Policies and rules established for determining2.4 compensation and benefits of any kind for corporate officers 77
CAPITAL AND SHARE OWNERSHIP7 501 General information on Natixis’ capital7.1 502
GENERAL SHAREHOLDERS’ MEETINGS8 513 Terms and conditions of attendance by8.1 shareholders at Shareholders’ Meetings 514
Cross reference table for the annual financial9.6 report and the management report 547
The universal registration document of Natixis may be used for the purposes of a public offer of securities or admission of securities for trade on a regulated market if supplemented by a securities note and, where applicable, a summary of all amendments to the universal registration document. All these are approved by the AMF in accordance with EU regulation 2017/1129.
The English language version of this report is a free translation from the original, which was prepared in French. All possible care has been taken to ensure that the translation is an accurate presentation of the original. However, in all matters of interpretation, views or opinion expressed in the original language version of the document in French take precedence over the translation.
Natixis posted very sound results in 2019, with steady growth momentum for our business lines, overall costs kept under control and reinforced solvency. In an unstable and changeable environment, these results reflect our strong strategic choices
Our Asset & Wealth Management businesses displayed an increase in revenues and assets under management, while safeguarding margins at the same time. Natixis Investment Managers continued to develop its range with the creation of Vauban Infrastructure Partners and Thematics Asset Management. Our business model – built on a network of a global distribution platform – has proven its strength and its worth in today’s tougher environment.
At Corporate & Investment Banking, a steady grip on costs meant we were able to continue creating value despite an increase in the cost of risk and a tougher context for capital markets activities. We also further developed our sectorial approach and boosted our
The company continues to transform to address the wide range of challenges facing the financial industry and thereby better support its clients over the long term.
Our business choices are proving their worth on a daily basis. We are now one of the European financial institutions least exposed to interest rates as a result of our asset-light model, and this is a major advantage in the current low interest rate environment.
Middle East provides a source of opportunities for our clients. AMERICAS
> Investment Banking and Mergers & Acquisitions > Financing > Capital Markets > Trade & Treasury Solutions > Coverage
> Life & Personal Protection Insurance > Property & Casualty Insurance
NEW DIMENSION : Natixis’ 2018-2020 strategic plan following the success of the New Frontier strategic plan (2014-2017)
V A balanced and diversified business m o d e l b e t w e e n b a n k i n g a n d non-banking activities, the latter representing ~60% in 2019 vs. ~45% in 2017 and ~50% in 2013.
RWA growth target below net revenue growth forecasts for the period of
Share of NII in net revenues: 9% in 2019 vs. 12% in 2018 and 33% in 2013.
V Making targeted investments in alternative investment activities, conviction-led investing and solutions.
V Increasing our operational efficiency by merging affiliates, taking operational efficiency actions, and strengthening our customer relationship management within distribution.
V Strengthening of the originate-to-distribute model by diversifying distribution channels and forming new partnerships.
V Developing the M&A network through the acquisition of four new boutique advisory firms: Fenchurch Advisory Partners (FIG), Vermilion Partners (China), Clipperton (Technology), Azure Capital (Australia).
V Renewal of the partnership between BPCE Group and Covéa, and resumption of the Banque Populaire network’s new non-life insurance activities.
V Technological development to the highest standards of the customer service industry.
V Higher ratio of unit-linked assets for life-insurance products than the market and our peers.
Special Committees of the Board of Directors at March 1, 2020 7 members
Map of expertise for members of the Board of Directors A detailed map of the expertise of members of the Board of Directors is provided in section 2.2.
Dimension strategic plan for 2018-2020. Our ESR policy underlies all our activities, business lines and processes.
Value creation in 2019 employee pride rate of women in the Senior
To comply with the scenario of limiting global warming to 2 °C, Natixis leads its financing and investments towards a low carbon economy.
Innovation: Natixis is decarbonizing its balance sheet with the Green Weighting Factor
Natixis’ compensation policy is a key factor in implementing its company strategy.
The compensation of executive corporate officers is included in the principles of
Total compensation awarded to the Chief Executive Officer vs. equity pay ratio
On the compensation policy for executive officers: principles and criteria for determining their compensation
Including Natixis, all the institutions affiliated with the central institution of Groupe BPCE benefit from a guarantee and solidarity mechanism the purpose of which, according to Articles L. 511-31 and L. 512-107-6 of the French Monetary and Financial Code, is to guarantee the liquidity and capital adequacy of all affiliated institutions, and to organize financial support within the Group.
This financial support is based on legislative provisions imposing a legal solidarity mechanism by which the central institution is required to restore the liquidity or solvency of affiliates in difficulty, and/or all affiliates of the Group, by providing, as necessary, the total capacity and regulatory capital of all contributing affiliates. As a result of this fully-engaged legal solidarity mechanism, one or several affiliates cannot be placed in court-ordered liquidation nor be concerned by the resolution measures within the meaning of Directive 2014/59 EU, unless this is the case for all the affiliates.
Accordingly, should Natixis encounter financial difficulty, (i) BPCE would firstly provide support using its own regulatory capital in accordance with its duty as a shareholder; (ii) should this prove insufficient, it would use the mutual guarantee fund created by BPCE which, at December 31, 2019 totaled €357.8 million in assets provided jointly by the Banque Populaire and Caisse d’Epargne networks, and which is increased through an annual contribution (subject to the amounts which would be used in the event of a call for funds); (iii) should BPCE’s regulatory capital and this mutual guarantee fund prove insufficient, BPCE would draw on (in equal proportions) both the Banque Populaire and Caisse d’Epargne networks’ own guarantee funds totaling €900 million and; finally (iv) should recourse to BPCE’s regulatory capital and these three guarantee funds prove insufficient, additional sums would be requested from all the Banque Populaire and Caisse d’Epargne banks.
Natixis Investment Managers ranks 17th globally by assets under management (Cerulli Associates: Global Markets 2019 report based on AuM as of December 2018).
For Natixis Investment Managers, 2019 was a year of solid financial performance, from both revenue and profitability standpoints. Despite some headwinds, Natixis Investment Managers was able to navigate these with determination and steadfast resolution, and ended the year on a strong footing. Natixis IM benefited brisk business in capital markets, which marked a stark contrast in 2019 and helped to progressively recover the adverse market effect face in the fourth quarter of 2018.
Following on from 2018's accomplishments, in 2019 was a year of strengthening Natixis Investment Managers’ multi-affiliate model, but also a year of execution and internal focus to expand the firm's distribution capabilities, reinforce its product range and improve performance and operational efficiency.
Natixis Investment Managers has seen strong results in manyV parts of its business. Its affiliate Mirova, specialised in ESG (Environmental Social and Governance) and impact investing, demonstrated strong growth, reflecting not only the increasing appeal of socially responsible investing but also strong investment performance and the importance of its brand. In a related area, the early success of its affiliate Thematics Asset Management — launched in March 2019 — demonstrates the great potential for
In 2019, Natixis Investment Managers continued to stronglyV enhance its brand visibility through high-level media engagement and global partnerships with thought leadership groups, such as the PRI, G7 Investor Leadership Network, World Economic Forum, Dow Jones, and others. Natixis Investment Managers remains committed to maintaining its place on the global stage to foster its distinctive approach towards active investing.
AEW/AEW Europe (€55.9 billion) real estate asset management, real estate investment trusts (SCPI) V and real estate mutual funds (OPCI)
Loomis, Sayles & Co. (€264.8 billion), equities (growth, core, value) and fixed income (core to high yield)V
business on the High Net Worth Individuals (HNWI) segment. In 2019, it acquired Massena Partners, an investment management and advisory firm exclusively focused on the HNWI segment. As part of this initiative, Natixis Wealth Management signed a partnership with Essling Capital in order to strengthen its offerings in private equity and real-estate club deals.
After simplifying its business model (divestment of the Sélection 1818 platform focused on independent financial advisors), Natixis Wealth Management continues to reposition its Wealth Management
Launched in January 2019 and bringing together three of Natixis Investment Managers’ existing Private Equity affiliates: Euro-PE, Caspian Private Equity and Eagle Asia.(1) A division of Natixis Advisors, L.P.(2)
In 2019, Natixis Interépargne consolidated its position as a benchmark in employee and retirement savings, with 77,000 client companies, nearly 3 million savers, and a market share of 27.1% in employee savings and 28.9%, in PERCO collective pension plans (1). With a market share of 24.6% in SRI (socially responsible investment), Natixis Interépargne has confirmed its leadership in this sector of employee savings. The range of employee and retirement plans for SMEs and self-employed professionals has expanded with the enactment of the new PACTE Act for business growth and transformation, and 20,000 new contract subscriptions.
Corporate & Investment Banking serves corporate clients, financial institutions, institutional investors, financial sponsors, public sector entities and the Groupe BPCE networks. It advises them and develops innovative tailor-made solutions to support their strategy by drawing on the full range of its expertise in investment banking and mergers & acquisitions on capital markets, and in financing and transaction banking. Its objective is to develop a strategic dialogue with each of its clients over the long term by building a close working relationship with them through a strong regional and international presence.
These areas of expertise are adapted locally across the three international platforms: Americas: Argentina, Brazil, Canada, Chile, Colombia, Mexico, PeruV and the United States; Asia-Pacific: Australia, China, Hong Kong, India, Indonesia, Japan,V Malaysia, Singapore, South Korea, Taiwan and Thailand; EMEA (Europe, the Middle East and Africa): France, Germany, Italy,V Russia, Spain, Switzerland, Turkey, the United Arab Emirates, and the United Kingdom.
In 2019, Corporate & Investment Banking continued to implement the objectives of the New Dimension strategic plan (2018-2020), targets aimed at achieving the following goals: to be recognized as a bank that offers innovative solutions and to become a benchmark bank in four strategic sectors (energy and natural resources, aerospace, infrastructure, real estate and hospitality).
All “green” loans receive a discount of up to 50% in their weighted assets, while the weighting of loans with a negative impact on the climate and the environment is increased by up to 24%. By adjusting the expected return on each loan depending on its impact on the environment and the climate, Natixis encourages its teams to favor green financing solutions (for an equivalent level of credit risk). This is a concrete way of contributing to the United Nations Sustainable Development Goals regarding climate change and the environment.
As part of its resolute specialist positioning, GSH's center of expertise is responsible for keeping an active watch over market and regulatory developments, and for focusing the GSH’s efforts in the areas of product or methodology investigation and innovation. Publications were issued on three key subjects in 2019: the decryption and critical analysis of the European package on the regulation of sustainable finance, the blue economy, and the vast issue of transitioning to a low-carbon economy, with a special focus on the transition of currently very high-carbon industrial models.
In 2019, the team further expanded its in-depth knowledge of investors in these green and sustainable finance areas, through multiple interactions (and research) centered on their ESG strategies.
Lastly, the GSH was the driving force behind the strategic development of Corporate & Investment Banking’s green and sustainable activities: enhanced development of loans (green loans and sustainability-linked loans) and investment solutions, consolidation on the green bond market, and pioneering of several innovative financing or investment products.
The GSH’s expertise in this area has positioned Natixis on the forefront of funding the energy transition (particularly on the emerging market of transition bonds or sustainability-linked bonds), ready to guide our top clients as they implement their own energy transition.
The Global Markets business model is built on the following elements: The development of innovative solutions (as opposed to standardV flow products) in the main asset classes. This tailored approach enables Natixis to respond more pertinently to its clients’ needs and set itself apart from its competitors; In addition, access to a wide range of flow products via electronicV platforms cover all client requests on the markets; the development of an investment policy targeted at clients’ local needs; The development of an investment policy targeted to clients’ localV needs. The challenge for the bank is firstly to focus on products in which Global Markets enjoys a genuine competitive advantage, and secondly to achieve the necessary critical size in these activities to ensure the sustainability of franchises; The further development of Global Markets’ international reach inV terms of client and market coverage, drawing on Corporate & Investment Banking’s presence in the EMEA, Americas and Asia-Pacific regions; A multi-underlying focus, illustrated by the Global SecuritiesV Financing team, which operates simultaneously on the fixed income and equity markets.
This business line comprises four divisions: Two solutions divisions intended to encourage a closerV commercial relationship with clients: Cross Asset Solutions, providing distributors, family offices, mutual insurers and pension funds with one-stop access to cross-asset solutions; and Multi-Asset Solutions, addressing the needs of major institutional investors, asset managers and corporates; A single Financial Engineering division offering clients innovativeV hedging, investment and financing solutions across all asset classes; A Multi-Asset Client Servicing & Execution (MACSE) divisionV coordinating flow products and digital offerings.
On the fixed income markets, Natixis’ teams offer clients financing, investment and hedging products and solutions on the credit, fixed income and forex markets in OECD and emerging countries. The teams are located in Europe (Paris, London, Milan, Madrid and Frankfurt), the Middle East (Dubai), Asia (Singapore, Tokyo, Hong Kong, Shanghai and Taipei) and the Americas (New York, Houston and São Paulo).
On the credit market, to address structural issues related to the growing disintermediation of financial markets, the Global Structured Credit & Solutions (GSCS) teams offer clients streamlined asset and liability management solutions: advisory and financing solutions for balance sheet reduction, arrangement of alternative financing and regulatory optimization. Combining origination, structuring, syndication and trading services, GSCS is structured in a way that enables Natixis to develop services for clients right across the structured credit value chain.
In Europe, the Merius investment platform, set up in 2016, grew further in the low interest rate environment to exceed €4.4 billion in investment commitments at the end of 2019, confirming investor interest in this innovative solution on the Dutch residential mortgage market. On the European ABS market, Natixis played a key market-making role through a number of major deals in the United Kingdom (5), France (2), Italy and the Netherlands. Natixis also continued to lead the way in private-sector deals with non-banking lenders in Europe. It issued an innovative securitization transaction backed by green assets. On the CLO market, Natixis conducted five major deals totaling some €2.1 billion.
Over the course of 2019, Natixis further expanded in the Asia-Pacific region, increasing its presence on the Australian residential mortgage-backed securitization market. Natixis participated in six RMBS deals for different sponsors such as La Trobe and Pepper, including Vermilion 2019-1 for sponsor Columbus Capital which was named “Best Debt Finance Deal for Australia/New Zealand” by FinanceAsia in 2019 alongside other nods for “green” projects. GSCS in Asia continued to distribute US and European products to Asian investors.
To ensure effective coverage of clients in the energy & natural resources (ENR) sector in relation to price risk solution activities, GMC’s marketing teams and ENR Finance’s origination teams combined forces to work together.
In 2019, Natixis further expanded its range to include investment solutions such as dividend offers, structured green bonds, new systematic strategies (e.g. protected equities) and thematic indices (water index). The Equity Derivatives team boasts renowned expertise in solution design as well as distribution and pre/post-trade services.
Research models (equity derivatives, fixed income, credit, foreign exchange), all backed by technical analyses.
A genuine center of expertise was developed in real estate, combining analyses of macroeconomic flows, valuation models and new publications to guide clients throughout their strategic projects. It also developed expertise in investment themes as varied as electric cars, gas and 5G.
The three business lines Real Assets (covering aviation, infrastructures, real estate and hospitality), Energy & Natural Resources and Distribution & Portfolio Management are core to Natixis' sector-oriented and originate-to-distribute (O2D) strategy. In 2019, they generated solid results, driven by robust origination and distribution business. The global infrastructure and real estate activities in Europe did especially well.
Natixis’ ambitions as a leading bank in the Energy and National Resources (ENR) sector are underpinned by its involvement for over 30 years with producers, distributors and traders in the three underlying industries (energy, metals, agricultural products), and as a global organization. The objective for ENR is to offer its clients the added value needed to foster strategic dialogue and deliver tailored banking solutions with the input of all Corporate & Investment Banking teams.
GMC: commodity price hedging activity, led by ENR in partnershipV with the Capital Markets team.
In 2019, this strategic sector-oriented approach resulted in several deals combining financing and price hedging.
In keeping with the bank’s sustainable development policy, Natixis arranged multiple deals indexed to environmental, social and governance (ESG) criteria for its clients in the sector. For example, Natixis served as the arranger of the first sustainability-linked pre-export finance facility. Natixis also set up green term facilities for Ghanaian cacao manufacturer Ghana Cocoa Board and agricultural commodities trader Louis Dreyfus Company, and a sustainable revolving facility for grain and oilseed trader Bunge.
The bank continues to pursue external and internal initiatives to digitize international commodities trading. The fintech Komgo®, in which Natixis invested alongside 16 banks and industry players, has delivered multiple additional features (letters of credit, receivables discounting, KYC tools, etc.) on its blockchain platform. The second fund-raising operation conducted in 2019 (during which Natixis increased its stake) should allow Komgo® to expand its development. The platform will ultimately streamline trade among all players in the value chain, including producers, traders, freight forwarders and banks. Several internal initiatives are also in progress with the goal of improving the acquisition and use of our data.
Natixis has financed over 1,150 projects in more than 25 years of business. It draws its expertise in infrastructure from its in-depth knowledge of the sectors and assets financed. Natixis is a world leader in this area, ranking No. 8 MLA globally in the first nine months of 2019 (source: Project Finance International). It covers the four main infrastructure segments — electricity and renewable energy, telecoms, social infrastructure and transportation, and natural resources — and has a dedicated infrastructure M&A advisory team. In 2019, Natixis finalized its industry bankers groups by hiring several new members, ensuring complete sector and global coverage of all Corporate & Investment Banking solutions.
Drawing on its leading position in infrastructure debt vehicles, Natixis consolidated its joint investment platform by establishing partnerships with institutional investors. This platform allows them to invest in this asset class while offering borrowers a competitive source of liquidity. There are currently 13 partners on the platform, with an investment capacity of nearly €8.3 billion.
In 2019, business was dynamic on all three international platforms and in all asset classes, with a key focus on environmental and renewable energy initiatives (Source: IJGlobal) illustrated in particular by strong activity in Latin America.
In Europe and the Middle East, Natixis' commitment to initiatives was highlighted by projects such as Beleolico Srl, the first offshore wind farm in Italy and the Mediterranean (sole arranger); the first French wind farm off the coast of Saint-Nazaire (coordinator for Groupe BPCE); the first wind farm in Saudi Arabia Dumat Al Jandal (arranger, offshore securities agent); and the Taweelah project in Abu Dhabi, set to become the largest desalination plant in the world (initial arranger, documentation bank, facility agent).
Natixis also boasts an enviable position as No. 2 MLA globally in the first nine months of 2019 (source: IJGlobal), in the telecommunications sector which is expanding rapidly as a result of the digitization of the economy. Natixis contributed to the development of fiber optics across France. The bank is also very involved in the data center segment.
In the transportation, Natixis participated as financial advisor and debt arranger for the construction of the tramway in Liège, Belgium.
These structures may include asset-based securities (ABS). Natixis helped Stratos with its maiden bond issue backed by a portfolio of 15 aircraft.
Natixis has been a leading player in the Real Estate & Hospitality sector for 30 years. It has offices in Europe, the United States and Hong Kong, and covers all asset classes: residential, office, retail, logistics and hospitality (hotels, clinics, retirement homes, etc.). Four industry bankers cover the real estate and hospitality sector, offering a comprehensive range of Corporate & Investment Banking solutions to clients in the sector. It draws on its extensive knowledge of the market to offer a broad range of high value-added expertise in accordance with the bank’s originate-to-distribute (O2D) model: M&A advisory through seven international boutiques, including Natixis Partners, structured real estate finance (senior, mezzanine, B note) and conventional finance, green-certified financing, bond issues, equities, and hedging.
Natixis capitalized on these areas of expertise, for example, to help Swiss Life Asset Managers acquire a portfolio of high-end Paris offices from Terreis, as the sole advisor to the insurer in this €1.7 billion deal and the arranger of the €507 million mortgage loan. This landmark deal illustrates the success of the bank’s sector-based model, as well as its ability to offer its clients the full spectrum of expertise.
Natixis also sets itself apart through its commitment to green and SRI finance. It is, in fact, one of the leading issuers of sustainable and green home loans. In 2019, it arranged funding for the 99 West offices in Berlin subject to Green Loan Principles; a loan indexed to ESG criteria for Capitaland allowing the Singapore-based real estate to install solar panels on six of its buildings; a green corporate loan of €200 million for Gecina with an interest rate indexed to carbon footprint reduction and HQE (high environmental quality) classification criteria.
Natixis stands out for the strength of its integrated international underwriting and distribution capabilities and is the only French bank with a Pfandbriefbank (Natixis Pfandbriefbank AG), which allows it to issue German-law mortgage bonds. In 2019, it issued €250 million in additional “Pfandbrief” bonds, bringing total issuance since the institution was established to €1.630 billion. Natixis is one of the main players in the CMBS market in the United States, ranking No. 14 as at September 30, 2019 (source: Commercial Mortgage Alert).
Distribution & Portfolio Management (DPM) develops optimal financing solutions for business and attractive investment opportunities for investors. The bank boasts excellent portfolio management and distribution across its three international platforms (Americas, EMEA and Asia-Pacific), made up of 215 professionals. It is in charge of the syndication and active management of the loan book, and therefore proactively manages the credit quality and profitability of financing put in place by Natixis.
In trade finance, TTS makes it easier for its clients to expand their business internationally via import/export security and financing solutions, such as documentary credit, documentary collections, market guarantees and thanks to its solid banking risk hedging expertise. TTS operates in France and on the Asia-Pacific, Americas and EMEA platforms, and is active in multiple countries through its network of partner banks.
On the financing front, TTS offers to manage the working capital requirements of its clients, using supply chain finance solutions.
In 2019, TTS continued to innovate with a focus on improving the client experience. For example, My Tracked Transfer allows financial companies and institutions to track their international payment transactions in real time. Also, clients can now initiate credit transfers securely from the websites using Instant Payment while securing their bank details with SEPAmail Diamond. Under its open banking strategy, TTS launched another instant payment solution, API, in partnership with Datalog Finance. And in trade finance and supply chain finance, TTS set up electronic signatures for daily transactions, and further developed its Receivables Finance offering on the Marco Polo blockchain platform used by a global network of banks.
The purpose of the Investment Banking business line is to strengthen strategic dialog with clients while offering them the best possible combination of solutions to meet their financing needs. It covers strategic and acquisition finance, primary bond and equity market finance, equity-linked finance (via the Strategic Equity Transaction team that reports to both the Head of Investment Banking and the Head of Global Markets), as well as financial structure and rating advisory services.
In 2019, Strategic and Acquisition Finance turned in a very strong performance on a highly competitive market, landing a wide variety of deals.
In the United States, Natixis served as arranger, co-bookrunner, syndication agent and sole issuing bank of a stand-by letter of credit for the acquisition of WEIR Group’s Flow Control Department by the world’s leading private investment firm, First Reserve.
Natixis secured a position as a strategic partner during the acquisition of heating services group Proxiserve by investment funds Core Infrastructure Fund II (managed by Mirova) and Asterion Industrial Infra Fund, in its role as bookrunner, underwriter, facility agent and sole rating advisor. This deal, consisting of a revolving credit line and a Term Loan B, also included green criteria — which is a first for this type of financing solution.
Lastly, in Asia, Natixis acted as arranger, underwriter and bookrunner for a $655 million syndicated debt refinancing loan for Shanghai Pharmaceuticals Group.
Natixis completed a number of landmark deals on a highly active bond market in 2019.
It continued to expand in the hybrid segment, with bond issues for LarfargeHolcim (€500 million), Accor (€500 million), Eurofins (€300 million) and EDF (€500 million).
In France, it participated in the Ceetrus bond issue (€300 million) and the Caffil double-tranche issue (€750 million and €500 million). It structured BNG’s inaugural SRI bond issue (€750 million) and ALS’ first sustainable bond issue (€1 billion). In Spain, it headed up Iberdrola’s hybrid bond issue (€800 million) and in Italy the Enel’s inaugural multi-tranche SDG bond (€2.5 billion). In Belgium, Natixis structured the maiden double-tranche bond issue for the Wallonia Region (€1.25 billion) and led the bank’s first green sukuk issue for Islamic Development Bank (€1 billion).
Natixis also led several prestigious transactions on the emerging, sovereign, supranational and agency markets, including bond issues by the Kingdom of Morocco (€1 billion), the Sultanate of Oman ($3 billion), the Arab Republic of Egypt ($2 billion), the European Investment Bank (€3 billion), the European Financial Stability Facility (€1 billion), the Belgian State (€6 billion) and the Government of Quebec (€1 billion), which was a first-time mandate for Natixis. Lastly, Natixis headed up the World Bank’s inaugural EUR issue (€1.25 billion).
On the equity capital markets (ECM), Natixis provides clients with tailored advisory services for all transactions that affect their capital structure: IPOs, capital increases and convertible or exchangeable bond issues. It develops advisory services for public tenders or exchange offers, and maintains a corporate broking business that offers clients intermediation services for acquisitions and disposals on the equity market, share buybacks and liquidity contracts.
In 2019, business was brisk on the equity capital markets in France, and Natixis furthered its development in the EMEA region in particular by leading multiple large-scale transactions.
The Strategic Equity Transaction team, which specializes in equity-linked finance, designs solutions to help clients manage their equity positions (equity stakes, treasury shares, investments). The team uses financing tools, derivatives or any other financial instrument in the interest of Natixis’ French and international clients.
The Strategic Equity Transaction team, renowned for its innovative and bespoke solutions, served as co-lead manager and co-bookrunner in the acquisition of Daimler AG shares by BAIC Group via a €2.2 billion syndicated loan.
Multiple large-scale international deals were conducted throughout the year. In France, Natixis advised Swiss Life on its acquisition of a portfolio of 28 prime assets from Terreis for €1.7 billion. In the United States, PJ SOLOMON advised Banijay Group on its acquisition of Endemol Shine Group, formerly co-owned by Disney/Fox and Apollo Global Management. In the United Kingdom, Fenchurch Advisory advised Swiss Re on the sale of its UK division, Reassure, to Phoenix Group for £3.25 billion. In Asia-Pacific, Vermilion Partners advised C. Banner International Holdings Limited on the sale of Hamleys Global Holdings. Also in the Asia-Pacific region, Natixis advised the shareholders of APM Monaco on the sale of 30% of their shares in a consortium led by TPG.
The Group’s five biggest entities are: BPCE Vie, a mixed life insurance company that offers all typesV of policies and agreements with commitments linked to the length of the policyholder’s life. It accounts for most of the Personal Insurance business workforce and provides other the entities of the Insurance division with the resources they need for their operations; BPCE Assurances, a non-life insurance company that offers a fullV range of property and casualty insurance products (auto insurance, multi-risk home insurance, personal accident coverage, health insurance, legal protection and business and personal protection insurance for professionals); Natixis Life, a Luxembourg-based life insurance company thatV offers life insurance and investment solutions to high net-worth customers; BPCE Prévoyance, a non-life insurance company whose operationsV include insurance coverage for accidents, illness and different forms of financial loss; BPCE IARD, a non-life insurance company that offers a full rangeV of property and casualty insurance products (auto insurance, multi-risk home insurance and legal and multi-risk coverage for professionals).
The Insurance division was created in 2014, in line with Groupe BPCE’s strategic ambition to become a fully-fledged bancassurance player primarily serving clients from the two main banking networks of Groupe BPCE: the Banque Populaire and Caisses d’Epargne savings banks. This strategic drive resulted in the following major structural transactions: result of this transaction, Natixis Assurance became the sole shareholder of BCPE Assurances. With the renegotiation of the partnership agreement with Covéa, BPCE Assurances will handle new non-life insurance business with the individual customers of the Banque Populaire banks in addition those of the Caisse d’Epargne banks; in March 2014, Natixis Assurances acquired 60% of BPCEV Assurances, a non-life insurance company created to serve customers of the Caisse d’Epargne network, and in 2017 bought the remaining 40% stake previously held by MACIF and MAIF. As a the renegotiation of the terms of the existing partnership betweenV Groupe BPCE and CNP Assurances, finalized in the first quarter of 2015. Accordingly, the distribution of life insurance policies for retirement savings and personal protection insurance, handled by the Personal Insurance business line, was extended to the Caisse d’Epargne network, with effect from January 1, 2016.
Launched at the end of 2017, the division’s strategic plan, New Dimension 2018-2020, aims to cement Natixis Assurances’ position as a front-running insurer in France, by delivering a differentiated customer experience and top-flight operating performances. The new plan will span the property & casualty arm’s entire value chain by creating a single management platform run by Natixis Assurances to better serve the Banque Populaire banks and the Caisse d’Epargne banks (the Innove#2020 project).
Over the last few years, the Insurance division has been operating in unprecedented market conditions: macroeconomic and financial shifts have resulted in the implementation of monetary policies with significant impacts on life insurance policies for retirement savings, and, to a lesser extent, for the non-life insurance business. In particular, historically low interest rates, which are the main source of revenue for life insurance players, have led to significant changes in product and investment strategies: life insurance products were aimed to improve the sharing ofV outcomes among the various stakeholders in order to ensure balance between sustainable business competitiveness and solvency protection in the medium term. Similarly, the Personal Insurance business line has responded to the sharp decline in market interest rates by lowering the revaluations incorporated into its policies. This has allowed it to accumulate a significant profit-sharing reserve representing nearly two years of revalued outstandings at the end of 2019. This reserve could be used as a significant cushion to supplement “policy” revaluations over the next eight years; a variety of commercial initiatives targeted at end-customers andV the business provider networks, aimed at increasing the share of inflows and assets invested in unit-linked products; the steady decline in returns from traditional fixed-rate assets hasV led to a number of changes in asset management policy: the diversification of fixed-income investments towards privateV debt, the gradual reallocation of the equity bucket towardsV recurring-dividend shares, development of a bucket for unlisted investments in PrivateV Equity and real estate.
In addition, the insurance business is monitored via prudential and regulatory oversight, a process that has seen significant changes: the Solvency II Directive came into effect on January 1, 2016,V resulting in changes in organizational structure, operating procedures and the assessment of minimum solvency as required for developed activities. In the current environment of historically low interest rates, this change constitutes a major challenge. The division prepared for this challenge by modifying its governance and risk management processes; similarly, new regulations have come into force in the insuranceV sector (PRIIPS, IDD, GDPR, easier termination of payment protection insurance), all of which are likely to lead to changes to products and operating procedures; finally, the upcoming entry into force of IFRS 9 and IFRS 17 willV oblige the Insurance division to adapt its financial and technical management; Natixis Assurances is continuing to prepare for the application of these standards as of January 1, 2022.
Total revenue from direct sales climbed 6% year-on-year to €11.1 billion, driven by business with the networks, strong momentum in personal protection insurance and payment protection insurance. Assets under management were up 14% to €68.4 billion. Revenue from personal protection insurance and payment protection insurance improved 12% to €993 million in 2019.
Non-life insurance revenues continued to show growth: premium income from property and casualty insurance totaled €1,577 million, up 6%. Growth was driven by auto (+8%) and multi-risk home insurance (+7%). The contract portfolio grew 5% to 6.1 million policies by end-2019, on the back of strong sales performances in both networks.
Natixis Payments is a payment services provider that offers a full range of payment solutions and services to all European public and private economic stakeholders.
Through its various entities, including Natixis Payment Solutions for payment processing solutions, Natixis Intertitres, Dalenys, Payplug, Comitéo, Titres Cadeaux, Le Pot Commun, S-money and E-Cotiz, Natixis Payments works across the entire value chain, from issuance, acquisition, online payments, e-wallets, prepaid cards, and everything in between. Natixis Payments therefore provides comprehensive management of domestic, European and international payment instruments. It draws on its robust technological grounding, its fintechs and teams of experts to develop a complete range of innovative solutions with carefully selected partners. Accordingly, 2019 was a year of strategic partnerships for the division, and especially those with VISA: with the creation of Xpollens, a white-label "Payments in a Box"V solution offering innovative payment services to fintechs, merchants and corporates. With this solution, clients can easily incorporate a complete set of payment services, ranging from issuing instant payment cards to instant payment to account administration; and the partnership around the FIFA 2019 Women’s World Cup inV France to allow fans to use prepaid contactless cards and payment bracelets created for the event. And as premium partners of the Paris 2024 Olympic and Paralympic Games, Visa, Groupe BPCE and Natixis Payments Solutions plan to extend this successful innovative payment experience to spectators and delegations. Group BPCE will also bring Payments division entity E-Cotiz on board for the event.
Other partnerships were also formed with fintechs such as Shopify and PayPlug, with the shared goal of simplifying everyday transactions. Through this collaboration, Shopify users platform can enjoy a user-friendly omnichannel payment solution that offers the highest level of protection against fraudulent transactions.
The organization of the division into three business units reflect all the division's solutions, which cover the entire value chain from issuance, acquisition, e-payment, prepaid to processing: a Processing BU, covering mainly Electronic Banking and FlowsV processing activities; a Merchant Solutions BU, covering digital and physical merchantV solutions. The e-commerce component is offered by Dalenys and PayPlug, which had an exceptional year building up their markets; an Issuing & Prepaid BU, offering a complete set of prepaidV products and issuing solutions through its new Xpollens range that runs off the S-money platform.
Natixis Payments also covers all market segments with tailored, user-oriented solutions on the retail, corporate, SME, government, association, financial institution, fintech and individual markets in Europe.
2019 also saw the finalization of a key milestone in the construction of the Payments division: the creation of a Fintech Campus. This crown jewel for the division marked the completion of the merger and synergy optimization initiatives in place for the last several months. Fintech Campus has been hosting S-money since summer 2019 and by 2021 will host all Payment fintechs to create a single hub dedicated to innovation and new payment methods.
A global expert in trade risk prevention and guarantees for corporate clients 70 years of experience and a dense geographic network have made Coface a benchmark in credit insurance, risk management and the global economy. The experts at Coface, which aims to become the most agile credit insurance partner in its industry, operate in the heart of the global economy. They help their 50,000 customers build successful, dynamic, and growth-oriented companies by protecting them from the risk of financial default by their clients. Coface’s services and solutions protect companies and help them make the necessary credit-related decisions to strengthen their ability to sell their products on both domestic and export markets.
At its meeting on March 27, 2019, the Board of Directors of Coface S.A. co-opted Nathalie Bricker, Chief Financial Officer CFO of Natixis, as a new non-independent director.
At its meeting on October 23, 2019, the Board of Directors of Coface S.A. co-opted Marie Pic-Paris, Chairman of Banque Populaire Rives de Paris, as a non-independent director, replacing Jean-Paul Dumortier who left the Board at the end of his six-year term at Banque Populaire Rives de Paris.
On April 15, 2019, Coface announced the acquisition of 100% of the share capital in SID — PKZ, Slovenia’s leading credit insurer. The business is now operated under the new brand Coface PKZ. Created by SID Bank in 2005, SID — PKZ issued €14.3 million in gross premiums in 2018. The transaction had a neutral impact on the Group’s capital adequacy ratio. Badwill of €4.7 million was taken to income in the income statement on the consolidation of Coface PKZ. Coface PKZ’s contribution (excluding badwill) to the Group’s net income at December 31, 2019 was not material.
On July 25, 2019, Coface filed an application with the ACPR to use the partial internal models approach. On December 4, 2019, it received approval to use this approach to calculate its regulatory capital requirements under Solvency II as from December 31, 2019. Coface’s partial internal model has been discussed and extensively examined by the Group’s supervisory authority since the pre-application phase was launched in 2016. The model covers the loan underwriting module. The other modules (market risks, counterparty risk, operational risk) continue to use the inputs of the standardized approach.
But persistent global imbalances and rising corporate debt mean that the risk of default remains high, especially in sectors undergoing major shifts (digitalization, environment) and countries experiencing political crises. Thus, Coface confirms its scenario of a gradual slowdown in global growth and a renewed rise in defaults around the world.
Against this backdrop, Coface completed its Fit to Win plan and drafted a new strategic plan. The new plan will draw on the many successes of the Fit to Win plan and will continue the transformation undertaken in recent years. It will seek to enhance Coface’s profitable growth momentum and the robustness of its business model.
On February 25, 2020, Natixis announced the sale of a 29.5% stake in Coface to Arch Capital Group at a price of €10.70 per share (dividend attached). The closing of the transaction is expected to take 6 to 12 months and to free up ~35bps of CET1 ratio. Following the closing of the transaction, Natixis will no longer be represented at Coface’s Board of Directors.
May 20, 2020 General Shareholders’ Meeting (to approve the 2019 financial statements)
Policies and rules established 2.4 for determining compensation and benefits of any kind for corporate officers 77
Compensation and benefits of any kind 2.4.2 for the Chairman of the Board of Directors and the Chief Executive Officer for 2019 82 his chapter partially corresponds to the Board of Directors’ report on corporate governance as required by the Article L.225-37 of the French Commercial Code (refer to the cross-reference table for the annual financial report and the management report in Chapter 9 of this universal registration document) and includes information on the composition of the Board and the conditions under which its work is prepared and organized, how its governance is structured, and its policy for compensating corporate officers.
● Chairman/Chairwoman of the Board/Committee *Including the non-voting member. All members of the Board of Directors are members of the Strategic Committee, which is chaired by Anne Lalou.
Stéphane About • EMEA (excl. France) (Corporate & Investment Banking) Patrick Artus • Chief Economist Luc Barnaud • Digital and Technology
Wealth Management) Oliver Bilal • International Sales and Marketing / Natixis Investment Managers (Asset & Wealth Management) Nathalie Bricker • Finance Nathalie Broutèle • Non•life insurance (Insurance) Alain Bruneau • Compliance
Banking) Frédéric Chenot • BPCE Network Coordination (Payments) Fouad Chéhady • Transformation
Sophie Didelot • Enterprise Risk Management (Risks) Christophe Eglizeau • Natixis Interépargne (Asset & Wealth Management) Dominique Fraisse • Energy & Natural Resources (Corporate & Investment Banking) Alain Gallois • (Corporate & Investment Banking) Benoît Gausseron • Communications David Giunta • U.S. And Canada / Natixis Investment Managers
Stéphane Honig • Strategy Hervé Housse • Internal Audit Mohamed Kallala • Global Markets (Corporate & Investment Banking) Christophe Lanne • Transformation (Asset & Wealth Management) Christophe Le Pape • Personal Insurance (Insurance) Anne Lebel • Human Resources
Cyril Marie • Finance / Natixis Investment Managers (Asset & Wealth Management)
Jean Raby • Asset & Wealth Management Isabelle Reux-Brown • Distribution
Joseph Pinto • Operations / Natixis Investment Managers (Asset & Wealth Management) Pierre•Antoine Vacheron • Payments Olivier Vigneron • Risks Richard Vinadier • Accounting
Marc Vincent • Corporate 2 CORPORATE GOVERNANCENatixis Governance at March 1, 2020 34 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
Additional information on the corporate officers 35NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
First appointed: co-opted by the Board of Directors on April 27, 2018 effective as of June 1, 2018 Term expires: 2022 AGM(a)
A graduate of the École Centrale de Paris school of engineering, Sciences Po and the Stanford Executive Program, François Riahi began his career as an auditor in the French government’s Inspection Générale des Finances from 2001 to 2005, before joining the government’s Budget Department. In 2007 he was appointed Advisor on the Reform of State Institutions and Public Finances to the President of the French Republic. He joined Groupe BPCE in March 2009, becoming its Deputy Chief Executive Officer in charge of Strategy. In May 2012 he took over as Head of the Asia-Pacific platform of Natixis’ Corporate & Investment Banking division, based in Hong Kong. In February 2016 he was appointed a member of Natixis’ Senior Management Committee as Global Co-Head of Corporate & Investment Banking. In January 2018 François Riahi was appointed to the Groupe BPCE as the member in charge of Finance, Strategy, Legal Affairs and Secretary’s Office of the Governing Bodies.
Member of the Board of:V Natixis Asia Limited (since 04/09/2012) (until 23/09/2016)O Natixis Australia PTY Ltd (since 03/09/2012) (until 18/07/2016)O Natixis Japan Securities (since 07/09/2012) (until 22/12/2017)O
Chairman of the Supervisory Board V of Natixis Pfandbriefbank AG (since 01/06/2016) (until 28/02/2018)O
Permanent Representative of V Natixis, Director of Natixis Coficiné (since 09/01/2017) (until 07/02/2018)O
Member of the Board of Natixis V Assurances (from 26/10/2017 to 31/12/2017)
Permanent representative of BPCE, V Member of the Board and Deputy Chief Executive Officer of CE Holding (from 01/01/2018 to 31/05/2018)
2022 AGM called to approve the financial statements for the year ended December 31, 2021.(a) Listed company.(1)
Born December 28, 1963 Nationality: French Natixis shares held: 153,649 Address: 50 avenue Pierre Mendès-France 75201 Paris Cedex 13
First appointed: co-opted by the Board of Directors and appointed Chairman of the Board by the Board on June 1, 2018 and ratified at the AGM of May 28, 2019 Term expires: 2023 AGM (a)
Member of the Board of Lazard V Ltd (1) (2) (since 28/07/2009) (until 19/04/2016)O Chief Executive Officer of Natixis V (since May 2009) (until 31/05/2018)O Chairman of the Board of V Directors of: Natixis Investment Managers (since 01/09/2010)
Member of the Board of V Peter J. Solomon Company LP (since 08/06/2016) (until 30/05/2018)O
Member of the Board of V Peter J. Solomon GP, LLC (since 15/12/2017) (until 30/05/2018)O
2023 AGM called to approve the financial statements for the year ended December 31, 2022.(a) Listed company.(1) Company outside Groupe BPCE.(2)
Additional information on the corporate officers 37NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
BPCE: Natixis shares held: 2,227,221,174 Address: 50 avenue Pierre Mendès-France 75201 Paris Cedex 13
Born October 9, 1958 Nationality: French Natixis shares held: 1,097 Address: 50 avenue Pierre Mendès-France 75201 Paris Cedex 13
First appointed: Board Meeting of December 21, 2017 Member — Strategic Committee
Catherine Halberstadt holds a postgraduate degree in Accounting and another in Business, Administration and Finance from the École Supérieure de Commerce de Clermont-Ferrand. In 1982 she joined Banque Populaire du Massif Central, where she was successively appointed Head of Human Resources, Chief Financial Officer, Chief Operations Officer and, from 2000, Deputy Chief Executive Officer. Catherine Halberstadt became Chief Executive Officer of Natixis Factor
Catherine Halberstadt was Chief Executive Officer of Banque Populaire du Massif Central from September 1, 2010, to March 25, 2016. From January 1, 2016 to October 31, 2018, she served as the BPCE Management Board Member in charge of Human Resources, Internal Communications and the Corporate Secretary's Office of BPCE. Since November 1, 2018, Catherine Halberstadt has occupied the roles of Member of the BPCE Management Board in charge of Human Resources.
Member of the Board of Bpifrance Financement V (since 12/07/2013), Chairwoman of the Appointment Committee and the Compensation Committee, Chairwoman of the Audit Committee and the Risk Committee of Bpifrance Financement (since 24/09/2015)
2023 AGM called to approve the financial statements for the year ended December 31, 2022(a) Listed company.(1) Company outside Groupe BPCE.(2)
First appointed: AGM of May 28, 2019 Term expires: 2023 AGM (a)
First appointed: Board Meeting of May 28, 2019 Member — Audit Committee
First appointed: Board Meeting of February 6, 2020 Member — Strategic Committee
Member of the Steering and Supervisory Board of Caisse V d’Epargne Côte d’Azur (since 29/04/2015) then Chairman (since 26/04/2017) Member of the Board of S.A. Compagnie Européenne de Garanties V et Cautions (since 10/07/2018) Member of the Board (since 16/01/2015) then Chairman V of the Paris Ouest local savings company (since 26/04/2017)
First appointed: Board Meeting of September 2, 2017 Member — Strategic Committee
Thierry Cahn holds a Professional Lawyers’ Certificate (CAPA) and joined the firm Cahn et Associés in 1981. In 1984 he joined the General Council of the Colmar Bar (Conseil de l’Ordre des Avocats de Colmar) of which he is still a member. In 1986 he was named Secretary General to the National Lawyers’ Association (Confédération Nationale des Avocats), which he chaired from 1995 to 1996, before becoming Chairman of the Colmar Bar Association from 1998 to 1999. Since 1985 he has also been Head Tutor at the Institut Universitaire de Technologie (IUT) de Haute Alsace and the CRFPA d’Alsace.
Chairman of the Board of Directors of Banque Populaire Alsace V Lorraine Champagne (since 30/09/2003) Member (since July 2009) then Vice-Chairman of the Supervisory V Board (since 24/05/2019), Member of the Cooperative and CSR Committee (since 24/05/2019), and Member of the Audit Committee (from July 2009 to 24/05/2019) of BPCE Member of the Supervisory Board of Banque BCP to Luxembourg V (since 03/07/2018)
KEY ADVISORY SKILLS Expertise in Human V Resources issues and business transformation
Alain Condaminas has a Master’s Degree in Economics and a postgraduate degree in Finance and Banking Techniques. He joined Groupe Banque Populaire in 1984. In 1992 he began working at Banque Populaire Toulouse-Pyrénées as Head of Production, supervising the Human Resources Department, and subsequently as Head of Operations. In 2001 he became Chief Executive Officer of Banque Populaire Quercy-Agenais. In 2003 he oversaw a merger with Banque Populaire du Tarn et de l’Aveyron, then a second merger in 2006 with Banque Populaire Toulouse-Pyrénées to create today’s Banque Populaire Occitane.
Permanent Representative of BP Occitane, Member of the Board V of IRDI (since 2006) Permanent Representative of BP Occitane, Member V of the Supervisory Board of: SOTEL (since 2001), IRDI SORIDEC Gestion (since 19/06/2015)
Additional information on the corporate officers 41NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
First appointed: co-opted by the Board of Directors on February 6, 2020 Term expires: 2022 AGM (a)
Other offices held in 2019: Within Groupe BPCE: Chairman of the Steering and Supervisory Board, Member V of the Risk Committee, Chairman of the Compensation Committee and Appointment Committee of Caisse d'Epargne et de Prévoyance Grand Est Europe CEGEE (since 28/05/2018) Member of the Board of Société Locale d'Épargne V Meurthe-et-Moselle (since 15/02/2016) Member of the Supervisory Board of: Banque BCP Luxembourg V (since 03/07/2018)
Chairman of the Supervisory Board of V Batigère-Sarel (1) (since June 2014) (until June 2017)O Chairman of the Supervisory Board of Batigère (1) V (since 29/06/2014) (until 18/06/2018)O Permanent representative of Interpart, Member V of the Board of Soval (1) (since 18/06/2015) (until 19/06/2018)O Permanent representative of Batigère Île-de-France, V Member of the Board of Novigère (1) (since 30/06/2014) (until 20/06/2018)O Permanent representative of Batigère Sarel, Member V of the Board of CILGERE Entreprises Habitat Constructions (1) (since 07/03/2014) (until 20/05/2016)O Chairman of Association Réseau Batigère (1) V (from 09/02/2012 to 19/05/2015) Member of the Board of AORIF (association) (1) V (since 03/12/2014) (until 10/11/2016)O
Member of the Steering and V Supervisory Board of Caisse d'Epargne of Lorraine Champagne Ardenne CELCA (since 2016) (until 2018)O
2022 AGM called to approve the financial statements for the year ended December 31, 2021.(a) Company outside Groupe BPCE.(1)
First appointed: co-opted by the Board of Directors on August 1, 2017 and ratified at the AGM of May 23, 2018 Term expires: 2023 AGM(a)
Chairman and Chief Executive Officer of Groupe DUPOUY S.A. V (since 22/07/1993) Chairman and Chief Executive Officer of ETS DUPOUY SBCC V (since 01/02/2004) Permanent Representative of BPACA, Member of the Board of V Bordeaux Grands Événements (from 2013 to 25/04/2019), Fondation Bordeaux Université (since 29/11/2017) Member of the Board of Union Maritime du Port de Bordeaux V (since 2008), Congrès et Expositions de Bordeaux SAS (from 2008 to 18/03/2019) Manager of SCI Badimo (since 26/01/2000)V
Member of the Board of Crédit Maritime V Mutuel du Littoral Sud-Ouest (from 2012 to 29/01/2015) Member of the Board of Crédit Commercial V du Sud-Ouest (since 2008) and Chairman of the Audit and Risk Committee (from 2011 to end-March 2015) Elected member of the Bordeaux Chamber V of Commerce and Industry(1) (since 2006) (until 23/11/2016)O Permanent Representative of BPACA, V Member of the Board of Crédit Maritime Mutuel du Littoral Sud-Ouest (since 29/01/2015) (until 04/06/2018)O Chairman of the Audit, Risk and Accounts V Committee (since 2012) (until 04/06/2018)O
Member of the Board of: Natixis V Interépargne (since 30/11/2016) (until 03/08/2018)O
Member of the Board of V BPCE Vie (since 28/03/2017) (until 03/08/2018)O
2023 AGM called to approve the financial statements for the year ended December 31, 2022.(a) Company outside Groupe BPCE.(1)
First appointed: co-opted by the Board of Directors on December 20, 2018 and ratified at the AGM of May 28, 2019 Term expires: 2020 AGM (a)
Member of the Board of Financi’Elles (since 24/03/2011)V Permanent Representative of CELC, Member of the Board of the V CANCER@WORK association (since 12/04/2018) Chairwoman of the Conseil de Développement Métropolitain de V Orléans Métropole (since 13/04/2018)
2020 AGM called to approve the financial statements for the year ended December 31, 2019.(a)
KEY ADVISORY SKILLS Expertise in financial V management and corporate strategy
Chief Executive Officer of Bureau du V Management Financier (absorbed by CASDEN in 2017) (since April 2013) (until November 2017)O
Additional information on the corporate officers 45NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Anne Lalou Dean of the Web School Factory, Chairwoman of the Innovation Factory
First appointed: co-opted by the Board of Directors on February 18, 2015 and ratified at the AGM of May 19, 2015 Term expires: 2022 AGM(a)
First appointed: Board Meeting of February 18, 2015 Member — Compensation Committee
First appointed: Board Meeting of February 18, 2015 Member — Appointment Committee
Expertise in areas relating V to M&A, finance, IT and corporate strategy
A graduate of the ESSEC Business School, Anne Lalou began her career as a manager and then Assistant Director in the M&A Department at Lazard in London then Paris. She was then made Head of Outlook and Development at Havas in Paris. She was Chairwoman and Chief Executive Officer of Havas Édition Électronique before joining Rothschild & Cie as Managing Director.
Member of the Supervisory Board of Eurazeo(1) (since 07/05/2010)V Chairwoman of the Eurazeo(1) CSR Committee (since 2014)V Member of the Eurazeo(1) Financial Committee (since 2012)V
Françoise Lemalle (until February 6, 2020) Chairwoman of the Steering and Supervisory Board of Caisse d’Epargne Côte d’Azur (CECAZ)
First appointed Board Meeting of February 9, 2017 Member — Strategic Committee
Françoise Lemalle earned her Chartered Accountant designation in 1991, becoming the youngest Chartered Accountant in the PACA region that year, then registered with the Compagnie des Commissaires aux Comptes in 1993. She runs an accounting and auditing firm of 20 people, located in Mougins. She regularly hosts training sessions for small retailers, craftspeople and self-employed professionals, mostly at management centers.
In 1999 she became a founding director of local savings company SLE de Cannes, before being elected as its Chairwoman in 2009. She sat on the Steering and Supervisory Board of Caisse d’Epargne Côte d’Azur as a Non-Voting Member, then from 2009 as Chairwoman of the LSC, joining the Audit Committee at the same time. Françoise Lemalle was appointed Steering and Supervisory Board Chairwoman on
In addition, she has been a Member of the Board of IMF Créasol(1) and a member of the association’s Audit Committee since 2013. Françoise Lemalle has also been a member of the BPCE Supervisory Board since May 22, 2015.
Member of the Steering and Supervisory Board of Caisse V d’Epargne Côte d’Azur (since 2013), then Chairwoman (since April 2015) Member of the Supervisory Board and Risk Committee of BPCE V (since 22/05/2015) Chairwoman of the Board of Directors of SLE CECAZ V (SLE Ouest des Alpes-Maritimes) (since 1999) Member of the Board of CE Holding Participations V (since 09/09/2015) Permanent Representative of Caisse d’Epargne Côte d’Azur, V Member of the Board of FNCE (since April 2015) Treasurer of the Benjamin Delessert Association (since 2015)V
Additional information on the corporate officers 47NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Born August 5, 1956 Nationality: French Natixis shares held: 1,000 Address: 53 Davies Street London W1K5JH England
First appointed: Board Meeting of December 17, 2014 Member — Audit Committee
Chairman of Centaurus Capital Limited (since 2002)V Member of the Board of Centaurus Capital Holdings Limited, V Centaurus Global Holding Limited, Centaurus Management Company Limited, Centaurus Capital group
First appointed: Board Meeting of December 14, 2016 Member — Risk Committee
First appointed: Board Meeting of December 14, 2016 Member — Strategic Committee
Member of the Supervisory Board of V Eurodisney SCA(1)(2) (since 17/02/2016) (until 13/09/2017)O
2023 AGM called to approve the financial statements for the year ended December 31, 2022.(a) Listed company.(1)
Additional information on the corporate officers 49NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Born November 26, 1961 Nationality: French Natixis shares held: 1,093 Address: 15, avenue de la Jeunesse CS30327 44703 Orvault Cedex
First appointed: co-opted by the Board of Directors on December 20, 2018 and ratified at the AGM of May 28, 2019 Term expires: 2023 AGM(a)
First appointed: Board Meeting of December 20, 2018 Member — Compensation Committee
A graduate of ISC Paris Business School, ITB (Institut Technique Bancaire) and ICG IFG (Institut Français de Gestion), Christophe Pinault began his career in 1984 at Banque Populaire Anjou-Vendée before moving to Crédit Agricole Mayenne and Crédit Mutuel Anjou. In 2002 he joined Caisse d’Epargne des Pays de la Loire as Head of the Network and then Member of the Management Board in charge of Development. He then joined Crédit Foncier in 2007 as Deputy Managing Director in charge of Development. In 2013 he was appointed Chairman of the Management Board of Caisse d’Epargne Côte d’Azur. He has been Chairman of the Management Board of Caisse d’Epargne Bretagne and Prévoyance Pays de Loire since April 27, 2018.
Member of the Board of Natixis V Payment Solutions (since 24/09/2013) (until 29/09/2016)O Chairman of the Management V Board of Caisse d’Epargne et de Prévoyance Côte d’Azur CECAZ (since 01/07/2013) (until 26/04/2018)O Permanent Representative of V CECAZ, Member of the Board of: ERILIA (since 03/06/2016) (until 26/04/2018)O Member of the Board of GIE V Caisse d’Epargne Syndication Risque (since 22/05/2014) (until 26/04/2018)O
Member of the Board of IXION V (from 29/03/2018 to 12/11/2018)
Permanent Representative V of CEBPL, Non-Voting Member of ERILIA (from 14/05/2018 to 12/11/2018)
2023 AGM called to approve the financial statements for the year ended December 31, 2022.(a)
First appointed: co-opted by the Board of Directors on April 4, 2019 and ratified at the AGM of May 28, 2019 Term expires: 2023 AGM(a)
First appointed: Board Meeting of April 4, 2019 Member — Compensation Committee
In 1993 she joined Honeywell International where for 10 years she served as Vice-Chairwoman & Chief Legal Officer in various departments in both France and Belgium.
Corporate Secretary, Chief Legal Officer (since 2007) and member V of the Executive Committee of ABB (from 2007 to 31/10/2019) Vice Chairwoman of the Board of Directors of ABB Asea Brown V Boveri Ltd (from 2007 to 31/10/2019) Member of the Board of Directors of ABB India Ltd (1) V (since 13/11/2019), Member of the Audit Committee, the Shareholder Relations Committee and the Corporate Social Responsibility Committee
Additional information on the corporate officers 51NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Philippe Sueur (until May 28, 2019) Member of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France
Born July 4, 1946 Nationality: French Natixis shares held: 4,000 Address: 57 rue du Général de Gaulle 95880 Enghien-les-Bains
First appointed: AGM of April 30, 2009 Date term of office expires: AGM of May 28, 2019 Member — Appointment Committee
First appointed: Board Meeting of December 17, 2014 Date term of office expires: AGM of May 28, 2019 Member — Strategic Committee
First appointed: Board Meeting of May 11, 2011 Date term of office expires: AGM of May 28, 2019
Philippe Sueur was Chairman of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France from April 29, 2014 to April 26, 2017.
Chairman of the Steering and V Supervisory Board of Caisse d’Epargne Île-de-France (since 29/04/2014) (until 26/04/2017)O Member of the Board of Syndicat V des Transports d’Île-de-France(1) (from 2007 to April 2015) Member of the Board of Agence V Foncière et Technique de la Région Parisienne (AFTRP)(1) (from 2007 to April 2015) Member of the Board of BPCE V Assurances (since 23/05/2005) (until 17/03/2017)O
First appointed: AGM of July 31, 2013 Term expires: 2021 AGM(a)
A graduate of Sciences Po Bordeaux and holding a post-graduate degree (DES) in public law, Nicolas de Tavernost began his career in 1975 with the cabinet of Norbert Ségard, Secretary of State for Foreign Trade, and then continued with French Postal Services and Telecommunications. In 1986, he took over as Head of Audiovisual Operations at Lyonnaise des Eaux, during which time he oversaw plans to create M6. In 1987 he was appointed Deputy CEO of Métropole Télévision M6, where he has served as Chairman of the Management Board since 2000.
Chairman of the Groupe M6(1) Management Board V (since May 2000) Chairman and Member of the Board of Société Nouvelle de V Distribution (since June 2019) Member of the Board of Groupe M6 Fondation d’Entreprise V (since 2018) Member of the Supervisory Board of Salto Gestion V (since 16/09/2019) Permanent Representative of M6 Publicité, Member of the Board V of Directors of Home Shopping Service S.A. (since 2013), M6 Diffusion S.A. (since 2013), M6 Editions S.A., M6 Événements S.A. (since 15/03/2012) Permanent Representative of Métropole Télévision, Member of the V Board of: Société Nouvelle de Distribution S.A. (from June 2011 to 27/06/2019), Extension TV SAS, C. Productions S.A. (since 21/10/2012), Société d’Exploitation Radio Chic — SERC S.A. (since 02/10/2017), Société de Développement de Radio diffusion — SODERA S.A. (since 02/10/2017), Médiatrie (since 22/11/2017) Permanent Representative of Métropole Télévision, Chairman of V M6 Publicité S.A. (since 2001), Immobilière M6 SAS (since 2001), M6 Bordeaux SAS (since 2001), M6 Interactions SAS (since 2001), M6 Foot SAS (since 2001), M6 Digital Services (from June 2011 to 01/02/2019), M6 Hosting (from 09/07/2018 to 01/02/2019), SNC Catalogue MC SAS (from 22/07/2016 to 20/06/2019), SNC Audiovisuel FF SAS (from 20/07/2017 to 20/06/2019) Permanent Representative of C. Productions S.A., Member of V the Board of M6 Films S.A. (since 01/01/2015) Permanent Representative of Métropole Télévision, Managing V Partner of SCI 107 avenue Charles de Gaulle (since 2001) Representative of RTL group, Member of the Supervisory Board V and Vice-Chairman of the Compensation Committee of Atresmedia 1 (since 29/10/2003)
Additional information on the corporate officers 53NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
then Chairman of the Supervisory V Board (since 02/10/2017) of Ediradio S.A. (RTL/RTL2/FUN RADIO) (until 30/04/2018)O
Member of the Board of Directors of V RTL France Radio (since 02/10/2017) (until 28/06/2018)O
Born June 29, 1949 Nationality: French Natixis shares held: 1,000 Address: 9 avenue Mercier 75008 Paris
Non-voting director: First appointed Board Meeting of April 4, 2019 and ratified at the AGM of May 28, 2019 Term expires: 2023 AGM(a)
First appointed (as non-voting member): Board Meeting of April 4, 2019 Member — Strategic Committee
From 2009 to November 22, 2014 Henri Proglio was Chairman and Chief Executive Officer of EDF, and has been Honorary Chairman since 2015.
Other offices held in 2019: Chairman of Henri Proglio Consulting SAS (since 09/01/2015)V Honorary Chairman of EDF (since 2015)V Member of the Board of: Dassault Aviation(1) (since 2008), ABR V Management Russia (since 2014), Akkuyu Nuclear JSC (Turkey) (since 2015), Atalian (since 01/09/2017), FCC (since 27/02/2015)
Additional information on the corporate officers 55NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
BoD: 75% RC: 67% AC: 60% SC: 100% French 25/08/2009 2023 AGM
BoD: 86% App. Com: 100% AC: N/A (since February 6, 2020) SC: 75% French 28/05/2019 2023 AGM
BoD: 92% App. Com: 100% SC: 60% French 28/01/2013 2022 AGM
BoD: 100% Comp. Com: 100% SC: 100% French 29/05/2012 2020 AGM
BoD: 100% AC: 100% RC (Chairman): 100% SC: 100% French 12/11/2009 2022 AGM
BoD: 92% App. Com: 100 % (until April 4, 2019) Comp. Com: 67% SC: 80% French 04/04/2019 2023 AGM
It must be noted that Natixis does not have an executive director. François Riahi is the Chief Executive Officer of Natixis but not an executive director. Natixis’ Board of Directors does not have a formal arrangement to hold a session without the executive officer present. However, the Chief Executive Officer is not present at the part of the Board Meeting during which his performance is evaluated and his compensation is determined.
To ensure that the governance of Natixis faithfully reflects its shareholding structure, as of 2006, in accordance with the governance procedures registered with the Autorité des Marchés Financiers (AMF — French Financial Markets Authority) when Natixis was formed, the Banque Populaire and Caisse d’Epargne networks (BPCE) have majority and equal representation on Natixis’ Board of Directors.
This form of corporate governance was chosen to create a single custodian of Natixis’ best interests and value creation. It permits unity of action, which is an essential requirement in terms of control, responsiveness and foresight in Company management.
As of April 4, 2019, Natixis’ Board of Directors also includes a non-voting member, Henri Proglio. He was an independent director until November 17, 2018, the term of his twelve years' mandate as member of the supervisory board and then as board member of Natixis. His knowledge of the group dating back to 2006, his recognised expertise in financial matters, and his experience in managing large corporations and tackling strategic challenges make for a useful and effective contribution to the Board of Directors. Henri Proglio attends Board Meetings in an advisory capacity. He is also a member of the Compensation Committee and the Strategic Committee.
Pursuant to Articles L.225-23 and L.225-27-1 I of the French Commercial Code, Natixis’ Board of Directors does not have any employee directors, or any employee shareholder directors. However, two representatives of the Social and Economic Committee attend every Board of Directors’ Meeting in an advisory capacity.
As is the case every year, at its meeting of December 19, 2019, and following the report submitted by the Appointment Committee, Natixis’ Board of Directors examined each independent director’s expertise, judgment and freedom of thought and expression, specifically with respect to the independence criteria recommended by the Afep-Medef code, and the criteria in the Board’s Internal Rules (see section 2.3.1.2 “Role and Powers of the Board of Directors”).
To this end, the Board of Directors analyzes a range of indices, criteria and parameters including the duration, extent and nature of the banking, trade or consulting relationships, the volume of commitments and the weight of Natixis compared to total indebtedness, and the company’s liquidity requirements.
Management and oversight of corporate governance 59NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Is not an executive corporate officer of a company in which Natixis directly or indirectly holds a directorship, or in which an employee of Natixis or an executive corporate officer of Natixis (currently or within the last five years) holds a directorship
Has not been an auditor of the company in the previous five years OK OK OK OK OK
Is not a Board member representing a major shareholder of Natixis or BPCE
In accordance with Article 9 of the Natixis bylaws, each director must own at least one hundred and forty (140) company shares during their term of office. Furthermore, in accordance with the recommendations of the Afep-Medef code and the provisions of Article 3 of the Compliance Charter for members of the Board of Directors (see section 2.3.1.2 B), the directors are asked to hold at least one thousand (1,000) Company shares within 18 months of joining the Board.
After considering the report submitted by the Appointment Committee, the Board of Directors of Natixis discussed, at is meeting held on December 19, 2019 and as it does each year, the best way to balance its membership, especially in terms of the knowledge, expertise and experience contributed by all the members, both individually and collectively. The Board concluded that the range of knowledge, expertise and experience of its members is sufficiently broad, complementary, and balanced to state that: individually, each one of the directors can contribute usefully to theV work of the Board and the Special Committees; and collectively, the Board has the ability to make informed decisionsV and the breadth of expertise necessary to ensure that the company is properly run and its business strategy is effective.
Accordingly, whenever a director is appointed, a “fit and proper” report outlining the candidate’s experience and skills, as well as their status with respect to other offices held simultaneously, availability, integrity and conflicts of interest, accompanied by their résumé, is sent to the members of the Appointment Committee for review. The Committee then provides the Board with its opinion.
The current version of the internal rules, adopted on December 19, 2019, completes the legal and statutory dispositions by stipulating the rules governing the Board of Directors’ operation and setting out the rights and duties of its members. These rules are available in full on the Natixis website (www.natixis.com).
The Board of Directors, assisted by the Board’s Special Committees: defines the strategy governing the company’s activities anda) oversees its implementation. Within the limits of the company’s corporate purpose and the powers expressly granted by law or its bylaws to the General Shareholders’ Meetings, the Board concerns itself with all matters affecting the Company’s performance and governs by virtue of its deliberations. The Board of Directors performs the controls and checks it deems appropriate; defines how senior management operates, and may onlyb) deliberate on this matter when it features on the agenda sent out at least 15 days prior to the Board Meeting and when at least two thirds of the directors are present or represented. As a reminder, the Board of Directors of a credit institution may not be chaired by the Chief Executive Officer. Nevertheless, based on provided justification the Autorité de Contrôle Prudentiel et de Résolution (ACPR — French Prudential Supervisory Authority for the Banking and Insurance Sector) may authorize the accumulation of these functions.
Under the conditions defined in Article 15 of the company bylaws, the Board of Directors may appoint a Chief Executive Officer from among the directors or otherwise, whom it may dismiss at any time.
In light of Natixis’ corporate purpose and in accordance with the provisions of the French Commercial Code (Article L.823-19) and the French Monetary and Financial Code (Article L.511-89), the Board of Directors must draw on an Audit Committee, a Risk Committee, a Compensation Committee and an Appointment Committee; adopts and revises the general principles of the companyf) compensation policy and controls its implementation.
It issues an opinion on how well Natixis’ compensation policy complies with current regulation, particularly regarding the company’s regulated staff.
It prepares the management report. It approves the report, as set out in Article L.255-37 of the French Commercial Code. It reviews the draft budget for the following year; verifies the publishing and disclosure process, as well ask) the quality and reliability of the information that Natixis intends to publish and disclose; is informed of any resignation/appointment of the company’sl) Chief Risk Officer.
The independent status of each member of the Board of Directors is examined by the Appointment Committee (the composition and role of which are described below), which prepares a report for the Board (see summary table above); some Board operating procedures are specified in the internalV rules: Except for decisions related to the examination and approval of parent company and consolidated financial statements and deliberations over the preparation of parent company and consolidated financial statements and management reports (company and group), directors participating in a Board Meeting by conference call 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.
To reaffirm its commitment to good governance, the Board of Directors has adopted a Compliance Charter for its members (appended to the Internal Rules). The purpose of this Charter is to promote the application of corporate governance principles and best practices by the directors of Natixis.
Before assuming office, every one of Natixis’ directors must ensure that they are familiar with the general or specific obligations incumbent upon them, such as those resulting from laws or regulations, bylaws, internal rules and this charter, as well as any other binding texts.
Each director represents all the shareholders and endeavors to act in the corporate interest of Natixis at all times. They undertake to defend and promote the values of Natixis.
Directors contribute to the collegiality and efficiency of the work of the Board and Special Committees. They make recommendations that they feel will improve the Board’s operating procedures, specifically during the Board’s periodic evaluation.
They ensure that the positions taken by the Board are formally decided on, properly reasoned and entered into the minutes of its meetings.
In accordance with Regulation 596/2014 of the European Parliament and Council (together with the delegated and enforcement regulations, the Market Abuse Regulation — MAR): “Inside information is any information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.”
a relative who has shared the same household for at least one yearV on the date of the transaction concerned; a legal person, trust or partnership:V
the managerial responsibilities of which are discharged by aV person discharging managerial responsibilities or by a person who is closely associated with them, that is directly or indirectly controlled by such a person,V
Directors and non-voting members must also inform Natixis of the number of shares they hold on December 31 of each year and any financial transactions carried out, so that this information may be disclosed by the Company.
A conflict of interest is any situation that risks compromising the ability of a director or non-voting member to make decisions in the best interests of Natixis and to exercise their duties independently of: their financial interests;V
In the event that a director or non-voting member cannot avoid being in one of these situations, they must immediately inform the Chairman of the Board of Directors, or Natixis’ Corporate Secretary if applicable, of any conflict of interest in which they may be involved. The director or non-voting member must specify if they are directly or indirectly connected and in what capacity, and they must contribute to documenting the conflict of interest.
If a director or non-voting member finds themselves in a conflict of interest, they must abstain from participating in any discussion within the Board of Directors, or the Special Committee if applicable, connected to the area of their conflict of interest; in such instances, they must abstain from the Board’s deliberations and votes, and will not be privy to the section of the minutes related to the area of their conflict of interest.
01/03/2019 Bonus share allocation (2017 Bonus Share Plan) (c) 6,090 N/A
01/03/2019 Bonus share allocation (2017 Bonus Share Plan) (a) 17,947 N/A
Jean Raby 01/03/2019 Bonus share allocation (2017 Bonus Share Plan) (c) 94,228 N/A
01/03/2019 Bonus share allocation (2017 Bonus Share Plan) (c) 19,597 N/A
At its meeting of February 17, 2013, the Board of Directors of Natixis drew up an internal charter on “related party agreements” in accordance with AMF recommendation No. 2012-05, updated on December 17, 2014 to include the changes made by Order No.
This charter defines the criteria for establishing “related party agreements” in accordance with the provisions of Article L.225-38 of the French Commercial Code.
The following agreements were authorized: Agreement modifying the new partnership agreements, enteredV into by CNP Assurances, BPCE, Natixis and BPCE Vie.
The agreement, which would entered into force on January 1, 2020, primarily provides for: the extension of the initial expiration date of the existingV agreements (currently December 31, 2022) to December 31, 2030 with the possibility of renewing these agreements upon each expiration for successive three-year periods until 2052; a change to the coinsurance breakdown for collective paymentV protection insurance, to be shared equally (50/50) between CNP Assurances and Groupe BPCE effective January 1, 2020; Amendment to the Tranche 1 new business reinsurance treaty,V entered into by BPCE Vie and CNP Assurances in the presence of Natixis and pertaining to the quota share reinsurance of euro-denominated guarantees issued by BPCE Vie through life insurance and accumulation contracts for retirement savings by BPCE Vie, and distributed by entities within the Retirement Savings scope with the exception of the contracts identified in Article R. 342-9 of the French Insurance Code.
Reciprocal financial guarantee contract between Natixis andV Natixis Financial Products Inc.; and
Each director’s individual attendance rate for Board of Directors’ Meetings is provided in section 2.2 of this chapter (see directors' individual fact sheets).
Within a reasonable amount of time before a Board Meeting, a digital file containing the items on the agenda is sent to each director via
The Chief Executive Officer attended all meetings, except for the meeting during which his compensation was discussed, so that the Board members could hear his opinion on important issues and ask him any questions that they deemed relevant.
The Chief Financial Officer, the Corporate Secretary and, as and when required, one or more business line heads have been invited to provide further information on subjects raised in meetings. Finally, the representatives of the Social and Economic Committee were invited to every Board of Directors meeting.
Feedback on the work of the Risk Committee and the US Risk CommitteeV Approval and update of the Risk Appetite Framework (RAF)V Annual review of limits as defined in the Order of November 3, 2014V Approval of contingency plans, particularly in light of the results of the alternative scenarios regarding liquidity positions V and risk mitigation factors Examination of the compliance risk management system and compliance control activity and resultsV Approval of liquidity risk toleranceV Comments on the H2O fileV Approval of strategies, policies, procedures, systems, tools and limits with regard to liquidity risk and underlying V assumptions Approval of the ALM standardsV Approval of the new annual report on internal control procedures for AML-CTF/asset freezingV Comments on the autocall action plan in AsiaV Comments on the corruption and influence-peddling detection and prevention systemV Overview of the senior management report (Volcker Rule) and update on the Volcker sector manualV Comments on interactions with regulatorsV
Pursuant to the Afep-Medef code, the Board of Directors examined the Company’s significant achievements in terms of social and environmental responsibility, particularly with regard to risk management, sustainable business development, communication and relationships with stakeholders, as well as its integration of social and environmental responsibility criteria into compensation and its initiatives to reduce Natixis’ environmental footprint. The Green Weighting Factor (GWF) was presented to the Board of Directors in this context. The GWF is an innovative tool used to steer Natixis’ climate strategy based on an internal capital allocation model that considers the environmental and climate impact of financing.
Every three years (2010, 2013, 2016, 2019), Natixis enlists the services of an independent outside firm to assess the work of its Board and Special Committees. Natixis conducts its own internal assessment for the other years.
As such, for 2019, Natixis conducted an external assessment to review the structure, operation, and makeup of the Board of Directors and its Special Committees and evaluate their overall performance.
During an individual interview, each director, as well the non-voting member, representatives from the Social and Economic Committee and the Chief Executive Officer completed a questionnaire prepared by the outside firm. Furthermore, as recommended by the Afep-Medef code, as part of the assessment of each director’s contribution to the work of the Board of Directors, each respondent was invited to give their opinion on each of the other directors by name, and on the non-voting member, the Chairman of the Board of Directors, the Chief Executive Officer and the members of the Social and Economic Committee.
This report shows that the directors have a very positive view of Natixis’ Board of Directors. The directors were unanimously considered to be serious, transparent, constructive, friendly and efficient.
Regarding the makeup of the Board of Directors, the directors believe that there is a good balance in terms of profiles and experience, with a mutually beneficial culture thanks to the existence of internal and independent directors. The directors are considered to be engaged, proactive and pleasant. In a spirit of ongoing improvement, the directors did suggest improving the technical expertise on the Board (expertise in digital technologies and risks).
The directors believe the Board’s handouts are of high quality, well-structured and that they enable a good understanding of the subjects covered. The way the Board operates was deemed to be very professional.
The directors also said that the Board dedicates a significant amount of its time to regulatory issues. They would like the Board to spend more time on long-term, forward-looking projects, specifically increasing the Board’s work on the bank’s strategy.
The directors also believe that the Board’s cohesion could be improved, in particular by organizing informal opportunities for discussion before or after Board meetings.
The training provided to directors is very much appreciated and the training program is deemed to be of very high quality. The effort made in this area is being recognized.
In 2019, Natixis renewed the training program for Board members that it started in 2018. The resulting training program is also in line with the existing one for members of the BPCE Supervisory Board.
Sixteen training sessions on 13 different topics were held in 2019. The 2019 training sessions were opened to members of the BPCE Supervisory Board and members of the Social and Economic Committee. Directors were also invited to attend sessions held by BPCE for Supervisory Board members.
Daniel de Beaurepaire (position previously held by Françoise Lemalle until February 6, 2020)
Management and oversight of corporate governance 69NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Two of the five members are independent members (Catherine Pariset and Bernard Oppetit).
submitting a recommendation to Natixis’ Board of Directors for theV appointment of Statutory Auditors or auditing firms; reviewing the Statutory Auditors’ work schedule, the results of theirV audits and recommendations, and any follow-up action thereof; issuing its opinion on the report presented to it on an annual basisV with regard to commercial relations between Natixis or one or more of its subsidiaries, and all or some of the entities forming Groupe BPCE; reporting regularly to the Board of Directors on the performance ofV its duties. It also reports on the results of the certification of the financial statements, the way in which this duty contributed to the integrity of the financial information and the role it played in this process. Any difficulty encountered is reported without delay.
consolidated budgets, as well as any related documents providedV to the Board of Directors or, if applicable, the Audit Committee of the principal subsidiaries.
The Audit Committee may submit to the Board of Directors any proposals to conduct an audit, especially concerning the financial statements of the company and its subsidiaries.
The committee may also, if it deems it appropriate, call on the skills of outside experts or consultants for the purpose of explaining any topic that falls under its remit.
The Audit Committee meets at least once a quarter. Minutes of the Audit Committee Meetings are prepared by the secretary of the Board of Directors. These minutes are shared with the Audit Committee members and approved at the following session. The Board of Directors is made aware of the Audit Committee’s work so that it can make fully informed decisions.
The Audit Committee met five times in fiscal year 2019. The attendance rate was 92% for the year as a whole.
For each matter submitted for review and analysis, the Audit Committee had the opportunity to hear from relevant Natixis personnel as well as to familiarize itself with reports on these matters.
The Audit Committee monitored the statutory audit of Natixis’ yearly, half-yearly and quarterly parent company and consolidated financial statements, as well as its draft budgets, before they were presented to Natixis’ Board of Directors.
Officer, the Corporate Secretary as well as the Head of Accounting and Ratios and the Natixis and BPCE Head of Inspection Générale.
For the purposes of performing the audit the financial statements, the Audit Committee is sent a copy of the reports of the Finance Department and the comments of the Statutory Auditors regarding annual financial statements and the review of the half-year and quarterly financial statements.
Other items Progress made on the project to implement IFRS 16 and 17V Review of IFRIC 23 V Presentation of changes to the memorandum on fair valueV Statutory Auditors’ audit plan for 2019, budget allocated for audits, and follow-up on completed/ongoing auditsV Information on prior authorizations given by the leader of the Audit Committee for the completion of the Statutory V Auditors’ services Follow-up on the preparation of the 2019 Statutory Auditors’ reports on the parent company and consolidated V financial statements Follow-up on Statutory Auditors’ fees for 2019 (certification and other assignments)V Review of changes introduced by the Prospectus DirectiveV
The Chairman and the members of the Risk Committee have an enhanced understanding of Natixis’ risk management and internal control as a result of their extensive expertise gained over the course of their professional careers.
Over the course of the 2019 fiscal year, and in compliance with the US Dodd-Frank Act, the US Risk Committee met five times. On October 17 and 18, 2019, the US Risk Committee met in New York so that Committee members could be in closer contact with the local teams. The US Risk Committee’s membership is the same as the Risk Committee. It is tasked with monitoring the management of risks related to Combined US Operations.
Natixis’ Risk Committee has internal rules specifying its powers and its operating procedures, the latest version of which was approved by the Board of Directors on November 7, 2017.
Under the authority of the Natixis Board of Directors, the Risk Committee’s primary duties are in particular: advising the Board of Directors on the bank’s overall strategy andV risk appetite, both current and future; assisting the Board of Directors when it checks the implementationV of that strategy by the executive managers and by the Head of Risk Management; issuing an opinion on the procedures established by Natixis thatV are used to ensure compliance with regulations as well as risk monitoring and control; to that end, it receives the reports of Natixis’ Risk Committees and those of its subsidiaries, as well as the reports on risks, specifically operational, market or counterparty risks, prepared at the behest of the Company’s Chief Executive Officer; monitoring the effectiveness of the internal control and riskV management systems; assisting the Board of Directors in determining guidelines andV verifying that the executive managers have properly implemented the supervisory mechanisms, especially in terms of the separation of duties and the prevention of conflicts of interest, that ensure the company is effectively and prudently managed; reviewing, pursuant to its remit, whether the prices of products andV services proposed to clients are compatible with Natixis’ risk strategy. If these prices do not correctly reflect the risks, the committee presents the Board of Directors with an action plan to remedy the situation;
Each director’s individual attendance rate at Risk Committee Meetings is provided in section 2.2 of this chapter (see directors' individual fact sheets).
In 2019, the Risk Committee’s duties focused on the following items: Risk management Key points from the risk dashboard and the bank’s risk environment outlookV Update on efforts to align the price policy with risk appetite (P&L upfront, Specialized Financing RWA) and an V appraisal of the prices of products and services offered to clients in view of the risk strategy of Natixis Assurances Annual review of the Risk Appetite Framework (RAF)V Annual review of indicators under the French Ministerial Order of November 3, 2014V Update on the ECB’s market and credit TRIM (Targeted Review of Internal Models)V Update on risk model managementV Update on the proposed benchmark reformV Update on H2O and the liquidity risk of Natixis Investment Managers funds and its frameworkV The BCBS 239 governance frameworkV Update on internal stress tests (selected scenarios, changes in methodology and results)V Presentation of the ICAAP (Internal Capital Adequacy Assessment Process)V Update on liquidity and the establishment of the LRO (Liquidity Risk Office)V Annual analysis of contingency plans, particularly in light of the results of the alternative scenarios regarding V liquidity positions and risk mitigation factors/review of ALM standards Check that the compensation policy is compatible with the risksV
Internal control Evaluation of the effectiveness of the internal control framework and the Risks function procedures in place V for fiscal year 2018 in accordance with the French Ministerial Order of November 3, 2014 Review of assignments conducted by Natixis General Inspection and BPCE Inspection Générale during the fiscal V year Monitoring of the implementation of recommendations made by Natixis General Inspection and BPCE V Inspection Générale Presentation of the annual report on internal controlV Presentation of the proposed audit program for 2020V Presentation of the Natixis General Inspection Department’s budgetV
review and monitoring of the US Chief Risk Officer’s priorities forV 2019; assessment and review of the roles and responsibilities of the USV Chief Risk Officer and the governance of Combined US Operations (CUSO) more generally; periodic review of changes to the business and risks of the USV platform, including compliance risks; periodic review of the platform’s regulatory environment;V
examination and approval of the CUSO Risk Appetite FrameworkV (RAF); progress update on model validation in the context of the riskV model management framework; examination and follow-up on specific tasks within the Natixis IMV scope, particularly with respect to liquidity risk and strengthening compliance risk indicators.
The number of independent directors on the Compensation Committee is not greater than half the total number of members, despite the recommendation by the Afep-Medef corporate governance code. It has a balanced composition (50% independent, 50% non-independent) and is chaired by an independent director (see summary table on compliance with Afep-Medef code recommendations in section 2.3 of this chapter). Furthermore, the opinions and proposals of the Compensation Committee are adopted if the majority of members present, including the Chairman, vote for them.
The role of Natixis’ Compensation Committee is to prepare the decisions that Natixis’ Board of Directors issues with regard to compensation, including Natixis employees who have a significant impact on the company’s risk. The Compensation Committee’s powers and operating procedures are detailed in the internal rules, the latest version of which was approved on December 17, 2014 by the Board of Directors.
The Compensation Committee is responsible for submitting proposals to Natixis’ Board of Directors concerning: the amount and terms of compensation paid to the Chairman ofV the Board of Directors of Natixis, including benefits in kind, pension plans and collective personal protection insurance, as well as the allocation of stock options or share purchases; the amount and terms of compensation paid to the CEO and,V where applicable, one or more Deputy CEOs, including benefits in kind, pension plans and collective personal protection insurance, as well as the allocation of stock options or share purchases; rules for allocating compensation to Natixis directors and the totalV amount submitted to the shareholders at Natixis’ General Shareholders’ Meeting for a decision; the monitoring of the compensation of the Chief Risk Officer andV the Compliance Officer; whether Natixis’ compensation policy complies with regulations,V including for the category of staff referred to in the French Ministerial Order of November 3, 2014, as well as for employees referred to in French Law No. 2013-672 on the Separation and Regulation of Banking Activities (“SRAB”) and Section 619 of the US Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”), or regulated categories of staff within Asset Management (AIFMD) or insurance activities (Solvency II); the annual review of Natixis’ compensation policy, specificallyV those employee categories whose professional activities are likely to have a significant impact on the risk profile of Natixis or the Group.
Management and oversight of corporate governance 73NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
The Compensation Committee met three times in fiscal year 2019. The attendance rate was 90% for the year as a whole.
Within a reasonable amount of time before a Committee Meeting, a digital file containing the items on the agenda is sent to each director via the secure DiliTrust electronic platform for review and analysis in preparation for the meeting.
Approval of the variable compensation factors for 2018 after assessing the degree to which the quantitative criteria V and strategic objectives of the annual variable compensation of executive corporate officers were met and validation of the compensation principles for fiscal year 2019 put to a vote of the Annual General Shareholders’ Meeting on May 20, 2019 Long Term Incentive Plan for Senior Management Committee membersV Annual analysis of the recommendations of the Afep-Medef code in terms of executive compensationV
Review of regulatory aspectsV Compensation policy for directors — fiscal year 2019V Deferred pay policy: definition of the performance conditions for the regulated staff for 2019V Review of Natixis’ compensation policy, including of the deferred income rules and conditions for paying variable V compensation as well as the amounts of variable compensation for each business line Review and monitoring of the achievement of performance conditions applicable to deferred variable V compensation Analysis of the compensation of the heads of control functions and the regulated population for fiscal year 2018V Impact of the 2019 special dividend payment on deferred variable compensation plansV Review of specific Risk and Compliance targets (2018 review & presentation of 2019 targets)V Analysis of compensation awarded to the 100 highest-paid employeesV 2018 annual report on compensation for the regulated population under CRD IVV Information on the calculation of the Equal Pay IndexV Policy on professional equality between men and womenV
Update on employee savings plansV Information on the allocation of bonus shares by the Board of Directors on April 12, 2019V Profit-sharing bonus for fiscal year 2018V
Daniel de Beaurepaire (position previously held by Philippe Sueur until 28/05/2019)
Three of the six members are independent (Anne Lalou, Diane de Saint Victor and Nicolas de Tavernost). The number of independent directors on the Appointment Committee is not greater than half the total number of members, despite the recommendation by the Afep-Medef corporate governance code. It has a balanced composition (50% independent, 50% non-independent) and is chaired by an independent director (see summary table on compliance with
Qualification as an independent director is discussed by the Appointment Committee, which prepares a report for the Board. Each year, based on this report and before the publication of the annual report, the Board of Directors reviews the status of each of its members based on independence criteria set out in the Board of Directors’ Internal Rules (see section 2.3.1.2 A of this chapter).
The Appointment Committee met three times in fiscal year 2019. The attendance rate was 100%.
Opinion on the co-option of a new independent director and their appointment as member and Chairman V of the Appointment Committee Opinion on the reappointment of six directorsV Opinion on the appointment of a group directorV Opinion on the appointment of a non-voting memberV Opinion on the diversity policy for members of the Board of DirectorsV Examination of the qualifications of independent directorsV Analysis of the qualifications needed for the duties carried out on the Board of DirectorsV Evaluation of the balance and diversity of knowledge, skills and experience that the Board members have, both V individually and collectively Identification of a person or a dominant group within the Board of Directors who might be detrimental to Natixis’ V interests
At its December 13, 2019 meeting, the Appointment Committee decided to add succession plans for executive corporate officers (meant to cover both emergencies and planned departures) to the 2020 agenda.
Management and oversight of corporate governance 75NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
At its annual off-site meeting on September 25, 2019, the Natixis Strategic Committee analyzed the following points: the evolution of Natixis’ business mix;V
On April 27, 2018, the Board of Directors accepted the resignation of Laurent Mignon from his duties as Chief Executive Officer of Natixis, effective June 1, 2018, and decided, following the favorable opinion of the Appointment Committee, to appoint François Riahi as his replacement effective June 1, 2018, for a period of four years ending with the adjournment of the 2022 Natixis General Shareholders’ Meeting held to approve the financial statements for the fiscal year ending December 31, 2021.
François Riahi therefore became executive manager of Natixis (dirigeant effectif, as defined by Articles L.511-13 and L.532-2 of the French Monetary and Financial Code).
Pursuant to Article L.511-13 and L.532-2 of the French Monetary and Financial Code, Natixis currently has two executive managers: François Riahi, Chief Executive Officer, and Marc Vincent, Head of Corporate & Investment Banking.
In the event of the absence of the Chief Executive Officer, the other executive managers will ensure business continuity until the Board of Directors appoints a new Chief Executive Officer based on a recommendation by the Appointment Committee.
At March 1, 2020, the Senior Management Committee’s members, in addition to the Chief Executive Officer, were Nathalie Bricker (Finance), Anne Lebel (Human Resources and Corporate Culture), Jean-François Lequoy (Insurance), André-Jean Olivier (Corporate Secretary), Jean Raby (Asset & Wealth Management), Véronique Sani (Technology and Transformation), Pierre-Antoine Vacheron (Payments), Olivier Vigneron (Risks) and Marc Vincent (Corporate & Investment Banking).
Except where circumstances prevented them from doing so, the members of the Senior Management Committee were present at all meetings in 2019. Representatives from the business lines or different support functions were invited to present projects or policies falling within their departmental remits.
76 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019 2019 was the second year that the 2018-2020 New Dimension strategic plan was implemented across all Natixis business lines. New Dimension sets out three powerful initiatives to give its clients a broader range of high added-value solutions: deepening the business model transformation that it successfully began under the New Frontier plan, allocating a significant portion of its investments to digital technologies, and differentiating itself by taking the lead in the areas where Natixis’ teams are recognized for their exceptional skills.
In Specialized Financial Services, the Senior Management Committee oversaw the completion on March 31, 2019 of Natixis’ sale and BPCE’s acquisition of the Factoring, Sureties & Financial Guarantees, Leasing, Consumer Finance and Securities Services business lines.
In Insurance, it oversaw the renewal of the non-life insurance partnership agreement between Groupe BPCE and Covéa.
Furthermore, the Senior Management Committee oversaw Natixis’ adaptation to changes in the economic and regulatory environment in the banking and insurance sectors. Specifically, it regularly monitored any regulatory changes and initiatives. It launched several projects that aimed to improve Natixis’ strength and operational efficiency, including efforts to strengthen the support functions’ operating model, work on optimizing risk supervision, an initiative to expand the activities of the Porto branch, and a project to improve the corporate culture and create the “technology & transformation” division, enabling Natixis to focus resources and ambitions on these two key issues in terms of corporate conduct. It also encouraged initiatives to promote agility, specifically by launching an idea-sharing challenge for all employees with a view to promoting projects to simplify operations.
substantial investments in order to generate cost savings. €50m was invested in this program in 2019.
The Senior Management Committee continued to work on implementing the Transformation and Operational Excellence program. Under this program, Natixis has committed to making
After in-depth discussions with the businesses and support functions involved, the Senior Management Committee approved the main management decisions, and reviewed and approved the budget, capital trajectory, Risk Appetite Framework, internal stress tests and ICAAP report. In addition, it approved the terms and conditions governing mandatory annual negotiations and the compensation review policy, the appointment of executive officers and managers, and all significant projects or investments. It also launched an analysis of Natixis’ real estate strategy, in partnership with BPCE as part of the DUO towers project.
Furthermore, the Senior Management Committee monitored the management, risk management and compliance measures within Natixis, and regularly reviewed changes in the company’s risks, as well as the consequences of audits. Specifically, it conducted a crisis management exercise involving a simulated cyber attack. It also paid special attention to conduct issues at its quarterly committee meetings, which were broadened in scope to include culture.
Finally, it began an analysis to provide a basis for preparing the next 2021-2024 strategic plan.
Executive Committee members contributed to the preparation of the 2021-2024 strategic plan as sponsors of cross-business initiatives on specific themes or contributors to these working groups.
Furthermore, they are regularly involved in different company projects, specifically in areas such as human resources (enhancing the leadership model, work on company culture), finance (projects focused on cost control) and the business lines.
Natixis’ compensation policy is a key component in the implementation of the company’s strategy. It is structured in a way that promotes employee engagement over the long term and increases the company’s employer appeal, while discouraging excessive risk-taking.
It reflects the individual and collective performance of its business lines and employees, and incorporates financial and qualitative performance criteria, including extra-financial criteria and specifically Social and Environmental Responsibility. It also serves to align over time the interests of Natixis’ various stakeholders, ensuring that it is not a source of conflicts of interest between employees and clients, while promoting behaviors that are in line with Natixis’ culture and rules of good conduct.
Pursuant to Article L. 225-37-2 III of the French Commercial Code, in exceptional circumstances, the Board of Directors may adapt certain provisions of the compensation policy provided that this deviation from standard policy is temporary, in the corporate interest and necessary to guarantee the sustainability or viability of the company.
The policy described below is in line with the compensation policy submitted to the General Shareholders’ Meeting in recent years and this version has not undergone any material changes.
Each director receives, for their own participation in Board Meetings, a fixed sum of €8,000 each year, as well as a variable sum of €2,000 per meeting, payable based on their attendance, with the number of compensated meetings being capped at seven.
In addition, compensation is earned for participation in the Board’s various Special Committees, if applicable.
For example, a director who is a member of the Compensation Committee will collect, in addition to the compensation earned for being a director, fixed compensation of €2,000 per year for participation in the Compensation Committee, plus €1,000 for each
Furthermore, all directors are members as of right of the Strategic Committee and will collect €2,000 for their participation to the Strategic Committee annual meeting, and will therefore earn a total of €30,000 if they also attended all Board of Directors and Compensation Committee Meetings and the Strategic Committee annual meeting.
Moreover, in accordance with the rules applicable within Groupe BPCE, the portion of directors’ compensation going to BPCE directors (including that of the Chairman) is granted and paid to BPCE and not to the directors.
The compensation of the Chairman of the Natixis Board of Directors is determined by the Board of Directors in consideration of the Chairman’s experience and by benchmarking against the market. Laurent Mignon’s gross annual fixed compensation for his duties as Chairman of the Board of Directors is €300,000.
The Chairman is eligible for compensation as a member of the Board of Directors but, in accordance with the rules applicable within Groupe BPCE, the portion of compensation attributable to BPCE directors including the Chairman is granted and paid to BPCE and not to the directors.
Furthermore, the compensation of the Chief Executive Officer is closely tied to the Company’s performance, especially through annual variable compensation that is contingent upon the achievement of predetermined targets. Details regarding these targets and the extent to which they have been achieved at the end of the period, as assessed by the Board of Directors after consulting with the Compensation Committee, are then submitted to a vote at the General Shareholders’ Meeting. The criteria include quantitative targets related to the financial performance of BPCE. As a reminder, Natixis is deeply embedded in Groupe BPCE in this regard, with intertwined strategic plans aimed at their mutual success. These criteria also include targets linked to Natixis’ performance as well as strategic targets, including in terms of CSR.
Target set at 120% of the fixed compensation with a range from 0% to 156.75% of the target, i.e. a maximum of 188.1% of the fixed compensation.
45% 11.25% net revenuesV 11.25% net income (Group share)V 11.25% cost/income ratioV 11.25% ROTEV
Annual variable compensation * CRD rules governing the portion of annual variable compensation that must be deferred. Deferred bonuses are subject to a continued service requirement and performance criteria.
At the end of the four years, the average of the overall annual ratings shall determine the percentage of shares that vest in addition to those vesting under the TSR criteria. In the event that TSR and CSR performance is substantially above target, the percentage of shares of the annual tranche that shall vest is capped at 120%.
The total of annual variable compensation and bonus shares in favor of the Chief Executive Officer during the fiscal year cannot exceed twice his fixed gross annual compensation.
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Furthermore, in line with the provisions of the Afep-Medef Code, the right to a benefit is contingent on meeting performance criteria and requirements, such as net income (Group share), ROE and the cost/income ratio reported for the two years prior to leaving the Company. Satisfaction of these criteria will be verified by the Board of Directors as necessary.
On April 27, 2018, François Riahi was appointed as Chief Executive Officer, effective June 1, 2018, for a period of four years ending with the adjournment of the 2022 Natixis General Shareholders’ Meeting held to approve the financial statements for the year ending December 31, 2021. In addition, the criteria for appointing and dismissing the Chief Executive Officer are set out in Articles L. 225-51-1 and L. 225-55 of the French Commercial Code.
Compensation and benefits of any kind for the Chairman 2.4.2 of the Board of Directors and the Chief Executive Officer for 2019
Chairman of the Board 2.4.2.1 of Directors – Compensation and benefits of any kind paid during the 2019 fiscal year and/or granted in respect of this fiscal year
In accordance with the principles approved by the General Shareholders’ Meeting on May 28, 2019, Laurent Mignon received gross compensation of €300,000 for the 2019 fiscal year in connection with his duties as Chairman of the Natixis Board of Directors.
François Riahi’s gross fixed compensation for 2019 in connection with his duties as Chief Executive Officer was €800,000 and remains unchanged from the previous year.
The annual variable compensation in respect of fiscal year 2019 was calculated on the basis of quantitative and strategic criteria first reviewed by the Compensation Committee then validated by the Board of Directors, and submitted to a vote at the General Shareholders’ Meeting on May 28, 2019.
The variable compensation target for the 2019 fiscal year was set at 120% of the Chief Executive Officer’s fixed compensation, with a range of between 0% and 156.75% of the target, i.e. a maximum of 188.1% of fixed compensation. François Riahi’s full-year variable compensation target was €960,000. The following targets were set for 2019: Strategic criteria
Regarding strategic criteria, the Board specifically took into consideration the progress made in the roll-out of the strategic plan, the dynamic distribution of insurance and payments products by the CE and BP networks, as well as the ground covered in CSR commitments and the launch of Green Weighting Factor. The Board also recognized the new momentum injected into Natixis' cultural transformation.
will be indexed to the Natixis share price, i.e. €640,050. This deferred amount will be paid in thirds in 2021 (100% in cash), 2022 (50% in cash and 50% indexed to the Natixis share price in
Payments in respect of annual variable compensation for 2019 will only be made after the vote at the General Shareholders’ Meeting on May 20, 2020.
Breakdown of annual variable compensation for the 2019 fiscal year by vesting date
The performance of Natixis shares versus the Euro Stoxx Banks index will be compared every year during the four-year period covered by the plan, i.e. fiscal years 2019, 2020, 2021 and 2022, for each of the annual tranches, each representing 25% of the shares allocated. Based on the relative performance of Natixis’ TSR compared with the average TSR of the Euro Stoxx Banks index, a ratio will be applied for each annual tranche, as follows: performance below 90%: no vesting of shares allocated out of theV annual tranche; performance equal to 90%: 80% of the shares of the annualV tranche shall vest; performance equal to 100%: 100% of the shares of the annualV tranche shall vest; performance greater than or equal to 120%: 110% of the shares ofV the annual tranche shall vest.
Individual strategic targets 5% oversight in terms of supervision and control 15% roll-out of the 2018-2020 Strategic Plan 5% implementation of Natixis transformation 5% managerial performance
(fixed portion + annual variable compensation awarded + performance share plan)
Pension Plan into an “Article 82” type life insurance policy (in reference to the French General Tax Code) put in place by Groupe BPCE. The premiums on this policy were paid by the Chief Executive Officer and not by Natixis. In 2019, François Riahi paid €117,333 into his policy.
Furthermore, in line with the provisions of the Afep-Medef corporate governance code, the right to a benefit is contingent on meeting performance criteria and requirements, such as net income (Group share), ROE and the cost/income ratio reported for the two years prior to leaving the company. The Board of Directors will verify the satisfaction of these criteria as necessary: Average Natixis net income (Group share) for the period1. in question equal to or higher than 75% of the expected budget average(1) for the period; Average Natixis ROE for the period in question equal to or2. higher than 75% of the expected budget average(1) for the period; Natixis’ cost/income ratio less than 75% at the time of leaving3. (last half-year closed).
A non-compete indemnity should the Chief Executive Officer leave office The non-compete agreement is limited to a period of six months and carries an indemnity equal to six months of fixed compensation, as in force on the date on which the Chief Executive Officer leaves office.
Natixis’ performance — underlying net income, Group share 1,370 1,607 1,715 1,372 1,344
Natixis’ performance — underlying net revenues 9,177 9,500 9,497 8,700 8,565
Chg. vs. N-1 0.4 pp 2.0 pp -2.5 pp 2.4 pp
Compensation granted to the Chief Executive Officer (1) 1,950,646 2,023,129 2,815,242 1,914,761 2,059,372
CEO pay ratio vs. average employee compensation (3) 15.4 16 21.4 15.2 17.3
CEO pay ratio vs. median employee compensation (3) 22.9 24.4 34.9 24.5 27
Compensation granted to the Chairman of the Board of Directors (2) 300,000 175,000 0 0 0
Compensation granted in respect of each fiscal year and for duties as Chief Executive Officer of Natixis, including bonus share awards. For information, (1) Laurent Mignon was Chief Executive Officer of Natixis until May 31, 2018, and François Riahi was Chief Executive Officer as of June 1, 2018.
Average and median compensation awarded to Natixis SA employees each year, including foreign branches, and used to calculate Chief Executive Officer pay (3) ratios, is calculated based on permanent employees for each year (full-time employees on permanent contracts working the entire year, excluding corporate officers) and represents fixed compensation plus total variable compensation granted, including bonus share awards, and any profit-sharing and group incentive plan amounts awarded during the year in respect of the previous fiscal year. pp: percentage pointNB:
Compensation due or granted for the fiscal year €1,790,646 (a) €996,245 (a)
François Riahi’s other compensation for his duties at BPCE 0 €111,585 €602,359 €323,396
Cash portion of variable compen sation for fiscal year 2018 paid in March 2019
Portion of instruments similar to securities for fiscal year 2018 paid in
Compensation o/w fixed compensation 16,000 16,000 o/w variable compensation 28,000 28,000
Compensation for his duties as Chairman of the Natixis Board of Directors 300,000 300,000 175,000 175,000
Policies and rules established for determining compensation and benefits of any kind for corporate officers 89NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Member of the Natixis Appointment Committee 5000 5,000 4,000 4,000 o/w fixed compensation 2,000 2,000 o/w variable compensation 3,000 3,000
In respect of BPCE and/or its subsidiaries 65,182.79 65,182.79 23,250 45,300 o/w fixed compensation 51,732.79 51,732.79 o/w variable compensation 13,450 13,450
In respect of BPCE and/or its subsidiaries N/A N/A 25,000 50,000
In respect of BPCE and/or its subsidiaries 24,650 24,650 11,189.51 11,189.51 o/w fixed compensation 9,700 9,700 o/w variable compensation 14,950 14,950
Member of the Natixis Audit Committee 8,000 8,000 8,000 8,000 o/w fixed compensation 3,000 3,000
(in euros) Amounts due Amounts paid Amounts due Amounts paid o/w variable compensation 5,000 5,000
Member of the Natixis Compensation Committee 5,000 5,000 5,000 5,000 o/w fixed compensation 2,000 2,000 o/w variable compensation 3,000 3,000
Member of the Natixis Audit Committee 8,000 8,000 7,000 7,000 o/w fixed compensation 3,000 3,000 o/w variable compensation 5,000 5,000
Member of the Natixis Audit Committee 8,000 8,000 8,000 8,000 o/w fixed compensation 3,000 3,000 o/w variable compensation 5,000 5,000
Chairman of the Natixis Risk Committee 29,000 29,000 29,000 29,000 o/w fixed compensation 17,000 17,000 o/w variable compensation 12,000 12,000
Member of the Natixis Risk Committee 9,000 9,000 9,000 9,000 o/w fixed compensation 3,000 3,000 o/w variable compensation 6,000 6,000
Policies and rules established for determining compensation and benefits of any kind for corporate officers 91NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
In respect of BPCE and/or its subsidiaries 7,800 7,800 N/A N/A
Member of the Natixis Compensation Committee 4,000 4,000 6,000 6,000 o/w fixed compensation 2,000 2,000 o/w variable compensation 2,000 2,000
Compensation o/w fixed compensation 3,243.84 3,243.84 o/w variable compensation 12,000 12,000
Member of the Natixis Appointment Committee 2,810.96 2,810.96 4,000 4,000 o/w fixed compensation 810.96 810.96 o/w variable compensation 2,000 2,000
Chairman of the Natixis Compensation Committee 21,000 21,000 23,000 23,000 o/w fixed compensation 15,000 15,000 o/w variable compensation 6,000 6,000
Member of the Natixis Strategic Committee 2,000 2000 2,000 2,000 o/w fixed compensation N/A N/A
The difference of €103 compared to the expected amount is due to the 13th-month calculation method applied to the employment contract portion.(*) Amounts before 30% withholding tax.(a) Compensation paid to BPCE.(b) Variable compensation for fiscal year 2019 of which €209,800 (50%) paid in 2020 and the balance (50%) deferred over three years in equal shares of €69,933.(c) Amount paid in 2019 for the variable compensation for fiscal year 2018, or €217,985, and for the deferred portion of the variable compensation for fiscal year 2017, or €76,769, and for the deferred portion of the variable (d) compensation for fiscal year 2016, or €57,404.
Under the terms of her employment contract, Catherine Halberstadt benefits from BPCE’s group incentive agreement paid in 2019 in respect of the 2018 fiscal year.(i) This amount includes payment of deferred variable compensation and securities delivery in respect of previous years, allocated for his duties as Chief Executive Director of Natixis (until June 1, 2018). The securities delivery (j) under the Senior Management Committee Long-Term Incentive Plans is presented in AMF Table No. 7. In addition, under social protection, €7,066 in benefits in kind were declared in 2018 for Laurent Mignon. Variable compensation for 2019, of which €377,640 (30%) in 2020 and the balance (70%) deferred over three years in equal shares of €293,720.(k) Amount paid in 2019 for the variable compensation for fiscal year 2018.(l) Variable compensation for fiscal year 2018, of which €228,837 (30%) in 2019 and the balance (70%) deferred over three years in equal shares of €177,984.(m) Before 12.8% withholding tax.(n)
Valuation of options according to the method adopted for the consolidated financial statements
No subscription or call options were exercised in fiscal year 2019.
Shareholders’ Meeting during the period to each corporate officer by the issuer and by all Group companies Plan date
30% of the shares issued to corporate officers will be subject to a lock-in period ending upon their termination of office.(a) Regarding principles of compensation for corporate officers, see section 2.4.1.3 "Annual variable compensation" and "Free allocation of bonus shares".(b)
Options held in respect of the issuer and the companies referred to above, exercised during the period, by the top ten salaried employees of the issuer and of these companies holding the highest number of options purchased or subscribed 0 N/A N/A
Laurent Mignon, Chairman of the Board of Directors (c) Term of office began: June 1, 2018 Term of office ended: the May 2023 General Shareholders’ Meeting
The components of the compensation due or granted to each executive corporate officer in respect of fiscal year 2019 must be submitted to Natixis’ General Shareholders’ Meeting for approval. For Natixis, this recommendation concerns the compensation of François Riahi.
allocation of stock options/bonus shares and any other long-termV compensation; signing bonuses;V
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Given the achievements observed by the Board of Directors after receiving the opinion of the Compensation Committee, the amount of annual variable compensation for 2019 was set as follows: in respect of BPCE quantitative criteria: €267,588 or 111.50% of the target;V in respect of Natixis quantitative criteria: €413,474, or 95.71% of the target;V in respect of strategic criteria: €307,200, or 106.67% of the target.V
Extraordinary compensation 0 In 2019 François Riahi did not receive any extraordinary compensation.
The ratio varies in a linear manner between each performance category. CSR objectives are based on the change in Natixis’ CSR performance over the four-year V vesting period as assessed by the three CSR rating agencies. The vesting process includes a rating scale corresponding to the CSR assessments of each agency, with requirements becoming more stringent over the last two years. At the end of the four years, the average of the overall annual ratings shall determine the percentage of shares that vest in addition to those vesting under the TSR criteria. In the event that TSR and CSR performance is substantially above target, the percentage of shares of the annual tranche that shall vest is capped at 120%. 30% of the shares issued to the corporate officer at the end of the vesting period V will be subject to a lock-in period ending upon the termination of his office.
Ban on hedging The Chief Executive Officer is prohibited from using hedging or insurance strategies, both during the vesting period of components of deferred variable compensation and during the lock-up period.
Contract termination payment: severance payment/non-compete payment - On May 2, 2018, the Board of Directors decided that François Riahi would, effective from his appointment as Chief Executive Officer, be entitled to the same severance payments and consideration for non-compete agreement as his predecessor, the commitments for which were approved at the May 23, 2018 General Shareholders’ Meeting. Rules for calculating severance payment: The monthly reference compensation is equal to one-twelfth of the sum of the fixed compensation paid in respect of the last calendar year in activity and the average variable compensation paid over the last three calendar years of activity. The amount of severance pay is equal to monthly reference compensation x (12 months +1 month per year of seniority). The Chief Executive Officer will not receive severance payments in the event of gross negligence or willful misconduct, if he leaves the Company at his initiative to take another position or changes his position within Groupe BPCE. Furthermore, in line with the provisions of the Afep-Medef corporate governance code, the right to a benefit is contingent on meeting performance criteria and requirements, such as net income (Group share), ROE and the cost/income ratio reported for the two years prior to leaving the Company. Satisfaction of these criteria will be verified by the Board of Directors as necessary: Average Natixis net income (Group share) for the period in question equal to or higher 1.
than 75% of the expected budget average * for the period; Average Natixis ROE for the period in question equal to or higher than 75% of the expected 2.
As a reminder, the amount of the Chief Executive Officer’s severance payment, combined with the non-compete indemnity if warranted, may not exceed the equivalent of 24 months of monthly reference compensation. Non-compete indemnity in the event of termination of the Chief Executive Officer’s office The non-compete agreement is limited to a period of six months and carries an indemnity equal to six months of fixed compensation, as in force on the date on which the Chief Executive Officer leaves office. The amount of the non-compete indemnity, together with the severance payment, if applicable, received by the Chief Executive Officer is capped at twenty-four (24) months of the monthly reference compensation (both fixed and variable). Upon the departure of the Chief Executive Officer, the Board of Directors must make a decision regarding whether to enforce the non-compete clause provided for under this agreement.
Like the rest of the staff, the Chief Executive Officer is covered by the mandatory pension plan. He is not covered by the kind of supplementary pension plans described in Article 39 (defined benefit plan) or Article 83 (voluntarily defined contribution plan) of the French General Tax Code. Furthermore, Natixis’ Chief Executive Officer paid into an “Article 82” type life insurance policy (in reference to the French General Tax Code) put in place by BPCE. The premiums on this policy were paid by the Chief Executive Officer and not by Natixis. In 2019, François Riahi paid €117,333 into his policy.
Directors’ compensation - In 2019, François Riahi received no compensation in respect of the 2019 fiscal year as part of his responsibilities as a director within Groupe BPCE.
Benefits of any kind €2,384 The Chief Executive Officer receives a family allowance in accordance with the same rules as those applied to Natixis employees in France.
Average performance achieved over the two years prior to leaving (the measurement shall be based on the known results for the four quarters prior to leaving).*
This chapter includes information on the risk factors set out under Prospectus regulation 3 on the management of risks associated with financial instruments, as well as information on capital management and compliance with the regulatory ratios required under the IFRS framework as adopted in the European Union. Some information in this chapter is an integral part of the notes to Natixis’ consolidated financial statements and consequently falls under the Statutory Auditors’ certification of the consolidated financial statements. This information is identified by the phrase “Data certified by the Statutory Auditors in accordance with IFRS 7”. Natixis is subject to the supervision of regulatory authorities and to the regulatory capital requirements applicable to credit institutions and investment companies, as per Regulation (EU) No 575/2013 of June 26, 2013. Under Pillar III of the Basel Accords, detailed, standardized information on items related to the Basel 3 report and to prudential publications is published in the third part of this chapter.
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk factors 100 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
Special dividends paid in 2019 related to the disposal of the retail banking activities
The concentration of credit and counterparty risk may compound Natixis’ exposure
Natixis is exposed to credit and counterparty risk through its financing, structuring, trading and settlement activities that are performed in large part by its Corporate & Investment Banking (CIB) division.
Credit and counterparty risk is one of the major risks identified by Natixis and represented 74% of total RWA at December 31, 2019.
At that date, therefore, Natixis’ exposure to credit and counterparty risk (Exposure at Default excl. CVA) totaled €265 billion, split primarily between companies (44%), sovereigns (15%), banks and similar items (32%). At 46%, credit and counterparty risk exposure was concentrated in France, while the rest of Europe (EU and non-EU) made up 19%, North America 18% and Asia 8% (see section 3.2.3.10).
Should one or more of its counterparties fail to honor their contractual obligations, Natixis could suffer varying degrees of financial loss depending on the concentration of its exposure to said counterparties. Moreover, should the ratings of counterparties
Natixis’ ability to carry out its financing, structuring, trading and settlement transactions also depends, among other factors, on the stability and financial soundness of other financial institutions and market participants. This is because financial institutions are closely interconnected, due in large part to their trading, clearing, counterparty and financing operations. A default by one participant in the financial industry market could have repercussions on other financial institutions, cause a chain of defaults by other participants in this market, and therefore incur financial losses for Natixis.
As part of its activities, and wherever necessary, Natixis recognizes in provisions for non-performing loans, reflecting actual or potential losses in respect of its loan and receivables portfolio, under “Provision for credit losses” on its income statement. At December 31, 2019, Natixis’ provision for credit losses totaled -€332 million.
Since January 1, 2018, Natixis applies IFRS 9 “Financial Instruments,” which requires raising provisions as of the initial recognition of a financial instrument. This new provisioning model applies to outstandings recognized at amortized cost or at fair value through other comprehensive income recyclable to income and to loan and guarantee commitments given (excluding those recognized at fair value through profit or loss), as well as to lease receivables. (See Note 6 “Accounting principles and valuation methods” to the consolidated financial statements for the fiscal year ended December 31, 2019 in Chapter 5.1 “Financial Statements”).
Under this framework, performing loans (Stage 1), for which there has been no material increase in credit risk since initial recognition, are provisioned for 12 months of expected losses. Underperforming loans (Stage 2), for which there has been a material increase in credit risk since initial recognition but not to the point of having to classify them as non-performing loans, are provisioned based on lifetime expected losses. Non-performing loans (Stage 3) are loans for which there is objective evidence of impairment loss. Natixis determines the provisions for non-performing loans based on an individual expected cash flow recovery analysis, whether these cash flows come from the counterparty’s activity or from the potential execution of guarantees. Non-performing loans that are not impaired following the individual analysis are provisioned at a standard rate based on historical unexpected losses on unprovisioned loans. At December 31, 2019, non-performing loans totaled €3,072 million, of which 23% was attributable to France, 19% to the rest of Europe, and 23% to North America. Natixis' non-performing loan ratio was 4.5% and its coverage ratio for these non-performing loans was 40.9%.
A deterioration in the financial markets could generate significant losses in Natixis’ capital markets activities
As part of its capital markets activities and to meet the needs of its clients, Natixis operates on the financial markets — namely the debt, forex, commodity and equity markets.
In recent years, the financial markets have fluctuated significantly in a sometimes exceptionally volatile environment which could reoccur and potentially result in significant losses for capital markets activities.
The losses that may be recorded due to high market volatility could affect several market products in which Natixis trades. The volatility of financial markets makes it difficult to predict trends and implement effective portfolio management strategies, and increase the risk of losses from net long positions when prices decline and, conversely, from net short positions when prices rise. As such, Natixis is especially exposed to interest rate and share price fluctuations (see paragraph 3.2.5.4).
The hedging strategies implemented by Natixis do not eliminate all risk of loss
The fair value of Natixis’ derivatives is determined by factoring in certain additional adjustments in order to account for: the quality of the counterparty (credit value adjustment — CVA) byV recognizing in the valuation of the derivative instruments the credit risk corresponding to the risk of non-payment of the amounts owed by the associated counterparty; Natixis’ own credit risk (debt valuation adjustment — DVA) byV recognizing in the passive valuation of derivative instruments the risk borne by our counterparties (i.e. potential losses that Natixis causes its counterparties to incur in the event of default or the deterioration of its own credit quality); funding risk (funding valuation adjustment — FVA) by recognizingV in the valuation of uncollateralized or partially collateralized cost related to the financing costs of future cash flows.
These additional adjustments recognized in the income statement have a direct impact on Natixis’ net banking income and equity. For information purposes, at December 31, 2019, the adjustments recognized on financial assets and liabilities held for trading under CVA, DVA and FVA were established at -€1.2 million, -€35.4 million and +€12.8 million respectively (see Note 7.3 of Chapter 5).
and relationships between investment service providers and clients or investors. These new regulations (including MiFID II, PRIIPs, Insurance Distribution Directive, Market Abuse regulation, Fourth Anti-Money Laundering and Counter Terrorist Financing Directive, Personal Data Protection Regulation, and the EU Benchmarks Regulation) have major impacts on the company’s business processes.
Compliance risk includes, for example, the use of inappropriate means to promote and market the bank’s products and services, inadequate management of potential conflicts of interest, disclosure of confidential or privileged information, or failure to comply with new client or supplier due diligence procedures, particularly with respect to financial security (including anti-money laundering and counter terrorist financing, compliance with embargoes, anti-fraud and corruption).
Natixis' Compliance Department oversees compliance risk prevention and mitigation (see section 3.2.8). Natixis nevertheless remains exposed to the risk of fines or other major sanctions imposed by regulatory and supervisory authorities, as well as civil or criminal legal proceedings that could have a material adverse effect on its financial position, business and reputation.
But even with the adoption of a Code of Conduct and the creation of a conduct framework, Natixis is exposed to potential actions or behaviors by employees, suppliers and contractors that are unethical or not in clients' interest, that do not comply with the laws and regulations on corruption or fraud, or that do not meet financial security or market integrity requirements.
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk factors 104 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
Natixis is exposed to several types of operational risks inherent to banking operations. These risks include process and procedural weaknesses, acts of fraud (both internal and external), system failures or unavailability, as well and cybercrime, and an operational failure related to a health risk could also be identified. Despite the controls and procedures in place, Natixis could be exposed to operational risk through, for example, data input errors, failures in collateral management, and incorrect application of procedures. These types of situations could generate significant compliance and control costs for the affected processes which could have an impact on Natixis’ financial position.
Furthermore, Natixis is exposed to the risk of an operational failure or interruption by its clearing agents, foreign exchange markets, clearing houses, custodians or other financial intermediaries or external service providers it uses to execute or facilitate its securities transactions. As interconnectivity with customers grows, Natixis may also be increasingly exposed to the risk of operational failure of its customers’ information systems.
Lastly, Natixis is exposed to cybercrime risk. Cybercrime covers a range of malicious and/or fraudulent acts, perpetrated digitally in an effort to manipulate data (personal, banking, insurance, technical or strategic data), processes and users, with the aim of causing material losses to companies, their employees, partners, clients and counterparties. A company’s data assets are exposed to new, complex and evolving threats likely to have material financial and reputational impacts on all companies, and in particular those in the banking sector. Given the increasing sophistication of the criminal enterprises behind cyberattacks, regulatory and supervisory authorities have begun to highlight the importance of Information and Communication Technology (ICT) risk management. Preventing cybercrime risk is a priority for Natixis, and as such it makes every effort to implement the guidelines established by these authorities through cooperation between its Information Systems (IS) and IT Systems Security (ITSS) Departments. This has resulted in a map of
Any damage to Natixis’ reputation could affect its competitive position and have a negative impact on its financial position
Thanks to Natixis' current reputation, it is able to maintain relationships with its clients, employees, suppliers, partners and investors that are built on trust.
Legislative and regulatory measures in response to the global financial crisis may have a material impact on Natixis and on the financial and economic environment in which it operates
Among the measures that have been or may be adopted could potentially: Prohibit or limit some kinds of financial products or activities,V thereby partially restricting the diversity of Natixis’ sources of income. For example, the introduction a withholding tax on dividends from borrowed securities under certain circumstances could weaken the appeal of some of Natixis’ current products.
Strengthen requirements pertaining to personal data protectionV and cybercrime, as they can lead to higher costs due to additional investments in the bank’s information system.
Require the bank to make a substantial financial contribution toV guarantee the stability of the European banking system and limit the impact of a bank failure on public finances and the real economy.
Natixis’ risk management system, which is based on the use of models, may fail and expose Natixis to unidentified or unforeseen risks, and could result in major losses
Natixis’ risk management system, which is based on the use of models, may fail and expose Natixis to unidentified or unforeseen risks, possibly resulting in major losses.
primarily statistical analysis of these observations (see section 3.2.5.4 for a detailed description of the risk management system). The measurement metrics and tools used may provide inaccurate conclusions on future risk exposures, mainly because of factors that Natixis may not have anticipated or correctly assessed or taken into account in its statistical models, or because of unexpected and unprecedented market trends that could reduce its ability to manage its risks. Consequently, the losses borne by Natixis could prove far greater than those forecast using historical averages. Moreover, Natixis’ quantitative models do not incorporate all risks. For instance, part of the VaR measurement model is designed on the basis of positive interest-rate environment assumptions. In early 2016, because the interest rate environment for interest rate derivatives was negative, stressed VaR was overestimated by €5 million.
In 2019 Natixis adopted Green Weighting Factor — a tool that uses a color scale to rate a loan book's exposure to climate risk. The aim is to encourage the lending businesses to favor clients and projects whose operations have a less harmful climate impact and at an identical credit risk.
For a more detailed description of Natixis' CSR (corporate social responsibility) policy and commitments, see Chapter 6 (Non-financial performance report) of this universal registration document, as well as section 6.4 for a description of the management of environmental and social risks.
A change in the business mix of Natixis’ lending activities in favor of transactions with a positive climate and environmental impact could have a negative impact on Natixis’ performance due to lost opportunities in sectors presenting a material environmental impact. Postponing this adjustment in its portfolios could negatively affect the credit quality. But keeping borrowers with a material climate impact in its loan book could have a negative impact on its credit quality should stricter regulations be imposed.
Lastly, in December 2019 the EBA published its Sustainable Finance work plan which will be accompanied by more stringent regulations for the fight against global warming. These regulations may penalize activities with a material climate impact (directly via operational constraints for Natixis client or through higher carbon quota prices). They could also have a negative impact on some of Natixis’ activities, such as lending and investment in hydrocarbon sectors, commodities and transportation.
At December 31, 2019, net revenues from the Insurance business line stood at €846 million, which represents 7% of Natixis' total net revenues.
The main risk to which Natixis’ Insurance affiliates are exposed in their life insurance business is market risk. Exposure to market risk mainly occurs through capital guarantee and return commitments relating to the euro-denominated savings fund scope.
Natixis securities holders and other Natixis creditors may suffer losses should Natixis undergo resolution proceedings
The European regulation establishing a framework for the recovery and resolution of credit institutions and investment firms, and the texts transposing these rules into French law (the BRRD regulation) aim primarily to establish a single resolution mechanism giving the resolution authorities “bail-in” powers. The purpose of these powers is to counter any systemic risk linked to the financial system and, more specifically, avoid any financial intervention by states in the event of a crisis. If a financial institution (or the group to which it belongs) subject to the BRRD defaults or is close to defaulting, these powers allow the authorities to impair, cancel or convert the financial institution’s eligible securities and commitments into shares. In addition to the option to use this “bail-in” mechanism, the BRRD provides resolution authorities with broader powers, allowing them to (1) obligate the financial institution to sell its activities to third parties, (2) replace it as obligor in respect of debt instruments with a third party, and (3) amend the terms of previously issued debt instruments.
Natixis’ internal control system encompasses all the steps taken by the institution to measure, monitor and manage the risks that are inherent to its various activities in accordance with legal and regulatory requirements. The system complies with the provisions set forth in the French Ministerial Order of November 3, 2014 on internal control by companies in the banking, payment services and investment services sector.
It is structured in accordance with the principles set out by BPCE, with the objective of ensuring a consolidated approach to risk within the framework of the control exercised by the shareholding group.
Natixis’ internal control system comprises: first-level permanent controls performed by operational staff onV the processing in their charge, following internal procedures and legal and regulatory requirements; second-level permanent controls performed by four departmentsV that are independent of operational staff: the Compliance Department, which reports to the CorporateV Secretary, is notably responsible for managing compliance risk, organizing the first-level permanent control system, and performing second-level controls, the IT Systems Security and Business Continuity (ITSS-BC)V function, which reports to the Compliance Department, assesses the risks and establishes the policies on information systems security and business continuity while ensuring they are correctly applied, the Risk Supervision Division, which is headed by the Chief RiskV Officer, reports directly to senior management and is responsible for measuring, monitoring and managing the risks inherent to the business activities, in particular credit and counterparty risk, market and liquidity risk, operational risk and model risk, the Regulatory and Accounting Review team within theV Accounting and Ratios division, which reports functionally to the Compliance Department, verifies the quality and accuracy of accounting and regulatory information; periodic controls performed by the General InspectionV Department. The General Inspection Department reports to the Chief Executive Officer and performs periodic audits to assess the risks to which the businesses are exposed and ensure the effectiveness of the entire internal control system.
The executive managers regularly inform the Board of Directors of all significant risks, risk management policies and changes made thereto.
First-level permanent controls are carried out by operational or functional staff on the transactions they perform, following internal procedures and legal and regulatory requirements. Transactions may be subject to a control by operational staff themselves (level 1.1) and to a separate control by the chain of command or by a functional department responsible for validating these transactions (level 1.2).
The first-level controls are centrally managed through a dedicated tool that is used to consolidate results, identify areas at risk and produce reports. The Compliance Department helps the operational departments or support functions define and update these controls.
In terms of IT Systems Security and Business Continuity (ITSS-BC), the function’s main role is to define and monitor security standards (see section 3.2.8.5). The second-level control plan has two parts, one shared with Groupe BPCE and another specific to Natixis, and is the result of a risk-based approach. The controls are carried out based on the first-level controls reported by the contributors (Information Systems Security Department or the appropriate security representatives for authorizations). ITSS-BC performs around 6,000 second-level controls each year.
The Regulatory and Accounting Review team within the Accounting and Ratios division reports functionally to the Compliance Department. This team plays a role in improving the accuracy of accounting and financial information through the implementation of control systems for the accounting, tax declarations and regulatory reports produced by the Finance Department. (See section 5.5 — Internal control procedures relating to accounting and financial information].)
In this respect, the General Inspection Department is independent of all operational entities and support functions. With no operational role, it can never find itself in a position of conflict of interest. It reports to Natixis’ Chief Executive Officer. The Natixis Head of General Inspection is a standing guest member of the Audit and Risk Committees of Natixis and its subsidiaries, and can speak directly to the Chairman of the Risk Committee. The General Inspection Department has a strong functional link with its BPCE counterpart, in accordance with the Natixis audit charter. In accordance with these principles, the General Inspection Department coordinates a global audit function at Natixis and is part of the Groupe BPCE Internal Audit Function.
field of investigation encompasses all of Natixis’ operational activities, its support functions — including entities in charge of permanent control assignments — and its outsourced activities. For all the business lines, these audits lead to an assessment of the suitability of existing control points in the processes audited as well as an appraisal of the risks arising from the relevant activities. It makes use of recurrent work in the area carried out by operational departments and permanent control teams. The audits lead to recommendations ranked in order of priority to strengthen the mechanisms for controlling and managing audited risks and to make them more comprehensive.
The reports are sent to BPCE’s Chairman of the Management Board and General Inspection Department and to Natixis’ Chairman of the Risk Committee and senior management, as well as to the audited units.
The Audit Plan may be revised during the year at the request of senior management or if required by circumstances. In addition to conventional audit assignments, the General Inspection Department is also able to carry out ad hoc audits in order to address issues arising during the year and not initially included in the Audit Plan.
In 2019, the General Inspection Department conducted audit assignments on all risk classes to which Natixis’ activities are exposed. It dedicated a significant share of its resources to managing the risks related to capital markets activities and the use of models. Several specialist projects involved all General Inspection staff. The most noteworthy included: the successful implementation of all recommendations issued byV General Inspection in 2017 as part of its self-assessment of its audit activities and in 2018 during a review by an external consultant; working groups with representatives from the branches’ andV subsidiaries’ own Audit Departments (DAI) that were run by General Inspection in 2019 to share best practices. Each DAI included a quality review that is independent of its processes in its 2020 plan; the hiring of a second data scientist with experience in dataV management. The tool chosen by Natixis was connected to the main databases and rolled out in all DAIs; training provided to all employees in the function’s monitoringV and coordination systems (related to BPCE’s Inspection Générale) and the integration of their projects into said systems. Data management techniques were automatically implemented in all relevant assignments, with support from both data scientists;
Risk management 111NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com the review of the General Inspection Department’s internalV structure to improve efficiency and get the audit team more involved in managing assignments and especially staff (recruitment, training and career management); the establishment of a new hiring process that shortens responseV times in order to reduce the impact of turnover on available staff.
Lastly, Natixis’ General Inspection Department collaborated with its BPCE counterpart on a number of projects and assignments. The two departments held six meetings in 2019. These meetings provided a forum for addressing matters related to audit plans and practices, as well as matters related to risk assessment and assignment evaluation (Joint General Inspection Coordination Committee).
The risk management function, carried out by the Risk Supervision Division (RSD), is structured as an independent and global matrix that covers all scopes and related geographic areas. In 2019, the risk management function was adjusted to better support Natixis’ transformation and the ever-increasing number of regulator changes. The organization structure was therefore simplified, with the aim of improving the risk oversight system across Natixis as a whole. This new organization structure notably resulted in: the creation of an Enterprise Risk Management (ERM)V Department, focusing on key cross-cutting processes and primarily aimed at centralizing the development of regulatory risk and project management models; the gathering into a single department, MARPL (Market ActivitiesV Risks, P&L and Liquidity), of missions involving the monitoring of market, liquidity, overall interest rate and counterparty risks; the creation of the Supervision of Conglomerate, Insurance andV Asset Management (SCIAM) Department, dedicated to supervising the Insurance and Asset Management business lines risks and whose main purpose is to bolster the framework for managing these risks using a cross-cutting approach.
It also independently validates models as part of its wider risk model management framework.
It plays an essential role within the committee structure, the highest-level of which is Natixis’ Global Risks Committee, which meets once per quarter.
In addition, it regularly reports on its work, submitting its analyses and findings to Natixis’ executive managers, to Natixis’ supervisory body, and to Groupe BPCE. A dedicated function generates a consolidated risk overview using a scorecard that indicates the various risks (credit, market, liquidity, operational, modeling, etc.). To fulfill these responsibilities, the Risk Supervision Division uses an IT system tailored to the activities of Natixis’ core businesses, applying its modeling and quantification methods for each type of risk.
The management and monitoring of Natixis’ structural balance sheet risks are under the authority of the Asset/Liability Management Committee (or “ALM Committee”). The ALM Committee’s monitoring scope includes overall interest rate risk, liquidity risk, structural foreign exchange risk and leverage risk.
The Compliance function oversees the compliance risk management system of Natixis S.A. and of its French and international branches and subsidiaries. It is also in charge of fraud risk prevention, information systems security, and business continuity.
The risk culture is central to the risk management function’s guiding principles, as set out in the Risk Charter. Its priorities are twofold: harmonizing best practices within the bank by deploying aV compendium of risk policies, standards and procedures covering all the bank’s major risks (credit, market, operational and model) and outline the bank’s strategic vision and risk appetite; deploying a three-pillar strategy in respect of the bank’s riskV culture: a first pillar seeking to raise awareness and inform, byV strengthening the division’s digital communications (e-letter Risk in Mind, strengthened presence of the Risk Supervision Division on the internal social network, etc.) and implementation of “Lessons learned” sessions, the aim being to learn from past incidents and share the lessons learned;
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk management 112 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019 a pillar focused on training with, in addition to mandatoryV e-learning modules, efforts to promote the training of all employees in specific subjects, notably relating to regulatory changes, onboarding sessions for new colleagues and a “discovery” program to give insight into the business lines and control functions, a “career path” pillar incorporating “risk culture” as a recruitmentV criterion, the introduction of cross-over business/risk pathways and the inclusion of “risk culture” as an employee appraisal criterion.
Initiatives aimed at inculcating the risk culture are run throughout the year. In particular, 2019 saw the first edition of our risk culture week.
The Code of Conduct adopted by Natixis in December 2017 is another effective means of inculcating the risk culture, as it defines the rules of conduct applicable to all employees, and encourages greater involvement and accountability. Four guiding principles serve as the building blocks of Natixis’ DNA and are adapted to each profession and function. The rules fall into the following themes: being client-centric;V
An analysis was then presented at conduct Committee Meetings held for each entity. They are four-party committees that bring together the business line, Human Resources, Compliance and the Risk Supervision Division.
Lastly, Natixis’ compensation policy is structured in a way that encourages the long-term commitment of the company’s employees while ensuring appropriate risk management.
Natixis’ risk appetite is defined as the nature and the degree of risk that the bank is willing to take within the bounds of its business model and strategy.
Natixis’ risk appetite principles result from the selection and control of the types of risks that the Bank is prepared to take in pursuit of its business model. They ensure consistency between Natixis’ overarching strategic guidelines and its capacity to manage risks.
The business model developed by Natixis is based on its recognized areas of expertise (Corporate Financing, Capital Market activities, Asset & Wealth Management, Insurance and Payments), in response to the needs of its clients and those of Groupe BPCE.
Natixis incurs risks that are intrinsic to its Corporate & Investment Banking, Asset & Wealth Management, Insurance and Payments business activities: credit risk generated by Corporate & Investment Banking isV managed under specific risk policies adapted by business and subsidiary, concentration limits defined by counterparty, sector and country, and through extensive portfolio monitoring. Natixis ensures the selective management of issuance commitments through independent analyses and various Credit Committees; leverage and liquidity risk are included in Groupe BPCE’s riskV framework. Since BPCE provides a liquidity and capital adequacy guarantee, Natixis applies BPCE’s risk policies to its own organization. These two risks require setting specific objectives for managing scarce resources using a dedicated framework and management objectives. Natixis oversees the strategy to diversify its sources of financing as well as those of Groupe BPCE, and manages its solvency ratio to cope with stress situations; within CIB, Natixis’ market activities — which aim to meet theV needs of its clients and exclude all forms of proprietary trading — incur market risk. This risk is managed according to a body of risk policies and specific qualitative and quantitative indicators; operational risk is intrinsic to all the bank’s business lines andV functions and is managed using a shared data collection tool. The system, which has been rolled out across the business lines and geographic regions, is used to map risks and implement corrective and preventive action plans accordingly; model risk primarily affects CIB activities related to valuation,V risk and capital models; Natixis is committed to strictly observing the laws, regulationsV and norms governing its activities, in France and internationally, in the realm of financial security (anti-money laundering, terrorism, corruption and fraud), compliance and client protection; Natixis’ most important asset is its reputation and its relationshipV with its clients. Clients’ interests are therefore put first and the bank — irrespective of the business activity, entity or geographic region — is dedicated to operating at the highest level of ethical standards, and in line with the best transaction execution and security. Together with Groupe BPCE, Natixis closely monitors its reputation risk using indicators that combine an ex-ante/ex-post approach.
The risk appetite framework comprises two successive thresholds for each identified risk and selected indicator: a detection threshold, setting the risk exposure allocated to eachV business line; and a limit set by the Board of Directors, stating the maximum riskV that, if exceeded, would pose a risk to Natixis’ business continuity and/or stability and would have to be reported immediately to the Board of Directors, BPCE and the ECB.
This operational framework is applied by type of risk (credit and counterparty risk, market risk, liquidity and leverage risk, operational risk, solvency risk, etc.) and draws on Natixis’ pre-existing measuring and reporting systems.
The risk appetite framework forms part of Natixis’ main processes, especially regarding: risk identification: every year risks are mapped to give an overviewV of the risks to which Natixis is or could be exposed. With this approach it is possible to identify material risks, the indicators of which are included in the risk appetite framework; the budget process and overall stress tests.V
Securitizations are transactions whereby credit risk inherent to a set of exposures is housed in special-purpose entities (generally a special-purpose entity (SPE) or “conduit”), which is then divided into tranches, usually for the purpose of selling them to investors. The SPE issues units that may in some cases be subscribed for directly by investors, or by a multi-seller conduit which refinances the purchases of its shares by issuing short-maturity notes (treasury notes or commercial paper).
Market risk is the risk of loss in value caused by any adverse fluctuations in market parameters. These parameters notably include the prices of securities (bonds, equities) and raw materials, interest rates, prices derivative financial instruments and foreign exchange rates.
Asset liquidity is an important component of market risk. In the event of insufficient or non-existent liquidity (for example, because of a reduced number of transactions, or a major imbalance in the supply and demand of certain assets), a financial instrument or any other tradable asset may not be able to be traded at its estimated value.
The absence of liquidity may lead to reduced access to capital markets, unforeseen cash or capital requirements, or legal restrictions.
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Legal risk is defined under French regulations as the risk of any legal dispute with a third party, arising from an inaccuracy, omission or deficiency that may be attributable to the company’s operations.
Climate risk is the increased vulnerability of businesses to variations in climate indices (temperature, rainfall, wind, snow, etc.). It may be physical in nature (increase in extreme weather events) or related to environmental transition (new carbon regulations).
The purpose of comprehensive internal stress tests is to assess the impact of a baseline economic scenario and of stressed economic scenarios on a bank's income statement, risk-weighted assets and equity.
They are converted into levels or shocks to economic and financial variables, such as GDP, inflation, employment and unemployment, interest and exchange rates, and stock and commodity prices, over a three-year period. These variables are factored into projection models used by Natixis to apply stress to the various aggregates on the income statement, risk-weighted assets and equity.
These projections are based on internal models, which are either based on the sensitivities or trends observed in financial and economic variables, or on internal historical data.
The risk control framework is overseen by the Risk Supervision Division with the active involvement of all the bank’s businesses and support functions. All the internal standards, policies and procedures are consistent with BPCE’s framework and are reviewed periodically to take into account the results of internal controls, regulatory changes and the bank’s risk appetite.
issue transaction authorizations after a counter-analysis of theV credit risk and the counterparty risk in line with the processes for credit approval and limit authorization; define internal rating methodologies and models;V
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commitment sub-limits by type of counterparty, type of product,V or sometimes by geographic region.
Natixis’ credit risk measurement and management procedures are based on: a standardized risk-taking process, structured via a system of limitV authorizations and decision-making Committees; independent analyses carried out by the Risk Supervision DivisionV during the loan application review process; rating tools and methodologies providing standardized andV tailored assessments of counterparty risk, thereby making it possible to evaluate the probability of default within one year and the loss given default; information systems that give an overview of outstanding loansV and credit limits.
a value adjustment in respect of counterparty risk (credit valuationV adjustment); counterparty risk mitigation;V
Natixis reduces its exposure to counterparty risk using three measures: use of bilateral netting agreements under which, if a counterpartyV goes into default, only the balance of the positive and negative valuations of the transactions carried out with the counterparty in question is considered as risk; riders to these agreements that govern the use of collateral swapsV that fluctuate according to the daily valuation of the portfolios of transactions carried out with the counterparties in question; use of clearing houses, which stand in for their members byV bearing most of the counterparty risk. To do this they use an initial margin and variation margin call system.
To manage this risk, Natixis set up a framework to manage the risks borne by clearing houses.
Specific wrong-way is subject to specific own funds requirements (Article 291.5 of the European Regulation of June 26, 2013, on prudential requirements for credit institutions and investment firms) and to prior approval of specific limits.
The internal rating system is an integral part of Natixis’ credit risk assessment, monitoring and control mechanism. It covers all the methods, processes, tools and controls used to evaluate credit risk. It takes into account fundamental inputs, including probability of default (PD), which corresponds to a rating as well as loss given default (LGD), which is expressed as a percentage.
Since September 30, 2010, Natixis has used specific internal rating methods for each asset class that are approved by the Autorité de Contrôle Prudentiel et de Résolution (ACPR — French Prudential Supervisory Authority), and that use the advanced internal ratings-based method (A-IRB) to rate “corporates”, “sovereigns”, “banks”, “specialized financing” exposure categories.
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For outstandings measured using the standardized approach, Natixis uses external rating systems of the agencies Fitch Ratings, Standard & Poor’s, Moody’s and DBRS.
In accordance with regulatory requirements, Natixis has established internal model validation policies and procedures for evaluating credit and counterparty risk. This independent model validation policy is part of its wider risk model management framework.
validation, and use — are clearly presented and the roles and responsibilities of each participant specified and detailed.
As part of the Risk Governance Department which reports to the Chief Risk Officer, Model Risk Management is responsible for the governance and standards applicable to a model’s life cycle. The various stages of a model’s life cycle — design, IT development,
LGD, CCF and ELBE backtesting is carried out by the Risk Supervision Division’s teams to: verify that the model is correctly calibrated;V
The inputs of the models for the scope of specialized financing and collateral (financial or other) are regularly updated, so that they reflect actual conditions as accurately as possible. Both the market inputs and collection inputs are updated.
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk management 120 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019 model performance indicators: the model’s performance isV measured to validate the segmentation and also to quantify, overall, the differences between the forecast and actual figures. This is achieved by using statistical indicators, which are compared against those calculated during modeling.
based on internal and external histories and an external benchmarkV for banks and sovereigns; using stochastic models if there is a claim against a financialV asset.
The report is then submitted to the internal validation teams (Model Risk Management) for their input, and subsequently presented to the various committees to inform the bank’s management.
Backtesting of LGDs and PDs by exposure class 2019 backtesting figures
The developed framework is based on the following two backtests: Market risk factor (RF) backtesting, i.e. to assess the predictiveV capacity of the stochastic processes used to describe the dynamics of unique risk factors; Portfolio backtesting: i.e. to assess the full exposure modelV (stochastic process, correlations and pricing) for portfolios representing Natixis’ exposures.
In respect of the market risk factor, backtesting uses historical trends to test RF predictions based on the stochastic processes. Backtesting can be performed ex-post by taking the aggregate historical market data for the selected backtesting period, or, to expand the results over wider time horizons and/or cover a broader range of market conditions. It may also be performed retroactively: this specific approach is called retro-backtesting. Here, the aim is to demonstrate that the models would have worked correctly had they been implemented in earlier periods and are thus suitable for future use.
In terms of exposure, the backtest applies historical Mark-to-Market (MtM) values of static backtesting portfolios to test the predicted future MtM values. In terms of RF, exposures are backtested ex-post by gathering the historical prices achieved, even though retro-backtesting capacities have been introduced for a sub-group of products. The ex-post approach involves duplicating the transactions in the dedicated backtesting portfolios directly in the front-office systems. The ageing process is thus similar to that of real portfolios. Retro-backtesting uses a specific tool to retro-backtest MtM on the main product categories.
The results are factored in at transaction level for historical and retroactive approaches and at several aggregated levels, including the product type and the counterparty for the historical approach only. The transactions considered for static backtesting duplicated in the front-office portfolios were chosen in such a way as to ensure the representativeness of portfolios and are discounted on an annual basis. Present and future prices are taken from the CCR (Counterparty Credit Risk) model engine, current prices being reconciled every quarter with those of the front-office systems, acting as reference.
Corporates (incl. SMEs) 12 Expert analysis-based rating models by business sector for corporates and statistical models for SMEs (scores)
LGD Sovereigns 1 Quantitative model based on internal and external defaults. The assessment of LGD during periods of decline is included insofar as all defaults are included for the LGD model
Corporates (incl. SMEs) 2 Statistical models (decision trees or assessment of recoverable assets) by type of financed asset. The safety buffers included in the LGD models serve to cover periods of decline (primarily via bootstrap techniques)
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Collateral eligibility is governed by the following process: vetting by the Legal Department of the documents relating to theV collateral and the enforceability of the collateral; validation by the Risk Supervision Division.V
Credit risk is supervised by making the various businesses accountable, and by various second-level control measures overseen by a dedicated Risk Supervision Division team.
It draws on a structure of preparatory Committees that are jointly steered by the Risk Supervision Division and each of the bank’s business lines.
These financial assets are divided into three categories depending on the increase in credit risk observed since their initial recognition. An impairment charge is recorded on outstanding amounts in each category.
Performing loans for which credit risk has increased materially since initial recognition are classified in Stage 2 (S2). The impairment or the provision for credit risk is determined on the basis of the instrument’s expected credit losses at maturity (lifetime ECL).
Measurements of an increase in credit risk resulting in S2 classification are based on a combination of quantitative and qualitative criteria. The quantitative criterion is based on the change in rating since initial recognition. Additional qualitative criteria are used to categorize as Stage 2 any contracts included on a non-S3 watchlist, undergoing adjustments due to financial hardship (forbearance) or more than 30 days past due. Additional criteria based on the sector rating and the level of country risk are also used.
The sector and country rating process is centered on a Geo-Sector Committee comprising the Finance division, the Risk Supervision Division and CIB representatives. The main objective of this Committee, established for the purpose of implementing IFRS 9, is to validate sector ratings as well as country and sovereign scores on a quarterly basis. These ratings then serve as a basis for calculating ECL. Sector ratings in particular are based on the results of the semi-annual economic environment reports.
Central governments or central banks 29,616 511 41 36,350 531 42
Central governments or central banks 7,551 1,122 90 4,469 1,525 122
Central governments or central banks 1,282 254 20 1,073 214 17
Claims on institutions and corporates undergoing a short-term credit assessment 122 64 5 124 85 7
Exposure class 31/12/2019 o/w off-balance sheet 31/12/2019 o/w off-balance sheet 2018 average
Exposures secured by mortgages on immovable property 226 9 221 5 221
Claims on institutions and corporates undergoing a short-term credit assessment 227 128 223 124 247
Claims on institutions and corporates undergoing a short-term credit assessment 58 25 140 223
Reclassification of central bank exposures from AA- to AA+ for the US central bank and from AA- to AA for the French central bank in the interest of better alignment with their external ratings (modification of the theoretical * allocation principle: level 1 internal rating, or equivalent to an S&P rating of between AAA and AA-, with allocation to an AA- rating).
Natixis is involved in securitization transactions in various roles: as an investor, through transactions for its clients, throughV derivative transactions and, to a marginal degree, through its market-making activity on certain ABS (particularly Asset-Backed Commercial Paper); Natixis mainly invests in senior securities assets with satisfactory levels of collateral and spreads. Similarly, it applies a sector and geography-based diversification strategy for underlying assets; as a sponsor, i.e. on transactions for its clients to create andV manage ABS programs; as an originator, i.e. as part of its refinancing activities whenV Natixis securitizes certain portfolios of loans granted to customers.
For every structured arrangement subject to approval, a substantiated request and a description of the arrangement, collateral, seller/originator and the proposed tranching must be submitted, along with an analysis of the associated guarantees.
A counter-analysis is then carried out by the Risk Supervision Division and, if necessary, a quantitative analysis of the portfolio’s default risks. Transactions are examined, and decisions are made based on all the loan application’s parameters, including the expected profit margin on the loan, the capital burn and compliance with the current risk policy.
Natixis relies on four external credit rating agencies, among others, for securitization transactions: Moody’s, DBRS, Fitch IBCA and Standard & Poor’s.
The Risk Supervision Division: defines risk measurement and fair value adjustment methods,V then submits them to the Market Risk Committee for validation; examines annual limit reviews (including risk appetite) and ad hocV requests for modifications (VaR, stress tests, operational indicators, loss alerts); raises alerts for areas at risk relating to the business lines or toV Natixis’ Senior Management; is responsible for the daily analysis and measurement of risks,V daily reporting, and notifying front office and management of any breaches; approves and manages the pricing models (prices) and riskV measurement models used by front office management tools; defines and validates models and methodologies relating to theV institution’s internal model, which is primarily used to calculate regulatory capital requirements; introduces and manages changes in standards and proceduresV common to all entities (subsidiaries and branches) carrying market risks.
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Different techniques are used to measure market risk: Value at Risk (VaR)
These measurements give a snapshot of VaR and help identify potential losses in each business, based on a predetermined confidence level (99%) and time period (1 day).
As is the case for VaR, the 10-day holding period used by Natixis involves extrapolating from the one-day stressed VaR by multiplying it by the square root of 10.
These involve comparing 99% VaR levels with actual and hypothetical daily P&L levels.
In the event of too many exceptions over a period of one year, on a sliding annual basis, an add-on is made to the multiplying factor applied in calculating VaR and SVaR during measurements of Natixis’ capital.
Rating and default migrations are simulated using an issuer correlation model and migration matrices over a capital horizon of one year. Positions are remeasured based on various scenarios. Thus, for each scenario, positions may be downgraded, upgraded or go into default.
The calibration of the transition matrix is based on Standard & Poor’s historical transition data. For both corporates and sovereigns, the historical depth exceeds 20 years. For issuers not rated by S&P, restatements are performed internally.
Correlation assumptions are based on the rating of each issuer’s creditworthiness within the IRC horizon (one year). The simulation process is based on intrasector correlation inputs.
In addition to VaR, SVaR and IRC measures, stress tests are used to simulate the impact of extreme market conditions on the value of Natixis’ portfolios as well as operational indicators: stress tests to measure potential losses on portfolios in1) extreme market conditions. Natixis’ mechanism is based on two categories of stress tests: overall stress tests and dedicated stress tests for each business.
As part of the Risk Governance Department which reports to the Chief Risk Officer, Model Risk Management is responsible for the governance and standards applicable to a model’s life cycle. The various stages of a model’s life cycle — design, IT development, validation, and use — are clearly presented and the roles and responsibilities of each participant specified and detailed.
The results of the model validation process performed at Natixis are presented to the Model Oversight Committees for confirmation, then submitted to the Model Risk Management Committee for approval before being sent, in the case of internal models, to the Standards and Methods Committee of the Groupe BPCE Risk, Compliance and Permanent Control division for final validation and possible submission to the regulator.
This Model Risk Management Committee is tasked with supervising the risk model for all of Natixis’ activities by, on one hand, approving validation reports and the related remediation plans and, on the other hand, monitoring consolidated risk model indicators. The Risk Model Oversight Committees are chaired by the Head of the Risk Governance Department; the Risk Model Management Committee is chaired by Natixis’ Chief Risk Officer who is a member of the Senior Management Committee.
The aim of this policy is twofold: ensure the reliability of the result announced by applying theV principle of prudence; protect Natixis from adverse events that cannot be easily hedgedV or that are non-hedgeable.
Adjustment amounts are updated on a monthly basis and reported to Natixis Senior Management. Changes in methodology applied to adjustment calculations in respect of market and model-related uncertainties are submitted for independent validation by the Model Risk Management teams.
At December 31, 2019, the VaR by business is at a lower level than business lines and, to a lesser extent, of Global Securities Financing the previous year (€8 million compared with €13.6 million). This is portfolios. mostly attributable to the decline of portfolios at Equity Markets
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The €5.6 million decline in consolidated VaR is primarily attributable to the decline in equity risk factors relating to the reduction in scope of the equity derivatives portfolio of Equity Markets Asia.
Three actual backtesting exceptions were recorded in the first half of 2019 on February 12, 13 and 27. They were related to the implementation in Asia of a hedging program to protect the equity derivatives portfolio against negative market effects. The losses recorded on these three dates (€42.2 million on February 12,
In the second half, two hypothetical backtesting events were noted. The hypothetical losses occurred on July 4 and September 12 and were linked to variations in the interest rate markets on the interest rate and Credit Value Adjustment (CVA) portfolios.
The historical stress test replicating the sovereign debt crisis in 2011 gave the maximum loss (-€40 million at December 31, 2019).
D e fa u lt b y a b a n k
to c k m a rk e t c ra sh
As part of the definition of its risk appetite, and in accordance with the French Ministerial Order of November 3, 2014, Natixis defined its operational risk tolerance policy with a view to limiting losses related to operational risks and regularly reviewing actions to reduce risks. The policy sets out the governance established, the quantitative and qualitative management framework, and the monitoring performed thus far.
It defines the operational risk management criteria, including: quantitative indicators: one historical indicator measuring the costV of risk, one forward indicator measuring the risk exposure, one individual indicator identifying the occurrence of major incidents to be reported to the regulator (Article 98), a specific individual indicator raising the alert on internal fraud events, and an operational risk management indicator measuring the progress of corrective actions; a qualitative indicator measuring the compliance with theV governance of the framework; specific indicators monitoring Information and CommunicationV Technology (ICT) risk, including cyber risk.
The structure of the function mirrors the organization of: the divisions under the responsibility of the operational riskV managers; the foreign offices under the responsibility of the operational riskV managers of the Americas, EMEA and Asia-Pacific platforms. They report hierarchically to the local Chief Risk Officer, and functionally to the Head of Operational Risk; the support and control functions under the responsibility of anV operational risk manager covering — in addition to the activities within his or her remit — overall and systematic operational risks (loss of access to premises or information systems, or loss of employee availability) to which Natixis is exposed.
This framework is managed using a single information system that has been deployed across the Company’s entities, business lines and support functions in France and internationally. It is available in French and English and hosts all the components of the operational risk oversight system (incidents, mapping of quantified potential risks, risk management systems, key risk indicators, corrective actions, Committees, etc.). The accuracy of the information entered or approved by the operational risk managers is ensured through reconciliation with information from other functions (accounting, compliance, legal, IT Systems Security, data quality, insurance, etc.).
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Qualitative evaluation of business line and support function risks by their owners
In addition to risk mapping, there are over 610 key risk indicators (KRIs) in place with corresponding limits, and which are monitored
Incidents are recorded as they occur, starting from an optional reporting threshold of €5,000 for the Corporate & Investment Banking and Asset Management business lines, and €1,500 for Payments, Insurance and Wealth Management. A single definition of “serious incident” is used, in compliance with Groupe BPCE standards (€300,000 gross). All serious incidents (above the defined threshold or deemed serious by the business line and the Head of the Operational Risk Department) are reported immediately to the business line’s management and to Natixis’ Chief Risk Officer.
Following an investigation involving all relevant parties, the operational risk manager of the business line compiles a standardized full report, including a factual description of the event, the analysis of the initial cause, the description of the impact and the proposed corrective actions. At every level of the Company, the business line Operational Risk Committees review their serious incidents and decide on the application of corrective actions, determine the deadlines and associated deliverables, and monitor the progress of these actions. The entities and business lines can decide to apply these measures to their own threshold, which is lower than that of Natixis and consistent with its activity and level of risk.
In 2019, nearly 2,950 incidents that occurred in the year (representing 8,250 single incidents) were entered into the recording tool by the Natixis business lines. The application of reporting threshold has helped to reduce the number of declarations made since 2016, particularly in the Payments, Insurance, and Asset & Wealth Management business lines and the cross-business functions.
Natixis and its subsidiaries benefit from the guarantees provided in the following main insurance programs: covering its insurable operational risks;V
“Regulated Intermediation Liability” (in three areas: FinancialB/ Intermediation, Insurance Intermediation, Real Estate Transactions/Management) with a total maximum payout of €10 million per claim and per year; “Operating Liability” covering €100 million per claim, as well asC/ a “Subsidiary Owner Civil Liability”/“Post Delivery-Reception Civil Liability” coverage extension for up to €35 million per claim and per year of insurance; “Company Directors Liability” for up to €200 million per claimD/ and per year of insurance; “Property Damage to Offices and to their content” (including ITE/ equipment) and the consecutive “losses in banking activities”, for up to €400 million per claim; “Protection of Digital Assets against Cyber-Risks” & theF/ consecutive “losses in banking activities”, for up to €140 million per claim and per year of insurance.
Natixis’ structural balance sheet risks are managed and monitored under the authority of the Asset/Liability Management Committee (ALM Committee), which is chaired by the Chief Executive Officer and composed of the members of the Senior Management Committee in charge of Finance, Risk Supervision Division and the Corporate & Investment Banking division, the Head of the Joint Refinancing Pool, the Head of Financial Management and BPCE’s Head of Financial Management. The Committee meets every two months and is mainly responsible for: defining and monitoring Natixis’ ALM;V
approving the major principles in terms of structural balance sheetV risks (structure, delegation of authority, fund transfer pricing, etc.) in compliance with the standard ALM framework set up by BPCE; validating ALM assumptions and conventions underlyingV calculations for metrics used to manage and monitor ALM risks; validating internal limits with respect to ALM indicators, the overallV Group limits being defined by BPCE; validating the overall funding policy in conjunction with the BPCEV ALM Committee; supervising structural balance-sheet risks, including managingV excessive leverage risk since 2015; supervising the main balance sheet aggregates and theirV development.
the ALM Department is responsible for updating the ALMV principles, standards, conventions and limits. It submits them to the ALM Committee for approval under the oversight of the Risk Supervision Division and supervises structural ALM risks on a consolidated basis while verifying the overall consistency of the ALM system. The department is also in charge of ALM, regulatory liquidity ratios and the leverage ratio (see section 3.3.2.2), the Treasury Department (joint refinancing pool), which comesV under the authority of the Financial Management Department, is responsible for covering the funding requirements of the business lines, providing operational management of liquidity risk in accordance with applicable risk mandates and limits, implementing the Natixis medium-term refinancing policy adopted by the ALM Committee, and operationally managing compliance with the regulatory liquidity ratio; the Risk Supervision Division, which is responsible forV independently evaluating the structural ALM risk monitoring system, second-level controls on cash and ALM indicators, and the approval of identified ALM methods for use in a model. A dedicated department (MARPL) is also responsible for holding a Market Risk Committee meeting to review the operational limits on banking scopes covered by risk mandates. The Risk Supervision Division also proposes the limits specified under the risk appetite system, which are validated by the Board of Directors.
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Natixis’ funding structure relies on a Joint Refinancing Pool shared by Natixis and BPCE. Placed under the authority of the Group ALM Committee, this platform was implemented in order to secure the Group’s financing and optimize the management and allocation of liquidity within the Group in accordance with predefined rules, with the aim of limiting the use of market financing and reducing funding costs.