP Participations, associate Manager of: SCI Ponant Plus (up to 08.05.2010)
Member of the Supervisory Board of: Natixis Chief Executive Officer of: Banque Populaire Val de France Chairman of the Supervisory Board of: MA BANQUE Vice-Chairman of the Board of Directors of: Banque Fédérale des Banques Populaires Member of the Board of: Banque Fédérale des Banques Populaires, Coface, Natixis Private Banking, Crédit Commercial du Sud-Ouest (CCSO) Member of the Supervisory Board of: FONCIA Groupe Permanent representative for Banque Populaire Val de France, member of the Board of: i-BP
Member of the Supervisory Board of: Natixis Chief Executive Officer of: Banque Populaire Val de France Chairman of the Supervisory Board of: MA BANQUE (formerly SBE) Member of the Board of: Banque Fédérale des Banques Populaires, Coface Permanent representative for Banque Populaire Val de France, member of the Board of: i-BP Member of: Executive Committee of Confédération Internationale des Banques Populaires, Banque Populaire Audit and Risks Committee, Natexis Banques Populaires Remunerations Committee
Member of the Executive Board of: BPCE – Caisses d’Epargne network (up to 04.07.2010) Member of the Board of: Natixis (up to 27.05.2010) Chairman of the Board of Directors of: Natixis Asset Management (up to 09.30.2010), BPCE Domaines (up to 12.31.2010), Erixel (up to 05.05.2010), Meilleurs Taux Chairman of the Supervisory Board of: Banque Palatine, GCE Capital, SOCFIM (up to 05.10.2010) Chairman of the Supervisory Committee of: FLCP (up to 02.19.2010) Chairman of: Erixel (up to 05.05.2010), GCE Fidélisation, Oterom Holding Member of the boards of: Crédit Foncier de France (up to 04.07.2010), Nexity, Banque Privée 1818 (up to 09.30.2010), Banca Carige (Italy), CNP Assurances (up to 04.22.2010), Sopassure, (up to 04.22.2010) Natixis Epargne Financière (up to 08.31.2010), Natixis Epargne Financière Services (up to 08.31.2010), Erilia (up to 12.31.2010), Ecureuil Vie Développement, CEMM, Oterom Holding (since 03.24.2010) Member of the Supervisory Board of: ANF Permanent representative for BPCE, member of the Board of: CE Participations (up to 04.07.2010) and Ecureuil Vie Développement Permanent representative for BPCE, member of the Supervisory Board of: GCE Business Services, GIE CE Syndication Risque (Chairman) Non-voting board member for: The Yunus Movie Project Partners
Member of the Executive Board of: BPCE Permanent representative for CNCE, (up to 08.25.2009) and member of the Board of: Natixis Chairman of the Board of Directors of: Natixis Asset Management, Erixel Chairman of the Supervisory Board of: Banque Palatine, GCE Capital, SOCFIM Chairman of the Supervisory Committee of: FLCP (since 01.08.2009) Chairman of: Erixel, GCE Fidélisation (since 25.09.2009) Member of the boards of: Crédit Foncier de France, Nexity, Banque Privée 1818, Banca Carige (Italy), CNP Assurances, Sopassure, GCE Domaines, Natixis Epargne Financière, Natixis Epargne Financière Services, Erilia, La Chaine Marseille – LCM (up to 11.30.2009), Ecureuil Vie Développement, Member of the Supervisory Board of: ANF, The Yunus Movie Project Partners (since 01.22.2009) Permanent representative for BPCE, member of the Board of: CE Participations (since 07.31.2009), Ecureuil Vie Développement Manager of: La Société Civile et Forestière de PY and Rotja (up to 12.31.2009) Permanent representative for BPCE, member of the Supervisory Board of: GCE Business Services, GIE CE Syndication Risque (Chairman since 10.22.2009) Permanent representative for CEPAC, member of the Executive Committee of Viveris (up to 12.31.2009) Permanent representative for CEPAC, member of the Board of: Banque des Antilles Françaises (Chairman up to 12.31.2009), Marseille Permanent representative for CEPAC, member of the Supervisory Board of: Viveris Management (up to 12.31.2009)
Chief Executive Officer of: Natixis Financement, Natixis Consumer Finance, Novacrédit Member of the Board of: Novacrédit
Chief Executive Officer of: Natixis Financement, Natixis Consumer Finance (since 11.09.2007), Novacrédit Member of the Board of: Novacrédit (since 11.27.2007)
Mr. Laurent Mignon, aged 47, has been Chief Executive Offi cer of Natixis since May 2009. A graduate of HEC and the Stanford Executive Program, for 10 years, Laurent Mignon has worked in various positions at Banque Indosuez, from the trading fl oor to corporate banking. In 1996, he joined Schroders Bank in London before going on to AGF in 1997 as CFO; he was appointed to the Executive Committee in 1998. He then worked on Investments in 2002 at Banque AGF, AGF Asset Management, and AGF Immobilier, and then for the Life and Financial Services and Credit Insurance divisions in 2003. From September 2007 to May 2009, he was associate Manager at Oddo et Cie alongside Philippe Oddo.
Chief Executive Officer of: Natixis 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 Directors), Sequana, Arkema, Lazard Ltd Chairman of: SAS Coface Holding (since 11.22.2010) Non-voting member of: BPCE’s board (Permanent representative for Natixis)
2CORPORATE GOVERNANCE Principes et règles arrêtés pour la détermination de la rémuneration et avantages de toute nature des membres des organes sociaux
FRANCE Member of the Board of: Natixis (until December 31, 2010) Chief Executive Officer of: Casino, Guichard-Perrachon, Rallye Chairman of: Euris SAS Chairman and member of the Board of: Finatis (until April 14, 2010) Member of the Board of: Fimalac Manager of: SCI Penthièvre Seine, (until May 30, 2010), SCI Penthièvre Neuilly Member of the advisory Board of: Banque de France Vice-Chairman then Chairman of: the Euris Foundation (since July 23, 2010) Chairman of: the “Promotion des talents” organisation Honorary chairman and member of the Board of: the Institut de l’École Normale Supérieure INTERNATIONAL Member of the Board of: Companhia Brasileira de Distribuicao (CDB) and Wilkes Participaçoes
Chief Executive Officer of: Casino, Guichard-Perrachon, Rallye Chairman of: Euris SAS Chairman of the Board of: Finatis Member of the Board of: Fimalac, Companhia Brasileira de distribuicao (CDB), Wilkes Participaçoes Manager of: SCI Penthièvre Seine, SCI Penthièvre Neuilly Member of the advisory Board of: Banque de France Chairman of: the “Promotion des Talents” organisation Vice President of: the Foundation Euris Honorary chairman and member of the Board of: the Institut de l’École Normale Supérieure
Mr. Bernard Oppetit, aged 54, 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 twenty 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 External Trade Advisor.
FRANCE Member of the Board of: Natixis INTERNATIONAL Chairman of: Centaurus Capital Limited Member of the Board of: Centaurus Capital Holdings Limited, Centaurus Global Holding Limited, Centaurus Management Company Limited Trustee of: the École Polytechnique Charitable Trust, Tigers Alliance Fund Management (Vietnam) (since 07.01.2010) Member of the advisory Board of: Ondra Partners
FRANCE Member of the Board of Natixis (starting November 12, 2009) INTERNATIONAL Chairman of: Centaurus Capital Limited Member of the Board of: Centaurus Capital Holdings Limited, Centaurus Global Holding Limited, Centaurus Management Company Limited Trustee of: the École Polytechnique Charitable Trust Member of the advisory Board of: Ondra Partners Offi ces below end on September 18, 2009 Member of the Board of: Centaurus Alpha Master Fund Limited, Centaurus Alpha Fund Limited, Centaurus Capital International Limited, Centaurus International Risk Arbitrage Master Fund Limited (formerly Centaurus Kappa Master Fund Limited), Centaurus International Risk Arbitrage Fund Limited (formerly Centaurus Kappa Fund Limited), Centaurus Asia Pacifi c Opportunities Master Fund Limited (formerly Centaurus Omega Fund Limited), Centaurus Asia Pacifi c Opportunities Fund Limited (formerly Centaurus Omega Fund Limited)
INTERNATIONAL Chairman of: Centaurus Capital Limited Member of the Board of: Centaurus Alpha Master Fund Limited, Centaurus Alpha Fund Limited, Centaurus Capital International Limited Centaurus International Risk Arbitrage Master Fund Limited (formerly Centaurus Kappa Master Fund Limited), Centaurus International Risk Arbitrage Fund Limited (formerly Centaurus Kappa Fund Limited), Centaurus Asia Pacifi c Opportunities Master Fund Limited (formerly Centaurus Omega Fund Limited), Centaurus Asia Pacifi c Opportunities Fund Limited (formerly Centaurus Omega Fund Limited), Centaurus Capital Holdings Limited, Centaurus Global Holdings Limited, Centaurus Management Company Limited Trustee for: École Polytechnique Charitable Trust Maison de l’Institut de France in London
INTERNATIONAL Chairman of: Centaurus Capital Limited Member of the Board of: Centaurus Alpha Master Fund Limited, Centaurus Alpha Fund Limited, Centaurus Capital International Limited Centaurus International Risk Arbitrage Master Fund Limited (formerly Centaurus Kappa Master Fund Limited), Centaurus International Risk Arbitrage Fund Limited (formerly Centaurus Kappa Fund Limited), Centaurus Asia Pacifi c Opportunities Master Fund Limited (formerly Centaurus Omega Fund Limited), Centaurus Asia Pacifi c Opportunities Fund Limited (formerly Centaurus Omega Fund Limited), Centaurus Capital Holdings Limited, Centaurus Global Holdings Limited Centaurus Management Company Limited Trustee for: École Polytechnique Charitable Trust, Maison de l’Institut de France in London
INTERNATIONAL Chairman of: Centaurus Capital Limited Member of the Board of: Centaurus Alpha Master Fund Limited, Centaurus Alpha Fund Limited, Centaurus Capital International Limited Centaurus International Risk Arbitrage Master Fund Limited (formerly Centaurus Kappa Master Fund Limited), Centaurus International Risk Arbitrage Fund Limited (formerly Centaurus Kappa Fund Limited), Centaurus Capital Holdings Limited, Centaurus Management Company Limited Trustee for: Maison de l’Institut de France in London
Member of Supervisory Board of: BPCE (since 07.31.2009) Member of the Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis Chairman of the Executive Board of: la Caisse d’Epargne et de Prévoyance de Bretagne Pays de Loire Chief Executive Officer of: SODERO Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Bretagne – Pays de Loire Chairman of the Board of Directors of: SODERO Participations, Mancelle d’Habitation, S.A. des Marches de l’Ouest (SAMO) 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 Board of: CE Participations, Natixis Global Asset Management, Compagnie de Financement Foncier SCF, Fédération Nationale des Caisses d’Epargne Permanent representative for CEBPL, member of the Board of: Pays de la Loire Développement, SEMITAN, NAPF Permanent representative for CEBPL, member of the Supervisory Board of: GCE Business Services, GCE Technologies Permanent representative for Sodero Participations: Chairman of the Supervisory Board of Grand Ouest Gestion (up to 12.31.2009)
Member of the Supervisory Board of: Natixis Chairman of the Executive Board of: la Caisse d’Epargne et de Prévoyance des Pays de la Loire Chairman and Chief Executive Officer of: SODERO Chief Executive Officer of: Caisse d’Epargne et de Prévoyance de Bretagne Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Pays de Loire, Grand Ouest Gestion (permanent representative for SODERO Participations) Chairman of the Board of Directors of: SODERO Participations, la Mancelle d’Habitation, S.A. des Marchés de l’Ouest Member of the Supervisory Board of: GCE Capital, GCE Business Services (permanent representative for CEP PDL), GIRCE Ingénierie (permanent representative for CEP PDL), Ecureuil Vie (up to 02.19.2007), Ixis CIB (up to 05.24.2007) Member of the Board of: Meilleurtaux, Oterom Holding, Caisse d’Epargne Group University, Pays de la Loire Développement (permanent representative for CEP PDL), SEMITAN (permanent representative for CEP PDL), NAPF (permanent representative for CEP PDL), GIRCE Stratégie (permanent representative for CEP PDL) Member of the Audit Committee of: Compagnie de Financement Foncier SCF, Ecureuil Vie, Ixis CIB
Chairman of the Executive Board of: la Caisse d’Epargne et de Prévoyance des Pays de la Loire Chairman and Chief Executive Officer of: SODERO Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Pays de Loire, Grand Ouest Gestion (permanent representative for SODERO Participations) Chairman of the Board of Directors of: SODERO Participations, Mancelle Habitation, S.A. des Marchés de l’Ouest Member of the Supervisory Board of: Natixis, GCE Capital, Ecureuil Vie, Ixis CIB, GIRCE Ingénierie (permanent representative for CEP PDL) Member of the Board of: Caisse d’Epargne Group University, Pays de la Loire Développement (permanent representative for CEP PDL), SEMITAN (permanent representative for CEP PDL), NAPF (permanent representative for CEP PDL), GIRCE Stratégie (permanent representative for CEP PDL)
Chairman of the Executive Board of: BPCE (since 07.31.2009), la Caisse Nationale des Caisses d’Epargne – CNCE (until July 31, 2009) Chief Executive Officer of: BP Participations (since 02.26.2009), CE Participations (since 07.31.2009) Chairman of the Board of Directors of: Natixis (since 04.30.2009), Financière Océor (since 07.15.2009) Chairman of the Supervisory Board of: Foncia Groupe (since 09.10.2009) Vice-Chairman of the Executive Committee of: Fédération Bancaire Française (since 07.08.2009) Member of the Board of: BP Participations, CE Participations (since 07.31.2009), CNP Assurances (since 04.21.2009), Sopassure (since 03.23.2009), Crédit Immobilier et Hotelier-CIH (Morocco) (since 05.28.2009)
FRANCE Member of the Supervisory Board of: Natixis Chairman and Chief Executive Officer of: Veolia Environnement Chairman of the Board of Directors of: Veolia Propreté, Veolia Transport, Veolia Water Member of the Board of: EDF, Dassault Aviation, Dalkia International, la Société des Eaux de Marseille, Sarp Industries, CNP Assurances Manager of: Veolia Eau – Compagnie Générale des Eaux Member of the Supervisory Boards of: Lagardère, A and B Dalkia (SAS) Member and Chairman of the Supervisory Board of: Dalkia France Non-voting member of: Caisse Nationale des Caisses d’Epargne INTERNATIONAL Director of: Veolia ES Australia, Veolia Transport Australasia, Veolia Environmental Services UK, Siram, Veolia Transport Northern Europe, Veolia Environmental Services North America Corp., Veolia Environnement North America Operations
INTERNATIONAL Director of: Veolia ES Australia (up to 10.19.2009), Veolia Transport Australasia (up to 10.19.2009), Veolia Environmental Services UK (up to 10.19.2009), Siram (up to 11.27.2009), Veolia Transport Northern Europe (up to 09.02.2009), Veolia Environmental Services North America Corp.. (up to 10.29.2009), Veolia Environnement North America Operations
Deputy CEO of: Banque Fédérale des Banques Populaires Chairman and Chief Executive Officer of: i-BP, Albiréo Permanent representative for i-BP to the Board of Directors of: Natixis Altaïr IT Shared Services (S.A.) Permanent representative for BFBP to the Supervisory Board of: Natixis Permanent representative for BFBP to the Board of Directors of: Partecis, Crédit Commercial du Sud-Ouest (CCSO)
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
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 * The title of Chief Executive Offi cer is not used in the sense intended by Article L.225-66 of the French Commercial Code.
Member of the Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis Vice President of the guidance and Supervisory Board of: Caisse d’Epargne Île-de-France Member of the boards of: Groupe Ecureuil Assurance, S.E.M.A.V.O. (Société d’Économie Mixte d’Aménagement du Val d’Oise) Permanent representative for CEIDF to: SICAV Associations 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)
Member of the Supervisory Board of: Natixis Vice President of the guidance and Supervisory Board of: Caisse d’Epargne Île-de-France Member of the Board of: Groupe Ecureuil Assurance, S.E.M.A.V.O. Permanent representative for CEIDF to: SICAV Associations 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)
Member of the Supervisory Board of: Natixis Vice President of the guidance and Supervisory Board of: Caisse d’Epargne Île-de-France Chairman and Chief Executive Officer of: Semavo (Société d’Économie Mixte d’Aménagement du Val d’Oise) Chairman of: the Val d’Oise Departmental Tourism and Recreation Committee Member of the Board of: the Syndicat des Transports d’Île-de-France (STIF), Sicav Association, Ecureuil Assurances IARD, AFTRP (Agence Foncière and Technique de la Région parisienne)
FRANCE Member of the Board of: Natixis (up to 04.01.2010) Chairman of: SOFIBIM (SAS) and Bagatelle Investissement et Management-BIM (SAS) Legal representative for SOFIBIM: President of Octant Partenaires (SAS) Manager of: Servinvest (SARL), M.B.O.B. (SCI), L.M.D.B. (SCI) Legal representative for Bagatelle Investissement et Management (BIM): Chairman of the Supervisory Board of HBI (SCA) Legal representative for SOFIBIM: Chairman of the Supervisory Board of Bercy Présidence Legal representative for Bagatelle Investissement et Management: chairman of Eurelior SAS, Fidelior SAS, Financière Elior SAS, Sofi lior SAS Chairman of: Bercy Services XII SAS (up to March 31, 2010) and Novelior (up to 09.21.2010) Up to October 7, 2010 Legal representative for Bercy Présidence: general managing company of Holding Bercy Investissements-H.B.I. (SCA) Legal representative for H.B.I: chair company of Bercy Participations (SAS) Legal representative for Bercy Présidence: general Manager of H.B.I., chairman of Bercy Participations, the general managing company of Elior (SCA) Chairman of: Bercy Présidence (SAS) Chairman and member of the Board of: Avenance (S.A.) and Eliance (S.A.) Chairman of Elior: Partenaires (SASU) Legal representative for Avenance S.A.: chair company of Bercy Services I (SAS) Legal representative for Avenance S.A.: chair company of Bercy Services V (SAS) Legal representative for Elior (SCA): which chairs Elior Gestion (SAS) Legal representative for Eliance: Chairman of Eliance Data Legal representative for Elior: Chairman of BS XIII, BS XIV, BS XV and BS XVI Member of the Supervisory Board of: Pragma Capital (S.A.)
INTERNATIONAL Vice-President and member of the Board of Areas (S.A.) Member of the Board of Areas IbericoAmericana
UP TO OCTOBER 7, 2010 Chairman and board member for: Avenance UK Member of the Board of: Elior UK Ltd, Serunion (S.A.) Legal representative for Avenance, member of the Board of: Avenance Nederland, Avenance Horeca
Offi ces at December 31 of previous fi nancial years 2009 FRANCE Legal representative for Bercy Présidence: general managing company of Holding Bercy Investissements-H.B.I. (SCA) Legal representative for Bagatelle Investissement et Management (BIM): Chairman of the Supervisory Board of HBI (SCA) (starting in 11.30.2009) Legal representative for H.B.I.: chair company of Bercy Participations (SAS) Legal representative for Bercy Présidence: general Manager of H.B.I., chairman of Bercy Participations, the general managing company of Elior (SCA) Legal representative for SOFIBIM: Chairman of the Supervisory Board of Bercy Présidence (starting 11.30.2009) Chairman of: Bercy Présidence (SAS), Bercy Services XII SAS Legal representative for Bagatelle Investissement et Management, chairman of Eurelior SAS, Fidelior SAS, Financière Elior SAS, Sofi lior SAS Chairman and member of the Board of: Avenance (S.A.), Eliance (S.A.) Chairman of Elior Partenaires (SASU) Legal representative for Avenance S.A.: chair company of Bercy Services I (SAS) Legal representative for Avenance S.A.: chair company of Bercy Services V (SAS) Legal representative for Elior (SCA): which chairs Elior Gestion (SAS) Legal representative for Eliance: Chairman of Eliance Data Legal representative for Elior: Chairman of BS XIII, BS XIV, BS XV and BS XVI Member of the Supervisory Board of Pragma Capital (S.A.)
2007 FRANCE Chairman of: Bercy Présidence (SAS) Manager of: Bercy Patrimoine (SARL), M.B.O.B. (SCI), L.M.D.B. (SCI) Chairman and member of the Board of: Avenance (SAS), Eliance (SAS) Legal representative for Avenance SAS: chair company of Bercy Services I (SAS) Legal representative for Avenance SAS: chair company of Bercy Services V (SAS) Legal representative for Elior (SCA), which chairs Elior Gestion (SAS) Member of the Supervisory Board of: Pragma Capital (S.A.) INTERNATIONAL Chairman and board member of: Avenance UK Vice-President and member of the Board of: Areas (S.A.) Member of the Board of: Elior UK Ltd, Areas IbericoAmericana, Serunion (S.A.)
2CORPORATE GOVERNANCE Role and operating rules of the corporate bodies 2.3 Role and operating rules of the corporate bodies
This form of corporate governance stems from the desire to create a single custodian of Natixis’ best interests and value creation. It permits unity of action, an essential requirement in terms of control, reactivity and foresight in Company management.
● Changes made to the Board of Directors in 2010: − on April 1, 2010, following the resignation of Robert Zolade, Laurence Debroux was co-opted as board member for the remainder of term of his offi ce, namely until the Natixis General Shareholders’ Meeting called to approve the fi nancial statements for 2014. This decision was ratifi ed by the Combined General Shareholders’ Meeting of May 27, 2010; − on May 27, 2010, following the resignation of Yvan de La Porte du Theil, Philippe Queuille was co-opted as board member for the remainder of the term of offi ce, i.e. until the Natixis General Shareholders’ Meeting called to approve the fi nancial statements for 2014; − on August 5, 2010, following the resignation of Alain Lemaire, Jean-Bernard Mateu was co-opted as board member for the remainder of the term of offi ce, i.e. until the Natixis General Shareholders’ Meeting called to approve the fi nancial statements for 2014;
2 CORPORATE GOVERNANCE Role and operating rules of the corporate bodies
With respect to the principle of gender parity within the Board of Directors, Natixis currently has two women board members out of a total of 15.
In accordance with Article 9 of the Natixis bylaws, each board member must own at least one thousand (1,000) Company shares during their term of offi ce.
The Chairman of the Board or the Chief Executive Offi cer are required to provide each board member with all of the documents and information needed to carry out their duties.
Amongst these Internal Rules, which were last amended on December 17, 2009, particular attention should be drawn to the following provisions: ● circumstances requiring the Board of Directors’ prior authorization: − the extension of Natixis’ activities to a new core business not currently carried out by the Company; − the appointment or dismissal of the CEO or, where applicable, one or more Deputy CEOs; − any acquisition or increase in shareholdings, as well as any investments or divestments (including the transfer of cooperative investment certifi cates issued by the Caisses d’Epargne or Banques Populaires) or the formation of joint ventures by Natixis or any of its main subsidiaries, involving an amount in excess of €150 million; − any asset transfers, mergers or demergers in which Natixis is involved.
Accordingly, an independent member of the Board of Directors may not: − be an employee or a corporate offi cer of the Company or Group, or an employee or board member of a shareholder with a controlling interest, either on its own or in concert, in the Company (as per Article L.233-3 of the French Commercial Code) or in a Company consolidated by it, or have served in such a capacity during the previous fi ve years; − be a corporate offi cer of a company in which the Company holds a directorship either directly or indirectly, or in which a designated employee of the Company or a corporate offi cer of the Company holds a directorship;
● Compliance Charter for members of the Board of Directors: The Compliance Charter for members of the Board of Directors, included in the Board of Directors Internal Rules, defines a code of conduct which aims to encourage board members to act independently and responsibly.
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 evaluation will be included in Natixis’ annual report (For 2010, see point 2.3.1.4 – Assessment of the Board’s work in 2010); ● 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.
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 2009 as well as the Chairman’s report on the preparation and organization of the Board’s work and the internal control procedures in place by the Company.
It was regularly informed of all correspondence from the Autorité de Contrôle Prudentiel (ACP (Prudential Supervision Authority) – French Regulatory Control Body) and the Autorité des Marchés Financiers (AMF – French Financial Markets Authority), and also prepared the draft resolutions for submission to the General Shareholders’ Meeting.
The fi rst element highlighted in the assessment was the specifi c nature of Natixis’ corporate governance. As a company in which BPCE has a controlling interest of over 70%, certain board members and the Chief Executive Offi cer of Natixis are also members of BPCE’s Management Board. Moreover, the two networks that are also shareholders of BPCE, the Banques Populaires and Caisses d’Epargne, have an equal number of seats on the Board. As such, the number of independent board members is limited.
Various proposals were submitted for the Board’s consideration, including: ● the organization of a yearly meeting of a committee to allow for a more in-depth discussion on the strategy of the Company and its business divisions and the overall vision of its executive management. This type of meeting would also encourage closer ties between the board members to replace the formal relations currently in place; ● changes in the format of the files currently submitted to the board members in order to make them more concise, notably via the inclusion of executive summaries and a table summarizing the Company’s main business indicators; ● the presentation of more concise reports on risks and a more theme-based approach to risks in order to give board members an overview of the Company’s position; ● the end to the principle of the block renewal of board members’ mandates.
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 quarterly, interim, and full-year period-end accounts.
On the subject of internal control and compliance, the Committee received a presentation of risk monitoring and internal control reports submitted to the ACP (Prudential Supervisory Authority). It also reviewed the activity and results of the Natixis compliance and internal control functions, as well as the work program of Natixis’ Internal Audit.
On March 1, 2011 the Compensation Committee had six members: Mr. Bolloré, Chairman, Ms. Bories and Messrs. Jeannin, Patault, Proglio and Sueur.
At least half the members of Natixis’ Compensation Committee are independent.
Changes made to the Compensation Committee from January 1, 2011: ● on February 22, 2011, following the resignation of Mr. Oppetit from his function within the Compensation Committee, the Board of Directors appointed Ms. Bories.
The Compensation Committee is responsible for submitting proposals to the Company’s Board of Directors on the following issues: Compensation for corporate offi cers
Minutes of each of the Compensation Committee’s Meetings are prepared and sent to individual members. The Chairman of the Committee provides a report on the Committee’s work to the Board of Directors, thereby enabling the Board to be fully informed of its decisions. It is also specifi ed that when these reports are presented, the Board of Directors shall not decide upon compensation in the presence of corporate offi cers.
On April 30, 2009, the Board appointed Laurent Mignon as Chief Executive Offi cer starting May 14, 2009 for a six-year term ending on May 14, 2015.
Alain Delouis (Human Resources) was appointed to the Senior Management Committee in early January 2011.
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 or she exercises those powers within the limits of the corporate purpose and subject to the powers expressly reserved for shareholders’ meetings and for the Board of Directors by law as well as in accordance with the provisions and restrictions stipulated in the Internal Rules. He or she 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.
On the Chief Executive Offi cer’s proposal, the Board of Directors may appoint one to fi ve Deputy Chief Executive Offi cers from among the board members or otherwise to assist the Chief Executive Offi cer.
The Senior Management Committee also focused on reinforcing Natixis’ role in defi ning Groupe BPCE’s strategy, i.e. creation of a single operator for all payment activities; regrouping of some of the Group’s leasing activities within Natixis with the acquisition of Cicobail and Océor Lease; development of distribution synergies with the networks. The Senior Management Committee was also consulted on the main choices of fi nancial policy.
The Senior Management Committee supervised Natixis’ business restructuring projects, in particular the merger of its private banking businesses and the creation of new platforms (EMEA countries, United States, Asia) to underpin the development of Corporate and Investment Banking overseas. Where appropriate, the Senior Management Committee reviewed and validated the Group’s strategic transactions prior to their submittal to the Board of Directors, including in particular: the agreement with Axa Private Equity governing the sale of most of Natixis’ proprietary private equity business in France; the merger of Banque Privée 1818 and Rothschild & Cie Gestion’s respective independent wealth management platforms; the acquisition of a majority stake in Ossiam (strategic ETFs – Exchange Traded Funds); the strategic partnership between Natixis Global Asset Management and IDFC Group in India within the asset management sector and the creation of the asset management fi rm, H2O, in London (high value-added global macro alternative management).
2CORPORATE GOVERNANCE Role and operating rules of the corporate bodies 2.3.4 GENERAL SHAREHOLDER MEETINGS
Decisions are taken by a simple majority of the votes of the shareholders present or represented.
EGMs are convened each time there are decisions concerning a change in the bylaws, notably in the event of a fi nancial transaction affecting the share capital.
Decisions are taken by a two-thirds majority of the votes of the shareholders present or represented.
Those shareholders that are able to justify their status with an accounting entry (pursuant to paragraph seven of
For holders of registered shares, an entry dated D-3 is suffi cient to enable them to attend the meetings.
Under the terms and conditions fi xed by law and regulations, shareholders may send their proxy and absentee voting ballots, either in paper format or, on decision of the Board of Directors published in the notices of meeting, by electronic transmission. The Board of Directors may also decide that shareholders may participate and vote at any General Shareholders’ Meeting by videoconference or electronic transmission under the terms and conditions set by the regulations.
In line with the provisions of Article 27 of the bylaws, each shareholder may, subject to the terms and conditions and at the times fi xed by law, request a copy of the documents needed to allow them to reach an informed opinion on the management and control of the Company. The nature of the documents and the terms and conditions for their dispatch or availability are determined by law and regulation.
In the event of non-compliance with the notifi cation requirement provided for in the paragraph above and at the request, recorded in the minutes of the meeting, of a shareholder representing at least 1% of the voting rights, the shares exceeding the fraction which should have been declared will lose their voting rights for a period of two years following the date of regularization of the notifi cation.
The AFEP-MEDEF code is available for consultation at the Company’s head offi ce and on the Natixis website.
2.4.1.2 Compensation and benefi ts of all kinds for members of the Board of Directors
− variable portion: €1,000 per meeting, up to a maximum of 5 meetings
2 CORPORATE GOVERNANCE Policies and rules for determining compensation and benefi ts 2.4.2 COMPENSATION AND BENEFITS OF ALL KINDS FOR THE CEO
On February 22, 2011, the Board of Directors, on the advice of the Compensation Committee, decided to pay the CEO a gross variable compensation of €1,200,000, the latter having met the quantitative and qualitative criteria set.
For 2010, Laurent Mignon benefi ted from a Company car valued at €5,179.80 gross.
Compensation in relation to the fi scal year €2,007,784 (a) €1,010,119
In the tables below: ● the annotation “amounts due” corresponds to compensation and benefits granted to corporate officers within the context of their duties for the year, irrespective of the date of payment (for example variable compensation awarded for 2009 but paid in 2010 appears both in the column “amounts due” for 2009, and the column “amounts paid” for 2010); ● the expression “amounts paid” corresponds to compensation and benefits actually paid to corporate officers within the context of their duties over the year irrespective of the date of allocation.
(a) 63% of this variable compensation is deferred for three years and subject to performance criteria linked to Natixis’ results. This deferred portion is paid in the form of instruments linked to Natixis shares.
Table showing directors’ fees and other compensation received by non-executive corporate officers of NATIXIS from January 1 to December 31, 2010
Yvan de La Porte du Theil (term of offi ce at Natixis up to 05.27.2010)
2 CORPORATE GOVERNANCE Policies and rules for determining compensation and benefi ts
Robert Zolade (term of offi ce at Natixis up to 04.01.2010)
Subscription or purchase options allocated during the period to each executive corporate officer by the issuer and by any group companies
Group (Natixis, BPCE, Groupe Caisse d’Epargne, Groupe Banque Populaire) Record of purchase or subscription options allocated
Number of exercisable options, including those exercisable by: 6,587,350 7,653,800 15,398,922 7,576,800
Yvan de la Porte du Theil 43,120 47,740 61,600 n/a (a)
François Pérol n/a n/a n/a n/a 2) Natixis CEO in 2010 n/a n/a n/a n/a
Vesting date Nov 17, 2008 Nov 15, 2009 Jan 29, 2011 Jan 21, 2012
Expiry date Nov 16, 2011 Nov 14, 2012 Jan 28, 2014 Jan 20, 2015
Cumulative number of lapsed and cancelled subscription options 501,578 649,572 1,389,850 3,078,551
Cumulative number of outstanding subscription options at end of period 5,955,642 6,982,668 14,009,072 4,498,249
Subscription or purchase options allocated to the top ten non-executive employees and options exercised by them
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 decisionmaking.
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’ internal control mechanism complies with the following regulatory requirements and standards: External standards
● for permanent and periodic control, Natixis applies the standards defined in Groupe BPCE’s control function charters.
Executive Management, under the stewardship of the Board of Directors, is responsible for the whole of the Group internal control mechanism.
These controls are carried out by operational or functional departments under managerial supervision. These departments are responsible for: ● checking transaction processing procedures are adhered to and compliant; ● justifying account balances for active accounts relating to the transactions they execute.
● 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.
● The Compliance Department’s main responsibilities are to: − ensure legal and regulatory watch relating to compliance, in conjunction with the legal function; − defi ne standards and methods for assessing compliance, control and reporting risks. These standards are devised in order to ensure market integrity and the primacy of customer interest, and to prevent confl icts of interest (including independence in third-party account management) as well as to counter money laundering and terrorist fi nancing; − ensure the execution of permanent second-level controls (including controlling compliance with standards and the application of procedures); − establish and maintain a compliance risk map; − implement a system of cooperation and links with the Risk Department, concerning the observation of operational defects that may entail compliance risks and measures to rectify them; − issue a written compliance opinion regarding all new activities, structures, processes, products and transactions, as well as signifi cant changes to existing products.
● fraud: In March 2010 Natixis’ Compliance Department set up a structure for steering and coordinating the global anti-fraud system. This new structure’s main work in 2010 focused on defining and implementing a consistent antifraud organization based on existing systems. Within this context, a common fraud risk mapping process was defined with the Operational Risk Department and rounded out with a network of anti-fraud correspondents in France and abroad in all business lines, support functions and subsidiaries.
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.
In late 2010, the Chief Executive Offi cer approved a project to redefi ne fi rst- and second-level controls. This project will make it possible to list, identify and formalize fi rst-level controls, and their results will be entered into a tool and transmitted to management and the Compliance department on a monthly basis. This permanent control revamp should take two years for the whole of Natixis.
By identifying the criticality of compliance risks, second-level controls can be ranked by priority, thus permitting launch of any necessary action plans.
The IT Systems Security and Business Continuity Department reports to Executive Management on IT Systems Security and Business Continuity policy, which it defi nes, controls and maintains.
Natixis’ Head of ITSS and BC reports to the Head of Compliance. He/she works in close cooperation with Internal Audit Department and the Risk Department.
A plan covering more than 150 controls classifi ed according to the COBIT and ISO27002 standards has been developed and implemented. It includes intrusion tests, vulnerability tests and internal investigations, as well as permanent IT monitoring (correlation of security events, Internet monitoring and security breach monitoring).
An initial security risk map was drawn up in line with the existing operational risk map. IT application sensitivity was also mapped.
Finally, the “confi dence chain” program to implement security services (creating and approving electronic signatures, time-stamping, justifi ed electronic archiving) as part of the dematerialization of Natixis’ client services was rolled out over the year in close cooperation with the business lines.
Natixis’ Internal Audit Department is responsible for verifying the Bank’s controls and is one of the bodies responsible for the correct functioning of the Bank’s internal control system within the meaning of the CRBF rule. In this respect, it is independent from all operational entities and support functions. It has no operational role and can therefore never fi nd itself in a position of confl ict of interest.
The Internal Audit Department reports are sent to Natixis’ Executive Management as well as to the audited units. In addition, Groupe BPCE’s General Inspection receives a copy of all internal audit reports issued by Natixis’ Internal Audit Department, in accordance with the provisions targeted by the CECEI document in its decision of November 15, 2007, as well as those set out in the charter of Groupe BPCE’s General Inspection.
In addition, efforts were made to continue consolidating Natixis’ “Audit” function in three main directions: ● Based on the Natixis Internal Audit self-assessment work done in 2010 with help from external firms, measures were taken to streamline the “Audit” function’s organization, to make it more efficient, to improve the conditions under which work is conducted and to consolidate risk assessment.
● In application of the principles adopted when the Groupe BPCE “Audit” function was put together, Natixis’ Internal Audit continued the work started to consolidate its methods with those of the BPCE General Inspection. This work will terminate in late 2011 and focus on the convergence of both department’s work and standards.
● Audit recommendations were given special attention, with the objective of improving their legibility and ensuring more effective monitoring. New rating standards – common with BPCE standards – were adopted and thus highlighted priority recommendations more clearly. Prevailing recommendations were requalified according to these new standards. Monitoring work specific to the most urgent recommendations was undertaken.
This work was carried out in active coordination with BPCE’s General Inspection. To this end, eight Internal Audit Coordination Committee Meetings were held during the year.
The Control Functions Coordination Committee (“CFCC”), which already existed within Natexis Banques Populaires, has maintained its role within Natixis since 2007.
It may also meet with operational managers when necessary. The Control Functions Coordination Committee held four meetings in 2010.
As part of the new unifi ed organization implemented for the Risk function as of July 1, 2010, the project aims to: ● propose a risk policy for Natixis in line with the company’s strategy, and monitor its regular application and updates; ● define methods and standards that make it possible to measure risks and approve risk taking (models, reporting, limits, delegation systems) in compliance with Groupe BPCE’s standards; ● provide a second opinion on business-line cases based on workflow and Committees, for which the Risk Department undertakes preparation and supervision and acts as secretary; ● set out supervision and risk monitoring procedures at the individual and consolidated level; ● produce risk reports for the Senior Management Committee, the business lines, BPCE and regulatory authorities.
In accordance with Articles 17ter and 38 of amended rule 97-02, alert procedures for serious incidents were introduced with alert levels set by type of risk. In 2010, the alert system was implemented three times after observation of a backtesting exception concerning regulatory VaR over 20% and two downgrades of ratings exceeding three notches and with a new rating less than or equal to BB. The requisite information was transmitted to the Risk Management Committee and France’s Prudential Supervisory Authority.
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: financial data, customer identification and analysis in accordance with the review procedures ratified by the Group Compliance Department, the counterparty’s internal ratings, taking country risk into account; ● external data: ratings allocated by rating agencies, sector analysis, country risk and sovereign risk analyses, etc.; ● information regarding commitments, collateral and guarantees; ● the credit file summarizing all of the credit risks incurred by Natixis and the effects of the proposed transactions on profitability and regulatory ratios.
In parallel, Natixis has conducted methodological work to introduce credit stress tests.
Credit risk management requires a risk rating, an LGD and commitment or transaction monitoring procedures in accordance with title II of CRBF rule and the French ministerial order of February 20, 2007.
Similarly internal management criteria (functions, desks, etc.) are taken into account.
Cases showing a deterioration in the level of risk are identifi ed as they arise and reported immediately to the Risk Department and the business line concerned, in accordance with counterparty watch list and alert procedures.
The Natixis Watch List and Provisions Committee meets quarterly and covers all of the Bank’s business lines (CIB, Investment Solutions and SFS). It reviews all doubtful cases under surveillance that may give rise to provisions or adjustments to existing provisions, and decides on the level of provision necessary.
In addition to specifi c provisions, Natixis also sets aside provisions to cover country risk and sector risk. These collective provisions are based on homogenous assets and formed according to three criteria: ● rating for exposures on private individuals and professionals; ● sector risk; ● geographic risk for other counterparties (corporate, sovereign, etc.).
Natixis’ market risk is controlled by the Market Risk Department, an integral part of the Risk function. This Department independently defi nes the principles (methods and limits) for measuring risks and monitors these principles.
The operational breakdown of the mechanism described in the Natixis market risk regulation charter is specifi ed in procedures. All these procedures were revised in the fi rst quarter of 2010, primarily to involve all parties and make them accountable (front offi ce and risks).
The delegation system was improved to smooth decisionmaking between two Committee Meetings.
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.
Early in 2010, BPCE granted a guarantee on most of the workout portfolio management assets in Paris and New York. Nevertheless, the Market Risk Department continued to manage risks on all transactions on a standardized and exhaustive basis, whether these transactions were 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.
2 CORPORATE GOVERNANCE Chairman’s report on the internal control procedures 2.6.4.3 Overall interest rate, liquidity and structural foreign-exchange risks
The ALM Committee is responsible for monitoring across the following scope: ● the banking portfolios of Natixis S.A. and of its credit subsidiaries for overall interest-rate risk; ● Natixis’ entire scope of consolidation excluding insurance subsidiaries that do not present intrinsic liquidity risks and which are specifically monitored and managed in respect of liquidity risk; ● Natixis’ entire scope of consolidation for structural foreignexchange risk.
Natixis’ ALM organization is as follows: ● Natixis S.A.’s Treasury aims to refinance all the business lines within the rules and limits set by the ALM Committee; ● subsidiary and non-subsidiary activities without ALM risk management mandates from the ALM Committee transfer management of their risk to the Treasury through individual matching contracts. The activities concerned primarily correspond to the Corporate and Investment Banking division’s financing activities; ● subsidiary and non-subsidiary activities that possess ALM risk management mandates match their net needs with Treasury subject to rules and limits set by the ALM Committee. The activities concerned include capital markets and specialized credit subsidiaries.
The very large majority of Natixis’ exposure is in euros and US dollars and uses a fl oating rate; as a result, Natixis’ overall interest-rate risk is essentially linear and concerns mismatching positions between contractual operations.
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 amounts are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Consumptions are monitored weekly; ● Supervision of short-term mismatching: this is measured on the basis of liquidity gaps. In order to manage forecast short-term 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 supervised by two permanent limits approved by the ALM Committee and monitored daily; one on overnight market exposure and the other on the two-month static liquidity gap; ● Supervision of medium-term mismatching: this is measured on the basis of liquidity gaps and asset-liability hedging ratios. These ratios include minimum coverage 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 Natixis’ ability to face different crisis scenarios (systemic, specific, combined, etc.) over a three-month period with assumptions revised periodically and approved by the ALM Committee.
The duties and organization relating to operational risks are described in Natixis’ Charter for Measuring, Controlling and Managing Operational Risks which was approved by its Operational Risk Committee in September 2007. The Charter defi nes: ● the procedures for detecting, analyzing and measuring operational risk: − incident recording,
− risk limits policy; The Operational Risk function is organized on a matrix-type basis according to the two axes of activity and location.
Operational Risk function governance has served to accompany changes and reorganizations in the banking business lines, while also maintaining constant efforts to improve procedures through corrective actions and action plans.
● individual analysis of all entries impacting consolidated shareholders’ equity and the preparation of a tax proof, including proof of deferred taxes, for each consolidated entity, thus contributing to the final calculation of consolidated shareholders’ equity; ● an audit trail justifying all accounting entries published in the financial statements and their notes based on the individual accounts of each of the consolidated entities and consolidation entries; ● archiving and security procedures, including the twice-daily back-up of the overall consolidation database with regular data recovery testing; ● provision of support and appropriate training to the accounting teams of those consolidated entities in which the consolidation system is rolled out, thus allowing for best practices to be spread within the Company.
Since 2008, Natixis has used a system enabling it to: ● produce a local IFRS-compliant reporting package, manage deferred taxes locally and automate the production of notes to the consolidated financial statements; ● guarantee the consistency of data relating to the banking and insurance consolidation scopes; ● benefit from the transparency of the Natixis sub-group reports progressively rolled out within the Company up to 2009; ● offer data recovery functionalities that can be used to generate regulatory, statutory and prudential reports and in the analytical review process; ● perform sub-consolidations; ● enable BPCE to access Natixis data through dedicated interfaces; ● secure the integration process for consolidation reports received from international entities through the implementation of local first-level controls followed by centralized second-level controls; ● offer these same international entities a periodic conversion functionality that enables the foreign currency value of quarterly results to be preserved.
The fact that most subsidiaries have their own management and control functions means that internal control procedures are decentralized and are tailored to the organization of each of the consolidated entities and systematically include a multi-tier accounting control process: ● a first-level control where permanent and local controls in operational business lines are integrated into the operating process and formalized in clearly-defined work programs; ● an intermediate level overseen by each entity’s financial or accounting departments where independent controls of operating processes are performed to ensure the reliability and exhaustive nature of the financial statements; ● a final level of control carried out by the Group Audit as part of its regular audits.
Natixis’ Accounting Controls are based on the following fundamental principles: ● separation of the accounting entry and control functions; ● standardization of control processes within the different business lines: methods, tools, reporting and schedules; ● management centralized by the Finance Department and taken up by an independent Accounting Review team; ● ensuring size of team is suited to the objectives defined.
Accounting Control draws upon: ● dedicated tools that allow for the industrialized reconciliation of account entries, reconciliation of contract data with accounting data reconciliation of economic and accounting results and centralization of control results in an internal application; ● formalized documentation, governed by a charter established by Groupe BPCE and explained through a control map which shows the nature, execution frequency and responsibility of the two levels of control. This map is also enhanced with process sheets describing the stages necessary for carrying out the controls.
At an international level, the overhaul of the Asian platform’s accounting system was also completed in 2010. After being deployed in Hong Kong, Singapore, Labuan and Sydney in 2009, the new accounting system was rolled out to the Ho Chi Minh and Shanghai branches in 2010.
Elsewhere, 2010 was marked by: ● improved control of suspense items by establishing dedicated teams within the Back Office Products Department; ● a marked improvement in reconciliation processes, both between balance sheet outstandings and management, and between accounting and financial results; ● an overhaul of reconciliation processes upstream of accounting, implemented by the Back Office, both in terms of reconciling positions with those of depositories (creation of a dedicated tool) and reconciling Front and Back positions (creation of an additional dedicated tool); ● a procedure for securing the valuations calculated for transactions on the GAPC (workout portfolio management) perimeter providing Natixis with a database shared by all parties intervening on this scope.
The accounting control mechanism will continue to develop in 2011 under the impetus of BPCE as part of a function-based approach.
Lastly, as part of the New Deal’s “Support Function Organization” project which clarifi ed and redefi ned responsibilities and allocated roles for each function and which led to the creation of the “Markets Accounting” Department within the Accounting function, 2011 should see the model extended to the whole of CIB. A feasibility study was completed for Financings at the end of 2010.
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 accounting and financial information; and
● to certify that this report contains the other disclosures required by Article L.225-37 of the French Commercial Code, it being understood that we are not responsible for verifying the fairness of these disclosures.
Professional standards require that we perform the necessary procedures to assess the fairness of the information provided in the Chairman’s report in respect of the internal control and risk management procedures relating to the preparation and processing of accounting and fi nancial information. These procedures mainly consisted of: ● obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of accounting and financial information on which the information presented in the Chairman’s report is based, and of the existing documentation; ● obtaining an understanding of the work involved in the preparation of this information and the existing documentation; ● determining whether any significant weaknesses in the internal control procedures relating to the preparation and processing of accounting and financial information that we might have identified in the course of our engagement are properly disclosed in the Chairman’s report.
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 of Directors in accordance with Article L.225-37 of the French Commercial Code.
Risk management 3.1 RISK FACTORS 113 3.1.1 Risks related to the macroeconomic environment and the fi nancial crisis 113 3.1.2 Risks related to the links with BPCE and the Banques Populaires and Caisses d’Epargne networks 114 3.1.3 Risks relating to natixis’ operations and the banking sector 115 3.2 PILLAR III 123 3.2.1 Basel 2 regulatory framework 123 3.2.2 Scope of application 123 3.2.3 Capital adequacy ratio 123 3.2.4 Composition of capital 124 3.2.5 Risk management 127 3.3 OVERALL INTEREST RATE, LIQUIDITY AND STRUCTURAL FOREIGN EXCHANGE RISK 151 3.3.2 Balance sheet risk management 151 3.4 INSURABLE RISKS 153 3.5 LEGAL RISKS 154 3.6 INSURANCE RISKS 157 3.7 SENSITIVE EXPOSURES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE FINANCIAL STABILITY FORUM 161
The information provided in the following sections is an integral part of the fi nancial statements certifi ed by the Statutory Auditors: ● 3.2.5.1 Natixis’ general risk management system; ● 3.2.5.2 Natixis’ Risk Department; ● 3.2.5.3 Credit risks (only for data mentioned as certified); ● 3.2.5.4 Market risks (only for data mentioned as certified); ● 3.3 Overall interest rate, liquidity and structural foreign exchange risks; ● 3.6. Insurance risks; ● 3.7 Sensitive exposures according to Financial Stability Board Recommendations.
Adverse market or economic conditions may cause a decrease in the net revenues, profi tability and fi nancial position of Natixis
During the 2008 fi scal year and the fi rst half of 2009, Natixis’ results and fi nancial condition suffered signifi cantly as a result of the disruptions that affected all markets throughout the world.
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 persistently weak recovery could have an adverse impact on the business conditions of fi nancial institutions. Furthermore, central banks could decide at any time, with or without prior consultation, to change their monetary policy (notably to increase their key interest rates) and adjust their liquidity policy to take account of the relative stabilization of the money and fi nancial markets, which could cause liquidity to suddenly dry up in these markets and more generally in the economy. With the recovery still shaky, such developments could have a negative impact on the environment in which fi nancial institutions operate and, as a result, have an adverse impact on Natixis’ fi nancial position and results.
Since the formation of BPCE, the refi nancing of Natixis over the medium-long term has been carried out at the Groupe BPCE level through BPCE S.A. Even though market conditions have largely stabilized in recent months, they could deteriorate in the future. Consequently, BPCE, which obtains funding on the international debt markets, among other sources, could fi nd it diffi cult to issue debt instruments under reasonable conditions.
3.1.2 RISKS RELATED TO THE LINKS WITH BPCE AND THE BANQUES POPULAIRES AND CAISSES D’EPARGNE NETWORKS
Natixis depends in part on the performances of the Banque Populaire and Caisse d’Epargne networks
However, Natixis has signifi cant infl uence over Banques Populaires and Caisses d’Epargne as a result of various rights it has been granted in relation to agreements entered into at the time CCIs were acquired by Natixis.
Natixis cannot freely sell its 20% equity interests in Banques Populaires or Caisses d’Epargne, and in some circumstances could be required to sell them
For further information on the contractual relationships relating to these subjects, please refer to section [1.4.5] “Signifi cant contracts”.
Natixis is obliged to maintain its holding in the capital of each Banque Populaire and Caisse d’Epargne at 20%
CREDIT RISK (FOR FURTHER DETAILS REFER TO SECTION [3.2.5.3] OF CHAPTER [3] AND SECTION [2.6.4] OF CHAPTER [2])
Credit risk is the risk of fi nancial loss on Natixis’ loans due to a debtor’s inability to honor its contractual obligations. The assessment of the probability of a debtor’s inability to repay and the expected recovery in this event are key factors in the measurement of credit quality. The debtor may be a bank, an industrial or commercial company, a sovereign state and its various entities, an investment fund, or a natural person. Credit risk increases in periods of economic uncertainty, insofar as such conditions may led at a higher rate of default.
Credit risk affects lending operations as well as other operations exposing Natixis to the risk of counterparty default, notably its trading operations in fi nancial instruments on capital markets and its settlement-delivery operations. For instance, a default by a bank could directly and signifi cantly affect Natixis through its trading positions and relations with said bank. Credit risk also exists in Natixis’ credit insurance and factoring businesses, although the risk of default lies with the debtor’s customers rather than the debtor itself.
The following details are provided: ● general principles for loan approval and management of credit risks; ● measurement of risk and internal ratings, which are an integral component of Natixis’ counterparty risk monitoring and control; ● credit risk reduction techniques (netting agreements, collateral, guarantees or credit default swaps); ● credit risk monitoring, which is based on business line accountability and various control measures overseen by a dedicated Risk Department team, with day-to-day monitoring provided by the businesses, the middle office overseeing financing and the Risk Management Department performing second level controls; and
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 refl ect 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 following details are provided: ● the organization of the control of market risks. The control of market risks is essentially the responsibility of the Market Risk Department, which defines risk measurement methodologies, approves limits and monitors all market risks within Natixis’ consolidation scope. The market risk control system is based on a risk authorization architecture, in which the Natixis Risk Committee is the central Committee and within which the Market Risk Committee plays an essential role; ● the measurement of market risks (synthetic assessments of Value at Risk, operational indicators used to manage operations on an overall basis and/or by similar operation, by focusing on more directly observable criteria and stress tests consisting in measuring potential losses incurred by portfolios in extreme market conditions); ● the quantitative data for measuring Natixis’ market risk; and
Operational risk is the risk of losses due to inadequate or failed internal processes, or due to external events, whether deliberate, accidental or natural occurrences. Internal procedures include, but are not limited to, Human Resources and information systems. External events include fl oods, fi res, earthquakes, fraud or terrorist attacks.
The principal legal proceedings in progress involving Natixis and its subsidiaries are described in section [3.5].
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 (for further information, please refer to section [3.4]). The purchase of insurance policies from leading insurers allows for the compensation of 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 section [3.2.5.5].
The insurance risks incurred by Natixis Assurance stem from the sale of savings and provident insurance contracts in France and abroad. The main risks are fi nancial, such as the risk of no longer being able to service a minimum contracted rate in the event of lower interest rates, risk of contract repurchases in the event of higher interest rates, credit risk, etc.
For further details about corrective actions implemented with a view to the turnaround of Coface, please refer to section [3.6].
If Natixis decided to dispose of certain operations, the selling price could turn out to be lower than expected and Natixis might continue to bear signifi cant risks stemming from these operations as a result of liabilities guarantees or indemnities that it might have to grant to the buyers concerned.
In its lending operations, Natixis periodically establishes provisions for loan losses, which are recorded in its income statement under “provision for credit losses”. Natixis’ overall level of provisions is based on its assessment of prior loss experience, the volume and type of loans granted, market practices, past due installments, economic conditions and other factors refl ecting the recovery rate of various loans. For further information on Natixis’ provisioning policy and its management of doubtful loans, please refer to section [3.2.5.3].
Although Natixis endeavors to establish a suffi cient level of provisions, its lending businesses may lead it to increase their provisions for loan losses in the future in the event of an increase in non-performing assets and/or deteriorating economic conditions, leading to an increase in counterparty defaults and bankruptcies, or for any other reason. Any signifi cant increase in provisions for losses or a signifi cant change in Natixis’ estimate of the risk of loss on its portfolio of non-impaired loans, as well as any incidence of losses in excess of provisions constituted in relation to the loans in question, could have an adverse effect on Natixis’ results and fi nancial position.
Natixis’ employees are one of its most important resources and there is intense competition to attract qualifi ed employees in many areas of the fi nancial services industry. Natixis’ results depend on its ability to attract new employees and to retain and motivate its existing employees.
Natixis may generate lower revenues from brokerage and other commission and fee-based businesses during market downturns
Independent of market changes, any under-performance of Natixis’ asset management business may result in a decline in assets under management (in particular, as a result of redemptions of mutual funds) as well as fees, premiums and other portfolio management income received by Natixis.
Like most of its competitors, Natixis relies heavily on its communication and information systems as its operations require it to process a large number of increasingly complex transactions. Any breakdown, interruption or failure of these systems could result in errors or interruptions to customer relationship management, general ledger, deposit, transaction and/or loan processing systems. If, for example, Natixis’ information systems failed, even for a short period of time, it would be unable to meet customers’ needs in a timely manner and could thus lose transaction opportunities. Likewise, a temporary breakdown of Natixis’ information systems, despite back-up systems and contingency plans, could result in considerable information retrieval and verifi cation costs, and even a decline in its proprietary business if, for instance, such a breakdown occurred during the implementation of hedging transactions. The inability of Natixis’ systems to accommodate an increasing volume of transactions could also undermine its business development capacity.
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 fi nancial 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.
● any adverse change in the political, military or diplomatic environments creating social instability or an uncertain legal situation capable of affecting the demand for the products and services offered by Natixis.
Natixis’ risk management techniques and policies may not be effective in limiting its exposure to any type of market environments or all types of risk, including risks that Natixis has not been able to identify or anticipate. Furthermore, the risk management techniques and strategies used by Natixis cannot guarantee risk reductions in all market confi gurations. These techniques and strategies may not be effective against certain risks, particularly those that Natixis has not previously identifi ed or anticipated. Some of Natixis’ qualitative tools and metrics used to manage risk are based upon its use of observed historical market behavior. Natixis uses tools to analyze these observations, notably statistically, to quantify its risk exposure. The tools and metrics used may provide erroneous conclusions as to future risk exposures, notably because of factors that Natixis has not anticipated or correctly assessed in its statistical models, or because of unexpected and unprecedented market trends. This would limit Natixis’ ability to manage its risks. The losses borne by Natixis could prove to be signifi cantly greater than those forecast in light of historical averages. In addition, Natixis’ quantitative models do not incorporate all risks. Certain risks are subject to a more qualitative analysis that could prove insuffi cient and thus expose it to signifi cant and unanticipated losses. In addition, while no material issue has been identifi ed to date, the risk management systems are subject to the risk of operational failure, including fraud. (Please refer to section [3.2.5.5] “Risk management” for a more detailed presentation of the policies, procedures and methods used by Natixis to identify, monitor and manage its risks).
Natixis’ reputation is essential in attracting and retaining its customers. The use of inappropriate means to promote and market its products and services, inadequate management of potential confl icts of interest, legal and regulatory requirements, ethical issues, money laundering laws, information security policies and sales and trading practices may damage Natixis’ reputation. Its reputation could also be harmed by any inappropriate employee behavior, fraud or misappropriation of funds committed by participants in the fi nancial sector to which Natixis is exposed, any decrease, restatement or correction of the fi nancial results, or any legal or regulatory action that has a potentially unfavorable outcome. Any damage caused to Natixis’ reputation could be accompanied by a loss of business likely to threaten its results and its fi nancial position.
Regulatory monitoring of bank capital was introduced by the Basel Committee on Banking Supervision (Basel 2) in 1988 and is based on three pillars that form an indivisible whole: 3.2.1.1 Pillar I
Natixis has an obligation for consolidated regulatory reporting to France’s Prudential Control Authority (Autorité de Contrôle Prudentiel) and it therefore establishes Pillar III on a consolidated basis.
EDF Investment Group is proportionally consolidated in accordance with the level of economic interest, i.e. 7%.
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 risk weightings according to Basel categories of exposure; ● the “internal ratings based” (IRB) approach, based on the financial institution’s internal ratings system; ● the IRB approach consists of two categories: − the Foundation IRB approach, for which banks use only their probability of default estimates,
− the Advanced IRB approach, under which banks use all of their internal estimates of the components of risk, i.e. probability of default, loss-given default, exposure at default, maturity.
● Reserves, including revaluation reserves, and unrealized or deferred gains or losses.
● Net income (group share), after deducting an estimated portion of this income for cash-settled dividends.
● Capital subject to the conditions of Article 4d of CRBF Regulation No. 90-02 of February 23, 1990 pertaining to capital (redeemable subordinated securities).
● Equity instruments: 45% of pre-tax net unrealized capital gains recognized as Tier 2 capital.
● 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.
Tier 3 capital comprises subordinated debt with a maturity of over 5 years used only to hedge market risk. Natixis is not concerned by these instruments.
As of December 31, 2010 and in accordance with the French Prudential Supervisory Authority, Natixis’ investments in Caisse d’Epargne and Banque Populaire, in the form of Cooperative Investment Certifi cates (CCIs), are no longer deducted from capital but are included in risk-weighted assets. For further details on CCIs, see section [1.4.5] “Major contracts”.
The primary shareholding resulting in a capital deduction was the €0.3 billion stake in CACEIS.
As of December 31, 2010 and in accordance with the French Prudential Supervisory Authority, Natixis’ investments in the Caisse d’Epargne and Banque Populaire banks, in the form of corporate investment certifi cates (CCIs), are no longer deducted from capital but are included in risk-weighted assets.
CFDI (Caisse Française de Développement Industriel) is the only Natixis subsidiary subject to this individually. The parent company and other French subsidiaries are credit institutions that are exempt from compliance with these requirements on an individual basis, by authorization of the French Prudential Supervisory Authority,.
Regulatory capital is structured as follows with respect to the various rules (all data after impact of the guarantee): (in billions of euros) 12.31.2010 12.31.2009 Change
Equity remained stable at €20.9 billion. The effects of the repayment of the €0.5 billion shareholder advance and €1.35 billion in hybrid securities and a €0.4 billion payout on these securities were offset by €1.7 billion in income for the year, a €0.3 billion reduction in the negative translation difference due to the dollar’s rise and a €0.3 billion decrease in net unrealized or deferred losses.
Tier 1 and total capital are impacted from changes in the prudential treatment of CCI. Whereas half (€4.7 billion) were deducted from Tier 1 capital and half from Tier 2 capital at December 31, 2009, they are now booked under risk-weighted assets (see below). Tier 1 capital includes a €0.2 billion provision for distribution of cash dividends (50% of net income at December 31, 2010, minus post-tax remuneration payable on hybrid shares and an estimate of the percentage of this divided to be subscribed as shares). The drop in other prudential restatements was primarily due to the reduction in unrealized or deferred losses posted and fi ltered prudentially.
Tier 2 capital fell by €0.5 billion due to the effects of regulatory depreciation and amortization.
Basel 2 risk-weighted assets amounted to €147.9 billion after the fi nancial guarantee granted by BPCE (€9.3 billion, down by €1.4 billion compared with December 31, 2009), and rose by €17.0 billion. Three risk categories contributed to this change: (in billions of euros) 12.31.2010 12.31.2009 Change
The €25.4 billion increase in credit risks was primarily due to the inclusion of CCIs (+€38.3 billion) and a currency effect (7% increase in the US dollar, +€2.6 billion). These factors were partly offset by the approval granted for the advanced internal ratings-based approach (IRBA, -€15.9 billion at that date) on September 30, 2010.
All in all, the resulting Tier 1 capital ratio was 11.4% at December December 31, 2010 compared with 9.7% at December 31, 2009. The Core Tier 1 ratio, excluding hybrid securities, was 7.9% at December 31, 2010.
Of which present value of residual exposure at default on fi nancial leases 15 -
This ratio is calculated on a parent company (non-consolidated) basis and according to regulations must be above 100%. Natixis and its subsidiaries respected this standard in 2010, and Natixis’ ratio was 107% at December 31, 2010.
The regulations on controlling large exposures were revised on December 31, 2010 (CRBF Regulation No. 93-05 amended by the decree of August 25, 2010). It aims to prevent excessive concentrations of risks for sets of counterparties that are related in a way that it makes it probable that if one encountered fi nancial problems, the others would also have diffi culties with fi nancing or reimbursement. The regulation is underpinned by an obligation to be respected at all times: all risks associated with a single counterparty cannot exceed 25% of the bank’s capital. Natixis complied with this requirement during 2010.
It uses three levels of coordinated controls: ● internal controls are carried out by operational or functional departments under the supervision of their management: business lines are responsible for the risks they incur in their transactions, until their extinction. Depending on the precise situation and transactions, first-level controls are conducted either by personnel themselves or by an ad hoc body, such as a 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.
The Risk function was set up on July 1, 2010. It features heightened integration, shorter decision-making channels, closer cross-functional ties via the use of dedicated teams and more clearly established duties compared with those exercised by the business line and subsidiary teams. The latter two objectives led to the creation of a Consolidated Risk Department charged with taking a cross-functional, exhaustive approach to risks and a Service and Investment Solutions Risk Department in charge of the heads of Risk in the two divisions.
It participates in the ALM Committee, which is steered and organized by the Finance and Risk Department.
Lastly, it reports regularly on its work, submitting its analyses and fi ndings to Natixis’ executive and decision-making bodies, and to Groupe BPCE. A risk consolidation team risks generates an overview through the use of scorecards that report on risks and risk management.
In order to fulfi ll these responsiblities, the Risk Department uses an IT system tailored to the activities of Natixis’ core business lines and which applies the department’s modelling and quantifi cation methods for each type of risk.
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 portfolio 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.
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. The limits governing country exposure (country caps) are examined and approved by the Natixis Global Risk Committee in light of the countries’ ratings and situations. Moreover, the Credit Committee’s decisions regarding transactions deemed to entail signifi cant exposure in terms of the total amount, country situation or type of transaction are underpinned by an analysis of country risk.
Since September 30, 2010, Natixis has used internal rating methods specifi c to the different Basel asset classes 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 as well as imposing corrective measures or adjustments wherever necessary, such as the enrichment or redefi nition of models, or the modifi cation of reference samples.
Natixis uses credit risk reduction techniques including netting agreements, personal guarantees, asset guarantees or the use of CDS for hedging purposes.
Natixis buys credit-default swaps and enters into synthetic securitization transactions in order to reduce all or part of the credit risk exposure attached to some assets by transferring the risk to the market. CDS-protected loans remain on Natixis’ balance sheet, but bear the counterparty risk attached to the credit-default sellers, which are generally OECD banks. Transactions with non-bank third parties are fully collateralized in cash.
The transactions are subject to decision-making and monitoring procedures that apply to derivative transactions.
Credit risk is supervised by making the various business lines accountable and by various control measures overseen by a dedicated Risk Department team.
As regards limit breaches, the monthly Limit Breach Committee analyzes breaches of predefi ned limits using specifi c indicators (number, total, duration, business lines concerned, etc.), examines signifi cant breaches and monitors their correction.
Natixis also sets aside provisions to cover country risk and sector risk (see Note 5.3 to the consolidated fi nancial statements presented in section [4.1] Financial data). These provisions are created on the basis of: ● ratings for loans to private individuals and professionals; ● sector risk and geographical risk for other counterparties (corporate entities, sovereigns, etc.).
SMALL and medium-sized enterprises recorded in the retail customers category 2,014 1,939 2,007 2,160
French and European Union counterparties account for 72% of Natixis’ exposure.
Banks and investment fi rms 15.4% 9.7% 3.9% 1.3% 30.2% 35.5%
Other exposure recorded in the retail customer category 0.0% 0.0% 0.0% 0.0% 0.0% 0.1%
Small and medium-sized enterprises recorded in the retail customers category 0.6% 0.0% 0.0% 0.0% 0.6% 0.8%
* o/w 11.8% in exposure to Groupe BPCE, compared with 7.7% at end-2009.
** The reference framework for business sectors changed in 2010. December 2009 fi gures were broken down again according to the new reference framework.
Exposure at risk as at months year years years Maturity >5 years
Small and mediumsized enterprises recorded in the corporate entities category 400 624 423 1,326 1,883 4,657 4,157
Banks and investment fi rms 9,918 7,500 9,867 20,215 25,948 73,448 77,484
Small and mediumsized enterprises recorded in the retail customers category 403 44 143 730 619 1,939 2,160
The standard approach is used for European subsidiaries, retail asset class exposures, liquidity lines provided to ABCP conduits, securitization positions with retail underlyings and real-estate leasing.
Natixis received approval for the advanced internal ratings-based method (IRBA) in 2010.
Other exposure recorded in the corporate entities category 76,846 17,469 10,544 104,858
SMALL and medium-sized enterprises recorded in the corporate entities category 1,128 2,153 1,376 4,657
SMALL and medium-sized enterprises recorded in the retail customers category 1,939 1,939
The following table shows the breakdown of VaR by internal rating (S&P equivalent) for asset classes treated under the IRB approach, after excluding: ● exposure to equities (calculated using a simple weighting); ● pool-based exposure (acquired portfolios); ● accounting adjustments; ● generic counterparties.
Specialized lending exposures treated under the supervisory slotting criteria approach at December 31, 2009 are now virtually all treated under IRBA. They are therefore included in the breakdown as of December 31, 2010. Excluding specialized lending, total Investment Grade exposure was 78%, an increase relative to December 31, 2009.
Breakdown by internal rating (S&P equivalent) for asset classes treated under the IRB approach, after excluding: ● exposure to equities (treated under the simple weighting approach); ● pool-based exposure (acquired portfolios); ● accounting adjustments; ● generic counterparties; ● specialized lending treated under the slotting criteria approach (at December 31, 2009).
* Under the advanced method, doubtful Corporate outstandings are calculated on a risk-weighted basis.
Specialized lending portfolios, which were treated under the slotting criteria approach at December 31, 2009, are now virtually all treated under IRBA.
The average risk-weighting for exposures under the IRB approach was 43% at December 31, 2010. Excluding specialized lending, the average risk-weighting was 33%, compared with 45% at December 31, 2009. This decrease was primarily due to the transition to IRBA.
Rating Residual maturity 12.31.2010 12.31.2009 50% Solid M <2.5 years 1,541
Satisfactory M >= 2.5 years 250% Weak M <2.5 years 1,161
Other collateral is defi ned as collateral other than securities, fi nancial instruments, real estate or loans. Tangible collateral comprises real estate or real-estate mortgages, in accordance with Articles 166.2 and 183.1 of the French decree of February 20, 2007.
❚ EXPOSURES COVERED BY PERSONAL COLLATERAL BY CATEGORY OF EXPOSURE (CLIENT ASSET CLASS)
Small and medium-sized enterprises recorded in the retail customers category 633 603
Breakdown of aggregate amounts represented by kept or acquired securitization positions by riskweighting category
Presentation of banking portfolio securitization positions (including securitization positions deducted from equity)
Natixis’ market risk is controlled by the Market Risk Department, an integral part of the Risk function. This department independently defi nes the principles (methods and limits) for measuring risks, submits them to the executive management for approval and monitors these risks. It validates market product valuation models and regularly ensures that models used are consistent with market developments and changes in best practices.
The market risk control mechanism is based on a delegation structure (mandates), which is under the responsibility of the Global Risk Committee and in which the Market Risk Committee plays an essential role.
The Market Risk Committee determines market risk policy, notably via the following tasks: ● determining and reviewing VaR and stress test limits, operational limits, and loss alerts; ● establishing delegations for validation purposes; ● reviewing risk exposure with a potential focus on a specific class of risk, class of asset or pay-off; ● informing on methodological changes concerning the calculation of VaR and stress tests; ● preparing quarterly summaries of limit excesses; ● communicating the results of backtesting; ● reviewing delegated decisions after they have been taken; ● providing information on the validation of market risk methodologies and fair value adjustments, and on the validation of models.
In line with the recommendations of France’s Lagarde Report, it also ensures adherence to the limit notifi cation procedure. It also makes sure that each trader sends email confi rmation that they belong to the desk where they are authorized to trade and that they respect their allocated limits.
Natixis’s market risk management is based on a risk metrics model that measures the risk run by each Group entity.
All decisions regarding risks factors are revised annually in Committee Meetings attended by all parties concerned (Risk Department, front office and P&L division),. Quantitative, objective tools are used to measure the relevance of risk factors. The aim is to ensure consistency between VaR calculations, results and sensitivities (use of the same risk factors).
The robustness of the VaR indicator is regularly backtested against the change in daily trading results. This exercise allows ex-post loss potential, as provided ex-ante by VaR, to be compared with actual outcomes.
Natixis’ internal VaR model was approved by the French Prudential Supervisory Authority (Autorité de Contrôle Prudentiel) in January 2009. Natixis therefore uses VaR to calculate capital requirements in respect of market risks on the portfolios within its remit;
2- 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; 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.
Overall stress tests are revised on a continuous basis. They are performed daily and may be grouped into three categories: ● Historic stress tests consist of reproducing sets of changes in market parameters observed during past crises in order to create an ex-post simulation of the extent of P&L changes recorded. While stress tests do not have any predictive powers, they do make it possible to gauge the exposure of the portfolio to known scenarios. Two new historic stress tests were calibrated in 2010, increasing the total to 11.
● Adverse stress tests are designed to detect the most adverse situations for the Bank, based on the characteristics of the Bank’s portfolio. Calculations involve running stress scenarios through a matrix, with adverse stress being defined as the level resulting in the maximum loss.
Specific stress tests, which are also calculated daily in management applications, were rolled out over all portfolios and supported by alerts. They were defi ned using the same severity standard and are used to identify the main loss areas by portfolio.
All limits (operational indicators, VaR, stress tests, loss alerts) are monitored daily by the Market Risk Department. Any limit breaches must be reported and loss alert limits may lead to a management decision concerning the positions in question (close, hedge, maintain, etc.).
As the chart below shows, VaR fell slightly over the year, thus indicating that exposure continued to decline (for the GAPC workout management portfolio) and that the volatility of market data and standard deviations used to calculate VaR were stable.
The chart below presents trading VaR history between 31.12.2009 and 31.12.2010, for the entire scope and GAPC after accounting for BPCE’s guarantee. As well as the history VaR for CIB.
The following table presents VaR fi gures after accounting for the BPCE guarantee: (in millions of euros) NATIXIS trading portfolio Limit VaR including the BPCE guarantee
The following chart shows results of backtesting (comparison of potential losses, as calculated ex-ante by VaR, with actual P&L
❚ OVERALL STRESS TESTS AT DECEMBER 31, 2010 INCLUDING THE BPCE GUARANTEE
A matrix organization structured according to business and location is used to oversee the entire company.
This system is rounded out within the business lines by an extensive network of Operational Risk Offi cers (more than 700 at end-December 2010). They are responsible for reporting any incidents to the Operational Risk Department and for providing operational risk data: indicators, progress on action plans, etc.
The main tasks in steering Natixis’ operational risks are as follows: ● validation of standards and methods, measures, operational risk management procedures; ● risk management; ● operational risk review.
The business-line Operational Risk Committees are offshoots of Natixis’ Operational Risk Committee. They closely manage the business lines’ operational risk exposure.
❚ FRACTION OF AMOUNTS OF UNREALIZED GAINS OR LOSSES INCLUDED IN TIER 1 OR TIER 2 CAPITAL AS AT DECEMBER 31, 2010
(in millions of euros) Assets Fraction of amounts included in Tier 1 or Tier 2 capital
Natixis’ overall interest rate risk is minor with respect to the volumes of the positions managed and does not warrant any special comments; the shock resulting from the application of Basel 2 standards (+200 bp instantaneous variation in the yield curves) at December 31, 2010 would result in a change in the portfolio’s absolute value of €35 million.
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. Consumptions are 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 long-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 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.
Structural foreign exchange risk comprises foreign exchange positions for which revaluation involves transferable equity. It stems from mismatches between the currency of net investments refi nanced by purchases of currency and the currency of equity. This is particularly the case for foreigncurrency investments in subsidiaries and branches abroad. Structural foreign exchange risk is accordingly defi ned as the risk of loss of transferable equity generated by an adverse fl uctuation in exchange rates against the euro.
Natixis’ structural forex risk for the most part concerns structural positions in the US dollar, due to the consolidation of foreign branches and subsidiaries funded in USD.
Given the existence of weighted risks denominated in currencies other than the euro (in particular the US dollar), the ALM Committee has approved currency purchases to fund long-term investments in order to immunize the bank’s capital adequacy ratio against changes in the euro-US dollar exchange rate.
The Insurance Department, which reports to the Legal Department within the Corporate Secretary’s offi ce, is tasked with analyzing insurable operational risks and taking out appropriate insurance coverage (direct insurance and/or transfer).
− damage to operating assets (buildings and contents, IT hardware and data), as well as loss of banking business due to such damage.
Natixis and all its subsidiaries therefore receive the following guarantees: − “combined” Overall Banking (values and fraud) and Company Civil Liability policies providing coverage of €100 million per claim and/or per year of insurance,
− a “Civil Operating Liability” insurance policy providing coverage of €50 million per claim,
All the insurance policies mentioned above are purchased with deductibles (accepted retention level) in accordance with Natixis’ capacities.
Insurance premiums for all these policies cost a total of €11.7 million over the whole of 2010.
The fi nancial consequences, assessed at December 31, 2010, 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 are not at 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.
In March 2009, the Paris public prosecutor’s offi ce launched a preliminary investigation into a complaint fi led by Natixis minority shareholders and coordinated by the Association de Défense des Actionnaires Minoritaires (Association to Defend Minority Shareholder Rights, ADAM). As part of this investigation, Natixis’ headquarters were searched in May 2009. The investigation is ongoing.
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 (Tribunal de Commerce de 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 its investment in the middle of the fi nancial crisis. The date of the hearing has not yet been set.
On August 2, 2010, Goldman Sachs International (GSI) initiated proceedings against Natixis before the High Court of Justice in London. These proceedings concern three transactions on credit default swaps between GSI and Natixis and which relate to certain portions of a structured vehicle by Goldman Sachs called “Altius IV Funding”. In July 2010, Natixis terminated these swaps, invoking the occurrence of an Additional Termination Event (ATE) in respect to each of its swap contracts. GSI disputed that an ATE had occurred as GTI considered that it had not breached its responsibilities toward Natixis. The parties entered into an agreement on November 9, 2010, notably entailing the withdrawal of litigation. This agreement contains confi dentiality clauses barring the release of details in this transaction.
On December 20, 2010, the Natixis branch in Milan received an order for preventive sequestration (Decreto Di Sequestro Preventivo) in the amount of €2.2 million. The sequestration was requested preventively in the context of proceedings launched against Natixis and other banks by the Florence public prosecutor in regard to derivative transactions between these banks and the Region of Tuscany and which were considered by the prosecutor to have generated illicit profi ts.
There are no other governmental, legal or arbitrational procedures likely to have a signifi cant impact on Natixis’ accounts.
3RISK MANAGEMENT Insurance risks 3.6 Insurance risks (These data form an integral part of the fi nancial statements certifi ed by the Statutory Auditors).
Risk of contract repurchases in the event of an increase in interest rates
The liability adequacy test carried out in accordance with IFRS 4 showed that insurance liabilities evaluated under local standards, for the year ended December 31, 2010, were greater than the fair value of these liabilities, taking into account the repurchase option incorporated in the policies.
Concerning securities in other categories, the sensitivity analysis carried out at end December 2010 shows that a 1-point increase in bond yields would have a negative impact of €48 million on equity (taking into account the variation attributable to policyholders and taxation), i.e. 4.2% of equity.
Natixis Assurances is subject to variations in the value of its fi nancial assets. The management of fi nancial risks involves defi ning a strategic allocation taking into account liability commitments, regulatory constraints (particularly in terms of non-concentration) and commercial requirements. Thus, allocation ranges are defi ned for each type of asset.
The monitoring and management of counterparty risk is carried out in compliance with Natixis’ standards and internal limits, as determined by the Credit Risk Committee, as well as the regulatory constraints imposed on insurance companies. Thus, 88% of the fi xed-income portfolio is invested in securities rated higher than A-.
The annual reinsurance plan seeks to diversify reinsurers and to deal only with parties having a high-quality rating. No reinsurance treaty is concluded or renewed with parties that are non-investment grade (rating of BB+ to D-). In practice, the ratings of reinsurers with which Natixis Assurances does business range from 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.
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 the underwriting centers, and €1 million for the two main underwriting centers, Coface S.A. and Coface Kredit), with the intervention of a subsidiary specialized in recovery (Coface Recovery Business Intelligence); ● 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; ● a system for the statistic 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 – for ratings of BBB or higher – and their score equivalents – account for 85% of credit insurance outstandings.
Second level controls are set up to ensure that the group’s credit risk standards are respected.
Financial risks are controlled according to strict standards and methods: ● exchange rate risk: the majority of Coface’s investment instruments are in euros. Currency risk on assets representing liabilities in euros whose underlying is denominated in other currencies is hedged to avoid holding open positions; ● counterparty risk: more than 92% of Coface’s bonds and fixed income products at 31 December 2010 were rated A (or equivalent) or better, according to at least one internationally-recognized rating agency;
Coface considers that its securities portfolio as sufficiently liquid to meet its commitments.
Second level controls on compliance with Coface’s investment policy are also carried out.
(1) The sensitivity of a bond measures the bond’s loss in value in the event of an interest rate hike. For example, a bond with a sensitivity of 4 would lose 4% of its market value in the event of a 1% rise in interest rates.
Exposure in the fi nancial statements as at December 31, 2010 was as follows: (in millions of euros) US RMBS’
Net exposure as at 12.31.2010 AAA AA A BBB BB B CCC CC
Available-for-sale asset portfolio 19 0 (8) 11 2 2 4 2 1
3 RISK MANAGEMENT Sensitive exposures in accordance with the recommendations of the Financial Stability Forum
4.1 MANAGEMENT REPORT FOR THE YEAR ENDING DECEMBER 31, 2010 168 4.1.3 Consolidated results 169 4.1.4 Analysis by business 171 4.1.5 Refi nancing 181 4.1.6 Subsequent events 183 4.1.7 Information concerning the Natixis parent company 183 4.2 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 186 4.3 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 328
III - Specifi c verifi cations and disclosures 380 4.6 STATUTORY AUDITOR’S SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND COMMITMENTS 381
II - Agreements and commitments already approved by the Annual General Meeting 383
● as to equity allocations in connection with the ownership of CCIs (Cooperative Investment Certificates), the new approach authorized by the Regulator starting December 31, 2010 consists of no longer deducting 50% of amounts from Tier 1 capital and 50% from Tier 2 capital, but instead recognizing them as risk-weighted assets with a weighting of 370%; ● for calculating Natixis’ ROE, the result used is net income (group share), from which DSN interest expense is deducted, net of tax effects as recognized in equity. The equity used is the average annual IFRS net equity (group share) after distribution, eliminating embedded or deferred gains or losses recognized in equity and excluding DSN; ● up to the date of the implementation of the BPCE guarantee, i.e. July 1, 2009, the gains (losses) on the revaluation of senior debt and of GAPC (Workout Portfolio Management) were added together. Since then, GAPC has been presented as a completely separate business line and the valuation of the senior issuer spread is included in the Corporate Center; ● the other conventions applied in determining the earnings generated by the entities making up the various business lines are as follows: − the business lines benefi t from the income derived from capital allocated to them,
− the divisions are invoiced for an amount representing the bulk of the Group’s overheads; the uninvoiced portion represents less than 3% of the Group’s total expenses.
The implementation of the New Deal strategic plan, announced in August 2009, was extended into 2010.
Investment Solutions strengthened the synergies between its three business lines, Global Asset Management, Insurance and Private Banking, and French networks.
Natixis integrated its Private Equity business for third parties into the Investment Solutions division.
In Financial Services, work continued on creating a single platform for each Securities and Payments business line.
Within Financial Investments, Coface confi rmed its recovery and has entered a new growth phase.
Furthermore, Natixis’ Private Equity proprietary operations in France were sold to AXA Private Equity.
Miscellaneous transactions with a view to reducing Natixis’ risk exposure or to strengthening its fi nancial structure were conducted successfully: ● transition to the Advanced Internal Ratings Based Approach (IRBA) for credit risk, reducing risk-weighted assets by €15.9 billion on September 30, 2010 (implementation date); ● active management of GAPC positions and a sharp reduction in the volatility of its earnings with the disposal of the bulk of its portfolios of complex credit derivatives to a banking counterparty (net reduction of €6.3 billion in risk-weighted assets in 2010) and a significant reduction in structured credit outstandings.
Furthermore, the improvement in Natixis’ capital adequacy ratios allowed it to buy back €1.35 billion in Deeply Subordinated Notes held by BPCE in the last quarter of 2010.
Workout portfolio management (GAPC), net income from discontinued operations and net restructuring costs were transferred to Net income (group share). This presentation provides improved reporting year comparisons. A reconciliation statement with intermediate aggregates published in 2009 and 2010 is presented in the annex at the end of Paragraph 4.1 of the Management Report.