PRESENTATION OF NATIXIS 3 1.1 Presentation of Natixis 4 1.2 History and links with BPCE 6 1.3 2015 Key fi gures 8 1.4 Natixis’ business lines 10 1.5 Natixis and its shareholders 26
CORPORATE SOCIAL RESPONSIBILITY 375 6.1 Strategic outlines and organization of the sustainable development policy 376 6.2 Reporting frameworks and methodology 390 6.3 Labor information 393 6.4 Environmental information 401 6.5 Social information 406 6.6 Social and environmental information for international operations 408 6.7 Report of one of the Statutory Auditors , appointed as independent third-party bodies, on the consolidated social, environmental and societal information provided in the management report 414
LEGAL INFORMATION 417 7.1 Natixis bylaws 418 7.2 General information on Natixis’ capital 424 7.3 Distribution of share capital and voting rights 429 7.4 Information from Article L.225-100-3 of the French Commercial Code 431 7.5 Draft resolutions of the Combined General Shareholders’ Meeting of May 24, 2016 432 7.6 Statutory Auditors’ special report on related-party agreements and commitments 444
This registration document was fi led with the French Financial Markets Authority on March 10, 2016, in accordance with Article 212-13 of the general regulations of the French Financial Markets Authority. It may be used in connection with a fi nancial transaction only if accompanied by a transaction note approved by the French Financial Markets Authority.
INSURANCE Life insurances Individual life insurance, savings, transfer of assets, retirement, death insurance, long-term care insurance and borrower’s insurance
NET INCOME (GROUP SHARE) 1,344 1,136 * Excluding exceptional items, see section 4.1.1 “Methodology” and Appendix to 4.1.3 “Consolidated results”.
*** See section 4.1.1 “Methodology” for exceptional items and Appendix to 4.1.3 “Consolidated results”.
*** After paying out the proposed dividend for the fi scal years in question.
** Pro forma data, see section 4.1.1 “Methodology” for exceptional items and Appendix to 4.1.3 “Consolidated results”.
Financial investments 127 140 * Excluding exceptional items, see section 4.1.1 “Methodology” and Appendix to 4.1.3 “Consolidated results”.
Before market opening (subject to modifi cation) 2016 First Quarter Results
1 PRESENTATION OF NATIXISNatixis’ business lines 1.4 Natixis’ business lines 1.4.1 INVESTMENT SOLUTIONS & INSURANCE
The asset management market continued to grow despite slow global economic growth. However, 2015 was a mixed year, with high market volatility and falling US and European fi nancial indices in the second half.
Natixis Global Asset Management achieved another record year, after 2013 and 2014, for both business infl ows and results, although there were signs of slowdown in the second half of the year. Global assets under management rose signifi cantly to a record high of €801.1 billion in 2015 versus €735.5 billion in 2014 on a constant euro basis, an increase of 8.9%. The €65.6 billion increase in assets under management was due to the combined effect of three key factors: a highly favorable foreign exchange effect (+44 billion) and infl ow effect (+33 billion) and a negative market effect (-12 billion). The scope effect was negligible in 2015: it was negative in the United States with the removal of Reich and Tang and positive in Europe with the acquisition of DNCA and the larger stake in Dorval AM, which was more than offset by the disposal of Cube Investment Management.
In 2015, the platform generated high full-year net infl ows of €19.6 billion. These account for nearly two-thirds of Natixis Global Asset Management’s total infl ows and demonstrate the power of this distribution channel. Furthermore, the quality of the aggregate infl ows is increasing: they include more long-term products and are becoming more diversifi ed in terms of expertise, affi liates, countries and customer segments. International infl ows (excluding the United States) reached record levels; in the United States, the distribution platform achieved a high level of gross infl ows while net infl ows were affected by fourth-quarter withdrawals associated with very diffi cult market conditions.
In addition to its strong presence in the US market, in 2015 the platform continued to expand its international coverage in Asia for major corporate clients and global advisors, and in Europe, mainly in the UK market, where business was brisk with institutional clients and on the retail market. Asset management distribution activity picked up in France and other European countries including Italy, Spain and Germany. A strategy of extending coverage to several Latin American countries (Mexico, Uruguay and Colombia) has been followed since 2014.
The European Asset Management business posted €384.3 billion in assets under management at end-2015 versus €340.8 billion at end-2014, a substantial increase of 12.8%. This is due to a positive infl ow effect and a change in scope (acquisition of DNCA Finance).
These companies experienced strong, and in some cases, very strong activity, backed by high-quality expertise, product performance and the support of distribution teams. They are also making headway with international clients, with an increasingly signifi cant share of sales directed abroad. For example, gross infl ows for Natixis Asset Management and its subsidiaries originating outside of France reached over 50% of the total in 2015, mainly from European countries.
Further progress was made in the implementation of Natixis Asset Management’s strategic plan structured around six specialized divisions (Fixed Income, European Equities, Investment and Client Solutions, Volatility and Structured Products, Global Emerging and Responsible Investment). This shift towards a European multiboutique model is refl ected in the existence of strong brands and recognized teams. Thus, in addition to NAM’s Fixed Income, European Equities and Investment and Client Solutions teams, Mirova is dedicated to infrastructure project fi nancing and a leader in several areas of SRI (socially responsible investment) and Seeyond specializes in structured and volatility products and recently launched an activity in the United States. In 2015, a new brand, Emerise, was created; Emerise is the brand name of “NAM Asia”, a Singapore-based company designed to facilitate the sale of Asian and emerging country products. This diversifi cation of business expertise has been accompanied by an expanded range of asset management offerings and solutions that are more comprehensive, more specialized and increasingly recognized.
AEW Europe is owned in partnership with Caisse des Dépôts, which has a 40% stake. This subsidiary is a European leader in investment advisory services and third-party real estate asset management. AEW Europe operates in nine European countries, with a particularly strong presence in Paris and London, and managed €18 billion in assets at end-2015 versus €16 billion at end2014. In 2015, the level of transactions (acquisitions and disposals) reached the record high and fundraising was also very strong. AEW Europe continued its 2015-2018 strategic plan with auspicious business prospects based on development and international diversifi cation opportunities amid considerable investor interest in real estate. The partnership between AEW Capital Management, in the United States and Asia, and AEW Europe constitutes a global platform that ranks number 6 in the world in terms of assets under management for third parties.
Assets under management for the US subsidiaries reached a total of $438.4 billion at end-2015, compared to $462.8 billion in 2014, a decrease of 5.3%. In Asia, assets under management stabilized at $7 billion at end-2015, despite a negative market effect.
The largest infl ows were recorded by Loomis and Sayles (bonds and equities), as well as Alpha Simplex (alterative cash products), Vaughan Nelson IM (equities) and AEW Capital Management (real estate assets). In addition, NGAM Canada, acquired in 2014, started to roll out its activity on the Canadian retail market supported by the US distribution teams.
The group’s US asset management companies directly provide distribution services in its areas of expertise for institutional clients in the United States. In the retail banking segment, they benefi t from strong support from the distribution platform, which provides asset management products, advisory and structuring capabilities, and related services that can be tailored to different markets and distribution channels. This platform supplies both volume retailers and private investment advisors. The distribution teams were further expanded, and have posted excellent sales performance over the last few years.
Assets under management of the NGAM Private Equity division rose from €5.8 billion at end-2014 to €6.3 billion, of which close to 90% for third-party investors, and covers the private equity, mezzanine, infrastructure and private debt segments under the multi-affi liate model which gives access to the expertise of six independent, complementary and international asset management companies.
1 PRESENTATION OF NATIXISNatixis’ business lines The private banking activity is aimed at three customer categories: the wealth management customers of the Groupe BPCE banking network, some 700 independent wealth management advisors, with access to a wide range of investment products and services via the Sélection 1818 distribution platform and, fi nally, direct clients, mainly introduced by Natixis.
In 2015, Banque Privée 1818 maintained its strong sales momentum with net infl ows of nearly €1.8 billion.
Gross infl ows from Groupe BPCE’s banking networks reached €1.4 billion in 2015, with assets under management totaling €7.64 billion.
Business owners and senior executives in France and abroad represent the core target markets of private banking teams in charge of direct customers (€7.03 billion in assets under management at December 31, 2015). They work closely with Natixis’ Coverage teams to roll out innovative and customized wealth-management solutions to meet the specifi c needs of this demanding customer segment.
In 2015, Banque Privée 1818’s Corporate Advisory team assisted with several LBOs, including one transaction of over €300 million that was among the 15 biggest LBOs carried out in France during the year. In this transaction, which was initiated by the wealth engineering teams and managed by the wealth management teams, the Banque Privée 1818 teams provided a complete package of services from corporate banking to wealth and fi nancial advisory and including setting up management packages.
In terms of innovation, in 2015 Banque Privée 1818 and CNP Assurances launched Sélection Cinto, a new life insurance policy for the wealth management market.
Despite diffi cult and highly competitive business conditions Sélection 1818 collected gross infl ows of €936 million.
The key feature of 2015 was the growth in infl ows invested in unitlinked policies, which jumped by 36% on 2014. Unit-linked policies represented 20.5% of gross infl ows, up 5.9 points on the previous year and aassets under management in unit-linked policies rose by 10.5% compared to 2014. The options and services included in the fl agship products offered to customers – Horizéo for the general public and Quintessa for private banking customers – proved particularly attractive for supporting the recovery of infl ows.
Overall, revenues fell slightly by 2% due to a reduction in euro infl ows into the fund (down 10%). This result is in line with the strategic direction taken by the business line and the networks to better balance the infl ow structure. The wealth management segment was particularly dynamic (up 36%) and assets under management rose by 5.4%.
Growth in the personal protection insurance business remained strong in 2015, with premiums increasing by 12% to €702 million. Payment protection insurance accounted for 78% of personal protection insurance premiums in 2015.
Natixis Assurances continued to record strong business growth, driven by Groupe BPCE’s ambitions under its “Growing Differently” strategic plan for 2014-2017. Overall, property and casualty insurance premium income totaled €1,180 million, representing an 11% increase, well above market levels (up 1.5% – source FFSA – 2015).
Growth was driven by auto and multi-risk home insurance due in particular to the positive impact of the new French consumer law known as the “Hamon Law” and the considerable efforts made by the networks. The policy portfolio grew by more than 9% in 2015. The claims experience in the non-life business improved slightly, thanks to more favorable conditions in the multi-risk home insurance segment.
The digital transformation of the business also continued in 2015, including the digitalization of new offerings available in the networks.
V Coverage: Natixis’ bankers are developing a strategic dialog with its customers by anticipating their needs and, in conjunction with the business lines, offering them all of Natixis’ products and services.
V Strategic Advisory: customers can benefit from Natixis’ expert advisory in the areas of mergers and acquisitions, financial strategy and ratings, and in primary equity capital markets.
V Portfolio Management: under the “Originate-to-Distribute” model implemented in 2013, Portfolio Management is responsible for actively managing the financing portfolio of the Corporate & Investment Banking division. It optimizes balance-sheet rotation and the use of related resources to give Natixis renewed origination capacity.
V The Capital & Rating Advisory business line aims to define the most appropriate equity and debt-based financing solutions for its customers who are subsequently advised on their investment decisions and choice of lenders. In this respect, capital market internationalization and disintermediation have led Natixis to develop a rating advisory service within this business line to facilitate its customers’ access to new international sources of liquidity.
V In energy and commodities, Natixis provides global sectorspecific coverage across the value chain, arranges and structures loans specific to these markets: pre-export financing, transactional facilities, borrowing base financing, reserve-based lending, etc. During 2015, in a sector that has become more difficult due to the collapse in prices for a large number of commodities, Natixis sought to selectively develop its Energy & Commodities franchise by focusing on the strongest market participants. As such, for example, Natixis financed the acquisition of Morgan Stanley’s trade portfolio by Castleton for $3.75 billion), and strengthened its positioning in the agricultural commodities sector (Ghana Cocobod, $1.8 billion; Biosev $318 million).
V Natixis is a leading player in real estate financing and boasts a comprehensive financing offering in Europe and the United States: advisory for equity transactions and for arranging corporate and specialized financing solutions, securitization, German mortgage covered bonds (Pfandbriefbank), etc. In 2015 activity was brisk and featured headline deals, such as the $854 million mortgage
Natixis’ business lines refinancing of 16 shopping centers owned by the group Altaréa Cogedim, the acquisition of a portfolio of 10 shopping centers owned by AEW Europe / China Investment Corp. for a total of €670 million, €472 million in refinancing for an office block in the 12th district of Paris on behalf of Tishman Speyer, or $349.5 million in financing to build a complex of four residential buildings in Manhattan (Gramercy Square). In addition, Natixis leveraged on its stronghold in the CMBS (Commercial mortgagebacked securities) market in the United States to securitize a total of $2.5 million in 2015, up 82% on the previous year.
On the cash equity market, Natixis is positioned as a Europewide broker specializing in the French market, offering the full range of expertise: research, sales, and value-adding execution products. Three distribution platforms – in Paris, London and New York – are available for corporate and institutional clients, as well as for Groupe BPCE network clients. In 2015 the bank continued to develop abroad by strengthening its teams in New York and London with a view to become a key player in top European companies for US and UK clients.
With trading teams in New York, London, Paris, Tokyo and Hong Kong, Natixis hedges underlying assets worldwide and leverages its expertise in mutual funds. As a leading player in Equity Finance activities, in 2014 Natixis was voted No. 1 for customer relations in equity lending in Europe, and No. 5 worldwide (source: Equity Lending Survey 2015 – Global Investor/ISF – group 2), as well as Best EMEA Equity Lender (source: Equity Lending Survey 2015 – Global Investor/ISF – group 2 voted by group 2).
As for e-trading on the equity markets, aside from a full range of products and services for execution, Natixis offers it clients a range of electronic platforms that draw on its fi nancial engineering expertise: an advisory tool for asset allocation, a structured product price generator and synthetic prime brokerage tools (Natixis Synthetic Services).
Despite the 2015 market context of a double bond crisis in the spring and the yuan devaluation shock, Natixis confi rmed its ability to manage its market risks and grow to better serve its increasingly international customers amid reduced liquidity and heightened volatility.
On the commodities markets, Natixis uses its dedicated trading and sales platforms in Asia, Europe and the Americas to offer hedging products on base metals, precious metals and energy. In 2015 synergies with the aircraft fi nancing and commodities businesses were reinforced by the impressive growth of business in the Americas and Asia.
Cross-expertise research brings one of the market’s biggest research teams to the capital markets, with a focus on six areas of expertise: equity, credit, economic, investment strategies, commodities, fi xed income and forex. In 2015 Natixis multiplied the publication of its studies and investment recommendations, and held conferences to give customers access to cross-disciplinary expertise based on joint analyses and targeted research. Natixis was voted the 2015 Best Credit Research Team in six sectors: ABS, agencies, covered bonds, retail and consumer goods, industrials and utilities (source: Euromoney – Fixed Income Research Survey 2015).
Meanwhile, quantitative research supports the Bank’s fi nancial innovation process and ensures that it remains competitive in today’s fast-changing markets by developing pricing and risk management models, as well as quantitative asset allocation strategies.
To maximize the use of bank resources when serving clients, Natixis created its Portfolio Management global business line in 2013. Its teams are dedicated to ensuring the best possible rotation of the Corporate & Investment Banking’s loan portfolio (i.e. all the vanilla and structured fi nancing originated by the bank) and maximizing its profi tability, taking into account rare resources (RWA [Risk-Weighted Assets], liquidity).
In 2015 Portfolio Management ensured the rotation of a signifi cant part of the bank’s fi nancing portfolio while creating value, in particular by establishing structured solutions.
V Cash management: In France, the Single Euro Payment Area (SEPA) and internationally, Natixis has a multi-channel and multiformat offering to process both incoming and outgoing flows, as well as additional security services.
V Liquidity management: Natixis offers cash and account management solutions, and provides centralization tools for treasury management, as well as cash investment solutions.
GTB is active on the Asia-Pacifi c (Singapore, Shanghai, Hong Kong), Americas (New York, São Paulo) and EMEA (Dubai, Moscow) platforms, and draws on a vast network of banking correspondents to facilitate the development of its customers’ business activities.
Against the backdrop of a tough market environment and a regulatory context that has become exceedingly complex, the Americas platform performed well in 2015 across its business sectors. It pursued its growth strategy in new geographic areas and developed its customer relationships. It also intensifi ed collaboration between the business lines to improve its position and earn the role of underwriter in fi nancing transactions and in transactions on the capital markets.
It reached a major milestone with the opening of a branch in Beijing, making it possible to be closer to Chinese customers to support their international development, particularly public that are headquartered in Beijing.
More generally, the platform gives local customers access to Natixis’ global offering, for example by offering them the benefi ts of services such as aircraft fi nancing. It continued to support customers wishing to invest in Europe, as evidenced by Chinese conglomerate Fosun’s public tender for the group Club Méditerranée.
Lastly, its contribution to Groupe BPCE increased markedly following the issuance of securities for BPCE and Natixis in several currencies and on various markets, including Japan, Singapore, Hong Kong and Australia.
Natixis is developing from its branches in London, Frankfurt, Milan, Madrid and Dubai, its subsidiaries in Moscow and Frankfurt, and its representative offi ces in Istanbul and Almaty. Its strategy is specifi c to each region: V In southern Europe, Natixis has the advantage of a strong historical presence with corporates and financial institutions in Italy and Spain. In 2015 the Madrid branch continued to grow amid a highly competitive market. In the markets, it carried out a two-tranche hybrid bond issue for Repsol and led the inaugural bond issue for ACS. It ended the year ranked No. 1 for bond issues for financial institutions in Spain (source: Dealogic). In terms of financing, the branch acted as sole lead manager, lead arranger of the refinancing of the Iberchem debt, and reopened the real estate refinancing market. The Milan branch fortified its presence on the primary bond market in Italy and led several bond issues for financial institutions and corporates. Natixis once again positioned itself at the top of the league tables for financial institutions. Moreover, the bank renewed its leading position in infrastructure financing in Italy. It also participated in large financing transactions for Italian corporates, such as Pirelli and Exor.
V On the African continent, 2015 was a year of selective growth in structured financing. On the capital markets the bank led a convertible bond issuance for a total of €1,116 million on behalf of Steinhoff International, and was the only French bank of the four associated bookrunners.
In 2008, Natixis established the GAPC division structure (Gestion Active des Portefeuilles Cantonnés – Workout Portfolio Management) in order to (i) isolate the assets that were most impacted by the crisis and that were no longer deemed to fi t the new strategic direction of Natixis, and (ii) progressively offl oad these assets by means of active management, ensuring the proper balance between speeding up the return of capital and the resale price of the assets.
The drastic run-off of assets led to the closure of GAPC on June 30, 2014. Since June 30, 2009, a portion of the GAPC portfolios has been covered by a guarantee from BPCE. The guarantee mechanism remains unchanged and will continue to apply to the residual RWA under the same conditions.
The guarantee covers credit assets, except for complex credit derivative portfolios and RMBS portfolios (fully sold on December 31, 2012) insured by US Agencies (FNMA known as Fannie Mae, FHLMC known as Freddie Mac) but including the hedging of risks linked to counterparties not providing collateral.
The implementation of the guarantee triggered two payments to BPCE: V the first for €1.183 billion in respect of the financial guarantee (including €1.035 billion for assets recognized as loans and receivables (L&R) and €148 million for available-for-sale assets (AFS) versus €1.249 billion in provisions); V the second for €367 million in respect of the Option.
Financial Services combines payment activities (credit transfers, direct debits, electronic payment transactions, etc.), securities account administration and fi nancial market transactions (retail and private banking custody), and employee savings (profi t-sharing and incentive plans, etc.) and pension schemes (individual and collective pension plans), service vouchers, and collective personal protection insurance.
In line with Groupe BPCE’s “Together” project, the objective of further increasing synergies with the Banque Populaire and Caisse d’Epargne networks has also been included in the 20142017 “Growing Differently” plan. This is a key focus for Specialized Financial Services.
With nearly 2,400 new contracts signed this year, Natixis Factor affi rmed its leading position among professionals and SMEs and bolstered its historical development strategy: supporting companies, from professionals to major corporate clients. The satisfaction rate for its clients, who are primarily from the Groupe BPCE networks, was 90% in the four rounds of surveys conducted in 2015.
CEGC ranks second in the French market for mortgage guarantees for individuals and guaranteed nearly €32 billion in loans in 2015 (up by 72% in a market underpinned by continuing low interest rates resulting in a high percentage of loan renegotiations).
1 PRESENTATION OF NATIXISNatixis’ business lines It is a leading player in the property administration, third-party management of retail and offi ce space, and residential sector market, issuing some 5,000 guarantees with a volume of nearly €6 billion. It guaranteed the completion of 13,000 single-family homes in France. CEGC is also present on the business market, with more than 68,000 guarantees issued in 2015, up 11%.
Created in December 2013, CEGC Conseil, a dedicated intermediation subsidiary, offers new real estate insurance products, particularly in construction insurance.
It provides the full range of consumer finance expertise for Groupe BPCE banks: design and marketing, network coordination, credit scoring, management and carrying of loans (revolving credit), collections and litigation. Despite a very restricted consumer fi nancing backdrop during the year, Natixis Financement maintained solid commercial momentum in both revolving credit and repayment loans.
New loans totaled €9.4 billion (nearly €1.1 billion for revolving credit and more than €8.3 billion for personal repayment loans).
Outstanding loans climbed 11% year-on-year to €18.7 billion at December 31, 2015, thus cementing the Company’s No. 3 spot on the French market (source: annual reports, Natixis Financement survey).
At the end of 2015, the fi nancing managed totaled €788 million, up 17% compared to 2014. In descending order, the loans were mainly devoted to the fi nancing of fi lms, television programs and movie theaters. The provision of new loans managed by Natixis Cofi ciné amounted to €656 million, up 16% compared with 2014.
The collective pension plan (Perco) has consistently posted robust growth since inception, particularly in the corporate and institutional client segments. The number of Perco accounts increased 10% yearon -year, taking the market share of accounts under management to 31.89% (source: AFG at June 30, 2015).
1 PRESENTATION OF NATIXISNatixis’ business lines ■ CHANGE IN NUMBER OF TRANSACTIONS
Natixis’ EuroTitres Department provides custody services for retail and private banking and is the leader in custody services to retail outsourcing.
Natixis manages 3.6 million securities accounts for a diversifi ed client base comprising Groupe BPCE’s banking networks, other banking institutions with or without retail networks, fi nancial companies and private banking asset management fi rms.
On February 23, 2015, the French government indicated that it was examining the possibility of transferring the management of state support procedures for exports, currently conducted by Coface, to the Bpifrance group.
Coface and the French government reached an agreement, signed on July 29, 2015, on the fi nancial terms of such a transfer. The agreement relates to compensation of €89.7 million before tax.
In October 2015, Coface further extended its commercial paper program used to fi nance the factoring business of its German subsidiary Coface Finanz.
The renewal of the program resulted in longer maturities (four of the six facilities will have a two-year maturity), a larger amount (from €500 million to €600 million) and a signifi cant fi nancial gain (decrease in the average price of the facilities to around 10 bp).
In March 2012, Coface created a special purpose vehicle for the development of its factoring business in Germany, the aim being to establish an alternative refi nancing solution to the liquidity facility provided by Natixis. The original program, for an overall amount of €1,100 million, subsequently evolved to €1,195 million in July 2014.
In December 2015, this securitization program was renewed early, with the maximum amount kept at €1,195 million. In this context, Coface entered into an agreement with the banks in charge of the fi nancing to rollover up to 23% of the overall maximum amount for a term of one year and up to 77% for three years.
Stock market indexes CAC Next 20, SBF 80, SBF 120, CAC All-Tradable and Euronext 100 1.5.2 BREAKDOWN OF SHARE CAPITAL AT DECEMBER 31, 2015
In 2015, Natixis’ share price decreased by 5% (from €5.49 at December 31, 2014 to €5.22 at December 31, 2015). Over the same period, the euro zone banking stocks index (DJ Euro Stoxx Bank) also decreased by 5%.
The average daily volume of Natixis shares traded on the market amounted to around 4.64 million in 2015 versus an average of around 4.06 million in 2014.
V A dedicated e-mail address (actionnaires@natixis.com), managed directly by the Individual Shareholder Relations team, enables individual shareholders to send questions to the Company.
Shareholders’ Club members are regularly updated on Natixis news through: V monthly newsletters focusing on Club highlights and company financial news; V an interactive multimedia version of the Shareholder Annual Newsletter.
Members can access the dedicated website (clubdesactionnaires. natixis.com) containing information about the Club and its program of activities (interactive Shareholder Annual Newsletters, meetings, conferences, video conferences, video chats, sponsorship events, etc.).
The seven thematic presentations (conferences, video conferences and video chats) that occurred during the year were led by internal experts from the teams at Natixis and its subsidiaries as well as by external experts. The presentations focused on current economic, fi nancial and stock market-related issues.
Our shareholders were thus able to talk to economists from our Economic Research team at three conferences held in Paris and also accessible via live webcast, to Philippe Waechter, Chief Economist at Natixis Asset Management at our two Q&A sessions via web-video and to Gérard Ampeau, from the École de la Bourse, at two online video conferences. Recordings of these events were then made available to our Shareholders’ Club members in our newsletters and on the dedicated website.
In addition, at the General Shareholders’ Meetings, there is a dedicated “Shareholders’ Club” stand for Club members, prospective members and for all shareholders requiring information on Natixis.
V The CCAN is an advisory body and sounding Board composed of 12 members who represent Natixis’ individual shareholders. These members are themselves individual shareholders chosen through an application process that includes an interview. A third of its members are renewed each year, following a call for applications sent via the usual communications media used to inform shareholders.
V The Committee is in charge of all aspects of financial communication for individual investors, and in particular the communication tools at their disposal.
V All of the topics discussed, reports of meetings and members’ video presentations are available on the website.
Besides the Chairman, François Pérol and the CEO, Laurent Mignon, the Board members were also present, including the chairpersons of the various specialized committees.
Laurent Mignon presented the accounts and highlights of 2014 and the results for the fi rst quarter of 2015. He concluded with a progress report on the “New Frontier” 2014-2017 strategic plan.
The Q&A session lasted nearly an hour. With an 82.9% quorum, all resolutions were adopted.
The live webcast and presentation of the Shareholders’ Meeting are available for one year on Natixis’ web site Investor Relations section and Shareholders’ Meeting.
2015 Distinctions – Natixis’ Shareholder Relations receive triple recognition At the awards ceremony for Best Shareholder Relations organized by Le Revenu Group, Natixis won three awards in the SBF120 Companies category (excluding CAC40): R gold for the Annual Shareholders’ Meeting. This is the fi rst time that Natixis has been recognized for its Annual Shareholders’ Meeting. This award pays tribute to the quality of the cross-company work done during fi ve months by Individual Shareholder Relations in coordination with Purchasing, Governance and Labor Relations, Legal, and Communications and CSR; R silver for Services to Shareholders; R bronze for Shareholder Relations, which is based on three themes: Shareholders’ Meetings, shareholder services and digital communications.
2.1 CORPORATE GOUVERNANCE 32 2.2 ADDITIONAL INFORMATION ON THE CORPORATE OFFICERS’ POSITIONS 34 2.3 MANAGEMENT AND OVERSIGHT OF CORPORATE GOVERNANCE 60 2.3.1 Board of Directors 61 2.3.2 Special committees: offshoots of the Board of Directors 68 2.3.3 Senior management 74 2.3.4 General Shareholders’ Meetings 76 2.3.5 Potential confl icts of interest 77 2.4 NATIXIS COMPENSATION POLICY 78 2.4.1 General principles 78 2.4.2. Policies and rules established for determining compensation and benefi ts of any kind for members of management bodies 80 2.5 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES 93 2.5.1 General Organization 93 2.5.2 First-level permanent control 95 2.5.3 Second-level permanent control: compliance and permanent control 95 2.5.4 Second-level permanent control: IT Systems Security and business continuity 97 2.5.5 Risk monitoring and control 97 2.5.6 Internal control system relating to accounting and fi nancial information 100 2.5.7 Periodic control 103 2.6 STATUTORY AUDITORS’ REPORT ON THE REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS 105
Chief Offi cer Finance, Risk and Operations (BPCE), member of the Management Board of BPCE
Pierre-Henri Denain - FGM - EMEA Europe (except France), Middle East, Africa
John Hailer - Asset Management and Private Banking - Natixis Global Asset Management U.S. and Asia
Pascal Voisin - Asset Management and Private Banking - Natixis Asset Managemet
Pierre Servant - Investment Solutions - Asset Management and Private Banking
Works Council representative Chairman of the Steering and Supervisory Board of Caisse d’Epargne Côte d’Azur
First appointed: Board Meeting of 04.30.2009 effective 05.14.2009 Renewal date: Board Meeting of 02.18.2015 Term expires: 2019 AGM (e)
V Member of the BPCE Management Board V Chairman of the Board of Directors of: Natixis Global Asset Management,
V Chairman of the Board of Directors of Natixis Global Asset Management
V Permanent Representative of Natixis, Member of the Board of Compagnie française d’assurance pour le commerce
V Chairman of Coface Holding S.A.S. then Chairman of the Board of Directors of Coface S.A. (formerly Coface Holding S.A.S.) (since 11.22.2012)
Chairman of the Board of Directors First appointed: AGM of 04.30.2009 (Chairman of the Board: Board Meeting of 04.30.2009) Term expires: 2019 AGM (e)
François Pérol is a graduate of HEC and the Institut d’Études Politiques de Paris, and alumnae of the École Nationale d’Administration. He began his career at the Inspection Générale des Finances (French General Inspectorate of Finance), and held various positions at the Ministry of the Economy and Finance, beginning with the Treasury Department (1994-2002), and then on the Cabinets of Ministers Francis Mer and Nicolas Sarkozy (2002-2004). He then left the administration to join Rothschild & Cie Banque as Managing Partner from 2005 to 2007. He was appointed Deputy Secretary General to the President of the Republic from 2007 to 2009. François Pérol has been Chairman of the BPCE Management Board since 2009. Key advisory skills: expertise in strategic matters concerning banking and fi nancial institutions, as well as the French and international economic and fi nancial environment.
V Chairman of the BPCE Management Board V Chairman of the Board of Directors of Crédit Foncier V Chairman of CE Holding Promotion, European Savings Bank Group (until 06.12.2015) V Member of the Board of Sopassure V Permanent Representative of BPCE Maroc, member of the Board of Banque
V Permanent Representative of BPCE, General Partner of SCA ECUFONCIER V Permanent Representative of BPCE, Chairman of Banque Populaire Création
V Chairman of the Board of Directors of Fondation des Caisses d’Epargne pour la Solidarité (until 03.09.2011)
V Chairman of the Supervisory Board of Foncia Group (until July 2011)
V Vice-Chairman of the Board of Directors of Crédit Immobilier et Hôtelier (Morocco) (until 2011)
V Permanent Representative of BPCE Maroc, Member of the Board of Banque Centrale Populaire
2 CORPORATE GOVERNANCEAdditional information on the corporate offi cers’ positions BPCE Permanent Representative - Daniel Karyotis Member of the BPCE Management Board – Finance, Risk and Operations
BPCE: Natixis shares held: 2,227,221,174 Address: 50 avenue Pierre Mendès France, 75201 Paris Cedex 13 Daniel Karyotis: Date of birth: 02.09.1961 Nationality: French Natixis shares held: 0 Address: 50 avenue Pierre Mendès France 75201 Paris Cedex 13
V Permanent Representative of Banque Palatine, member of the Board of Directors of OCBF
V Member of the BPCE Management Board - Finance, Risk and Operations (since 12.01.2012)
V Permanent Representative of BPCE, Member of the Board of Crédit Foncier de France (since 12.11.2012)
Attendance rate in 2015 Board of Directors: 90% Strategic Committee: 100%
V Member of the Supervisory Board and Audit Committee of BPCE
Alain Condaminas has been Chief Executive Offi cer of Banque Populaire Occitane since 2006. Key advisory skills: expertise in Human Resources issues and business transformation, extensive knowledge of banking businesses.
V Chief Executive Officer of Banque Populaire Occitane V Member of the Supervisory Board of BPCE (until 05.22.2015) V Member of the Supervisory Board and Risk Committee of BPCE (since 12.16.2015) V Chairman of Fondation d’Entreprise BP Occitane V Member of the Board of Natixis Asset Management V Permanent Representative of BP Occitane, Member of the Board of i-BP V Permanent Representative of BP Occitane, member of the Investment Committee of Multicroissance V Permanent Representative of BP Occitane, manager of SNC Immocarso
V Permanent Representative of BP Occitane, Vice-Chairman of the Board of Directors of CELAD S.A. (b)
V Permanent Representative of BP Occitane, Member of the Board of i-BP, IRDI (b)
V Permanent Representative of BP Occitane, Member of the Supervisory Board of SOTEL (b)
V Permanent Representative of BP Occitane, Member of the Supervisory Board of ABP IARD
V Permanent Representative of BP Occitane, Member of the Investment Committee of Multicroissance
Laurence Debroux Member of the Management Board – Chief Financial Offi cer of Heineken N.V.
Independent director First appointed: co-opted by the Board of Directors on 04.01.2010 and ratifi ed at the CSM of 05.27.2010 Term expires: 2019 AGM (e)
Attendance rate in 2015 Board of Directors: 25% (h) Audit Committee: 60% Risk Committee: 50% Strategic Committee: 100%
Laurence Debroux is an HEC graduate and began her career in 1992 at Merrill Lynch Bank. From 1993 to 1996 she worked in the Finance division of Elf Aquitaine. In 1996 she joined Sanofi fi rst as Chief Financing & Treasury Offi cer and then as Chief Financial Offi cer, before becoming Director of Strategy and being promoted to the Executive Committee of Sanofi -Aventis. Laurence Debroux was Chief Financial and Administrative Offi cer of the JCDecaux Group from 2010 until 2015, and joined Heineken N.V. in Amsterdam on March 1, 2015. She was appointed to the Group’s Executive Board as Chief Financial Offi cer by the General Shareholders’ Meeting of April 23, 2015. Key advisory skills: expertise in issues related to fi nance, communications and business strategy.
V Member of the Board of JCDecaux Bolloré Holding S.A.S. (until 01.15.2015), Média Aéroports de Paris S.A.S. (until 01.15.2015)
V Member of the Supervisory Board of Médiakiosk S.A.S. (since 11.30.2011)
V Director and member of the APG/SGA Audit Committee (from 05.21.2014 to 12.31.2014)
2 CORPORATE GOVERNANCEAdditional information on the corporate offi cers’ positions Alain Denizot - term of offi ce commencing 05.19.2015 Chairman of the Management Board of Caisse d’Epargne Nord France Europe (CENFE)
V Chairman of the Management Board of Caisse d’Epargne Nord France Europe
Nord Pas de Calais, Immobilière Nord France Europe (since 02.12.2015), V Permanent Representative of CENFE, Member of the Board of Hainaut
Immobilier S.A. V Permanent Representative of CENFE, Member of the Supervisory Board of
IT-CE V Permanent Representative of Immobilière Nord France Europe, Chairman of
S.A.S. Euroissy Parc (since 04.24.2015) V Permanent Representative of CE Holding Promotion (until 09.01.2015),
Then Member of the Supervisory Board and the Audit and Risks Committee of BPCE
V Chairman of the Supervisory Board of Immobilière Nord France Europe
V Permanent Representative of CENFE, Chairman of Finorpa SCR (b), Finorpa Financement (b)
V Permanent Representative of CENFE, Member of the Board of Hainaut Immobilier
V Permanent Representative of CENFE, Member of the Board of Finovam (since 12.24.2014)
(a) Listed company. (b) Company outside Groupe BPCE. (c) 2019 AGM convened to approve the fi nancial statements for the year ending 12.31.2018.
2 CORPORATE GOVERNANCEAdditional information on the corporate offi cers’ positions Sylvie Garcelon Chief Executive Offi cer of CASDEN Banque Populaire
Director First appointed: co-opted by the Board of Directors on 02.10.2016 Term expires: 2016 AGM (c)
Attendance rate in 2015 Board of Directors: N/A Audit Committee: N/A Risk Committee: N/A Strategic Committee: N/A
V Chief Executive Officer of CASDEN Banque Populaire (since 05.27.2015) V Chief Executive Officer of Banque Monétaire et Financière (BMF) V Deputy Chief Executive Officer of CASDEN Banque Populaire (until 05.27.2015)
(a) Listed company. (b) Company outside Groupe BPCE. (c) 2016 AGM called to approve the fi nancial statements for the year ended 12.31.2015.
Michel Grass Chairman of the Board of Directors of Banque Populaire Bourgogne Franche Comté
Holding a degree in Management Sciences from Université de Paris 1, Michel Grass began his career in 1983, working in healthcare as a Clinic Director in Sens. From 1987 to 2010 he founded and ran a regional group of private clinics. In 2000 he became a director at Banque Populaire de Bourgogne, and served as a commercial court judge from 2009. Michel Grass has been Chairman of the Board of Directors of Banque Populaire Bourgogne Franche Comté since 2010, and is Member of the Supervisory Board of BPCE since May 22, 2015. Key advisory skills: entrepreneurial experience, knowledge of the regional economic context.
V Chairman of the Board of Directors of Banque Populaire Bourgogne Franche Comté
V Chairman of Fédération Hospitalisation Privée Bourgogne Franche Comté, Commission Economique Hospitalisation Privée
V Chairman and Chief Executive Officer of S.A.S. Polyclinique du Val de Saône, S.A.S. Clinique Paul Picquet (until 2011)
V Chief Executive Officer of S.A.S. Avenir Santé, S.A.S. SE Clinique Paul Picquet (until 2011)
Member – Risk Committee First appointed: Board Meeting of 12.17.2014 Date term of offi ce expired: 11.16.2015
V Secretary General of Banque Populaire du Massif Central (until no later than 03.31.2016)
V Member of the Supervisory Board and Audit and Risk Committee of BPCE (since 11.16.2015)
Chairman of Sociétariat BPMC S.A.S. V Permanent Representative of Banque Populaire du Massif Central,
V Member of the Supervisory Board of Foncia Groupe (until 07.26.2011)
V Member of the Board of Cie Européenne de Garanties et Cautions (since 10.27.2011)
+ Member of the Audit and Risk Committee (since 2013) V Member of the Board of: Natixis (a)
2 CORPORATE GOVERNANCEAdditional information on the corporate offi cers’ positions Anne Lalou - start of offi ce 02.18.2015 Dean and Managing Director of Web School Factory, Managing Director of the Innovation Factory
Key advisory skills: entrepreneurial experience, expertise in areas relating to M&A, fi nance and corporate strategy.
V Member of the Supervisory Board of Eurazeo (a), Foncia Group. V Member of the Supervisory Board of Foncia Holding V Chairman of the Eurazeo (a) CSR Committee V Member of the Eurazeo Financial Committee (a)
V Member of the Board of Directors of KEA&PARTNERS (until February 2015)
Naxos (b) (until July 2011). V Member of the Supervisory Board of
V Member of the Supervisory Board of Medica (b) (since March 2012) (until March 2014)
V Chief Executive Officer of the Innovation Factory (b) (since February 2013)
As the youngest Certifi ed Public Accountant in the PACA region upon receiving her CPA degree in 1991, Françoise Lemalle registered with the Compagnie des Commissaires aux Comptes (French National Statutory Auditors Association) in 1993. She headed up an accounting and audit fi rm of 20 people located in Mougins. She regularly conducts training courses for retailers, craftsmen and independent professionals, notably through local administrative management centers. In 1999 she became the founding director of local savings company SLE de Cannes before being elected its Chairman in 2009, having fi rst sat on the Steering and Supervisory Committee as a non-voting member since 2009. She also became a member of the Audit Committee from this date. In addition, she has been a member of the Board of IMF Créasol (b) since 2013 and a member of the association’s Audit Committee. Françoise Lemalle has also been a member of the BPCE Supervisory Board since May 22, 2015.
Key advisory skills: Entrepreneurial experience, extensive knowledge of the accounting, fi nancial and audit fi elds.
V Member of the Supervisory Board and Risk Committee of BPCE (since 05.22.2015)
V Member of the Board of CE Holding Promotion (since 09.09.2015) V Representative of Caisse d’Epargne Côte d’Azur, Member of the Board of FNCE
V Member of the Supervisory Board of HLD (until 02.12.2015) V Trustee of the École Polytechnique Charitable Trust V Member of the Board of Cnova (a)
V Member of the Board of Natixis (a), Centaurus Capital Holdings Limited, Centaurus Global Holding Limited, Centaurus Management Company Limited, Centaurus Capital International Limited
V Member of the Board of Emolument Ltd (from 09.25.2014 to 11.17.2014)
(since 09.09.2015) V Member of the Supervisory Board and Risk Committee of BPCE
V Permanent Representative of CERA, Treasurer of Fondation Belem V Permanent Representative of CERA, Manager of: SCI dans la ville, SCI
V Representative of BPA, member of the Supervisory Board of Atlantique Mur Régions, Ouest Croissance Gestion
V Member of the Board of FNBP (until 01.30.2012) V Member of the Board of Natixis
V Chairman of the Supervisory Board of Rhône Alpes PME Gestion (b) (since 03.13.2012)
V Representative of CERA, member of the Board of Directors of Compagnie des Alpes (b) (since 10.18.2012), Fondation d’entreprise CERA, FNCE, Habitat en Région, le Club du Musée Saint Pierre
V Representative of CERA, Member of the Board of Fondation Entrepreneurs de la Cité
Member – Appointments Committee First appointed: Board Meeting of 12.17.2014 Date term of offi ce expires: 05.19.2015
Member – Strategic Committee First appointed: Board Meeting of 05.11.2011 Date term of offi ce expires: 05.19.2015
A graduate of the École Polytechnique and the École Nationale de la Statistique et de l’Administration Économique (ENSAE), Didier Patault has been with Groupe BPCE since 1992 after starting his career at Caisse des Dépôts et Consignations. After holding various fi nancial and sales positions at Caisse d’Epargne des Pays du Hainaut (1992-1999), in 1999 he joined Caisse Nationale des Caisses d’Epargne as Director of Group Development on the local economic markets. In 2000 he was appointed Chairman of the Management Board of Caisse d’Epargne des Pays du Hainaut, and then Chairman of the Management Board of Caisse d’Epargne des Pays de la Loire (2004-2008), and fi nally Chairman of the Management Board of Caisse d’Epargne BretagnePays de Loire (2008-2013).
V Chairman of the Supervisory Board of Banque BCP V Member of the Supervisory Board, the Audit Committee, the Appointments
V Member of the Board of Natixis (a), CE Holding Promotion, Natixis Coficiné, CE Participations, Natixis Global Asset Management
V Permanent Representative of CEBPL, Member of the Board of Directors of Pays de la Loire Développement, Nantes Atlantique Place Financière, SEMITAN, FNCE
V Permanent Representative of CEBPL, Member of the Supervisory Board of GCE Business Services (until December 2011)
V Permanent Representative of CEIDF, Member of the Supervisory Board of IT-CE (since 05.24.2013)
Independent director First appointed: AGM of 04.30.2009 Term expires: 2019 AGM (e)
Attendance rate in 2015 Board of Directors: Appointments Committee: Compensation Committee: Strategic Committee: A graduate of HEC business school, Henri Proglio began his career in 1972 at the Générale des Eaux Group (now Veolia Environnement ), where he held various Senior Management positions. In 1990 he was appointed Chairman and Chief Executive Offi cer of CGEA, a subsidiary specialized in waste management and transport. In 2000 he became Chairman of Vivendi Environnement (Veolia Environnement), and, in 2003, Chairman and Chief Executive Offi cer. In 2005 he was also named Chairman of the School Council of his alma mater, HEC. Henri Proglio was Chairman and Chief Executive Offi cer of EDF from 2009 to end-2014. Key advisory skills: A nationally and internationally renowned industrialist, with expertise in large corporations and strategic issues.
V Member of the Board of: Natixis (a), Dassault Aviation (a)
V Member of the High Commission for Transparency and Information on Safety in Nuclear Facilities
V Member of the National Commission for Sectors of Vital Importance
V Chairman of the Board of Directors of Transalpina di Energia
V Chairman of the Board of Directors of Veolia Propreté (until 03.23.2011), Veolia Transport (until 03.23.2011)
V Member of the Board of South Stream Transport AG (since 12.12.2012)
V Member of the Board of Dalkia (from 07.25.2014 to 11.22.2014)
V Member of the Board of ABR Management (Russia) (since 2014)
2 CORPORATE GOVERNANCEAdditional information on the corporate offi cers’ positions Philippe Sueur Chairman of the Steering and Supervisory Board of Caisse d’Epargne Ile-de-France
Attendance rate in 2015 Board of Directors: 86% Appointments Committee: Compensation Committee: Strategic Committee: Philippe Sueur holds a postgraduate degree in political science and history, a doctorate in law, and is an Associate Professor in Roman Law and Institutional History. He began his career in 1974 as a Lecturer before becoming a Full Professor at Université d’Amiens and then at Université de Paris III - Sorbonne Nouvelle and Paris-Nord. From 1992 to 2002 he was Dean of the Faculty of Law, Political and Social Science at Université Paris XIII - Nord. As Mayor of Enghien-les-Bains since 1989, Philippe Sueur has also held various elected positions such as Regional Councilor until 2011, Councilor at Large for the Val d’Oise region since 1994, and Vice-Chairman of the Val d’Oise regional council between 2001 and 2008, and then again since 2011. Since April 29, 2014 Philippe Sueur has been Vice-Chairman of the Steering and Supervisory Board of Caisse d’Epargne Ile-de-France. Key advisory skills: Recognized academic authority, extensive knowledge of local and regional authorities.
V Vice-Chairman of Association Nationale des Maires de Stations Classées et Communes Touristiques (ANMSCCT) - French Association for Mayors of Tourist Municipalities), Val d’Oise regional council
V Chairman of the Comité d’Expansion Economique du Val d’Oise (CEEVO) and the Val d’Oise Technopôle (since April 2015)
V Vice-Chairman of the Steering and Supervisory Board of Caisse d’Epargne Ile-de-France
V Vice-Chairman of ANMSCCT (b), Val d’Oise regional council (b) (since March 2011)
V Member of the Board of BPCE Assurances, STIF (b), AFTRP (b), IRIS (b)
Attendance rate in 2015 Board of Directors: 100% Appointments Committee: 100% Compensation Committee: Strategic Committee: A graduate of the IEP in Bordeaux and holder of a DES in public law, Nicolas de Tavernost began his career in 1975 with the cabinet of Norbert Ségard, Secretary of State for Foreign Trade, and then for Post and Telecommunications. In 1986 he took over as Head of audiovisual operations at Lyonnaise des Eaux, and went on to oversee the creation of M6. In 1987 he was appointed Deputy CEO of Métropole Télévision M6 where he has served as Chairman of the Management Board since 2000. Key advisory skills: expertise in strategic, management and business development matters.
V Chairman of the Groupe M6 Fondation d’Entreprise V Member of the Board of Association Football Club des Girondins de
V Permanent Representative of Métropole Télévision, Chairman of M6 Publicité SA, Immobilière M6 S.A.S., M6 Bordeaux S.A.S., M6 Interactions S.A.S., M6 Web S.A.S., M6 Foot SAS, TCM DA S.A.S.
V Representative of RTL Group of the Supervisory Board and Vice-Chairman of the Compensation Committee of Atresmedia (formerly Antena3) (a)
V Volunteer Member of the Board of the endowment fund RAISE
V Permanent Representative of M6 Publicité, Member of the Board of M6 Évènements S.A. (since 13.15.2012)
V Permanent Representative of Métropole Télévision, Member of the Board of C. Productions S.A. (since 10.21.2012)
R Chairman of M6 Publicité SA, Immobilière M6 S.A.S., M6 Bordeaux S.A.S., M6 Interactions S.A.S., M6 Web S.A.S., M6 Foot SAS
R Chairman of M6 Toulouse S.A.S. R Member of the Shareholders’
Committee of Multi 4 S.A.S. R Managing Partner of SCI 107 av
V Permanent Representative of Métropole Télévision, Chairman of TCMDA S.A.A. (since 06.27.2013)
Pierre Valentin - term of offi ce ended 07.30.2015 Chairman of the Steering and Supervisory Board of Caisse d’Epargne Languedoc-Roussillon
Director First appointed: co-opted by the Board on 01.28.2013 and ratifi ed at the CSM of 05.21.2013 Date term of offi ce expires: 07.30.2015
Pierre Valentin holds a degree in private law and another from the Institut des Assurances d’Aix-Marseille. An entrepreneur, he began his career in 1978 with Mutuelle d’Assurances du Bâtiment et des Travaux Publics in Lyon. In 1979 he founded the company Valentin Immobilier and joined the Caisse d’Epargne network. In 1984 he joined the Advisory Board of Caisse d’Epargne d’Alès. In 1991 he joined the Advisory Board of Caisse d’Epargne Languedoc-Roussillon. In 2000 he was appointed Chairman of the local savings company “Vallée des Gardons”. Since 2000 he has been a member of the Steering and Supervisory Board of Caisse d’Epargne Languedoc-Roussillon, and was Chairman of the Audit Committee between 2003 and 2006. In 2006 he was appointed Chairman of the Steering and Supervisory Board of Caisse d’Epargne LanguedocRoussillon, and was reappointed in 2009 and in 2015.
Since 2008 Pierre Valentine chairs the Board of Directors of the FNCE and actively participates in the governance of the group. Member of the Board, Chairman of the Audit Committee, Vice-Chairman of the Supervisory Board of Banque Palatine between 2008 and 2013, then Member of the Board of the Natixis listed company between 2013 and 2015. Pierre Valentin, Member of the Supervisory Board of BPCE since 2009 and Member of the Audit and Risk Committee from 2013 to 2015, was appointed Chairman of the Supervisory Board of BPCE on May 22, 2015.
V Chairman of the Steering and Supervisory Board of Caisse d’Epargne Languedoc-Roussillon (CELR)
V Member of the Supervisory Board and Audit and Risk Committee of BPCE (since 05.22.2015)
V Member of the Board of Association Maison de santé Protestante d’Alès (formerly Clinique Bonnefon)
V Member of the Board of CE Holding Promotion, FNCE, Association Maison de santé Protestante d’Alès (formerly Clinique Bonnefon) (b)
V Member of the Board of Pierre et Lise Immobilier (b)
The information it contains takes into consideration, in particular, Annex I of European Regulation (EC) 809/2004 of April 29, 2004, as well as the 2010 Autorité des Marchés Financiers (AMF - French Financial Markets Authority) report on corporate governance and internal control published on July 12, 2010 and the supplementary report of December 7, 2010, the report on corporate governance and management compensation published each year by the AMF and specifi cally the AMF’s 2015 report, published on November 9, 2015, the activity report from the High Committee on Corporate Governance (HCGE) published on October 2, 2015, the Guide for compiling registration documents, also published by the AMF on December 10, 2009 and amended on December 17, 2013, and the June 2013 Guide to applying the AFEP-Medef Corporate Governance Code for listed companies, supplemented by the HCGE in December 2014 and November 2015.
In accordance with Article 26 of Act No. 2008-649 of July 3, 2008, involving various provisions to adapt Company law to EU law, the Corporate Governance Code, to which reference has voluntarily been made when preparing this report, is the Corporate Governance Code for listed companies published by the Association Française des Entreprises Privées (AFEP – French Association of Private Sector Companies) and the Mouvement des Entreprises de France (Medef – French Business Confederation), hereinafter referred to as the “AFEP-Medef code”, which was revised in June 2013 and November 2015. The AFEP-Medef code is available for consultation at the Company’s head office and on the Natixis website.
This form of corporate governance stems from the desire to create a single custodian of Natixis’ best interests and value creation. It permits unity of action, which is an essential requirement in terms of control, responsiveness and foresight in Company management.
Following the merger of Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des Caisses d’Epargne (CNCE) that resulted in the creation of BPCE, Natixis has been partly owned by BPCE since August 1, 2009. As of December 31, 2015, BPCE held a 71.20% stake in Natixis.
Committee in charge of selecting or appointing directors Committee in charge of compensation (Articles 17.1 and 18.1 of the Code) “It […] must be predominantly comprised of independent directors.”
Session of the Board of Directors held without the executive directors (Article 10.4 of the Code) “The Board of Directors must provide for a meeting once a year [...] without the executive or “in-house” directors, [...] at which the evaluation of the Chairman’s, Chief Executive Offi cer’s and Deputy Chief Executive’s respective performance shall be carried out [...], and the participants shall refl ect on the future of the company’s executive management.”
Natixis’ Board of Directors does not have a formal arrangement to hold a session without the executive director present. However, the Chief Executive Offi cer is not present at the part of the Board Meeting regarding the determination of his compensation and performance. It should also be noted that Laurent Mignon is the non-executive director CEO of Natixis.
As indicated above, Natixis’ Board of Directors had 15 members at March 1, 2016. The members are divided up as follows: V two members from BPCE, namely Mr. François Pérol and BPCE represented by Mr. Daniel Karyotis; V four members from the Banque Populaire banks, namely Ms. Sylvie Garcelon and Messrs. Thierry Cahn, Alain Condaminas and Michel Grass; V four members from the Caisses d’Epargne, namely Ms. Françoise Lemalle and Ms. Stéphanie Paix and Messrs. Alain Denizot and Philippe Sueur; V five independent members namely Ms. Laurence Debroux, Ms. Anne Lalou, and Messrs. Bernard Oppetit, Henri Proglio and Nicolas de Tavernost.
Pursuant to Articles L. 225-23 and L. 225-27-1 of the French Commercial Code, Natixis’ Board of Directors does not have any employee directors, or any employee shareholder directors. Conversely, two representatives of the Central Works Council attend each of the Board of Directors’ meetings in an advisory capacity.
As is the case every year, at its meeting of December 16, 2015, and following the report submitted by the Appointments Committee, Natixis’ Board of Directors examined each director’s expertise, judgment and freedom of thought and expression and, more specifi cally, compliance with the independence criteria recommended by the AFEP-Medef code and incorporated into the Board’s Internal Rules (see 2.3.1.2 - Role and Powers of the Board of Directors).
Natixis applies the concept of a “reference banker” - i.e. a ‘banker who is essential to all requirements of the Company’ - to both assess the importance of business relationships, identify any situation of dependency on Natixis, and fi nally gauge whether these relationships are of a nature to affect the independence of the director’s judgment.
Consequently, the Natixis Board of Directors determined that the fi ve above-mentioned independent Board members meet the necessary independence criteria.
Has not held any salaried positions or corporate offi ces in the last fi ve years with BPCE, Natixis or any of its subsidiaries OK OK OK OK OK
Is not a major customer, supplier, or corporate or investment banker to the Company or the Group; does not derive a signifi cant portion of business from the Company or its Group OK OK OK OK OK
Since April 30, 2009, the Board of Directors has been chaired by Mr. François Pérol, Chairman of the BPCE Management Board. At the end of the General Shareholders’ Meeting, the Board of Directors, at its meeting of May 19, 2015, unanimously reappointed Mr. François Pérol as Chairman of the Board of Directors.
This appointment was ratifi ed by the Combined Shareholders’ Meeting of May 19, 2015 (tenth resolution).
R On May 19, 2015, the General Shareholders’ Meeting of Natixis renewed the terms of offi ce of the following directors for a term of four years, i.e. until the end of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending on December 31, 2018: R Mr. François Pérol,
R On December 16, 2015, the Natixis Board of Directors acknowledged the resignation of Ms. Catherine Halberstadt from her directorship, on November 16, 2015.
V Changes made to the Board of Directors since January 1, 2016: R On February 10, 2016, the Board of Directors of Natixis co-opted Ms. Sylvie Garcelon to replace Ms. Catherine Halberstadt for the remainder of her predecessor’s term of offi ce, namely until the end of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending on December 31, 2015.
In order to follow the AFEP-Medef code’s recommendation that terms of offi ce be staggered in such a way as to avoid reappointing large numbers of directors at once and promote the balanced re-appointment of directors, Natixis instituted an action plan in 2012. Thus, the terms of offi ce of four directors will be staggered compared to those of the other members.
Current term expiration: 2019 AGM Alain Condaminas, Sylvie Garcelon, Stéphanie Paix 2019 AGM Nicolas de Tavernost 2019 AGM BPCE, François Pérol, Thierry Cahn, Laurence Debroux, Michel Grass, Anne Lalou, Bernard Oppetit, Alain Denizot, Henri Proglio, Philippe Sueur, Françoise Lemalle
In accordance with the law and the bylaws, the Chairman convenes and chairs the Board and organizes and manages its work. He chairs General Shareholders’ Meetings. The Chairman of the Board or the Chief Executive Offi cer are required to provide each director with all of the documents and information needed to carry out their duties.
In addition to the duties attributed by law and the bylaws, the Chairman of the Board of Directors provides his support and expertise to the Chief Executive Officer, while respecting the CEO’s executive responsibilities. As such, he may attend any meeting that addresses subjects related to Natixis’ strategy and organization, and, at the CEO’s request, he may represent Natixis in its relationships with the Group’s major partners so as to promote business relationships.
In addition, the Chairman of the Board of Directors sees to maintaining the quality of the relationships with shareholders, by participating in actions carried out in that arena.
In addition to the legal and statutory requirements with which it complies, the Board of Directors has adopted a set of internal rules governing its operation and setting out the rights and duties of its members. These are sent to each member at the time of his appointment. The complete Internal Rules of Natixis’ Board of Directors are available on the website www.natixis.com.
R or for which Natixis or the Group represents a significant portion of such person’s business; R have a close family relationship with a corporate offi cer of Natixis or the Group; R have been an auditor of Natixis or a Group company during the last fi ve years; R have been a member of Natixis’ Board of Directors for more than 12 years; R receive or have received signifi cant additional compensation from Natixis or the Group, excluding directors’ fees, including participation in any stock option plan or other performancebased compensation.
The independent status of each member of the Board of Directors is examined by the Appointments Committee (the composition and role of which are described below), which prepares a report for the Board (see summary table, above);
V some special powers: R the Board of Directors’ authorization when the CEO takes a new offi ce outside the Company,
Per article 621-1 of the General Regulations of the Autorité des Marchés Financiers (AMF - French Financial Markets Authority): “Inside information is any information of a precise nature that has not been made public, relating directly or indirectly to one or more issuers of fi nancial instruments, or to one or more fi nancial instruments, and which, if it were made public, would be likely to have a signifi cant effect on the prices of the relevant fi nancial instruments or on the prices of related fi nancial instruments.”
If the Board of Directors has received inside information on Natixis, the directors and any individual attending Board or Committee Meetings must refrain: V from performing any transactions on the financial instruments it has issued, directly or indirectly, on its own behalf or on behalf of another, on or off the market, before that information has been made public; V from disclosing that information to any third party, including within Natixis, unless it is within the normal context of performing his duties; V from recommending or ordering that a transaction be performed on the basis of that information.
2 CORPORATE GOVERNANCEManagement and oversight of corporate governance Directors should be attentive to the risk that is incurred whenever people close to them, specifi cally those with very close ties (spouse, child, live-in parent, or legal person or entity run, administered, managed or controlled by the director or his spouse, child, live-in parent or for which one of them receives the majority of economic benefi ts) perform transactions in Natixis shares.
Directors must also inform Natixis of the number of shares held on December 31 of each year and any fi nancial transactions carried out, so that this information may be disclosed by the Company.
In addition, all directors must receive training including by attending, where necessary, the training modules provided by the Company (see paragraph 2.3.1.5).
In particular, it sets out the procedure to be followed, from the notifi cation of the Board of Directors to approval by the General Shareholders’ Meeting, in light of the Statutory Auditors’ special report (see Statutory Auditors’ Special Report on related-party agreements and commitments in Chapter 7 “Legal Information”).
At its meeting of February 10, 2016, the Board of Directors reviewed all related party agreements that have been authorized by the Board over previous fi scal years, which continued to have an impact over the period. Based on the criteria used for its initial approval, the Board of Directors upheld the authorization of all of these agreements. However, the fi nancial guarantee master agreement between Natixis and Natixis Lease, signed on December 17, 2009, was found to have expired. The Board also approved an amendment to the fi nancial conditions of a previously authorized
The Board of Directors held a total of seven meetings in 2015. The attendance rate was nearly 91% for the year as a whole, a rate identical to 2014.
At least three days before a Board Meeting, a fi le listing the items on the agenda was sent via a secure website to each director for his review and analysis of the the issues that will be addressed.
The Chief Finance and Risk Offi cer, Corporate Secretary and, as and when required, one or more business-line heads were invited to provide further information on subjects raised in meetings. The Central Works Council representatives also attended the meetings.
V Submission of the work by the Audit Committee and the Risk Committee V Reports on terms for exercising internal control and on measuring and monitoring risk V Implementation of the provisions of the Ministerial Order of November 3, 2014: strengthening of the internal control governance system, validation of aggregate limits by risk type, approval of the Business Continuity Plan which is an integral part of Natixis’ risk management program
V Report on internal control activity and results V Adoption of the Chairman’s report on the Board’s work and on internal control and risk management procedures
V Assessment and outlook of the “Originate to Distribute” model V Implementation of the Volcker Rule V Opening of branches and representative branches internationally
For the sixth year in a row, Natixis assessed the work of its Board of Directors and Special Committees, in accordance with recommendations set out in the AFEP-Medef code regarding the correct governance of listed companies.
In 2015 Natixis expanded its existing training program for Board members and it is now also consistent with the existing one for members of the BPCE Supervisory Board.
The new program is now divided into three areas: V a training program on “fundamentals” for new Board members and others who wish to receive it. This training is structured around five modules that provide Board members with useful knowledge for a proper understanding of the issues discussed at Board Meetings. Training is delivered by in-house and external instructors within six months of the new Board member taking office; V an “expertise” training program on technical or complex issues designed to equip Board members with the necessary expertise to properly understand, monitor and validate technical or complex matters discussed at Board Meetings. It is organized into modules spread over the course of the year and covers various issues including accounting and financial matters, risk management, directors’ liability (civil, criminal and regulatory), compliance principles and internal control; V a training program provided as and when needed designed to give Board members the necessary knowledge and skills to carry out their duties. This training takes the form of a deeper examination of issues related to the business lines or other current topics, memos related to economic, accounting, regulatory, compliance, legal and other issues posted on the corporate governance site, the provision of e-learning on targeted subjects (money laundering, fraud, etc.), and Board members’ participation in certain events held by Natixis business lines/departments.
To assist in its review process and prepare some of its deliberations, Natixis’ Board of Directors surrounded itself with a number of Special Committees.
During 2015, the Audit Committee comprised fi ve members: As of March 1, 2016, these members were: Bernard Oppetit Chairman
Sylvie Garcelon (post held by Catherine Halberstadt until November 16, 2015) Member
Two-thirds of the Audit Committee are not independent members, as recommended by the AFEP-Medef code, in order to represent the different components of the Company’s main shareholders (members from the Caisses d’Epargne and the Banque Populaire banks, plus a representative of BPCE). (see Summary table on compliance with AFEP-Medef code recommendations in section [2.3] of this chapter).
The Chairman and the members of the Audit Committee have extensive accounting and fi nancial expertise gained over the course of their professional careers. Mr. Oppetit is a fi nancial market specialist and has substantial experience in complex fi nancial products and alternative management companies. Ms. Debroux is recognized for her fi nancial analysis and corporate strategy skills. Mr. Karyotis has extensive experience as a Chief Financial Offi cer, a position he holds at BPCE. Ms. Garcelon is CEO of CASDEN Banque Populaire, and as such possession solid fi nancial experience. Finally, Ms. Paix has considerable expertise in bank audits, factoring, cash management and operations management.
Natixis’ Audit Committee has internal rules specifying its powers and its operating procedures, the latest version of which was approved by the Board of Directors on December 17, 2014.
V assessing the quality of internal control, specifically the consistency of the systems for measuring, monitoring and controlling risk, and, as and when needed, proposing implementation of supplementary actions in this sense.
The remit of the Audit Committee is also: V to monitor the process of preparing financial information (compiling the accounts, management report, etc.); V to monitor the statutory audit of Natixis’ yearly, half-yearly and quarterly parent company and consolidated financial statements, as well as its draft budget, at least two days before they are presented to Natixis’ Board of Directors, as well as the parent company financial documents distributed when the accounts are closed; V to monitor the effectiveness of internal control systems relating to compiling financial information; V to review, with the Statutory Auditors, any risks to their independence; to do this, it must ensure that the amount of fees paid by Natixis and the Group, or the share of those fees in the net sales of the firms and networks, does not, by its nature, undermine the independence of the Statutory Auditors; V to issue an opinion on the choice or renewal of Natixis’ Statutory Auditors and review their audit schedule, the results of their checks and their recommendations, as well as all the follow-up measures taken on these latter; V to issue its opinion on the report presented to it on an annual basis regarding commercial relations between Natixis or one or more of its subsidiaries and all or some of the entities forming Groupe BPCE.
The Company’s CEO provides the Audit Committee with any documents and information it needs to perform its duties. The following list is not exhaustive: V parent and consolidated financial, accounting, and regulatory documents prepared periodically by the Company; V summary reports by the Company’s Statutory Auditors; V any audit reports concerning the Company; V accounting policies and methods applied within the Company; V projected parent and consolidated results at the end of March, June, September and December; V consolidated budgets and financial statements of the main subsidiaries, as well as any related documents provided to the Board of Directors or, if applicable, the Audit Committee of the principal subsidiaries.
The Audit Committee met fi ve times in FY 2015. Its members’ attendance rate was 87% for the year as a whole (vs. 92% in 2014).
The Audit Committee monitored the statutory audit of Natixis’ yearly, half-yearly and quarterly parent company and consolidated fi nancial statements, as well as its draft budgets, at least two days before they were presented to Natixis’ Board of Directors.
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 professionals careers.
The remit of the Risk Committee is also: V to issue an opinion on the procedures established by Natixis that 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 reporting on risks, specifically operational, market or counterparty risks, performed at the behest of the Company’s CEO; V to monitor the effectiveness of the internal control and risk management systems; V to assist the Board of Directors in determining the guidelines and controlling the implementation by Senior Managers of the supervisory mechanisms to guarantee the effective and prudent management of the Company, specifically the separation of duties and the prevention of conflicts of interest;
The Risk Committee met fi ve times in FY 2015. Its members’ attendance rate was 83% for the year as a whole.
V Examination of the impact of the Ministerial Order of November 3, 2014 on risk governance; review of the plan for the implementation of the new provisions; action items on the implementation of these provisions
Three of the six members are independent (Ms. Lalou and Messrs. Proglio and de Tavernost). The number of independent directors on the Compensation Committee is not greater than half the total number of members as recommended by the AFEP-Medef
Corporate Governance Code. It has a balanced composition (50% independent, 50% non-independent), and the Committee is chaired by an independent director. (see Summary table on compliance with AFEP-Medef code recommendations in section [2.3] of this chapter).
V Changes made to the Compensation Committee in 2015: R On February 18, 2015, Anne Lalou was appointed a member of the Compensation Committee.
R On May 19, 2015, Alain Denizot was appointed a member of the Compensation Committee, to replace Didier Patault.
V No changes have been made to the Compensation Committee since January 1, 2016.
2 CORPORATE GOVERNANCEManagement and oversight of corporate governance 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: V the level and terms of compensation paid to the Chairman of the Board of Directors of Natixis, including benefits in kind, pension plans and collective provident insurance, as well as the allocation of stock options or share purchases; V the level and terms of compensation paid to the CEO and, where applicable, one or more Deputy CEOs, including benefits in kind, pension plans and collective provident insurance, as well as the allocation of stock options or share purchases; V rules for allocating directors’ fees to Natixis’ directors and the total amount submitted to a decision by Natixis’ General Shareholders’ Meeting; V the compliance of Natixis’ compensation policy with regulations, including for the “regulated population” addressed in the French Ministerial Order of November 3, 2014, as well as for employees addressed in French Law No. 2013-672 known as the Law on the Separation and Regulation of Banking Activities (LSB) and Section 619 on the US law known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”) or identified categories of staff within Asset Management activities (AIFMD); V annual review of Natixis’ compensation policy, specifically those employee categories whose professional activities are likely to have a significant impact on the risk profile of the Natixis or the Group; The Compensation Committee may have cause to review and issue an opinion on the insurance taken out by Natixis to cover its offi cers’ liability.
The Compensation Committee met three times in FY 2015. Its members’ attendance rate was 100% for the year as a whole.
Each director’s attendance at the Appointments & Compensation Committee’s meetings appears in section 2.2 of this chapter (see Directors’ individual factsheets).
In 2015 the Committee focused on the following areas: Executive corporate offi cers Senior Management Committee members
V Consulting with shareholders on the individual compensation of corporate offi cers (“Say on pay”) V Renewal of commitments/agreements made on behalf of the CEO V Renewal of the principle of the award of a long-term incentive plan for corporate offi cers and the extension of this plan to include members of the Senior Management Committee
V Reviewing the compliance of Natixis’ compensation policy with regulations, including for the “regulated population” addressed in the French Ministerial Order of November 3, 2014, as well as for employees addressed in French Law No. 2013-672 known as the Law on the Separation and Regulation of Banking Activities (LSB) and Section 619 on the US law known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”) or identifi ed categories of staff within Asset Management activities (AIFMD)
V Variable compensation of the “regulated” population for the fi scal years 2014 and 2015 V Analyzing the compensation of the heads of control functions (Risks, Compliance, Internal Audit Department)
The Appointments Committee is made up of six members. As of March 1, 2016, these members were: Henri Proglio Chairman
Three of the six members are independent (Ms. Lalou and Messrs. Proglio and de Tavernost). The number of independent directors on the Appointments Committee is not greater than half the total number of members as recommended by the AFEP-Medef Corporate Governance Code. It has a balanced composition (50% independent, 50% non-independent), and is chaired by an independent director (see Summary table on compliance with AFEP-Medef code recommendations in section [2.3] of this chapter).
V Changes made to the Appointments Committee in 2015: R On February 18, 2015, Anne Lalou was appointed a member of the Appointments Committee.
The roles that devolve to Natixis’ Appointments Committee are, in essence, reviewing the selection of corporate offi cers and directors, and evaluating the directors’ individual and collective skills as well as the effectiveness of the Board of Directors. The Appointments Committee’s powers and operating procedures are described in detail in the Internal Rules of the Board of Directors, the latest version of which was approved on December 17, 2014.
The Committee’s primary remits are: V giving an opinion and, upon request from Natixis’ Board, making proposals and recommendations to the Board on the appointment of a CEO and, when appropriate, one or more Deputy CEOs of Natixis; V issuing an opinion and making recommendations to the Board of Directors on the selection/appointment of directors; V evaluating the balance and diversity of knowledge, skills and experience that the Board members have, both individually and collectively; V detailing the duties and the qualifications required for serving on Natixis’ Board of Directors, and assessing the time to be spent on that service; V deciding on a policy and a set of targets for the balanced representation of men and women on the Board of Directors. It prepares a policy with the purpose of achieving those targets. Natixis’ target and policy as well as the implementation procedures are made public; V periodically, at least once a year, assessing the structure, size, composition and effectiveness of the Board of Directors with regard to the remits that are assigned to it, and submitting all useful recommendations to the Board; V periodically, a least once a year, assessing the knowledge, skills and experience of the Board of Directors, both individually and collectively, and reporting this to it; V periodically scrutinizing the policies of the Board of Directors on selecting and appointing Natixis’ Senior Managers , Deputy CEOs and the Chief Risk Officer and making recommendations thereon.
The Appointments Committee met three times in FY 2015. Its members’ attendance rate was 100% for the year as a whole.
V Reappointment of the Chief Executive Offi cer V Selection of the new independent director to replace Christel Bories V Reappointment of 10 directors whose term of offi ce was due to expire V Recommendations in connection with the appointment of two new directors
V Evaluating the Board of Directors’ work in 2015 V Evaluating the knowledge, skills and experience of Directors, both individually and collectively V Evaluating the balance and diversity of knowledge, skills and experience that the Board members have, both individually and collectively
Gender balance V Deciding on a policy and a set of targets for the balanced representation of men and women on the Board of Directors.
The Strategic Committee was chaired by Laurence Debroux, an independent director, from its inception in 2011 until February 10, 2016. The Board of Directors, at its meeting of February 10, 2016, appointed Anne Lalou as Chairman of the Strategic Committee to replace Laurence Debroux.
The scope of responsibility of the Strategic Committee relates to thoroughly examining the global strategy of Natixis and its business lines, and sharing senior management’s vision for Groupe BPCE.
On April 30, 2009, the Board appointed Laurent Mignon as Chief Executive Offi cer starting May 14, 2009 for a six-year term. Mr. Mignon’s term of offi ce was renewed by Natixis’ Board of Directors on February 18, 2015 for a period of four years, to end after the 2019 General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending on December 31, 2018.
The Chief Executive Offi cer subsequently set up a Senior Management Committee that he chairs, made up of the heads of Natixis’ three core businesses (Corporate & Investment Banking, Investment Solutions and Insurance, Specialized Financial Services), and support functions.
Lastly, Natixis has an Executive Committee comprising the members of the Senior Management Committee and the heads of certain business lines and support functions essential to the Company’s success (see Composition of the Executive Committee, section 2.1 of this chapter) The Committee’s role mainly focuses on information and monitoring.
Barring exceptions, it meets weekly under the Chairmanship of the CEO. Except where circumstances prevented them from doing so, the members of the Senior Management Committee were present at all meetings in 2015. Representatives from the business lines or different support functions were invited to present projects or policies falling within their departmental remits.
It supervised the creation of a major Insurance division within Natixis, as part of the “Assurément #2016” project. In addition, the Senior Management Committee was attentive to continuing the development of trade cooperation with the networks.
Beyond the strategic plan, the Senior Management Committee oversaw Natixis’ adaptation to changes in the economic and regulatory environment in the banking and insurance sectors. In particular, it oversaw the work to bring the bank into compliance with the law on banking activity separation and regulation in France, and the Volcker Rule in the United States. In addition, it ensured that the adaptations required pursuant to Directive CRDIV on governance or adaptation of HR processes relative to material risktakers were implemented.
Finally, the Senior Management Committee monitored the management, risk management and compliance measures within Natixis, and regularly reviewed changes in the Company’s risks.
2 CORPORATE GOVERNANCEManagement and oversight of corporate governance 2.3.4 GENERAL SHAREHOLDERS’
CSMs combine the two previous types of meetings (OGM and EGM) on the same date under the same Notice of Meeting.
Management and oversight of corporate governance 2.3.4.6 Identifi cation of shareholders
Any shareholders holding more than 1% of the voting rights, and having already declared their statutory threshold crossing, may obtain/consult the list of shareholders having crossed the statutory threshold from Natixis’ registered offi ce or by contacting Natixis’ Investor Relations (30 avenue Pierre Mendès-France 75013 Paris).
2 CORPORATE GOVERNANCENatixis Compensation Policy 2.4 Natixis Compensation Policy 2.4.1 GENERAL PRINCIPLES
In France, Natixis’ collective compensation and employee savings plans are underpinned by common social standards that include: V a profit-sharing agreement (accord de participation); V an employee savings plan (“PES”); V an employee retirement savings plan (“PERCO”).
The regulated categories of staff at Natixis are based on the principles set out in Directive 2013/36/EU, known as “CRD IV”, and the Decree of November 3, 2014 and are defi ned based on criteria determined by the European Banking Authority (EBA) in its regulatory technical standard published on December 16, 2013 and approved by the European Commission in Commission Delegated Regulation (EU) No. 604/2014 of March 4, 2014.
Regulated categories of staff at Natixis during the 2015 fi scal year came to a total of 274 employees: Of which 235 staff members identifi ed by qualitative criteria: V directors, i.e. 15 individuals; V members of Natixis’ Senior Management Committee, i.e. 10 individuals; V key staff responsible for control functions (Internal Audit Department, Risk and Compliance) and other support functions
Natixis Compensation Policy who are not members of the management bodies listed above, i.e. 42 individuals; V key staff responsible for important business lines and foreign locations (excluding Asset Management and Insurance), i.e. 29 individuals; V individuals with authority to take, approve or veto a decision on credit risk exposure and who are responsible for market risk exposure exceeding materiality thresholds established in the regulations and who have not already been identified by the criteria above, i.e. 139 individuals.
Variable compensation awarded in the form of shares or similar instruments represents 50% of variable compensation awarded to employees who are members of regulated categories of staff. This rule applies to both the deferred and conditional component of variable compensation allocated and the non-deferred portion of the variable compensation.
Guaranteed variable compensation is not authorized, except when hiring outside Groupe BPCE. In this case, the guarantee is strictly limited to one year.
All recipients of deferred variable compensation are prohibited from using individual hedging or insurance strategies during both the vesting period and lock-up period.
As a reminder, Article L.511-78 of the French Monetary and Financial Code transposing Directive 2013/36/EU, known as “CRD IV”, into French law caps the variable component at 100% of the fi xed component of the total compensation for each individual in regulated categories of staff, unless the General Shareholders’ Meeting allows for a higher percentage, which in any case may not exceed 200%.
2 CORPORATE GOVERNANCENatixis Compensation Policy On May 19, 2015, Natixis’ General Shareholders’ Meeting capped the variable component at 200% of the fi xed component of the total compensation for each member of the regulated categories of staff.
The policy is developed by the Human Resources Department, in conjunction with the business lines, and is complying with the principles defi ned by the regulators and the current social security and tax law s.
The compensation policy is regularly and independently reviewed by the Internal Audit Department.
The members of the Board of Directors of Natixis received directors’ fees for the 2015 fi scal year subject to the terms and conditions set out below.
Members of the Audit Committee: R fixed portion: €3,000 per year (prorated to the term of office),
R Compensation Committee: Chairman: R fixed portion: €15,000 per year (prorated to the term of office),
R Appointments Committee: Chairman: R fixed portion: €15,000 per year (prorated to the term of office),
Members of the Compensation Committee: R fixed portion: €2,000 per year (prorated to the term of office),
R Strategic Committee: Chairman: R variable portion: €12,000 per meeting, capped at one meeting
As of January 1, 2013, directors’ fees are subject to total withholding tax of 36.5% for residents of France.
The structure of annual variable compensation has been determined based on quantitative and strategic criteria submitted for review beforehand to the Compensation Committee and subsequently approved by the Board of Directors.
■ RULES FOR DETERMINING ANNUAL VARIABLE COMPENSATION FOR THE 2015 FISCAL YEAR
- €716,803 will be deferred over three years, 50% of which will be indexed to the Natixis share price, and will be paid in thirds in 2017, 2018 and 2019, provided that the employment and performance conditions are met.
V In order to align shareholders’ interests with those of executive managers over time and with a view to the implementation and timetable of the New Frontier strategic plan, based on the positive opinion of the Compensation Committee, Natixis’ Board of Directors, at its meeting of February 18, 2015, granted the free allocation of: 27,321 performance shares, i.e. 0.001% of the share capital at the allocation date, to the Chief Executive Officer of Natixis, with a vesting period of four years. This grant fell within the authorization granted by Natixis’ General Shareholders’ Meeting held on May 21, 2013 in its 17th resolution. The Chief Executive Office of Natixis is associated to the relative performance of the Natixis share and the consistency of this performance. The relative performance will be tested annually: thus, if Natixis’ annual TSR is higher than the median annual TSRs of the institutions in the EuroStoxxBank index for four consecutive years, 80% of the allocated shares will be acquired. For each year where the annual TSR is lower than the median, a penalty of 20% will be applied. Moreover, if the relative performance of Natixis’ TSR measured over the whole vesting period is lower than the top two thirds of the TSR of the institutions in the EuroStoxxBank index, 20% of the allocated shares will be lost. Furthermore, 30% of the shares delivered to the executive corporate offi cer at the end of the vesting period will be subject to a lock-in period ending with the termination of the offi ce as Chief Executive Offi cer of Natixis.
V As a reminder, at its July 31, 2014 meeting, Natixis’ Board of Directors awarded 31,955 performance shares to the executive corporate offi cer (the CEO of Natixis).
The total of the annual variable compensation and allocations in favor of the Chief Executive Offi cer during the fi scal year cannot exceed twice his fi xed gross annual compensation.
■ CHANGE IN THE ANNUAL FIXED AND VARIABLE OF THE CHIEF EXECUTIVE OFFICER SINCE 2011
Annual allocated variable compensation in € Fixed compensation benefits + fringe benefits (family supplement + company car benefit) in €
Quantitative and strategic criteria for determining the Chief Executive Offi cer’s variable compensation for 2016 were approved by the Board of Directors on February 10, 2016 after review by the Compensation Committee.
V 5% digital transformation with the Banque Populaire and Caisse d’Epargne network
Laurent Mignon receives a family supplement, in accordance with the same rules as those applied to Natixis employees in France. Since February 6, 2015, he no longer benefi ts from a company car.
At its February 10, 2016 meeting, the Board of Directors approved a change to the personal protection insurance and supplemental health insurance of CEO Laurent Mignon, so that he would benefi t from similar social protection as the other members of BPCE’s Management Board, with the implementation of a scheme to maintain compensation for a period of 12 months in the event of temporary incapacity to work.
Furthermore, in line with the provisions of the AFEP-Medef Corporate Governance Code, the right to a benefi t 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. T he fulfi llment of these criteria will be verifi ed by the Board of Directors.
Laurent Mignon, CEO Compensation due or granted for the fi scal year €1,899,372 (a) €1,821,512
Value of options granted during the fi scal year 0 0
Summary table of the compensation of each executive corporate officer In the tables below: V the expression “amounts due or granted” refers to compensation and benefits allocated to corporate officers in connection with their duties over the year, irrespective of the payment date; V the expression “amounts paid” refers to compensation and benefits actually paid to corporate officers in connection with their duties over the year, irrespective of the date of allocation.
(b) This amount includes payment of previous years’ deferred components of variable compensation.
Deferred securities or similar instruments portion of variable compensation for fi scal year 2011
Deferred securities or similar instruments portion of variable compensation for fi scal year 2012
Deferred cash portion of variable compensation for fi scal year 2013
In respect of BPCE and its subsidiaries 13,391.67 12,191.67 N/A N/A
In respect of BPCE and its subsidiaries 23,266.67 23,266.67 6,000 6,000
In respect of BPCE and its subsidiaries 16,266.67 15,666.67 N/A N/A
In respect of BPCE and its subsidiaries 33,891.67 33,891.67 8,700 8,700
Member of the Natixis Appointments and Compensation Committee N/A N/A 7,000 7,000
Member of the Natixis Appointments and Compensation Committee N/A N/A 6,000 6,000
Member of the Natixis Appointments and Compensation Committee N/A N/A 11,917 11,917
(3) Variable compensation for fi scal year 2014, of which €206,511 (50%) paid in 2015 and the balance (50%) deferred over three years in equal shared of €68,837. The fi nal allocated amount in 2016 will be €76,554 (after application of an index ratio).
(4) Amount paid in 2014 for the variable compensation for fi scal year 2013, or €215,999.
(5) Variable compensation for fi scal year 2015, of which €200,596 (50%) paid in 2016 and the balance (50%) deferred over three years in equal shares of €66,865.
(6) Amount paid in 2015 for the variable compensation for fi scal year 2014, or €206,511, for the deferred portion of the variable compensation for fi scal year 2013, or €77,075.
(8) Variable portion for fi scal year 2014, of which €340,743 (40%) paid in 2014 and the balance (60%) deferred over three years in equal shares of €170,372. The fi nal allocated amount in 2016 will be €189,470 (after application of an index ratio).
(11) Amount paid in 2015 for the variable compensation for fi scal year 2014, or €340,743, for the deferred portion of the variable compensation for fi scal year 2013, or €190,762, for the deferred portion for fi scal year 2012, or €110,207, and for the deferred portion for fi scal year 2011, or €90,844.
Subscription or call options granted during the period to each executive corporate officer by the issuer and by any group companies
Performance shares granted by the General Shareholders’ Meeting during the period to each executive corporate offi cer by the issuer and by all Group companies Plan date
Valuation of options according to the method adopted for the consolidated fi nancial statements Date vested Date of transferability (b) Performance conditions
R TABLE 7 Performance shares that became transferable during the period for each executive corporate officer
Performance shares that became transferable during the period for each executive corporate offi cer No. and date of plan
Number of exercisable options, including those exercisable by: 4,760,945 1) Natixis Directors in 2015: 158,205
Cumulative number of outstanding subscription options at end of period 0
In accordance with the AFEP-Medef Corporate Governance Code, the components of the compensation due or granted to each executive corporate offi cer in respect of fi scal year 2015 must be submitted to Natixis’ General Shareholders’ Meeting for approval. For Natixis, this recommendation concerns the remuneration of Laurent Mignon.
Components of compensation due or granted in respect of the fi scal year ended which are subject to or have been approved by the General Shareholders’ Meeting relating to related-party agreements and commitments procedures Amounts Comments
Gross fi xed compensation in respect of 2015. Laurent Mignon’s gross annual fi xed compensation in respect of his offi ce as CEO has remained unchanged since he took offi ce.
The variable compensation in respect of fi scal year 2015 was calculated on the basis of quantitative and strategic criteria fi rst reviewed by the Compensation Committee then validated by the Board of Directors. Variable compensation consists of: V quantitative targets (70%), 25% of which based on fi nancial performance in relation to the Groupe BPCE budget (net revenues (4%), net income Group share (13%) and cost/income ratio 8%) and 45% based on the performance of Natixis (net revenues (11.25%, net income Group share (11.25%), cost/income ratio (11.25%) and Return on Tangible Equity (11.25%); V 30% individual strategic objectives relating to the ongoing development of the "asset light" model, synergies with the BP and CE networks, the development of the projects in the Insurance business line and managerial performance, with each of these four criteria assigned a 7.5% weighting.
Annual variable compensation can represent a maximum of 156.75% of the target variable compensation, which in 2015 was €960,000. Based on the criteria set by the Board of Directors following the proposal of the Compensation Committee and the achievements observed by the Compensation Committee and the Board of Directors, the amount of variable compensation was calculated as follows: V in respect of BPCE quantitative criteria: €269,192, or 112.16% of the target; V in respect of Natixis quantitative criteria: €481,487, or 111.46% of the target; V in respect of strategic criteria: €345,600, or 120% of the target.
V No stock options were granted to Laurent Mignon during fi scal year 2015. V Based on the positive opinion of the Compensation Committee, and as approved by Natixis shareholders at the May 21, 2013 General Shareholders’ Meeting in the 17th resolution, Natixis’ Board of Directors, at its meeting of February 18, 2015, granted the free allocation of 27,321 shares to the Company’s Chief Executive Offi cer, i.e. 0.001% of Natixis’ share capital at the allocation date.
The Chief Executive Offi ce of Natixis is thus associated to the relative performance of the Natixis share and the consistency of this performance. The relative performance is tested annually: thus, if Natixis’ annual TSR is higher than the median TSRs of the institutions in the EuroStoxxBank index for four consecutive years, 80% of the allocated shares will be acquired. For each year where the annual TSR is lower than the median, a penalty of 20% will be applied. Moreover, if the relative performance of Natixis’ TSR measured over the whole vesting period is lower than the top two thirds of the TSR of the institutions in the EuroStoxxBank index, 20% of the allocated shares will be lost. Finally, 30% of the shares delivered to the corporate offi cer at the end of the Vesting Period will be subject to a lock-in period ending with the termination of the offi ce as Chief Executive Offi cer of Natixis.
2 CORPORATE GOVERNANCENatixis Compensation Policy Components of compensation due or granted in respect of the fi scal year ended which are subject to or have been approved by the General Shareholders’ Meeting relating to related-party agreements and commitments procedures Amounts Comments
On February 6, 2015, Laurent Mignon relinquished his right to a company car. Laurent Mignon received payment of a family allowance, in accordance with the plan in force for Natixis’ employees.
At its February 10, 2016 meeting, the Board of Directors approved a change to the personal protection insurance and supplemental health insurance of CEO Laurent Mignon, so that he would benefi t from similar social protection as the other members of BPCE’s Management Board, with the implementation of a scheme to maintain compensation for a period of 12 months in the event of temporary incapacity to work. The components of the Chief Executive Offi cer’s social protection and complementary scheme are subject to related party agreements. In 2015, the total amount of annual contributions relating to Laurent Mignon’s personal protection insurance and supplemental health insurance was around €48,785, of which €9,152 paid by the CEO.
In accordance with the new provisions of the French Monetary and Financial Code introduced by the Ordinance of February 24, 2014 and the Ministerial Order of November 3, 2014, the powers of the Natixis Board of Directors regarding internal control and risk management were increased signifi cantly during fi scal year 2015.
In late 2014, Natixis modifi ed its governance system by creating a Risk Committee separate from the Audit Committee and tasked in particular with advising the Board of Directors on strategy and risk appetite and with assisting the latter in its control function (see 2.3.2.2 Role and powers of the Risk Committee). In order to carry out its mandate, the Risk Committee has full information on Natixis’ situation regarding risk. It may, if necessary, use the services of the Head of Risk Management or external experts. It may also interview any Natixis manager that may provide insight into the work of the Risk Committee.
The Senior Managers , under the supervision of the Board of Directors, are responsible for implementing the whole of Natixis’ internal control system. As such, they designate the persons in charge of the Risk Management, Permanent Control and Compliance Control functions, who report to them on their assignments.
The overall internal control system is coordinated by the Control Functions Coordination Committee (CFCC), which is chaired by the Natixis Chief Executive Offi cer or his substitute, the Corporate Secretary. The Committee is attended by the Chief Financial and Risk Offi cer and the Heads of Risk, Compliance and Internal Audit, as well as Heads of operational or functional departments as necessary. The CFCC’s remit is to: V address all issues pertaining to the organization and planning of control services; V highlight areas of emerging or recurring risk within the scope under consideration and report any significant anomalies observed to the executive body; V provide the executive body with updates on ongoing controls performed by internal or external control functions, or by regulators, and ensure that the conclusions from these undertakings are taken into account by the operational business lines.
The Compliance Department organizes the fi rst-level control mechanism for operational risk, particularly compliance risk. It helps each operational and functional department defi ne and update the controls they are responsible for. The fi rst-level controls are centralized in a dedicated tool that is used to consolidate results, identify areas at risk and produce reports. At the end of December 2015, 1,587 had been reported (mostly on a monthly basis).
V The Compliance Department develops best practices for preventing and managing compliance risk at Natixis, thereby helping to prevent financial loss and the associated reputation risk. It acts in accordance with instructions prescribed by BPCE and its scope of action covers Natixis, its subsidiaries and branches.
V The Compliance Department’s main responsibilities are to: R ensure a legal and regulatory watch relating to compliance, in conjunction with the legal function; R defi ne standards and methods for assessing compliance, control and reporting risks. These standards are devised in order to ensure market integrity and that customers’ interests take priority, and to prevent confl icts of interest (including independence in third-party account management) as well as to counter money laundering and terrorist fi nancing; R establish and maintain a compliance risk map; R ensure the execution of second-level permanent controls (including controlling compliance with standards and the application of procedures); In 2015, 1,910 controls were performed via the SCAN tool; R issue a written compliance opinion regarding all new activities, structures, processes, products and transactions, as well as signifi cant changes to existing products. This opinion is accompanied by a right of veto or appeal within the New Product Committees set up within Natixis’ business lines and its subsidiaries, or centrally for products common to several business lines; R intervene in an advisory role in order to support activities with a view to ensuring security and compliance with standards; R contribute to employee training in conjunction with the Human Resources Department; R centralize the reporting of any anomalies within the meaning of the Ministerial Order of November 3, 2014, at subsidiary or business-line level, with a view to their consolidation by the Natixis group and their communication to BPCE; and defi ne the conditions for operating the alert mechanism provided for by this article whilst respecting the confi dentiality of declaring parties; R prepare regular summary reports, notably for Natixis’ and BPCE’s senior management; R oversee the consistency and effectiveness of permanent controls for compliance risk.
This “direct” link is refl ected in: V Natixis’ Chief Compliance Officer being required to issue prior approval for the secondment, appointment or removal of a subsidiary’s Compliance manager; V Natixis’ Chief Compliance Officer participating in annual performance and career advancement reviews; V the obligation to send information to Natixis’ Chief Compliance Officer.
The Compliance Function Charter published in June 2010 details the function’s operating procedures.
The systems were further enhanced in 2015, notably by updating or redesigning certain compliance procedures that will be introduced during the fi rst quarter of 2016 and through further monitoring and control activities concerning the employee code of conduct. In addition, the upgraded software for tracking compliance with professional ethics rules will be operational during 2016, along with a planned international roll-out in order to harmonize the system.
The regulatory changes in 2015 were accompanied by over 28,000 training initiatives provided to Natixis staff. This year, most of this training, which is focused on compliance risk, dealt with the Volcker Rule and the Banking Separation Law as well as anti-money laundering and terrorist fi nancing and cyber-security.
Natixis also substantially expanded its AML/CTF training schemes in 2015 with the creation of a new e-learning solution, which was rolled out in France and abroad and takes account of specifi c local regulations. The cyber-security training programs were supplemented by over 13,000 awareness-raising initiatives.
In 2015, work continued on improving the prevention and control system. The main activities in 2015 were: V updating of the umbrella procedure “Combating terrorist financing and complying with embargoes”. Updating of the Corporate & Investment Banking division’s “Anti-money laundering” procedure and the accompanying handbook, now available in digital forma; V the continued international restructuring of the “Anti-money laundering” function involving, among other things, functional reporting by the relevant foreign employees to the Financial Security Department; V the design, and roll-out in June, of a new e-learning program on anti-money laundering fundamentals. Natixis also took special care to continue to work closely with the public authorities in the area of combating terrorist financing and complying with embargoes.
Report of the Chairman of the Board of Directors on internal control and risk management procedures 2.5.4 SECOND-LEVEL PERMANENT CONTROL: IT SYSTEMS SECURITY AND BUSINESS CONTINUITY
To confi rm the effectiveness of their BCPs, in 2015 Natixis’ business lines and support functions in France and abroad (excluding NGAM and its subsidiaries), performed: V 59 backup user site exercises; V 70 IT backup tests; V 1 remote working exercise (working from home) involving 500 staff (covering Europe, the Middle East and French overseas territories); V 17 crisis management practice exercises including one conducted by the Natixis Senior Management Committee.
The Natixis Risk function is part of the Groupe BPCE mechanism organized into functions, with the relationship between the shareholding central body and its subsidiary Natixis being governed by the Group Risk Charter.
Its scope of action extends to the following risks: V credit and counterparty risk (including country risk); V market risk; V overall interest rate, liquidity and structural foreign-exchange risk; V operational risk; V specific risks related to the Insurance and Asset Management activities; and covers all entities consolidated by Natixis.
The main responsibilities of the Risk Department are to: V propose a risk appetite system for Natixis in line with the Company’s strategy, and the application, regular updating and close monitoring of the system; V define methods and standards that make it possible to measure risks and approve risk taking (models, reports, limits, limit authorizations) in compliance with Groupe BPCE’s standards and the regulations; V provide a second opinion on business-line cases based on workflow and Committees, for which the Risk Department undertakes preparation and supervision and acts as secretary; V set out supervision and risk monitoring procedures at the individual and consolidated level; V provide information to the Natixis Board of Directors and Risk Committee based on summary information and one-off analysis;
2 CORPORATE GOVERNANCEReport of the Chairman of the Board of Directors on internal control and risk management procedures V produce risk reports for the Senior Management Committee, the business lines, BPCE and regulatory authorities.
Natixis’ risk governance authority is the Global Risk Committee, chaired by one of the Senior Managers , which defi nes the key elements of risk policy, analyzes the main risks and validates the main risk standards and methods implemented.
The Risk function accomplished a great deal in 2015, including: V defining Natixis’ risk appetite, i.e. setting out in qualitative and quantitative terms the risks that the bank is prepared to take on in the pursuit of its business model and its strategic directions. The risk appetite system is consistent with the framework determined by the European regulator and the work carried out by BPCE. It is based on a special governance process, the definition of common standards, the existence of a system of limits in relation to the management of operational activities and regular monitoring; V bringing the supervisory framework for the various types of risk in line with the requirements of the Ministerial Order of November 3, 2014; V achieving compliance with the requirements of the French Law on the Separation and Regulation of Banking Activities and the Volcker Rule (sub-section of the US Dodd-Frank Act) including, in particular, mapping all permitted activities and defining tracking indicators for each type of activity; V work on compliance with Solvency II regulations and particularly the completion of ORSAs (Own Risk and Solvency Assessment) focusing mainly on risk monitoring by insurance companies.
This Committee is organized by the Risk Department and chaired by the Chief Executive Offi cer and assembles members of the Senior Management Committee in charge of the business lines, Finance and Risk, the Head of Risk and the Heads of the support functions concerned.
The ALM Committee’s monitoring scope includes: V Natixis’ entire scope of consolidation for liquidity risk (excluding insurance subsidiaries, which do not present intrinsic liquidity risks and which are monitored and managed separately in respect of ALM risks); V Natixis’ entire consolidation scope for structural foreign exchange risk; V the banking portfolios of Natixis and its credit subsidiaries for overall interest rate risk.
2 CORPORATE GOVERNANCEReport of the Chairman of the Board of Directors on internal control and risk management procedures V Natixis’ Market Risk Department is in charge of monitoring ALM limits. It also performs second-level controls of ALM indicators generated by the Financial Management division and third-level controls of the indicators established by the liquidity management team.
The duties and organization of Operational Risk Department staff as described in the operational risk policies and procedures validated by the Natixis Operational Risk Committee are designed to know, control and reduce Natixis’ operational risks, in compliance with Groupe BPCE standards.
The control and reduction of operational risks relies on operational risk control procedures including: V drawing up and monitoring action plans (or corrective actions); V tracking the levels of risk control mechanisms.
In this regard, the processes for preparing the consolidated fi nancial statements and regulatory reporting are operationally autonomous, but linked to BPCE’s processes.
The reliability of these process is based on the following core principles: V definition and dissemination of the accounting and regulatory principles applicable to Natixis companies, including the analysis and interpretation of new standards published during the period;
The preparation of the consolidated fi nancial statements also relies on: V use of a direct consolidation method, broadly rolled out throughout the Group, allowing for the analysis and control of the consolidation packages of each consolidated company via a formal review process; V preparation of consolidated financial statements on a quarterly basis. This allows for greater control over financial reporting, thus anticipating significant transactions over the fiscal year; V reporting and reconciliation of intra-group transactions at M-1 and then at M, where M is the reporting month, thus increasing the number of reconciliations and contributing to the preparation of quarterly statements; V use of an automated control process for individual information provided by the consolidated entities through the use of consolidation packages that incorporate accuracy and consistency checks, which must be complied with before the data can be transmitted; V individual analysis of all entries impacting consolidated shareholders’ equity and the preparation of supporting documents for taxes, including proof of deferred taxes, for each consolidated entity, thus contributing to the final calculation of consolidated shareholders’ equity; For the preparation of the consolidated fi nancial statements and part of its regulatory reporting, Natixis has software that enables it to: V produce a local IFRS-compliant reporting package, including, for foreign entities, a reporting period foreign currency conversion feature; V extend its data collection and consolidation processes to regulatory reporting; V guarantee the consistency of data relating to the banking and insurance consolidation scopes; V offer retrieval features that can be used to input data into the various reports; V enable BPCE to access Natixis data through dedicated interfaces; V secure the integration process for consolidation packages received from international entities through the implementation of local first-level controls followed by centralized second-level controls.
In order to perfect its overall data collection system, Natixis is continuing to roll out new modules in its consolidation package, thus facilitating the compilation and preparation of certain regulatory fi lings (COREP capital reporting and FINREP).
Finally, Natixis, and more broadly Groupe BPCE, are involved in the industry-wide movement to bring publication dates forward.
For accounting, permanent and periodic controls apply to the completion and monitoring of: V accuracy and veracity checks, such as the management/financial account reconciliation procedures (balance sheet and income statement), clearing of suspense items, and more generally the justification of all accounts; V consistency checks through analytical reviews; V checks that income and expenses are allocated correctly; V verification that the presentation complies with accounting rules; V correct processing of specific transactions in line with the relevant principles; V verification of financial information (notes to the financial statements, items of financial communication); V adjustment of anomalies identified at the time of these controls as well as the corresponding analyses and documentation.
These controls are conducted using the various accounting systems in place throughout the consolidated Group.
2 CORPORATE GOVERNANCEReport of the Chairman of the Board of Directors on internal control and risk management procedures For regulatory reporting, permanent and periodic controls apply to the completion and monitoring of: V accuracy and veracity checks, such as the management/financial account reconciliation processes, as management data can come from various sources; V controls of the traceability and completeness of data, throughout the various reporting preparation processes; V compliance and presentation controls in respect of the regulatory requirements specific to each reporting process; V quality controls of the data needed to produce the reports and the quality of the attributes entered into the databases used, allowing the proper breakdown of accounting or management data; V consistency checks between published reports, where possible and relevant.
It also draws on: V the application of the principles established in the BPCE charter, which specifies the scopes governed by the two-level control processes and stipulates an approach covering supervision of the control teams; V two kinds of assignments (operational or organizational) to be carried out either as part of the account closing process or in periodic assignments; V formalized documentation, governed by a charter established by Groupe BPCE and specifically containing detailed procedures describing the mechanism’s structure; V risk mapping showing the nature, the frequency of occurrence and the responsibility of the different control levels across all scopes (accounting and regulatory); V centralized oversight within the financial or accounting departments, performed by the dedicated Regulatory and Accounting Review team, which also carries out second-level controls; V a risk-based approach, enabling the Review teams to guide and determine the frequency of their controls given the quality of the internal control processes.
In addition to the operational control tasks delegated to it, the Regulatory and Accounting Review team also fulfi ls the following duties in respect of the organization of the control function within the Group: V definition of the control policy applicable to Natixis and its subsidiaries: organizational and operational principles of permanent internal control for accounting, fiscal and regulatory matters; V coordination of the control systems within the subsidiaries, in liaison with the Review officers appointed by each local Finance or Accounting department; V monitoring of the deployment of the accounting and regulatory control environment within each entity by disseminating and analyzing a regular dashboard, and transmitting the conclusions to each entity.
V the strengthening of prudential and fiscal controls; V the reinforcement of monitoring of local control systems and support for the Review officers.
V continuing initiatives committed to strengthening second-level controls in the tax and regulatory areas; V upgrades to the accounting control system in line with changes to IFRS.
The Internal Audit Department conducts audit assignments across the whole of Natixis (parent company, subsidiaries and branches) and covers all classes of risk arising from the various business activities carried out. It has full and unrestricted access to all information, confi dential or otherwise. Its fi eld of investigation encompasses all of Natixis’ operational activities, its functional departments – notably including entities in charge of permanent control assignments – and its outsourced activities. In all business lines, it carries out in-depth analyses of operations, as well as the front-to-back processes by which operations are carried out. These analyses 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. They lead to recommendations to strengthen the comprehensiveness and robustness of the mechanisms for controlling or managing the risks audited. These recommendations are ranked by order of priority.
The Internal Audit Department’s reports are sent to Natixis’ Chairman and senior management as well as to the audited units. In addition, Groupe BPCE’s General Inspection receives a copy of all internal audit reports issued by Natixis’ Internal Audit Department, in accordance with the provisions approved by the CECEI in its decision of November 15, 2007, as well as those set out in Groupe BPCE’s General Inspection charter.
The work of Natixis’ Internal Audit Department is based on an annual Audit Plan drafted and executed jointly with Groupe BPCE’s General Inspection, which aims to optimize the allocation of audit resources across the scope covered. It is part of a four-year plan that sets out the intervention frequency and adapts resources to the risks to be controlled.
Natixis’ annual and multi-year audit plans are approved by its Chief Executive Offi cer and by BPCE’s General Inspection. The Annual Audit Plan is examined by the Audit Committee. In 2015, the Internal Audit Department conducted audit assignments on all risk classes to which Natixis’ activities are exposed. It devoted a fairly signifi cant share of its resources to assignments of a regulatory nature, as part of the certifi cation process undertaken by Natixis (Basel and Solvency 2), as well as assignments conducted in Natixis’ subsidiaries pursuant to audit agreements entered into with them.
STATUTORY AUDITORS’ REPORT ON THE REPORT BY THE CHAIRMAN OF THE NATIXIS BOARD OF DIRECTORS, PREPARED IN ACCORDANCE WITH ARTICLE L.225-235 OF THE FRENCH COMMERCIAL CODE
It is the Chairman’s responsibility to prepare, and submit to the Board of Directors for approval, a report on the internal control and risk management procedures implemented by the Company and containing the other disclosures required by Article L.225-37 of the French Commercial Code, particularly in terms of corporate governance.
INFORMATION CONCERNING INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES RELATING TO THE PREPARATION AND PROCESSING OF ACCOUNTING AND FINANCIAL INFORMATION
We certify that the Chairman’s report includes the other disclosures required by Article L.225-37 of the French Commercial Code.
Deloitte & Associés Mazars KPMG Audit a Department of KPMG S.A. José-Luis Garcia
This chapter presents information regarding risks and capital adequacy in accordance with the following regulatory requirements: V requirements in respect of accounting standards (IFRS 7, IFRS 4, etc.); V requirements in respect of the European regulation of June 26, 2013 (CRR) and the European CRD IV Directive implementing the Basel 3 reforms in Europe.
In addition to this still uncertain economic backdrop, the fi nancial and banking markets have been particularly affected by other major events, such as the many unconventional economic support programs introduced by the European Central Bank, and the transition to sole supervision by the ECB.
The US economy showed several signs of weakness with salaries failing to rise in tandem with the sharp increase in employment, corporate debt already at a high level, lending conditions toughening, and the credit spreads of US oil and gas producers widening substantially. As such, it is now more likely that the Fed will suspend its interest rate hike cycle rather than continuing with a series of rapid increases to the target Fed Funds rate.
Similarly, the ECB may have to lower deposit rates (at -0.3% at December 31, 2015) and extend its bond purchase program in the event that infl ation slips back into negative territory – a possibility in spring should the oil price continue to trade at $30 a barrel. These measures could result in a potentially brutal contraction of liquidity on these markets and in the economy in general. Such developments could potentially have a negative impact on the environment in which fi nancial institutions operate and, consequently, on Natixis’ fi nancial position and results.
In response to the fi nancial crisis and under the impetus of international and domestic regulators, governments (including countries in which Natixis entities operate) have either adopted, or are in the process of submitting to parliament, a number of regulatory measures which are a breakaway from the current framework (MiFID 2, the review of the standardized approach on credit risk, the fundamental review of the trading book, etc.).
Since the inception of BPCE, Natixis’ medium-to-long-term funding requirements for the sub-fund public offerings have been met by Groupe BPCE through BPCE S.A. (see Chapter 4). In the event market conditions deteriorate in the future, BPCE, which obtains fi nancing on the international debt markets, among other sources, may have diffi culty issuing debt instruments under reasonable terms and conditions.
Natixis is exposed to several categories of risk inherent to banking operations.
There are fi ve main categories of risk (credit and counterparty risk, market risk, liquidity and fi nancing risks, operational risk and insurance activities risk) inherent to Natixis’ operations, which are summarized below and described in greater detail in Chapter 3, paragraph 3.2.4, and in Chapter 2, paragraph 2.5, “Chairman’s report on internal control procedures”. Particular focus is given to the scale and the impact that these risks could have on the results and assets of Natixis, as well as the organization and control of these risks.
3 RISKS AND CAPITAL ADEQUACYIntroduction While Natixis believes that these strategic directions provide a number of opportunities, it will continue to face uncertainties given the current state of the global economy, and there is no guarantee that it will achieve the goals of this new strategy.
Natixis’ employees are one of its most important resources and there is intense competition to attract qualifi ed employees in many areas of the Financial Services industry. Natixis’ results depend on its ability to attract new employees and to retain and motivate existing employees.
An extended market decline may reduce the liquidity of assets and make it more difficult to sell them, giving rise to significant losses
In some of Natixis’ businesses, a prolonged fall in asset prices could threaten the level of activity or reduce liquidity in the market concerned. This situation would expose Natixis to signifi cant losses if it was unable to rapidly close out its potentially lossmaking positions. This is particularly true in relation to assets that are intrinsically illiquid. Certain assets, such as derivatives traded between banks, that are not traded on a stock exchange, regulated market, or offset through a clearing house are generally valued using models rather than on the basis of the market price. Given the diffi culty in monitoring changes in prices of these assets, Natixis could suffer unforeseen losses.
Like most of its competitors, Natixis relies heavily on its communication and information systems to process a large number of increasingly complex transactions for its businesses. Any breakdown, interruption or failure of these systems could result in errors or interruptions to customer relationship management, general ledger, deposit, transaction and/or loan processing systems. If, for example, Natixis’ information systems failed, even for a short period of time, it would be unable to meet customers’ needs in a timely manner and could thus lose transaction opportunities. Likewise, a temporary breakdown of Natixis’ information systems, despite back-up systems and contingency plans, could result in considerable information retrieval and verifi cation costs, and even a decline in its business if, for instance, such a breakdown occurred during the implementation of hedging transactions. The inability of Natixis’ systems to accommodate an increasing volume of transactions could also undermine its business development capacity.
The processes for the management of information system security risks are described in greater detail in Chapter 2, section 2.5.4.
Unforeseen events, such as a severe natural disaster, pandemic, terrorist attacks or any other state of emergency, could lead to a sudden interruption of Natixis’ operations and cause substantial losses insofar as they are not covered or are insuffi ciently covered by an insurance policy. These losses could relate to property, fi nancial assets, market positions and key employees. Such unforeseen events may, additionally, disrupt Natixis’ infrastructure, or that of third parties with which it conducts business, and could also lead to additional costs (such as relocation costs of employees affected) and increase Natixis’ costs (in particular insurance premiums). Subsequent to such events, Natixis may be unable to insure certain risks, resulting in an increase in Natixis’ overall risk.
Natixis is subject to significant regulation in France and in several other countries around the world where it operates; regulatory actions and changes could adversely affect Natixis’ business and results
As a multinational banking group performing complex and largescale cross-border transactions, Natixis is subject to tax legislation in a large number of countries throughout the world, and structures all of its operations in a way that optimizes the effective tax rates. Changes to tax legislation or its application by the competent authorities in these countries may have a signifi cant impact on Natixis’ results. Natixis has implemented management processes to create value from the synergies and business capabilities of its different entities. Natixis also endeavors to structure the fi nancial products sold to its customers while optimizing their taxation. The structures of Natixis’ intra-group transactions and fi nancial products sold by Natixis are based on Natixis’ own interpretations of applicable tax laws and regulations, generally on the basis of opinions received from independent tax advisers and, on an ad hoc basis as and when necessary, on rulings or specifi c interpretations from the tax authorities. There can be no assurance that the tax authorities will not seek to challenge such interpretations in the future, in which case Natixis could be subject to tax adjustments.
Its operating methods are described in detail in Chapter 2, paragraph 2.5, “Chairman’s report on internal control procedures” and sections 3.4, 3.6 and 3.7 of this chapter.
It regularly reports on its work, submitting its analyses and fi ndings to Natixis’ Senior M anagers , to Natixis’ Board of Directors , and to Groupe BPCE. A risk consolidation team generates an overview through the use of scorecards that report on risks and risk management.
The ALM Committee’s monitoring scope includes the overall interest rate risk, the liquidity risk and the structural foreign exchange risk.
Natixis’ risk appetite is defi ned as the level of risk that the bank is willing to take within the bounds of its business model.
The risk appetite framework is reviewed by Senior Management and approved by the Board of Directors, and is based on an umbrella document outlining, qualitatively and quantitatively, the size of the risks that the bank is willing to take, and describing the principles of governance, monitoring and operational oversight. Natixis’ risk appetite is reviewed annually.
The business model developed by Natixis is based on its recognized areas of expertise (corporate fi nancing, market activities, Asset Management, insurance, services and specialized fi nancing), responding to the needs of its clients and those of Groupe BPCE. The bank seeks sustainable and consistent profi tability in balance with its consumption of scarce resources. It declines any engagement with activities that it does not master.
The bank has a liquidity and solvency risk profi le which enables it to absorb stresses as required.
Natixis’ most important asset is its reputation and its relationship with its clients. The interest of the client is therefore put fi rst, and the bank – irrespective of the activity, entity or geographic region – is dedicated to operating at the highest level of ethical standards, and in line with the best standards of transaction execution and security.
For each identifi ed risk and selected indicator, the risk appetite operating mechanism relies on two successive levels: V an overall limit setting the risk envelope allocated to the business lines; V and a warning threshold on the maximum risk which, if exceeded, would pose a risk to Natixis’ continuity and/or stability.
Natixis is defi ned by its strong risk culture at every level of its organizational structure.
As such, this risk culture underpins the fundamental principles of the Risk Division and the bank, and through the Risk Charter it is an integral part of its guiding principles. Its priorities are threefold: V to harmonize best practices within the bank by deploying comprehensive risk policies, standards and procedures that cover all of the bank’s major risks (credit, market and operational) and outline the bank’s strategic vision and risk appetite; V to roll out e-learning campaigns on operational risks in particular; V to promote the training of all employees on specific subjects, particularly those related to regulatory changes.
Credit risk is the risk of fi nancial loss on Natixis’ loans due to a debtor’s inability to honor its contractual obligations. Assessing the probability of a debtor’s inability to repay and, in this event, the projected recovery is a key component of measuring credit quality. The debtor may be a bank, an industrial or a commercial company, a sovereign State and its various entities, an investment fund, or a natural person. Credit risk increases in periods of economic uncertainty, insofar as such conditions may lead to a higher rate of default.
3 RISKS AND CAPITAL ADEQUACYGovernance and risk management system Credit risk affects lending operations as well as other operations exposing Natixis to the risk of counterparty default, particularly its trading operations in fi nancial instruments on c apital markets and its settlement-delivery operations. For instance, a default by a bank could directly and signifi cantly affect Natixis’ trading positions and relations with the bank in question. Credit risk also exists in Natixis’ credit insurance and factoring businesses, although the risk lies with the debtor’s customers rather than the with the debtor.
Country risk: Country risk measures the potential impact of a foreign country’s specifi c economic, fi nancial, political or social conditions on Natixis’ fi nancial interests.
Sovereign risk: Sovereign risk is a sub-category of country risk, namely the fi nancial risk attached to the State and the central public authorities of a given country.
Natixis is exposed to this risk because of the transactions it executes with its clients (for example, over-the-counter derivatives (swaps, options, etc.), securities lending and borrowing, repurchase agreements, etc.).
Market risk is the risk of loss in value caused by any adverse fl uctuations in market parameters. These parameters include, in particular, bond prices, interest rates, securities and commodities prices, derivatives prices and prices of all other assets, particularly foreign exchange rates.
External events include, but are not limited to, natural disasters, fraud or terrorist attacks. Furthermore, any interruptions or failures of Natixis or third party information systems may result in lost earnings and thus generate losses. Similarly, unforeseen events may cause an interruption in the continuity of Natixis’ operations, thus generating material losses and additional costs.
Non-compliance risk is defi ned by the French regulations as the risk of a legal, administrative or disciplinary penalty, accompanied by signifi cant fi nancial losses, that arises from a failure to comply with the provisions specifi c to banking and fi nancial activities, whether these are stipulated by laws or regulations, with professional or ethical standards, or instructions from the executive body, notably issued in accordance with the policies of the supervisory body.
Reputational risk is the risk of damage to the confi dence shown in the company by its customers, counterparties, suppliers, employees, shareholders, supervisors, or any other third parties whose trust, in whatever respect, is a prerequisite for the normal conduct of business.
Natixis is also exposed to the following risks: Risk related to insurance activities
Strategy risk is the risk inherent to the strategy chosen or resulting from Natixis’ inability to implement its strategy.
Moreover, since November 2014, the supervision of large European banks is covered directly by the European Central Bank (ECB). This deployment of this new supervisory framework continued in 2015.
Financial assets designated at fair value through profi t and loss 191,639 (10,843) 180,796
Revaluation adjustments on portfolios hedged against interest rate risk 227 0 227
CET1 is calculated using accounting shareholders’ equity (excluding reclassifi ed hybrid securities), with the following restatements: V deductions not subject to the transitional arrangements: R estimated dividend,
R own credit risk on debts issued and fi nancial instruments (debit value adjustment),
Provided below are details of debt instruments recognized in Additional Tier 1 capital and their characteristics, at December 31, 2015, as required by regulation No. 1423/2013 (Appendix II).
2 Unique identifi er (e.g. CUSIP, ISIN or Bloomberg identifi er for private placement) FR0010154278 FR0010347880 3 Governing law(s) of the instrument French French
Regulatory treatment 4 Transitional CRR rules Additional Tier 1 instruments Additional Tier 1 instruments 5 Post-transitional CRR rules Ineligible Ineligible 6 Eligible at solo/(sub-)consolidated/solo& (sub-)consolidated Consolidated Consolidated 7 Instrument type (types to be specifi ed by each jurisdiction) CRR Article 52 CRR Article 52 8 Amount recognized in regulatory capital (currency in million, as of most recent reporting date)
9 Nominal amount of instrument EUR 15m USD 250m 9a Issue price 100% 100%
10 Accounting classifi cation Shareholders’ equity Shareholders’ equity 11 Original date of issuance 01. 25.2005 06.30.2006 12 Perpetual or dated Perpetual Perpetual 13 Original maturity date N/A N/A
Partially discretionary, existence of dividend pushers 20b Fully discretionary, partially discretionary or mandatory (in terms of amount) Mandatory Mandatory 21 Existence of step up or other incentive to redeem no no 22 Non-cumulative or cumulative Non-cumulative Non-cumulative 23 Convertible or non-convertible Non-convertible Non-convertible 24 If convertible, conversion trigger(s) N/A N/A
30 Write-down features Yes Yes 31 If write-down, write-down trigger(s) "Supervisory Event" (non-compliance with regulatory ratios and/or at the discretion of the regulator)
Conditional redemption option at any time, at par and for the full issue if changes occur in tax legislation (loss of deductibility of interest expenses, imposition of withholding tax) or regulatory legislation (loss of Tier 1 issue status)
At each coupon payment date (on 03.28, 06.28, 09.28 and 12.28 of each year)
At each coupon payment date (on 01.30, 04.30, 07.30 and 10.30 of each year)
At each coupon payment date (on 01.20, 04.20, 07.20 and 10.20 of each year)
Optional after two profi t-making fi scal years following the end of the "Supervisory Event" (subject to compliance with regulatory ratios), but obligatory in the case of dividend distribution, the liquidation of the issuer
Optional after two profi t-making fi scal years following the "Capital Ratio Event", but the write-up amount cannot exceed the “Maximum Distributable Amount” nor the “Maximum WriteUp amount”
Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated 7 Instrument type (types to be specifi ed by each jurisdiction)
Coupons/dividends 17 Fixed or fl oating dividend/coupon Floating Fixed Fixed Fixed Fixed Floating Floating 18 Coupon rate and any related index Coupon structured between 95% and 120% of the bond average rate 19 Existence of a dividend stopper no no no no no no no 20a Fully discretionary, partially discretionary or mandatory (in terms of timing)
Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory 20b Fully discretionary, partially discretionary or mandatory (in terms of amount)
Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory 21 Existence of step up or other incentive to redeem no no no no no no no 22 Non-cumulative or cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative 23 Convertible or non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible 24 If convertible, conversion trigger(s) N/A N/A N/A N/A N/A N/A N/A
26 If convertible, conversion rate N/A N/A N/A N/A N/A N/A N/A
32 If write-down, full or partial N/A N/A N/A N/A N/A N/A N/A
Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Ineligible Tier 2
EUR 494m EUR 106m EUR 20m EUR 100m EUR 46m EUR 60m EUR 10m EUR 1,000m
EUR 500m EUR 100m EUR 20m EUR 100m EUR 46m EUR 60m EUR 10m EUR 1,000m
Conditional redemption option at any time, at par and for the full issue if changes occur in tax/regulatory legislation
N/A Conditional redemption option at any time, at par and for the full issue if changes occur in tax/ regulatory legislation
N/A N/A N/A N/A N/A N/A Decision of the Annual Shareholders’ Meeting for absorption of losses
Shareholders’ equity Capital 5,005 Issue premium 4,197 Retained earnings 6,497 Treasury shares (12) Other, including items of comprehensive income 916 Other instruments to be reclassifi ed as Additional Tier 1 capital 1,213 Net income 1,344 Total shareholders’ equity – group share 19,160 Reclassifi cation as Additional Tier 1 capital (1,213)
Translation adjustments (77) Restatement of dividend forecast (dividend for previous year) 0 Prudential fi lters after transitional arrangements Own credit risk: Gain on reclassifi cation of hybrid securities (259) Own credit risk: liabilities and derivatives net of deferred taxes (100) Prudent valuation adjustment (290) Unrealized gains and losses (5) Total prudential fi lters (654) Deductions after transitional arrangements Dividend proposed for current year and related expenses (1,127) Goodwill
Amount as per accounting base (3,097) Amount of related deferred tax liabilities 483 Amount included in value of investments in associates (290)
Non-controlling interests Amount as per accounting base 116 Prudential adjustment including transitional arrangements (100)
Deferred tax assets (tax loss carry-forwards) Amount as per accounting base (2,369) o/w portion not including tax loss carry-forwards and impact of netting 582 Prudential adjustment including transitional arrangements 1,608
Amount as per accounting base Other equity instruments 1,213 Residual gain on reclassifi cation as equity 259
Nominal value adjustment during the period 99 Early redemption through exercise of call option 0 Leveling due at the grandfathering limit 0 Total hybrid instruments 1,571
Amount as per accounting base 4,241 Regulatory adjustment (1,221) Transfer of grandfathering leveling on hybrid capital instruments 0 Total Tier 2 instruments 3,020
Pursuant to Implementing Regulation No. 1423/2013, the audit trail of prudential capital as described in Appendix VI of the regulation is provided below.
Common Equity Tier 1 capital: instruments and reserves 1 Capital instruments and the related share premium accounts 9,202 26 (1), 27, 28, 29, EBA list 26 (3)
6 Common Equity Tier 1 (CET1) capital before regulatory adjustments 16,770 0
Common Equity Tier 1 capital: instruments and reserves 7 Additional value adjustments (negative amount) (290) 34.105 8 Intangible assets (net of related tax liability) (negative amount) (3,426) 36 (1) (b), 37, 472 (4) 0 9 Empty set in the EU
11 Fair value reserves related to gains or losses on cash fl ow hedges 289 33 (a) 0 12 Negative amounts resulting from the calculation of expected loss amounts (76) 36 (1) (d), 40, 159, 472 (6) 0 13 Any increase in equity that results from securitized assets (negative amount) 0 32 (1) 0 14 Gains or losses on liabilities valued at fair value resulting from changes in own credit standing (360) 33 (b) 0 15 Defi ned-benefi t pension fund assets (negative amount) 0 36 (1) (e), 41, 472 (7) 0 16 Direct and indirect holdings by an institution of own CET1 instruments (negative amount) (5) 36 (1) (f), 42, 472 (8) (7)
22 Amount exceeding the 15% threshold (negative amount) 0 48 (1) 0 23 o/w direct and indirect holdings by the institution of the CET1 instruments of fi nancial sector entities where the institution has a signifi cant investment in those entities 24 Empty set in the EU
25 o/w deferred tax assets arising from temporary differences 0 36 (1) (c), 38, 48 (1) (a), 470, 472 (5)
25b Foreseeable tax charges relating to CET1 items (negative amount) 36 (1) (I)
28 Total regulatory adjustments to Common equity Tier 1 (CET1) (4,339)
43 Total regulatory adjustments to Additional Tier 1 (AT1) capital (269)
44 Additional Tier 1 (AT1) capital 1,302 45 Tier 1 capital (T1 = CET1 + AT1) 13,733
Tier 2 (T2) capital: regulatory adjustments 52 Direct and indirect holdings by an institution of own T2 instruments and subordinated loans (negative amount) (8) 63 (b) (i), 66 (a), 67, 477 (2) 0 53 Holdings of the T2 instruments and subordinated loans of fi nancial sector entities where those entities have reciprocal cross holdings with the institution designed to infl ate artifi cially the own funds of the institution (negative amount)
54a o/w new holdings not subject to transitional arrangements 0 54b o/w holdings existing before January 1, 2013 and subject to transitional arrangements 0 55 Direct and indirect holdings by the institution of the T2 instruments and subordinated loans of fi nancial sector entities where the institution has a signifi cant investment in those entities (net of eligible short positions) (negative amount)
56b Residual amounts deducted from Tier 2 capital with regard to deduction from Additional Tier 1 capital during the transitional period pursuant to Article 475 of Regulation (EU) No. 575/2013 o/w own capital instruments 0 o/w non-signifi cant investments in the capital of other fi nancial sector entities 0 o/w signifi cant investments in the capital of other fi nancial sector entities (12)
59 Total capital (TC = T1 + T2) 16,245 59a Risk weighted assets in respect of amounts subject to pre-CRR treatment and transitional treatments subject to phase out as prescribed in Regulation (EU) No. 575/2013 (i.e. CRR residual amounts)
o/w items not deducted from T2 items (Regulation (EU) No. 575/2013 residual amounts) 477, 477 (2) (b), 477 (2) (c), 477 (4) (b)
Capital ratios and buffers 61 Common Equity Tier 1 (as a percentage of risk exposure amount) 11.0% 92 (2) (a), 465 62 Tier 1 (as a percentage of risk exposure amount) 12.1% 92 (2) (b), 465 63 Total capital (as a percentage of risk exposure amount) 14.3% 92 (2) (c)
Applicable caps on the inclusion of provisions in Tier 2 76 Credit risk adjustments included in T2 in respect of exposures subject to standardized approach (prior to the application of the cap)
77 Cap on inclusion of credit risk adjustments in T2 under standardized approach 15,879 62 78 Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach (prior to the application of the cap)
79 Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach 50,080 62
81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) 0 484 (3), 486 (2) & (5)
82 Current cap on AT1 instruments subject to phase-out arrangements 1,271 484 (4), 486 (3) & (5)
The change in prudential capital under Basel 3/CRR over the period is shown below: R CHANGES IN PRUDENTIAL CAPITAL AFTER APPLYING TRANSITIONAL ARRANGEMENTS
Amount of Common Equity Tier 1 (CET1) at end of period 12,432
Amount of Additional Tier 1 (AT1) capital at end of period 1,302
o/w impact of changes in phase-in rate 137 o/w other impact of changes in basis (701)
3 RISKS AND CAPITAL ADEQUACYCapital management and capital adequacy Over 2015, Basel 3/CRR prudential capital, after applying transitional arrangements, evolved as follows: Common Equity Tier 1 (CET1) capital totaled €12.4 billion at December 31, 2015, down €0.2 billion over the year.
The €0.29 billion increase in accounting shareholders’ equity group share to €19.2 billion was mainly due to the incorporation of net income for the year for +€1.34 billion, and the favorable impact of the dollar rise on exchange conversion for +€0.47 billion. These items were offset by the payment of the dividend for 2014 (-€1.06 billion), the recognition of a deferred tax liability on goodwill in the US recognized by the Asset Management business line (-€0.42 billion) and the impact of the DNCA acquisition (put option on non-controlling interests) for -€0.18 billion.
In addition to the items above, additional Tier 1 capital increased moderately (+€146 million), following the replacement of a -€418 million acquisition by a €500 million issue in for the period. The balance was primarily due to the change in the phase in rate applied on items deducted from additional Tier 1 (AT1) capital, as well as the items subject to these provisions.
(in billions of euros) Risk credit CVA Market risk Operational risk Total RWA
The +€2.2 billion increase in credit risks over the year was primarily due to the following factors: V an increase in outstandings (+€2.9 billion) notably due to changes in activity and the increase in the book value of investments in insurance companies; V the impact of the dollar rise (+€2 billion); V an improvement in risk parameters (improved ratings, better recognition of guarantees received) for -€4.7 billion; V acquisitions and disposals of financial investments (-€0.9 billion).
Operational risk increased by €0.7 billion due to the replacement of the reference indicator for fi scal year 2012 by fi scal year 2015 (standard practice is to calculate operational risk using the average indicator for the previous three years).
Central governments and central banks 30,801 562 45 61,875 635 51
Central governments and central banks 5,262 1,899 152 6,366 2,110 169
Exposures to institutions and corporates with a short-term credit assessment 37,841 151 12 1,594 120 10
Central governments and central banks 3,473 22 2 6,328 46 3
Capital planning consists of determining Natixis’ target solvency level, continually ensuring compliance with regulatory capital requirements and adapting the allocation of capital and the measurement of business line profi tability accordingly.
Thus Natixis’ capital planning, in line with the strategic plan which set a target CET1 ratio of 9.5% – 10.5%, aims for a target ratio of 10.5%.
The quantitative framework is generally based on: V commitment ceilings by business line or sector; V commitment sub-limits by type of counterparty, type of product, or sometimes geographic region.
The principles of counterparty risk management are based on: V risk measurement based on the type of instrument, the duration of the transaction, and taking into account whether or not netting and collateralization agreements are in place; V defined counterparty risk limits and approval procedures; V a value adjustment calculated in accordance with the counterparty risk, i.e. credit value adjustment (CVA). The CVA represents the market value of a counterparty’s default risk. The accounting principles and evaluation methods for this adjustment are described in detail in Chapter 5 (“Consolidated financial statements and notes”); V consideration of the risk of unfavorable correlation, or specific wrong way risk. Specific wrong way risk is generated by a transaction for which the counterparty’s default risk and the market value of the position are linked by a deterministic relationship. This risk is managed by a specific procedure that involves regular monitoring as well as a calculation of dedicated capital requirements.
3 RISKS AND CAPITAL ADEQUACYCredit and counterparty risks (including country risk) 3.4.4 RISK MEASUREMENT AND INTERNAL
The mechanism is based on: V internal rating methodologies specific to the various Basel asset classes and consistent with Natixis’ risk profile. There is a unique rating procedure and methodology for each asset class; V an IT system used for managing the successive stages of the rating process, from the moment the process begins to its validation and logging once complete; V procedures and controls that place internal ratings at the heart of the risk-management system, from transaction origination to expost analysis of defaulting counterparties and the losses incurred on the relevant loans; V periodic reviews of rating methodologies, the method for calculating the LGD and the underlying risk parameters.
The rating scale varies according to the type of counterparty and includes 21 grades for major corporates, banks and specialized fi nancing.
It should be noted that internal ratings are also one of the criteria used to determine the level of authority required to approve credit.
Backtesting and benchmarking are an integral part of the model approval process. Backtesting and performance-monitoring programs are used at least once a year to ensure the quality and reliability of LGD estimates and rating models and LGD grids or probability of default scales (Corporate, Banks, Sovereign and LGD Secured). They include a detailed analysis based on a range of indicators, e.g. differences in terms of severity and migration compared with agency ratings, observed defaults and losses and changes in ratings prior to default, and the performance measurements of LGD models, based on the quantitative analysis of historical data and supplemented by qualitative analysis.
The change in the portfolio’s credit quality over one year is also analyzed by looking at internal rating migrations. This aspect of the analysis process gives an overview of the positioning of the Bank’s credit portfolio.
Additional indicators are also calculated to verify the internal risk ranking (Gini Index, average rating, previous year’s rating, ratings of counterparties that have defaulted) and provide statistics as a supplement to the qualitative analyses.
Rating Analysis Committee Meetings are chaired by the heads of the Specifi c Credit Risk Departments and the Risk Division Chief Operating Offi cer, or by representatives designated by them. The follow-up on the decisions made during Committee Meetings are presented at subsequent meetings, particularly if thresholds have been breached and this situation has not been rectifi ed.
All of these analyses are also presented each quarter to the Chief Risk Offi cer and sent to the regulator.
Losses given default are calculated: V on a statistical basis for the Corporate asset class; V based on internal and external histories and an external benchmark for banks and sovereigns; V using stochastic models if there is a claim against an asset.
Losses given default, which are determined using internal methods for calculating capital requirements, are also monitored quarterly during Rating Analysis Committee Meetings. Corporate and Bank LGD monitoring has therefore been rolled out over the past few months and is gradually being extended to all of the IRB-A-approved portfolios (Specialized Financing and Sovereigns).
3 RISKS AND CAPITAL ADEQUACYCredit and counterparty risks (including country risk) The indicators defi ned for backtesting are used both to measure the model’s performance and to validate the model currently used. Two types of indicators are used: V population stability indicators: these analyses are used to verify that the population observed is still similar to the population that was used to build the model. The model may be called into question if the segmentation variables or the LGDs result in excessively large distribution differences. All of these indicators are compared against the benchmark indicators (usually those calculated when the model was built or those issued by external data or agencies). These analyses are applicable to both expert appraisal-based models and statistical models; V model performance indicators: the model’s performance is measured to validate the segmentation and also to synthetically quantify the differences between the forecast and actual figures. This is achieved by using statistical indicators, which are compared against those calculated during modeling.
A backtesting report is produced once backtesting is complete. This report includes: V all of the results for the backtesting indicators used; V any additional analyses; V an overall opinion of the results in accordance with the Group’s standards.
The backtesting report and the reviews are presented to the Chief Risk Offi cer and the Group Risk Standards and Methods Committee (BPCE CNMRG). They are sent to the regulator every year.
Similarly, providers of sureties (via signature guarantees or CDS) are examined, rated and monitored, as with debtors.
Credit risk is supervised by holding the various business lines accountable, and by various control measures overseen by a dedicated Risk Department team.
Periodic reviews of sector-based risk policies also help to ensure that the risk envelopes allocated by the Global Risk Committee, chaired by the Chief Executive Offi cer, are observed. This risk undergoes sector monitoring by the Risk Division , which, among other things, results in the production of half-yearly market reviews covering the majority of the business sectors, for which the focus (especially in geographic terms) is tailored to the make-up of Natixis’ portfolio. The purpose of this process is to: V monitor new information about each sector (main events and changes in trends); V monitor objective indicators specific to each sector; V assess the change in the risks inherent to each sector; V regularly rate business sectors/sub-sectors, independently of the individual counterparty rating process.
At its monthly meetings, the Limit Breach Committee analyzes breaches of predefi ned limits using specifi c indicators (number, total, duration, business lines concerned, etc.), examines signifi cant breaches and monitors their correction.
Corporate & Investment Banking risks are monitored by the Restructuring and Special Affairs Department (DRAS), which intervenes in diffi cult cases where necessary. The Litigation Department handles collections of loans in litigation.
This stress testing is regularly calculated for the Natixis consolidation scope to evaluate the risk generated in the event of an adverse trend in the economic and fi nancial data. The results are regularly presented to the Global Risk Committee, which also validates the selected scenarios. The stress-testing approach factors in counterparty ratings and default rates (stressed PD scales, migration matrices, specifi c denotching per sovereign counterparty, and so on) and includes stresses on the unsecured LGD (Corporates, Banks and Sovereigns, etc.) and the secured LGD (asset or collateral values by business line).
It draws on a structure of preparatory Committees that are jointly steered by the Risk Division and each of the bank’s business lines.
Sector-based provisions are determined at a quarterly meeting of the Sector Provision Committee, whose role is to decide, as appropriate, whether to recognize provisions for new sectors or reverse provisions for sectors for which provisions have previously been recognized, based on the market trends in each sector and on the market reviews.
R TABLE 3: EXPOSURE AND EAD BY BASEL CATEGORY OF EXPOSURE (Data certifi ed by the Statutory Auditors in accordance with IFRS 7)
Exposures secured by mortgages on immovable property 212 27 199 13 1,312
Exposures to institutions and corporates with a short-term credit assessment 40,207 2,655 39,066 1,513 22,381
Ho ld in g co m pa ni es an d co ng lo m er at es Re ta il
(in millions of euros) Category of exposure France Europe* North America Other Total
Collective investment undertaking 5 5 * Europe = European Union + Europe outside EU
Finance – BPCE 54,591 53,203 * Europe = European Union + Europe outside EU
(in millions of euros) Category of exposure Exposures IRB-A approach IRB-F approach
Note: as of June 30, 2015, Groupe BPCE affi liates are presented under the standardized approach. This explains the main variations in the IRB-A and SA approaches, and has no impact on the calculation of the consumption of capital.
≤ 3 months ≤ 1 year ≤ 2 years ≤ 5 years >5 years Total
Other than SMEs and SF 29,205 18,260 12,233 30,102 11,191 100,991
Note: as of June 30, 2015 Groupe BPCE affi liates are presented under the standardized approach, with no impact on the calculation of the consumption of capital. This change results in a lower share of Investment Grade outstandings under the internal approach.
The following table shows the breakdown of exposure at risk by external agency for asset classes measured using the standardized approach, excluding: V exposures to equities; V pool-based exposures (acquired portfolios) and third parties grouped into homogenous risk classes; V securitization positions; V unrated positions; V other items that do not represent a credit obligation.
Exposures guaranteed by mortgages on immovable property 22 22 Exposures to institutions and corporates with a short-term credit assessment 27 3 8 1,910 1,975
3 RISKS AND CAPITAL ADEQUACYCredit and counterparty risks (including country risk) R T ABLE 13: EAD BY CATEGORY OF EXPOSURE AND BY INTERNAL RATING
Exposure o/w balance sheet o/w off-balance sheet EAD RWA Risk weighting RWA Risk weighting
Generic (a) and non-rated third parties 5,186 2,444 2,742 3,859 4,497 116.5% 2,887 117.8%
R TABLE 14: AVERAGE RISK WEIGHTING BY INTERNAL RATING (S&P EQUIVALENT) FOR ASSET CLASSES MEASURED UNDER THE IRB APPROACH
The following table shows the breakdown of exposure at risk by internal rating (S&P equivalent) for asset classes measured using the internal ratings-based approach (IRB), excluding: V exposures to equities (calculated using a simple weighting); V pool-based exposures (acquired portfolios) and third parties grouped into homogeneous risk classes; V securitization positions; V exposure to Groupe BPCE affiliates, presented under the s tandardized approach as of 06.30.2015.
For exposures measured under the internal approach (IRB), excluding the equity, securitization and other items classes.
R TABLEAU 16B: DESCRIPTION OF FACTORS THAT HAVE IMPACTED EXPECTED LOSSES ON PERFORMING EXPOSURES With the exception of transactions measured under the standardized approach, other items not representing a credit obligation, equities or securitization positions.
Central governments and central banks 33,937 0.2% 10.5% 514 59 1.5% 67,746 0.1% 8.2% 611 59 0.9%
Note: from June 30, 2015, the standardized approach is applied to Groupe BPCE affi liates. This explains the variations in the IRB-A and SA approaches.
3 RISKS AND CAPITAL ADEQUACYCredit and counterparty risks (including country risk) R TABLE 17: GUARANTED EXPOSURES BY TYPE AND INTERNAL RATING OF GUARANTOR (S&P EQUIVALENT) ■ INSTITUTIONS
A+, A, A- * Not rated: excluding exposures guaranteed by Groupe BPCE affi liates.
R TABLE 17B: GUARANTEED EXPOSURES BY ECONOMIC SECTOR Excluding protection provided by Groupe BPCE affi liates.
(in millions of euros) Guarantor ranking by protection amount Protection received %
Equity holdings are part of the product strategy of Natixis’ capital business lines. Unlisted equity holdings also result from an investment rationale. The applicable accounting methods are mentioned in Chapter 5 (“Consolidated fi nancial statements and notes”).
3 RISKS AND CAPITAL ADEQUACYCredit and counterparty risks (including country risk) R TABLE 24: EAD BY TYPE AND NATURE OF EXPOSURE (EXCLUDING IMPACT OF THRESHOLDS)
Private Equity held in suffi ciently diversifi ed portfolios 2,119 2,119 2,467
R TABLE 27: AGGREGATE AMOUNT OF DIVESTMENT GAINS OR LOSSES FOR THE PERIOD UNDER REVIEW
R TABLE 28: FRACTION OF AMOUNTS OF UNREALIZED GAINS OR LOSSES INCLUDED IN TIER 1 OR TIER 2 CAPITAL
For every structured transaction subject to approval, a substantiated request and a description of the structure, collateral, transferor/ originator and the planned tranching must be submitted, along with an analysis of the associated guarantees.
A counter-analysis is then carried out by the Risk Division and, if necessary, a quantitative analysis of the portfolio’s default risks. Transactions are examined and decisions are made based on all of the loan application’s parameters, including the expected profi t margin on the loan, the capital burn and compliance with the current risk policy.
R TABLE 32: EAD BY APPROACH AND BY WEIGHTING On securitization positions in the banking book (including counterparty risk) and the trading book. Exposures shown exclude look-through approach.
3 RISKS AND CAPITAL ADEQUACYSecuritization R TABLE 34: RE-SECURITIZATION EXPOSURES BEFORE AND AFTER SUBSTITUTION
The Risk Division places great importance on the formal defi nition of all risk policies governing market transactions based on both a qualitative and forward-looking analysis. This analysis includes the strategic review of global risk envelopes according to the respective targets of each business line and market trends, and provides an early warning system for the different risks identifi ed.
The Risk Division defi nes the principles for measuring risk, submits them to Senior Management for approval and monitors their effective implementation and follow-up. It validates market product valuation models and regularly ensures that models used are consistent with market developments and changes in best practices.
In accordance with the recommendations of France’s Lagarde report, the Risk Division also ensures adherence to the limit notifi cation procedure. This procedure ensures that each trader sends e-mail confi rmation that they belong to the desk where they are authorized to trade and that they agree to the allocated limits.
Natixis’ market risk management is based on a risk metrics model that measures the risks incurred by each Group entity.
R To this end, a statistical model has been constructed to track the combined behavior of market parameters affecting portfolio value. The calculation method is based on an econometric model whose standard deviations are calculated as being the maximum (risk factor by risk factor) standard deviations calculated over rolling 12-month and 3-month periods. This method makes VaR more responsive if the markets suddenly become more volatile.
The reliability of the VaR is measured regularly through comparison with the changes in the daily trading results, a process also known as backtesting. This exercise allows an expost comparison of the potential losses, as projected ex-ante by the VaR, with the actual losses.
Natixis’ internal VaR model was approved by the Autorité de Contrôle Prudentiel et de Résolution in January 2009. Natixis thus uses VaR to calculate capital requirements for market risks within approved scopes.
As part of changing regulatory standards (Basel 2.5), Natixis implemented a stressed VaR model (SVaR), which is calculated based on a fi xed econometric model over a continuous 12-month period that defi nes the charge that the bank’s current VaR model would generate under a representative crisis scenario relevant to its portfolio, and has calculated an IRC (Incremental Risk Charge) that estimates the migration and default risks of market instruments. The IRC is based on a one-year capital horizon at a 99.9% confi dence level. These indicators are calculated on a daily basis.
All market stress test mechanisms (including liquidity stress tests) are defi ned by the Risk Division , which is responsible for defi ning principles, methodology and calibration and scenario choices. The Market Stress Test Committee, which is co-chaired by the Chief Risk Offi cer and the Head of Global Markets, is responsible for the operational implementation of stress tests and meets on a monthly basis. The Committee validates work to be carried out, its workload and determines the annual IT budget.
4. Operational indicators are used to manage activity on an overall and/or similar business basis, by focusing on more directly observable criteria (sensitivity to changes in the underlying and to volatility, correlation, nominals, diversification indicators, etc.). Limits corresponding to these qualitative and quantitative operational indicators thereby complement VaR, stress test and loss alert limits. They are determined in accordance with the latter limits.
The independent validation of models developed internally by Natixis plays a fundamental role in the supervision of market risks, as it is a means of verifying the valuation of the fi nancial instruments traded within the bank and of analyzing the risk exposure with regard to the market prices observed or relevant factors.
Through benchmarking, these models are compared with marketplace practices, thus reinforcing the validation of internal modeling choices.
The following chart shows the VaR trading history between December 31, 2014 and December 31, 2015, for the entire scope.
The main events that occurred in August were the devaluation of the Chinese currency and the sharp decline in the Asian stock markets that spurred volatility in the markets.
The exception was a result of a market stress observed that day following the Swiss National Bank’s decision to remove the fl oor on its EUR/CHF exchange rate, fi xed at 1.20 since September 6, 2011. As this increase is greater than 2.33% of the standard deviation, it was not captured in the VaR.
Overall stress test levels were stable compared to 2014, averaging -€28.1 million at December 31, 2015, versus -€27.9 million at December 31, 2014.
The historical stress test replicating the 1987 decline of equities gave the maximum loss (-€83 million at December 31, 2015).
It defi nes fi ve operational risk management criteria: V four quantitative indicators: one historical indicator measuring risk exposure, one prospective indicator measuring the cost of risk, one individual indicator identifying the occurrence of major incidents to be reported to the regulator, and an operational risk management indicator measuring the progress of corrective actions; V a qualitative indicator measuring the compliance of the framework.
Overseeing this framework is a single overarching 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 required to manage operational risk (incidents, mapping of quantifi ed potential risks, risk management systems, key risk indicators, action plans, comitology, etc.). The accuracy of the information entered or approved by the operational risk managers is ensured through reconciliation with information emanating from other functions (accounting, compliance, legal, IT systems security, etc.).
The capital requirements for operational risk are calculated using the standard method for all the Company’s operational divisions. However, Natixis uses an internal methodology to obtain an overall estimation of its level of exposure to operational risk by business line entity, geographic region and certain major risk situations. The methodology relies on a VaR calculation based on risk mapping, factoring in identifi ed incidents for backtesting and known external losses.
Every year the Operational Risk Department, in conjunction with the other control functions, works with each business line, entity and support function to map operational risks. This is done by identifying and descriptively analyzing risks, quantifying these risk situations (defi ning the average frequency, the average and maximum loss), and by taking into account existing risk management frameworks. This mapping is carried out for all of the bank’s activities and its consistency is verifi ed through backtesting, i.e. by using the incident history.
The mapping process is used to identify the exposed business lines as well as the biggest risks faced by Natixis, and to manage these risks. The mapping of extreme risk situations (which are infrequent and include major natural disasters, pandemics, attacks, etc.) is based on external data on incidents in the fi nancial industry, specifi cally the defi nition of frequencies. Also taken into account are assumptions on unrealized net revenue items and the effectiveness of risk management mechanisms, as well as contingency and business continuity plans.
Overall trend of reported incidents by number and by financial impact per business line
Over the course of 2015 the “Execution, Delivery, and Process Management” Basel category made up 91% of reported incidents in terms of number . There were no reports of internal fraud .
The Company’s risk profi le features two main risk categories: business line risk, concentrated to Corporate & Investment Banking, and overall risk (loss of access to premises or information systems, or of availability of employees).
V The main risks analyzed are: R internal or external fraud; R a drop in the value of securities; R liability risk (civil operating and professional liability, as well as managers’ and executive corporate offi cers’ civil liability); R damage to operating assets (buildings and their contents, IT hardware and data), and of banking business resulting from this damage.
This risk is measured in terms of the sensitivity of portfolios’ economic value by bp on the yield curve and by currency. For the largest portfolios it is controlled through limits approved and monitored by the Risk Division . In accordance with the Decree of November 3, 2014, an overall limit was also defi ned and approved by the Board of Directors. As regards Treasury, which centralizes most positions, this mechanism is rounded out with interest rate and spread stress tests which are also governed by limits.
Given its nature, overall interest rate risk is a marginal risk for Natixis and calls for no particular remarks; the Basel 2 normative shock (+200 bp instantaneous shift in the yield curves) would lead to an absolute value variation in the portfolio’s economic value of €218 million at December 31, 2015. This sensitivity, which is very low considering the size of the banking book, nevertheless increased compared to December 31, 2014 (€134 million) and results mainly from balance sheet management operations.
(1) Excluding those related to banking portfolios for Capital markets activities that are presented to the Market Risk Committee.
Given the presence of risk-weighted assets in foreign currencies (mostly USD), the aim of Natixis’ structural foreign exchange risk policy is to immunize the Core Tier 1 ratio from exchange rate fl uctuations. To this end, it establishes a “structural” foreignexchange position that is reevaluated for translation adjustment when it funds strategic long-term net investments in foreign entities, while non-strategic net investments in local currencies are refi nanced with loans. Furthermore, net investments in local currencies are never hedged, in line with the “net investment hedge” principle as defi ned by IAS 39.
The Core Tier 1 ratio’s sensitivity to exchange rate fl uctuations is regularly assessed by the ALM Committee. The Committee sets an acceptable variation range on the dollar for this sensitivity and a monitoring report is presented during its meetings.
Natixis’ liquidity risk management policy is an integral part of the Group’s policy. It sets out to optimize Natixis’ activities within a clear, shared and standardized framework in terms of governance and ALM regulations and in line with the Group’s risk constraints.
Thus, the purpose of the overall liquidity risk management policy is to: V guarantee that Natixis complies with its financing commitments while ensuring that the amounts trade to meet its funding and liquidity matching needs are in line with the Group’s short- and medium-term refinancing capacities; V optimize the cost of fund refinancing within the set risk constraints to help reach the profitability objectives; V respect the internal limits set in close cooperation with BPCE and adapted to the Group’s ability to provide for Natixis’ ultimate liquidity needs; V comply with national and international regulations; V contribute to diversify the sources of funding of Groupe BPCE (by geographic area, product and counterparty); and specifically promote the collection of non-financial resources.
Liquidity risk is controlled, managed and monitored as follows: V management of each business line’s funding needs: to manage the bank’s refinancing needs, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Funding needs are monitored weekly for Corporate & Investment Banking business lines and monthly for other business lines; V management of the bank’s contribution to Groupe BPCE’s net market footprint: the objective is to match the liquidity allocation system with the Group’s strategic ambitions and operational oversight; V supervision of short-term liquidity matching, which is measured using liquidity gaps. This indicator is produced daily for a 365-day horizon in intervals of one day, based on all the parent company’s transactions and is extended to the US subsidiaries. It is subject to four permanent limits approved by the ALM Committee and monitored daily, on overnight market exposure at opening, on the 60-day, 150-day and 330-day static liquidity gaps; V supervision of medium-term liquidity matching, which is performed using coverage ratios that are defined by tranche of maturity, like the ratio of assets that have not yet matured to liabilities that have not yet matured. These ratios are calculated for long-term cash assets, credit subsidiaries housing mediumterm activities, and for Natixis on a consolidated basis, and are restricted by the minimum hedging ratios approved by the ALM Committee and monitored monthly; V simulations of liquidity stress scenarios: the purpose of these scenarios is to challenge the Group’s ability to continue to respect its commitments and operate in the event of a liquidity crisis. Natixis periodically simulates its contribution to the Group’s stress results based on different crisis scenarios (systemic, specific, combined, etc.) and different levels of intensity (moderate, strong, extreme, etc.) over one-, two- and three-month periods for which assumptions are set by BPCE;
Since mid-2011 Natixis’ funding structure has been rooted in the organization of a cross-entity Natixis-BPCE liquidity pool, placed under the authority of the Group ALM Committee. This platform was implemented in order to secure the Group’s fi nancing and optimize the management and allocation of liquidity within the Group in accordance with pre-defi ned rules, to reduce market fi nancing and refi nancing costs.
Over the course of the year, in line with Group policy, Natixis continued to diversify its funding sources, extend the maturities of funds raised, and reduce its market footprint. As in 2014, efforts were focused on developing customer deposits in current accounts and structured issues placed with investors.
Under its annual medium-term refi nancing program, in 2015 Natixis raised €14.2 billion in resources with a term of more than one year (versus €13.3 billion in 2014) and an average lifespan of approximately four years. 40% of this program was achieved via structured private placements, with the remainder predominantly provided by BPCE as part of the Group’s medium-term refi nancing policy approved by the Group ALM Committee.
The regulation governing liquidity risk applicable to French credit institutions took effect on June 30, 2010 (French decree dated May 5, 2009). The liquidity ratio was designed to ensure that liquid assets with maturities of less than one month are greater than or equal to liabilities falling due within the same period.
In 2010, the Basel Committee introduced new liquidity risk measures: V the Liquidity Coverage Ratio (LCR, January 2014) is a short-term liquidity ratio whose aim is to ensure that, in stress scenarios, banks hold enough liquid assets to cover their net cash outflows for a 30-day period; V the Net Stable Funding Ratio (NSFR, October 2014) is a long-term structural liquidity ratio developed to strengthen the resilience of the banking sector by requiring banks to maintain a stable funding profile and by limiting the mismatching of assets and liabilities to less than one year.
To date, European regulation requires: V compliance with the LCR as from October 1, 2015.The minimum requirement, which was initially set at 60%, rose to 70/% on January 1, 2016, and will increase each year to reach 100% on January 1, 2018;
Natixis calculates its LCR monthly on a consolidated basis and operationally manages its liquidity position and coverage of liquidity requirements relative to these new metrics.
Finally, Natixis regularly assesses its contribution to the Group’s NSFR based on its interpretation of present legislation.
The Delegated Act adopted on October 10, 2014 defi ned liquid assets and the criteria they must meet to be eligible for the liquidity buffer to be used to cover funding needs in the event of a shortterm liquidity crisis. The assets in question must be available, unencumbered and subject to various discounts as imposed by regulations, and are supposed to represent the possibilities and limitations on monetizing these assets.
Under the French Ministerial Order of November 3, 2014 on internal control by companies in the banking, payment services and investment services sector subject to the supervision of the Autorité de Contrôle Prudentiel et de Résolution (ACPR – French Prudential Supervisory Authority for the Banking and Insurance Sector), companies concerned are required to set overall limits and have policies and processes in place to detect, manage and monitor excessive leverage risk.
Accordingly, in 2015 Natixis established: V governance under the authority of the ALM Committee for managing and monitoring excessive leverage risk (see section 3.8.1); V a dedicated risk policy for excessive leverage risk. Notably, the ALM Committee decided to target a leverage ratio above 4% from end-2015, above the 3% minimum requirement currently recommended by the Basel Committee. This is in keeping with the Bank’s transformation strategy towards an «asset-light» model, as advocated by the New Frontier plan; V an overall limit and an alert threshold applied to Natixis’ leverage ratio, proposed by the ALM Committee and approved by the Risk Committee.
Total Demand Less than 1 month 3 months 6 months 6 months to 1 year 1 to 2 years 2 to 5 years
In particular, in calculating the liquidity coverage ratio (LCR), the amounts of these additional cash outfl ows and additional surety requirements are measured. These amounts correspond to the payment the bank would have to make within 30 calendar days were its credit rating to be downgraded by as many as three notches.
3 RISKS AND CAPITAL ADEQUACYCompliance and reputational risk, legal risks 3.9 Compliance and reputational risk, legal risks 3.9.1 COMPLIANCE AND REPUTATIONAL RISK
The department advises and assists all employees on how to prevent compliance risks when performing their duties, and participating in establishing new standards, policies and procedures. To ensure the proper oversight of new activities, structures and new or modifi ed products, the department issues formal notices to help secure of Natixis’ activities.
V compliance with Natixis’ employee code of conduct, which covers gifts and invitations received or offered, personal transactions, the performance of duties outside of Natixis and offices and investments held in a personal capacity.
Natixis has set up a permanent and complete information barrier separating its asset management business activities within Natixis Asset Management from its other activities.
This procedure is not intended to replace conventional reporting methods at Natixis, such as the escalation of anomalies to the higher levels of the organization. Alerts raised using this procedure are addressed to the compliance manager and/or Chief Compliance Offi cer.
Defending the primacy of customers’ interests is a defi ning principle of Natixis’ activities and is refl ected in the policies of each entity in France and abroad.
In all circumstances, employees are required to serve customers with diligence, loyalty, honesty and professionalism, and to offer fi nancial products and services that are appropriate to customers’ abilities and needs.
In 2015 Natixis implemented the Automatic Exchange of Tax Information regulation across all its French and international operations concerned and located in the member states that are early adopters of the new norm.
In 2015 the following actions were taken: V a new shared tool for referencing the use of personal data was implemented,
The purpose of the Financial Security Department, which reports to Compliance management, is to organize anti-money laundering and counter-terrorist fi nancing (AML – CFT) measures and to ensure compliance with embargoes and anti-fraud measures, both for Natixis and its subsidiaries. In addition to this standing supervisory task, it may directly spearhead special efforts on behalf of some business lines.
Natixis is fully committed to guaranteeing a secure environment for customers, partners and employees. Natixis’ anti-fraud culture is also continuously reinforced and deployed through regular awareness-building campaigns for employees and customers and specifi c controls of activities that are especially at risk.
In terms of advice and support to business lines, all projects submitted to the IT Commitment Committee are required to undergo security analysis. At the start of the project the business lines express their security requirements to the IT Department who respond by implementing the appropriate technical solutions.
The fi nancial consequences, assessed at December 31, 2015, of litigation deemed likely to have, or which has in the recent past had, a material impact on the fi nancial situation of Natixis and/or Natixis and its consolidated subsidiaries as a whole, or on their profi tability or their business, have been included in Natixis’ consolidated fi nancial statements.
In 2007 the judge accepted all aspects of the Harris Associates L.P. motion and rejected the motion of the plaintiffs, who appealed the decision. In 2008 a panel of judges from the Court of Appeals for the Seventh Circuit upheld the ruling of the District Court in favor of Harris Associates L.P. The plaintiffs then (i) requested a rehearing of the appeal by the entire Court of Appeals, which rejected their request, after which they (ii) sought relief from the United States Supreme Court, requesting that the denial of their appeal be overturned. The Supreme Court decided to hear the case.
In a ruling handed down on March 30, 2010 the US Supreme Court vacated the case before the Court of Appeals for the Seventh Circuit so that the Court could determine whether the decision of the District Court in favor of Harris Associates L.P. should be upheld or overturned. The Court of Appeals for the Seventh Circuit upheld the ruling of the District Court in favor of Harris Associates L.P. on August 6, 2015. All legal remedies having being exhausted since, this case is now closed.
3 RISKS AND CAPITAL ADEQUACYCompliance and reputational risk, legal risks casino/hotel complex. Regarding the construction project, Natixis had already committed to issuing a bank guarantee of completion in the amount of €20 million. All of the claims fi led by the Commune of Sanary-sur-Mer were dismissed in a ruling handed down by the Administrative Tribunal of Toulon on April 12, 2013. The Commune of Sanary-sur-Mer has appealed this ruling. On July 10, 2015 the Court of Appeals upheld the ruling and rejected and denied the appeal fi led by the Commune of Sanary-sur-Mer. As the plaintiff has not appealed, the case is now closed.
In 2012 a complaint was fi led against Natixis Asset Management before the Paris District Court (Tribunal de Grande Instance de Paris) by 187 former employees of CDC Gestion (current name Natixis Asset Management.) The purpose of the complaint is the legal recognition of their rights to the common law profi t-sharing schemes from 1989 to 2001.
Following the application for a priority preliminary ruling on the issue of administrative constitutionality raised by Natixis Asset Management on the interpretation of an article of the French Labor Code, on August 1, 2013, the Constitutional Council declared the fi rst paragraph of Article L.442-9 of the French Labor Code in its version prior to Law No. 2004-1484 of December 30, 2005 to be unconstitutional and ruled that employees of companies whose share capital is predominantly held by public entities cannot call for a profi t-sharing scheme to be applicable to them for the period during which the provisions declared unconstitutional were in force. The case is still in progress before the Paris District Court.
In September 2014 the Paris District Court ruled in favor of Natixis Asset Management and dismissed all of the employees’ complaints. The employees have appealed this ruling to the Paris Court of Appeal.
In April 2012 MMR Investment Ltd fi led a joint claim against Natixis and the fi nancial intermediary, claiming not to have received the bonds, despite having paid the subscription price to the fi nancial intermediary. The claim mainly concerns the reimbursement of the subscription price of the bonds and, and as an alternative, the annulment of the subscription in particular on the grounds of defect in consent.
Natixis Assurances essentially sells personal insurance and non-life insurance products, the main risks of which are of a fi nancial nature: Risk of no longer being able to meet the minimum contractual rate of return in the event of a decline in interest rates
To deal with this risk, BPCE Vie (a subsidiary of Natixis Assurances) has only sold policies without a minimum guaranteed return in recent years: more than 90% of the policies have a zero minimum guaranteed return. The minimum guaranteed return averages 0.18%.
The sensitivity of equity to variations in interest rates is mitigated by the classifi cation of approximately €2.9 billion, fair value, in interestbearing securities in the category of held-to-maturity securities.
The monitoring and management of counterparty risk is carried out in compliance with Natixis’ standards and internal limits, as determined by the Credit Risk Committee, as well as the regulatory constraints imposed on insurance companies. Thus, 66% of the fi xed-income portfolio is invested in securities rated higher than A-.
3 RISKS AND CAPITAL ADEQUACYOther risks V reserve risk: for each inventory, the Technical And Reinsurance Department conducts an actuarial assessment of the reserves for claims to be paid (those already known and claims yet to be filed). The assessment is based on methods that are widely recognized by the profession and required by the regulator; V catastrophe risk: catastrophe risk is the exposure to an event of significant magnitude generating a multitude of claims (storm, risk of civil liability, etc.). More often than not there is little possibility of pooling this risk on a national scale, or the risk is severe enough to threaten the Company’s solvency. This risk is therefore reinsured either through the government in the event of a natural disaster or an attack, for example, or through private reinsurers, specifically in the event of a storm or a civil liability claim, or through reinsurance pools.
To safeguard against this risk, the Company decided to opt for a 200-year return period. Priorities are adapted in step with the development of the business.
Through its activities, Coface is exposed to two main types of risk. The fi rst is the technical risk constituted by the risk of losses on Coface’s portfolio of insurance policies. The second is the fi nancial risk related to the risk of losses arising from adverse changes in interest rates, exchange rates or the market value of securities or real estate investments. Coface has implemented tools designed to control these risks and to ensure they remain within conservative limits.