INTERVIEWWITH THE CHIEF EXECUTIVE OFFICER 2 PROFILE 4 KEY FIGURES 2019 6 STRATEGIC PLAN 8 A GOVERNANCE STRUCTURE SUPPORTING NATIXIS STRATEGY 10 ESR 12 COMPENSATION 14
LEGAL AND GENERAL INFORMATION9 535 Legal notices and practical information9.1 relating to Natixis 536
This universal registration document was filed with the French Financial Markets Authority (Autorité des Marchés Financiers – AMF) on March 6. 2020, as the competent authority designated under EU regulation 2017/1129 without prior approval in accordance with Article 9 of said regulation.
Natixis continued to grow in 2019, reflecting its strong strategic choices and solid business model.
What progress have you made in implementing the New Dimension strategic plan?
Corporate & Investment Banking, Insurance and Payments expertise to work so that they can transform their ambitions into reality.
> Issuing > Acquiring > Processing > Asset Management > Wealth Management > Employee Savings Schemes
(1) Fédération Nationale des Banques Populaires (2) Fédération Nationale des Caisses d’Epargne (3) Indirectly through Local Savings Companies (4) Banque Palatine, subsidiaries grouped together within the Financial Solutions & Expertise division, Oney Bank (5) Float: 29%
In 2019, Natixis recorded very sound results with each of our four businesses growing revenues faster than costs. This momentum of successive growth is the result of our unwavering implementation of our asset-light strategy and represents a solid base for us to complete our 2018-2020 strategic plan.
The New Dimension ambition: differentiation and sustainable value creation through targeted expertise.
V Outside Europe: >50% of Asset & Wealth Management revenues excluding Europe, 37% for Corporate & Investment Banking CIB.
New leadership roles aimed at increasing span of control by 35%.
The New Dimension strategic plan is in place across our business lines
V Developing the Green & Sustainable Hub and running the Green Weighting Factor.
* Energy & Natural Resources, Infrastructure, Aviation, Real Estate & Hospitality.
V Complete range of payment services structured around three divisions: processing and services, retail solutions, prepaid and issuance.
V Realization of Natixis Assurances’ ambition to become a fully-fledged insurer for the BPCE Group networks: the Banque Populaire and Caisse d’Epargne banks.
PROFILE A governance structure supporting Natixis strategy 11NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
V Measurement of the portfolio’s carbon footprint and alignment of portfolios with the 2 °C scenario.
V Evaluation of the trajectory of all Mirova’s portfolios at 1,5 °C.
In 2019, Natixis was the first bank to manage the climate impact of its balance sheet using the Green Weighting Factor. This internal capital allocation model adjusts the return on each credit facility according to its impact on the climate. This rating system influences individual decisionsolutions for an equivalent level of credit risk.
On the payment or allocation of variable or non-recurring items for the previous fiscal year
Total compensation granted to the Chief Executive Officer (€m) CEO pay ratio vs average employee’s compensation 14 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
In the event of court-ordered liquidation concerning all the affiliates, the external creditors of all the affiliates are managed by their ranking and in the order of hierarchy in an identical fashion and irrespective of their association with any given affiliated entity. Consequently, holders of AT1 capital and other pari passu securities would be more affected than holders of T2 capital and other pari passu securities, who would be more affected than holders of senior non-preferred external debt, who, in turn, would be more affected than holders of senior preferred external debt. In the event of resolution, identical write-down and/or conversion rates would be applied to the debts and credits of the same ranking and irrespective of their association to any given affiliated entity, and in the order of the hierarchy set out above.
Only the entities not concerned by court-ordered liquidation nor resolution measures and which do not contribute to the Group solidarity mechanism, as is the case of Natixis, are excluded from contributing to the bail-in of other failing affiliates.
As a global multi-affiliate asset management business, Natixis Investment Managers includes more than 20 specialized investment managers in the US, Europe and Asia. Based on the Active ThinkingSM concept, the brand platform of Natixis Investment Managers embodies its commitment to a highly active, conviction-led investment style and its stewardship for a long-term investing approach.
Natixis Investment Managers’ multi-affiliate structure encompasses a portfolio of more than 20 independent active asset managers providing a distinctive, alpha-generating and diversified suite of investment strategies across traditional and specialized equity, fixed income and alternative asset classes, supported by a federation of shared services. The Company supports the growth of each affiliate through its global distribution platform, offers financial backing for innovation and global oversight to ensure the consistency of operational risk management. Natixis Investment Managers covers over 20 countries, and its main support functions operate from Boston, London and Paris.
alpha generation of thematic equity investing and its tie to ESG themes, which continue to dominate the marketplace in Europe and increasingly in other parts of the world.
The group strengthened its global equity offering not only with aV highly active, conviction-driven range of thematic strategies, but also by acquiring a minority stake in US-based WCM Investment Management. The establishment of a strong distribution partnership with WCM has already proven to be successful with the launch of new products in the US and Europe and asset gathering from new clients for WCM.
In the illiquid space, Natixis Investment Managers is widening theV scope of its strategies and enhancing its distribution capabilities and reach. For instance, the creation of Vauban Infrastructure Partners — an affiliate dedicated to equity investments for the creation, development and operation of social infrastructure, transportation infrastructure, utilities and digital networks — makes a substantial contribution to Natixis Investment Managers’ alternative and real assets range. The development of Flexstone Partners validates the strategy of combining its affiliates in the Private Equity advisory space to create a single platform.
Natixis Investment Managers continues to grow its footprint,V reinforcing its presence with insurers and global financial institutions. A joint venture between its affiliate Ostrum Asset Management and La Banque Postale to combine their insurance-related activities and create a leader in the market for European insurers has recently been announced. Natixis Investment Managers also acquired a minority stake in Fiera Capital, its preferred distribution partner in Canada and, although it is still early to see meaningful asset gathering, the pipeline of opportunities is significant. In Asia, which industry wide is expected to be the greatest contributor to global asset growth over the next 10 to 15 years, Natixis Investment Managers has continued to expand the scope of its relationships and the number of affiliates distributed in the region. Adding locally managed investment strategies will be very important to continue to grow in the region.
Natixis Investment Managers will continue to cement its position as a fully active player in the asset management industry, anchored by mature, market-leading businesses in the US and France, and grow its presence across Europe and in other critical regions, including Asia-Pacific, the Middle East and Latin America. Building on its current leading market position and its differentiating multi-affiliate business model, Natixis Investment Managers will further enhance the reach of its distribution network, continue to diversify its line-up of affiliate investment offerings, continue investments in digitalization and technology, and expand its global footprint and capabilities, notably in Asia. The firm will also continue to invest in ESG and impact investing, as well as diversity and inclusion, and is committed to making clearly measurable progress in both areas.
H2O Asset Management (€30.3 billion), global macro multi-strategy and international fixed incomeV
Mirova (€15 billion), SRI equity and fixed income, infrastructure project financingV
Natixis Wealth Management caters to two client categories: wealth management clients originating from Groupe BPCE’s banking networks and from Natixis (Group sourcing), and direct clients (business proprietors, senior executives/company directors and owners of family wealth). It designs and implements wealth management and financial solutions and offers clients a broad spectrum of expertise and solutions covering all facets of their projects — corporate advisory and wealth engineering, advised management, financing, private equity, life insurance, structured products, real estate solutions and diversification — proposed in close collaboration with several Natixis entities. Natixis Wealth Management also works with its wholly-owned subsidiary VEGA Investment Managers — a specialist in multi-management, advisory and open architecture fund selection — and with all subsidiaries of Natixis Investment Managers, in order to supply various products and services to its clients.
At year-end 2019, Natixis Wealth Management had €30.4 billion in assets under management, up €4.3 billion or 16% over the period.
As part of France’s number two banking group, Groupe BPCE, it enefits from an extensive local presence via the Banque Populaire and Caisse d’Epargne networks, and uses the financial management solutions provided by Natixis Investment Managers — a specialist in active investment management for employee savings.
For more than 50 years, Natixis Interépargne has been offering companies and savers innovative digital services and solutions
At December 31, 2019, Corporate & Investment Banking (CIB) comprised 3,646 employees (FTEs) in 27 countries around the world: 38.3% of which in France, and 61.7% internationally.
Corporate & Investment Banking's areas of expertise are: Capital Markets: a wide range of diversified, standard and bespokeV products and solutions on the fixed income, credit, forex, commodities and equities markets; Financing: origination, arrangement and syndication of structuredV financing, as well as portfolio management for all vanilla and structured financing under an originate-to-distribute (O2D) model; Trade & Treasury Solutions: treasury solutions and trade financeV solutions; Investment Banking: acquisition & strategic finance, financing onV the primary markets for bonds and equities, financial engineering applied to holdings, and financial structure and rating advisory services; Mergers & Acquisitions: preparation and execution of disposalsV and mergers, fund-raising, restructuring and capital protection.
Organized by client type (banks and the international public sector, insurers, financial sponsors, asset managers and corporates), the Coverage function has a strong regional presence in France and is supported internationally by all Natixis’ teams across 38 countries. This structure encourages responsiveness, close, personalized working relationships and in-depth strategic dialogue with clients over the long term.
Natixis also furthered the development of its green finance expertise, for example implementing its Green Weighting Factor, a tool not only for innovative oversight of capital allocation based on the environmental performance of its financing solutions, but also for helping clients achieve their own personal ecological transition. With the Green Weighting Factor, Natixis has also become the first bank to actively steer the impact of its balance sheet on the climate.
The Green & Sustainable Hub (GSH) continued to drive Corporate & Investment Banking’s efforts to promote green and sustainable finance, securing a position as a valued partner for corporate clients, the public sector and investors in navigating the key issues of the ecological and social transitions of tomorrow.
Business once again expanded in the United States, fueled by the CLO market. Natixis is a renowned on this market as an arranger and placement agent, ranking among the top 10 arrangers of broadly syndicated CLOs (sources: New Issues — Thomson Reuters and Bloomberg) and as the No. 1 arranger of middle-market CLOs. Outside the CLO segment, Natixis continued to diversify its ABS business through the development of securitizations linked to real assets (aircraft).
In compliance with the French law on the separation and regulation of banking activities, the Treasury and Collateral Management team, which used to report to Global Markets, was placed under the oversight of the Finance Department. Functional subordination was maintained with the Global Head of Global Markets.
On the equity derivatives market, Natixis offers tailored solutions to match the goals and constraints of all its distributor and institutional clients. The bank caters to insurers, pension funds, asset managers, hedge funds, private banks, family offices, bank and insurance distribution networks and wealth management advisors.
A number of awards were received in 2019, underscoring the drive and expertise of the Corporate & Investment Banking teams Natixis was in particular named “Most Innovative Investment Bank for Financial Institutions Group” by The Banker magazine. This award acknowledges the diversity of solutions proposed and the innovation offered to institutional investors in both the fixed income and equity derivatives markets.
A product of the merger of the Equity Finance (Equity Derivatives) and Securities Financing group (Fixed Income) teams, Global Securities Financing aims to promote dialog with clients in order to offer them multi-underlying and multi-product solutions. With 65 employees in Paris, London, Frankfurt, New York, Hong Kong and Tokyo, Global Securities Financing’s primary areas of expertise are collateralized funding and collateral management (repos, securities lending/borrowing, etc.), repo market-making and credit and sovereign securities lending/borrowing, and index (equity) market-making, and has a Solutions Department. The pooling of expertise facilitates the development of innovative hybrid solutions.
Global Markets Research, now CIB Research, complements Natixis’ sales strategy. It publishes analyses to guide clients in their investment decisions and contributes to creating financial solutions tailored to clients’ needs using models, such as valuation models, risk management models and quantitative asset allocation strategy
Recognized for the macroeconomic expertise of its Chief Economists in its three international platforms, CIB Research also does extensive research in key sectors such as infrastructure, real estate, energy & natural resources, and insurance. In 2019, it launched a new website with an offering tailored to each client, inviting them to rate the publications and select personalized investment themes.
Quantitative Research contributes to the adaptation of our offering on the capital markets. It supports the bank’s financial innovation process and ensures that it remains competitive in today’s fast-changing markets. Its teams help develop pricing, risk management models and quantitative asset allocation strategies.
The ENR franchise has been adapted across the bank’s three platforms (EMEA, Asia-Pacific and the Americas) and has four pillars: ENR Industry Group: an industry bankers’ group made up ofV specialists tasked with developing solutions for investment banking; ENR Finance: teams in charge of debt and both structured financeV and commodity trade finance; ENR Advisory combines M&A advisory services, targetingV independent oil companies and mining groups, and a pool of engineers that carry out the technical analysis of the assets involved. In M&A advisory, Natixis is actively working to build up its own teams and relies on the network of affiliates (including PJ SOLOMON in the United States, Vermillion in China and Azure in Australia) to support the growth of this activity, which is central to strategic dialog with its clients;
In structured financing, Natixis led a number of high-profile, high value-added landmark transactions in all areas of the globe.
In accordance with the strategy initiated under the New Dimension plan, Natixis further developed its sector approach with a now global M&A presence and the addition of new landmark mandates such as the acquisition by Vauban Infrastructures Partners of stakes in Indigo previously owned by Ardan, and the development of Engie Australia & New Zealand’s low-carbon assets investment platform.
In Asia, for example, the funding of the Yunlin project off the coast of Taiwan was named “Best Syndicated Loan” by The Asset, and solar farm Kiamal in Australia was named “Best Project Finance Deal” at Finance Asia’s 2019 Achievement Awards.
With 40 years’ experience in the sector, Natixis is one of the biggest players in aviation worldwide and finances nearly 4% of the global fleet. It covers all types of assets (medium/long-haul, regional) and manufacturers. Drawing on its expertise in arranging, structuring and distributing specialized financing in these markets, including commercial loans, portfolio financing, financing with export cover and optimized loans (JOL, JOLCO, FOL, etc.), Natixis is developing a comprehensive investment banking, advisory (M&A, ratings) and hedging offering.
It caters to airlines and aircraft leasing companies, with strong growth in the latter client category. For example, as a senior secured lender for Avollon, the world's third biggest leasing company, Natixis supports Avollon across the continuum of expertise, including leading its $500 million inaugural unsecured term loan facility in 2019.
In 2019, Natixis was named “Asia-Pacific Bank of the Year” by Airline Economics, a leading publication in the aviation industry. This award underscored the quality and volume of funds raised by Natixis for its clients in the region this year. Landmark deals highlighted by the publication included the ICBC Leasing French optimized lease (FOL) for 15 aircraft named “Asia-Pacific Tax Lease Deal of the Year”.
Among other highly visible, strong value-added deals, Natixis arranged the assurance export-backed financing of two Airbus A380 aircraft for Emirates, named “Deal of the Year” by Airline Economics.
In Europe, Natixis was ranked No. 1 MLA and bookrunner in 2019 (source: Dealogic), reflecting the vitality of its business and its positioning as a major arranger. The year was highlighted by the arrangement of landmark deals in its four countries of operation: France (funding of rental homes leased to EDF employees by Powerhouse Habitat for €560 million, €271 million in funding for the acquisition of Château La Messardière by LCH, the luxury hospitality branch of LOV Group), Germany (€240 million in residential financing in Berlin for UK investor Phoenix Spree, Italy (financing for a portfolio of offices owned by Générali for €420 million), and Spain (financing for health complex Healthcare Activos as sole arranger for €175 million).
Business was also booming across the United States in all asset classes, both on the syndicated loan market and the CMBS market with highly visible deals such as the $550 million floating-rate loan for the acquisition of the Wilshire Courtyard offices along the Miracle Mile in Los Angeles by Onni Group; the $600 million funding of residential buildings in San Francisco owned by pension funds; and the $230 million floating-rate loan for the mixed-use Congress Square building in Boston’s business district for Related Fund Management. Some of these deals were distributed to Asian institutional investors, testifying to the strength of its cross-platform distribution, particularly with this category of investors.
Natixis further consolidated its strategic O2D model in 2019, while developing processes and initiatives aimed at optimizing credit risk management. As a key component of the bank’s O2D strategy, the Singular digital financing platform was extended to the primary distribution activities. The platform’s main purpose is to improve collaboration and visibility across the O2D chain and ultimately provide a better service for clients. With these measures, Natixis was able to continue to accelerate balance-sheet rotation amid tighter regulatory, competitive and macroeconomic constraints.
Trade & Treasury Solutions (TTS) develops two flagship businesses: Treasury Solutions and Trade Finance.
In Treasury Solutions, TTS helps corporate clients manage, optimize and enhance their cash flow with its multi-bank, paperless centralized account statement service and pooled automated multi-bank cash solutions. TTS designs products that put their cash surpluses to work through paid accounts.
TTS also supports financial institutions at every stage of their cash flow processing (centralization of payments to and from Europe, optimization and simplification of international payment circuits).
TTS also offers Groupe BPCE and its constituent networks its support and expertise in the operational areas affecting its businesses.
Natixis arranges tailor-made solutions, drawing on the full range of its expertise in M&A advisory services, equity capital market transactions and bonds. It is also recognized for its structuring and placement capacity, thanks to its dedicated syndication and secondary-market teams.
In corporate acquisition finance, Natixis took part in two syndicated loans granted to two pharmaceutical companies in Italy. It was mandated by Recordati, as global coordinator, MLA-bookrunner and underwriter, for a €400 million facility aimed at financing the acquisition of rights to Novartis drugs for the treatment of rare diseases.
Natixis also stood out by arranging multiple leveraged buy-outs for investment funds. It served as bookrunner, rating advisor, hedging bank and alongside Natixis Partners (which advised the buyer) in financing the acquisition of Armonea by Colisée.
In France, Natixis was global coordinator and B&D (bill & delivery) agent for SPIE’s €600 million bond issue to refinance half the group’s senior credit and extend the average maturity of its debt. Natixis had already assisted SPIE with its March 2017 bond issue used to fund the acquisition of SAG, Germany’s leading energy infrastructure service provider.
In the corporate segment, Natixis led the multi-tranche and multi-currency (EUR/GBP) bond issues of Spanish infrastructure group Abertis and telecom operator Orange.
Natixis also orchestrated several inaugural issues, including FFP (€300 million), Icade Santé (€500 million) and Fosun (€400 million). The bank served as Avolon’s bookrunner for two USD issues in 2019.
Natixis also broadened its expertise in the “project” bond segment. It contributed, as joint lead placement agent, to the success of the private placement issued by FLNG Liquefaction 2, which raised $865 million over an average maturity of 12.3 years.
In this buoyant environment, Natixis proved it was capable of innovating by leading the first Additional Tier 1 benchmark bond (€750 million) on the financial institutions market for La Banque Postale. It also arranged the maiden restricted Tier 1 subordinated debt issue for La Mondiale (€500 million) and the first senior preferred debt issue for UniCredit Bank (€1.25 billion), as well as the HoldCo issue for Sumitomo Mitsui Financial Group, Inc. (€1.25 billion).
Natixis, which signed the Principles for Responsible Banking in September 2019, deepened and demonstrated its commitment to funding the green transition with all categories of issuers.
On the IPO market, despite relatively low volumes and a very small number of deals, Natixis was Française des Jeux’s global coordinator for France’s largest IPO of the decade (€1.9 billion) and first privatization in 15 years. It also took part in its first IPO in Saudi Arabia as joint bookrunner for Arabian Centres.
Natixis drew on its expertise to participate in France’s largest capital increase of the year (€711 million) as global coordinator for Tikehau Capital. It also conducted several landmark deals in Europe, acting as global coordinator for Salini Impregilo in Italy, and organizing private placements in Belgium for real estate specialists Warehouses de Pauw (WDP) and Xior Student Housing.
On the convertible bond market, Natixis consolidated its franchise by significantly expanding its business, notably via a series of convertible bond issues for Air France KLM, Atos, Orpea and Veolia. It also served as global coordinator for the maiden issues of two fast-growing global groups: Neoen and Worldline.
Natixis recorded a very strong performance in corporate broking, improving on 2018. Natixis acted as presenting bank in the takeover bids by investment fund CVC on April Group and US fund Searchlight on Latecoere Group. Natixis ODDO-BHF entered into a liquidity agreement with Iliad.
Natixis is ranked No. 3 bookrunner by number of deals and No. 4 by amount in EUR on the equity capital markets (vs. No. 3 and No. 8 in 2018, No. 4 and No. 9 on 2017) in France (source: Bloomberg).
It develops a tailored structuring approach and offers clients a comprehensive range of solutions, including the acquisition of securities on the market, the financing of equity investments or economic exposures, the optimization of equity investment management and the establishment of share buyback programs.
This advisory business activity consists of analysing financial structures and credit rating issues for Natixis’ corporate and financial institution clients. Its goal is to define the most appropriate equity and debt-based financing solutions for its clients. Given the internationalization and increasing disintermediation of capital markets, clients rely more on ratings, giving this business line increasing strategic importance. It applies its rating advisory expertise to analyze and optimize the impact of major events on clients’ ratings, and can even help clients obtain their first rating.
In 2019, Natixis further strengthened its advisory activities by making a strategic investment in Azure Capital. With this Australian boutique, specializing in infrastructure, energy and natural resources, Natixis expanded its international network of seven boutiques already including Natixis Partners (France), Natixis Partners España (Spain), PJ SOLOMON (United States), Fenchurch Advisory (United Kingdom), Vermilion Partners (China) and Clipperton (France),
In France, Natixis Partners ranks No. 5 by number of deals (source: L’Agefi & Mergermarket), and more specifically No. 3 by number of deals with midcaps (source: L’Agefi).
of GAPC on the aforementioned date. Since June 30, 2016, in view of the current value of the option (see "TRS" and "Option" below), Natixis has not recorded any capital savings on assets hedged by the TRS (as described below).
The drastic run-off of assets led to the closure of GAPC on June 30, 2014. Since July 1, 2009, a portion of the GAPC portfolios has been covered by a guarantee from BPCE. The monitoring system and guarantee mechanism remain strictly unchanged since the closure
In December 2019, by mutual agreement with BPCE, the two banks terminated the financial guarantee, which became void for Natixis as it could no longer call up the guarantee. Nevertheless, the parties agreed that Natixis will continue to owe BPCE 85% of any moneys collected on the guaranteed assets for a period of three years from the termination of the guarantee. At the same time, the parties terminated all other agreements entered into in respect of the guarantee mechanism established in 2009, i.e. the TRS and the agreements covering the governance of the guarantee.
Natixis’ Insurance division had 1,880 full-time equivalent (FTE) employees at the end of 2019, compared to 1,741 at the end of 2018. The Insurance business generated total revenue from direct sales of €12.7 billion in 2019.
The Insurance division comprises several legal entities (excluding investment vehicles): Group company Legal form Location % voting rights % of ownership
In terms of location, most of the Insurance division’s activity is in France via companies established in France. The Personal Insurance business line, however, owns a Luxembourg-based entity specialized in life insurance products for Wealth Management clients, and is a client of the BPCE networks and non-Group entities in various EU countries. It also owns an entity in Lebanon through an equity interest in a subsidiary in partnership with a local private bank.
Lastly, the rapid development of digital technology and its application in the development of new methods of distribution and customer interaction is a source of opportunities that the Insurance division is closely monitoring. Accordingly, it has pursued a policy aimed at: digitizing its management processes: the business line intends toV continue the digitization and automation of low-value-added processes in order to become one of the most efficient players in terms of management costs relative to assets under management; In personal insurance, the division rolled out a new multi-site, multi-banner customer relationship model in 2018, with identical organization, tools and customer relations processes for both the Banque Populaire banks and Caisses d’Epargne. A platform for managing estates was also created; adapting subscription processes to incorporate new digital toolsV and customer behaviors. A significant share of non-life subscriptions is already carried out and formalized remotely using an electronic signature. Steps have been taken to preempt rapid development in these approaches;
Natixis’ businesses 29NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com continuing to scale down administrative management activities inV favor of in-branch transactions using applications installed on workstations and customer-initiated transactions through the self-care options gradually being rolled out for many products and management operations; continuing to adapt information systems with the aim of improvingV operational efficiency and service quality: the process aimed at transforming and digitizing the management of claims at BPCE Assurances (Purple#Care project) was launched in 2017 and should be wrapped up in 2020. Finally, plans to modernize Natixis Life’s IT system, with a view to speeding up growth in the business line, increasing profitability and operating performance through process digitization and automation, and improving risk control, were put into action in 2018 and the first deliveries will go live in 2020; outsourcing low-value-added operations to address variations inV business activity or to process specific operations for which adequate in-house skills or expertise is not immediately available; implementing a single operating model for non-life insuranceV across all Groupe BPCE networks. Project #Pop’Timiz, aimed at pooling non-life middle- and back-office activities for the Banque Populaire and Caisse d’Epargne banks, was successfully finalized. The #INNOVE2020 program, in which BPCE Assurance is to become the sole non-life insurance platform for Banque Populaire and Caisse d’Epargne retail customers by 2020, was launched in 2018. New auto, two-wheeler and multi-risk home insurance offers were launched in the Banque Populaire banks in 2019, and will be expanded to both networks by the end of 2020.
Greece has undertaken reforms that have opened the door to a promising credit insurance market. The opening of a local entity will extend Coface’s long-standing presence in the Mediterranean & Africa region, which accounted for 27% of group revenue in 2019. The impact of the new entity on the Group’s financial statements was not material in 2019.
Euronext’s Index Steering Committee decided to add Coface S.A. to the SBF 120 index as of June 26, 2019. SBF 120 is one of the flagship indices on the Bourse de Paris, listing the top 120 corporations in terms of market cap and liquidity. This decision came on the heels of the improvement in the liquidity of the Coface share and the increase in its market capitalization, recognizing the enhancement of its fundamentals since the strategic plan, Fit to Win, was implemented.
The end of 2019 raised hopes of a trade agreement signed between the United States and China, while elections in the United Kingdom set the date of the UK’s effective withdrawal from the European Union. Leading indicators also stabilized at relatively low levels, especially in manufacturing sectors. Lending terms remain accommodative following central bank action.
The Board of Directors renewed the term of Xavier Durand as Chief Executive Officer for a period of four years. His term will expire at the Annual Shareholders’ Meeting called to approve the financial statements for 2023. Xavier Durand and the Management Board will present Coface’s new strategic plan on February 25, 2020.
2020 investor relations calendar 31NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com 2020 investor relations calendar1.3
George-Éric De La Brunière • Natixis Wealth Management (Asset & Wealth Management) Guillaume de Saint Seine • Coverage (Corporate & Investment Banking) Anne-Cécile Delas • Trade & Treasury Solutions (Corporate & Investment Banking)
Teresa Mora•Grenier • Financial Oversight (Finance) Stéphane Morin • U.S. Risk and Compliance (Risks and Corporate
Philippe Setbon • Ostrum Asset Management (Asset & Wealth Management) Cécile Tricon•Bossard •
Born April 8, 1973 Nationality: French Natixis shares held: 18,828 Address: 30 avenue Pierre Mendès France 75013 Paris
Member of the BPCE Management Board (since 01/01/2018)V Chairman of the Board of Directors of: Natixis Investment V Managers (since 01/06/2018), Natixis Assurances (since 07/06/2018), Coface S.A. (1) (since 15/06/2018), Natixis Payment Solutions (since 21/09/2018) Member of the Board of Peter J. Solomon GP LLC V (since 01/06/2018) Member of the Board of Peter J. Solomon Securities V Company LLC (since 30/05/2018)
Member of the Board: Natixis North V America LLC (since 31/05/2016) (until 15/01/2018)O
Permanent Representative V of BPCE, Member of the Board of: Crédit Foncier de France (from 01/01/2018 to 31/05/2018)
KEY ADVISORY SKILLS Expertise in strategic matters V in banking and financial institutions, as well as the French and international economic and financial environment
Chairman of the Management Board of BPCE (since 01/06/2018)V Chairman of the Board of Directors of Crédit Foncier France V (from 17/05/2018 to 31/07/2019) Member of the Board of CE Holding Participations V (since 06/06/2018) Member of the Board of Sopassure (since 18/06/2018)V Member of the BPCE Management Board (since 06/08/2013)V
Chairman of the French Banking Federation V (from 01/09/2018 to 31/08/2019) and then Member of the Executive Committee (since 01/09/2019) Chairman of the Association Française des Établissements V de Crédit et des Entreprises d’Investissement (from 01/09/2018 to 31/08/2019) Member of the Board of Arkema (1) (since 27/10/2009), AROP V (Association pour le Rayonnement de l’Opéra National de Paris) (since 10/12/2015), CNP Assurances (1) (since 01/06/2018) Non-voting member of ODDO BHF SCA (since 29/03/2019) V and FIMALAC (since 16/04/2019)
Member of the Board of Natixis V Assurances (since 13/03/2017) (until 07/06/2018)O
Vice-Chairman of the Fédération V Bancaire Française (French Banking Federation) (from 01/06/2018 to 31/08/2018)
BPCE — Permanent Representative Catherine Halberstadt Member of the Groupe BPCE Management Board in charge of Human Resources
First appointed: co-opted by the Board of Directors on August 25, 2009 and ratified at the AGM of May 27, 2010 Term expires: 2023 AGM (a)
Member of the BPCE Management Board in charge of Human V Resources (since 01/01/2016) Member of the Board: Crédit Foncier (since 10/05/2012)V
Member of the Board of Natixis (1) V (from 25/05/2012 to 16/11/2015)
Member of the Supervisory Board V (from 04/04/2012 to 16/11/2015) and Risk Committee of BPCE (from 2013 to 16/11/2015) Chief Executive Officer of Banque V Populaire du Massif Central (BPMC) (since 01/09/2010) (until 25/03/2016)O Permanent Representative of BPMC, V Chairwoman of SAS Sociétariat BPMC (since 2011) (until 25/03/2016)O Permanent Representative of BPMC, V Member of the Board of I-BP, Association des Banques Populaires pour la Création d’Entreprise (since 01/09/2010) (until 25/03/2016)O Permanent Representative of BPMC, V Member of the Committee of Banques d’Auvergne (2) (since 2010) (until 25/03/2016)O
Daniel de Beaurepaire (since May 28, 2019) Chairman of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France
From 1996, he worked at the firm International Audit Company, becoming its Chairman in 2005, then joined accounting firm GEA Conseil where he became co-manager in the same year. He was appointed co-manager of audit firm GEA Finances in 2010 until June 2018.
From 2009 to 2012 Daniel de Beaurepaire was Chairman of Société Locale d'Epargne PME Professionnels, then Director at Locale Épargne Économie Sociale et d’Entreprise from 2013 to 2014. In 2015 he was appointed Chairman of Société Locale d’Épargne Paris Ouest.
Manager of GEA Conseils (since January 2005)V Chairman of SAS International Audit Company V (since January 2005) Member of the Board and Treasurer of Association Société V des Amis de Versailles (since June 11, 2019)
Additional information on the corporate officers 39NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
First appointed: co-opted by the Board of Directors on January 28, 2013 and ratified at the AGM of May 21, 2013 Term expires: 2022 AGM (a)
2022 AGM called to approve the financial statements for the year ended December 31, 2021.(a)
First appointed: AGM of May 29, 2012 Term expires: 2020 AGM (a)
First appointed: Board Meeting of May 29, 2012 Member — Strategic Committee
Alain Condaminas has been Chief Executive Officer of Banque Populaire Occitane since 2006.
Member of the Supervisory Board V of Natixis (from 27/06/2012 to 19/05/2015) Member of the Supervisory Board V and Risk Committee of BPCE (since 16/12/2015) (until 31/12/2018)O Permanent Representative of BP V Occitane, Manager of SNC Immocarso (since 2007) (until 29/10/2018)O Member of the Board of Natixis V Investment Managers International (since 15/03/2007) (until 28/09/2018)O
Born March 10, 1958 Nationality: French Natixis shares held: 616 Address: 50 rue de Laxou 54000 Nancy
A graduate of the National School of Public Works of the State (ENTPE) and holding a postgraduate degree in Corporate Administration, Dominique Duband began his career as an engineer in the departmental infrastructure directorate, then the general council of the Meurthe-et-Moselle department in France, before joining urban planning semi-public corporation Solorem in 1989.
In 2018 he became member of the Supervisory Board of Banque BCP Luxembourg, and has been Chairman of the Steering and Supervisory Board at Caisse d’Epargne Grand Est Europe since May 28, 2018.
Outside Groupe BPCE: Member of the Supervisory Board of: Batigère V (from 29/06/2017 to 25/03/2019) Member of the Board of: Présence Habitat (since 18/06/2009), V Érigère (from 29/06/2009 to 14/06/2019), Batigère Rhône-Alpes (since 19/06/2008), Batigère Groupe (since 20/07/2017), Livie (since 27/06/2018), AMLI (association) (since 18/06/2008), Fédération Nationale des S.A. et Fondations d'HLM (since 16/06/2016), Avec Batigère (association) (since 29/06/2017), Fondation d'Entreprise Batigère (since 22/05/2017), GIE Batigère Développement Grand Paris (from 27/06/2017 to 15/05/2019), Coallia Habitat (since 26/06/2019), Coallia (association) (since 26/06/2019) Permanent representative of the Batigère group, Member V of the Supervisory Board of Batigère Île-de-France (from 26/06/2018 to 31/10/2019) Chairman of the Board of Directors of: Interpart (since 28/06/2018)V
Bernard Dupouy Chairman of the Board of Directors of Banque Populaire Aquitaine Centre Atlantique (BPACA)
First appointed: Board Meeting of May 28, 2019 Member — Strategic Committee
In-depth knowledge of retail V banking, the regional economy and the economy of the French overseas territories
A graduate of the École Supérieure de Commerce, d’Administration et des Entreprises de Bordeaux, Bernard Dupouy became a Member of the Board of Banque Populaire du Sud-Ouest (BPSO) in 1996. He was appointed Secretary in 2006, then Vice-Chairman in 2009. In November 2011, BPSO became Banque Populaire Aquitaine Centre Atlantique (BPACA); Bernard Dupouy subsequently became Deputy Vice-Chairman, then Chairman of its Board of Directors in January 2015.
He was also Chairman of the Board of Directors of BPSO subsidiary Crédit Commercial du Sud-Ouest from 2008 to 2011. From 2011 to 2015, he was a Member of the Board and Chairman of the Audit Committee and Risk Committee.
Bernard Dupouy also served as a Member of the Board of Crédit Maritime Mutuel du Littoral Sud-Ouest from 2012 to 2015, then became a Permanent Representative of BPACA, Member of the Board of Crédit Maritime, and Chairman of the Audit, Risk and Accounting Committee from 2012 to June 4, 2018, when that entity was merged into BPACA. A well-known entrepreneur in the Aquitaine region, Bernard Dupouy is the Chief Executive Officer of DUPOUY S.A., a company specialized in exports and distribution in French overseas territories.
Chairman of the Board of Directors of Banque Populaire Aquitaine V Centre Atlantique (BPACA) (since 27/01/2015) Member of the Supervisory Board and the Appointment V Committee (from 01/08/2018 to 24/05/2019), Compensation Committee (since 02/08/2018) and Audit Committee of BPCE (since 24/05/2019) Member of the Board (since May 2015) and Vice-Chairman of the V Board of Directors (since 06/06/2018) of the National Federation of Banques Populaires Permanent Representative of BPACA, Member of the Board of V Société Centrale des Caisses de Crédit Maritime Mutuel (since 05/06/2018)
Chairman of Madikera Management V 2M SAS (since 12/07/2016) (liquidated on 31/12/2018)O
Additional information on the corporate officers 43NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Born December 17, 1956 Nationality: French Natixis shares held: 1,112 Address: 12 rue de Maison-Rouge CS 10620 45146 Saint-Jean-de-la-Ruelle
First appointed: Board Meeting of December 20, 2018 Member — Appointment Committee
KEY ADVISORY SKILLS In-depth knowledge V of retail banking, IT matters and securities
Chairwoman of the Management Board of Caisse d’Epargne V Loire-Centre (CELC) (since 01/08/2009) Permanent Representative of CELC, Chairwoman of the Board V of Directors of BPCE Trade (since 30/06/2017 to 14/11/2019) and of BPCE Solutions Credit (formerly Ecureuil Crédit) (from September 2008 to 31/12/2019) Chairwoman of the Board of Directors of BPCE Services Financiers V (from 17/12/2013 to 27/05/2019), and of the “Les Elles du Groupe BPCE” Association (since 01/10/2012) Member of the Board (since October 2009) and Member of the V Risk Committee and Audit Committee, Chairwoman of the Audit Committee (since September 2019) of Crédit Foncier de France. Member of the Board of BPCE International et Outre-Mer (since V 05/08/2013, Association Parcours Confiance Loire-Centre (since 07/07/2009) Vice-Chairwoman of the Board of Directors of Touraine Logement V ESH (since 29/06/2017, Member of the Board since 2014) Permanent Representative of CELC, Member of the Board of: V FNCE (since 01/08/2009), GIE IT-CE (since 21/04/2011), ALBIANT-IT S.A. (since 11/12/2015), GIE BPCE IT (since 24/07/2015), Fondation d’entreprise Caisse d’Epargne Loire-Centre (since 18/12/2015), Association Habitat Région (since 08/12/2010)
First appointed: co-opted by the Board of Directors on February 10, 2016 and ratified at the AGM of May 24, 2016 Term expires: 2020 AGM(a)
First appointed: Board Meeting of February 10, 2016 Member — Strategic Committee
Sylvie Garcelon has been Chief Executive Officer of CASDEN Banque Populaire since May 2015.
Dean of the Web School Factory (since April 2012)V Chairwoman of the Innovation Factory (since February 2013)V Member of the Board (since 18/03/2014) and Chairwoman of V the Ethics, Quality and CSR Committee of Korian (since 22/06/2017)
Member of the Board of Kea&Partners V (from December 2013 to 09/02/2015) Member of the Supervisory Board V of Foncia Holding(2) (since September 2011) (until September 2016)O Member of the Supervisory Board V of Foncia Groupe(2) (since February 2012) (until 07/09/2016)O Chairwoman of the Appointments and V Compensation Committee of Korian Medica S.A.(1) (2) (since 18/03/2014) (until 22/06/2017)O
First appointed: co-opted by the Board of Directors on July 30, 2015 and ratified at the AGM of May 24, 2016 Term expires: 2022 AGM(a)
Chief Executive Officer of Lemalle Ares X-Pert (since 1991)V Member of the Board and Member of the Audit Committee: IMF V Créa-Sol (since July 2013)
First appointed: co-opted by the Board of Directors on November 12, 2009 and ratified at the AGM of May 27, 2010 Term expires: 2022 AGM(a)
First appointed: Board Meeting of December 17, 2009 Member — Strategic Committee
Member of the Board and Chairman of the Cnova(1) Audit V Committee (since 20/11/2014) Trustee of The Academy of St Martin-in-the-Fields V (since June 2016)
Member of the Board of Centaurus V Capital International Limited(2) (until 30/03/2015) Member of the Supervisory Board of V HLD(2) (from 2011 to 12/02/2015) Trustee of the École Polytechnique V Charitable Trust (until 01/11/2017)O
2022 AGM called to approve the financial statements for the year ended December 31, 2021.(a) Listed company.(1) Company outside Groupe BPCE.(2)
First appointed: co-opted by the Board of Directors on December 14, 2016, and ratified at the AGM of May 23, 2017 Term expires: 2023 AGM(a)
Catherine Pariset holds a master’s degree in Management Sciences from Université Paris-Dauphine, and has 35 years’ experience in auditing and advisory services. She was a partner at PricewaterhouseCoopers (PwC) from 1990 to 2015, as well as the partner responsible for the worldwide auditing of AXA, Sanofi, Crédit Agricole, Caisse des Dépôts, Compagnie des Alpes and Generali France. She also served as a member of the PwC Board for seven years, and was partner overseeing the insurance and banking sectors.
Other offices held in 2019: Member of the Board, member of the Audit Committee and Risk V Committee of the bank PSA Finance (since 22/02/2019)
Member of the Supervisory Board of V Eurodisney Associés SCA (since 17/02/2016) (until 13/09/2017)O
Member of the Audit Committee of V Eurodisney (since 09/11/2016) (until 13/09/2017)O
First appointed: Board Meeting of December 20, 2018 Member — Strategic Committee
Chairman of the Management Board of Caisse d’Epargne Bretagne V Pays de Loire CEBPL (since 27/04/2018) Chairman of the Supervisory Board of: Batiroc Bretagne-Pays de V Loire (since 04/05/2018), Sodero Gestion SAS (since 04/05/2018), CE Développement SAS (since 13/12/2016) Chairman of the Board of Directors of Sodero Participations SAS V (since 04/05/2018) Permanent Representative of CEBPL, Member of the Board of GIE V IT-CE (since 14/05/2018) Member of the Board of FNCE (since 27/04/2018), BPCE V Assurances (since 12/06/2007) and member of the Audit Committee and Risk Committee (since 05/12/2017), Natixis Investment Managers (since 21/05/2013) and member of the Audit and Accounts Committee (since 12/12/2017) then Chairman (since 11/09/2018), Turbo (since 18/07/2019) Member of the Board and Treasurer of the Belem Foundation V (since 02/07/2015) Member of the Supervisory Board of Seventure Partners (since V 25/07/2016), Alliance Entreprendre SAS (since 29/06/2016) Member of the Supervisory Board of Caisse d’Epargne Capital V (since 08/11/2016) then Chairman (since 14/06/2017)
Diane de Saint Victor (since April 4, 2019) Secretary General of ABB
Born February 20, 1955 Nationality: French Natixis shares held: 1,000 Address: Baarerstrasse 63 6300 Zug, Switzerland
First appointed: Board Meeting of April 4, 2019 Member — Strategic Committee
Since 2007 she has been executive director and Secretary General of ABB.
Member of the Board of Directors of the US Chamber of V Commerce in France (from 2017 to December 31, 2019) Chairwoman of the Board of Directors of the Compensation V Committee and Member of the Audit Committee of Altran Technologies (since 15/05/2019)
Director at Barclays Bank V PLC & Barclays Bank PLC (2) (since 2013) (until 2017)O
Vice-Chairman of the Steering and Supervisory Board of Caisse V d’Epargne Île-de-France (from 2008 to 24/04/2014)
Chairman of Société d’Économie Mixte d’Aménagement du Val V d’Oise (SEMAVO) (since 1997), Institut de Formation des Animateurs de Collectivités (IFAC — Local Supervisors’ Training Institute) for France and Val d’Oise (since 2008) Chairman of the Comité d’Expansion Économique du Val d’Oise V (CEEVO) and the Val d’Oise Technopôle (since April 2015)
First appointed: Board Meeting of December 17, 2014 Member — Strategic Committee
Member of the Board of GL Events S.A. (since May 2008)V Volunteer member of the Board of the RAISE endowment fund V (since 22/11/2013), Polygone S.A. (since 02/03/2013) Chairman of SPILE, an association under French law 1901, and V Chairman of the Groupe M6 Management Board (since April 2013)
Member of the Board of TF6 V Gestion S.A.(2) (from 2001 to 01/03/2015) Permanent Representative of V Métropole Télévision(2), Chairman of TCM DA SAS (since 27/06/2013) (until 20/11/2017)O Permanent Representative of M6 V Publicité(2), Chairman of the Board of Directors of: M6 Créations SAS(2) (from 15/09/2014 to 02/01/2015) Chairman of the Groupe M6 V Fondation d’Entreprise (since 2011) (until 12/07/2016)O Member of the Board of the Football V Club des Girondins de Bordeaux (since 2001) (until 06/11/2018)O Permanent Representative of V Métropole Télévision, Member of the Board of SASP Football Club des Girondins de Bordeaux (since 2012) (until 06/11/2018)O Member (since 18/12/2002) (refer to V
Permanent Representative of V Métropole Télévision, Member of the Board of IP France Régions S.A. (since 02/10/2017) (until 31/05/2018)O
First appointed (as non-voting member): Board Meeting of April 4, 2019 Member — Appointment Committee
Member of the Board of Thales(2) V (from 23/12/2014 to 13/05/2015) Member of the Board of V Fennovoima Ltd(2) (Finland) (from March 2015 to November 2015)
Laurent Mignon (President) 56 BoD: 100% SC: 100% French 01/06/2018 2023 AGM
BoD: 83% Comp. Com: 100% SC: 100% French 01/08/2017 2023 AGM
BoD: 83% App. Com: 100% RC: 89% SC: 100% French 20/12/2018 2020 AGM
BoD: 92% Comp. Com: 100% App.Com: 100% SC (Chairman): 100% French 18/02/2015 2022 AGM
BoD: 92% AC (Chairman): 100% RC: 100% SC: 80% French 14/12/2016 2023 AGM
BoD: 100% Comp. Com: 67% RC: 100% SC: 80 % French 20/12/2018 2023 AGM
BoD: 100% App. Com. (Chairman): 100% Comp. Com: 100% SC: 100% French 04/04/2019 2023 AGM
BoD: 83% Comp. Com. (Chairman): 100% App. Com: 100% SC: 100% French 31/07/2013 2021 AGM
AC: Audit Committee. Comp. Com: Compensation Committee. App. Com: Appointment Committee. SC: Strategic Committee.
Individually, each member of the Board of Directors contributes usefully to the work of the Board and the Special Committees; and collectively, the Board has the ability to make informed decisions and the breadth of expertise necessary to ensure that the Company is properly run.
The illustration below outlines the areas of expertise of each member of the Board of Directors. Collectively, the Board’s members represent a highly diverse and complementary source of knowledge, skills and experience.
Management and oversight of corporate governance 57NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
This report was prepared in accordance with Article L.225-37 of the French Commercial Code.
The information it contains specifically takes into consideration Annexes 1 and 2 of European delegated regulation (EU) No. 2019/180 of March 14, 2019, as well as recommendation No. 2012-02, as amended, consolidating the recommendations published since 2009, of the Autorité des Marchés Financiers (AMF — French Financial Markets Authority) in its reports on corporate governance and executive compensation, and specifically the AMF’s 2019 report, published on December 3, 2019, the activity report from the High Committee on Corporate Governance (HCGE) published on December 19, 2019, and the AMF's guide to compiling registration documents, published on December 10, 2009, and amended on December 17, 2013, and on April 13, 2015, and lastly, the June 2013 guide to applying the Afep-Medef Corporate Governance Code for listed companies, supplemented by the HCGE in December 2014, November 2015, November 2016 and June 2018.
The Company refers voluntarily to 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, November 2015, November 2016, June 2018 and January 2020. The Afep-Medef code is available for consultation at the Company’s head office and on the Natixis website: www.natixis.com.
In accordance with the “apply or explain” rule provided for in Article L.225-37-3 of the French Commercial Code and addressed in Article 27.1 of the Afep-Medef code, Natixis believes that its practices comply with the recommendations of the Afep-Medef code. However, certain recommendations could not be implemented for the reasons given in the table below: Summary table on compliance with Afep-Medef code recommendations: implementation of the “apply or explain” rule
Audit Committee (Article 16.1 of the Code) “The proportion of independent directors on the Audit Committee should be at least equal to two thirds...”
Independent members do not make up two thirds of the Natixis Audit Committee, as recommended by the Afep-Medef code, in order to represent the different components of the Company’s main shareholders (members from the Caisse d’Epargne and the Banque Populaire banks, in addition to a Groupe BPCE representative). Strictly following the Afep-Medef code recommendations on the composition of the Audit Committee would require Natixis’ independent directors to sit on more than three Special Committees, at the risk of negatively affecting the quality of those committees work, in light of the resulting increased workload. That is why Natixis promotes a balance of directors within the committees, which are, additionally, always chaired by an independent director. It should be noted that the opinions and recommendations of the Audit Committee are only adopted if the majority of members present, including the Chairman, voted for them.
The number of independent directors on Natixis’ Appointment Committee is not greater than half the total number of members, despite the recommendation by the Afep-Medef code. It has a balanced composition (50% independent, 50% non-independent), and the committee is chaired by an independent director. Like the Audit Committee, strictly following the Afep-Medef code recommendations on the composition of the Appointment Committee would require Natixis’ independent directors to sit on more than three Special Committees, at the risk of negatively affecting the quality of that committee’s work, in light of the resulting increased workload. That is why Natixis promotes a balance of directors within the committee, which is, additionally, always chaired by an independent director. It should be noted that the opinions and recommendations of the Appointment Committee are only adopted if the majority of members present, including the Chairman, voted for them.
The number of independent directors on the Compensation Committee is not greater than half the total number of members, despite the recommendation by the Afep-Medef corporate governance code. It has a balanced composition (50% independent, 50% non-independent), and the committee is chaired by an independent director. Like the Audit Committee and the Appointment Committee, strictly following the Afep-Medef code recommendations on the composition of the Compensation Committee would require Natixis’ independent directors to sit on more than three Special Committees, at the risk of negatively affecting the quality of that committee’s work, in light of the resulting increased workload. That is why Natixis promotes a balance of directors within the committee, which is, additionally, always chaired by an independent director. It should be noted that the opinions and recommendations of the Compensation Committee are only adopted if the majority of members present, including the Chairman, voted for them.
Payment of the non-competition benefit (Article 24.6 of the Code) “The non-competition benefits must be paid in installments during its term.”
The Chief Executive Officer’s non-competition benefit is not paid in installments. This is because the commitments made to the Chief Executive Officer when he was appointed by the Board of Directors on May 2, 2018 were made before the publication of the revised Afep-Medef code on June 21, 2018 that included this provision. Natixis will review the matter of complying with this provision when François Riahi is reappointed.
At the Combined Shareholders’ Meeting of April 30, 2009, Natixis changed its form of governance from a French société anonyme (a public limited company) with a Supervisory Board and a Management Board to a French société anonyme with a Board of Directors.
At its meeting of April 30, 2009, Natixis’ Board of Directors opted to separate the positions of Chairman of the Board and Chief Executive Officer. This decision was a result of the Company’s desire to comply with best practices in corporate governance and to make a clear distinction between the strategic direction, decision-making and control functions that come under the Board of Directors' responsibilities, and the operational and executive functions that fall to the Chief Executive Officer.
Natixis’ Board of Directors had 15 members at March 1, 2020. It is composed as follows: two members from BPCE, namely Laurent Mignon and BPCE itself,V represented by Catherine Halberstadt; four members from the Banque Populaire banks, namelyV Thierry Cahn, Alain Condaminas, Bernard Dupouy and Sylvie Garcelon; four members from the Caisse d’Epargne banks, namelyV Daniel de Beaurepaire, Dominique Duband, Nicole Etchegoïnberry and Christophe Pinault; five independent members, namely Anne Lalou, Bernard Oppetit,V Catherine Pariset, Diane de Saint Victor and Nicolas de Tavernost.
It is further specified that, pursuant to article R.225-29 II 5° of the French Commercial Code, no director is bound by an employment contract and/or a services agreement with the Company.
The five independent directors at Natixis are currently Anne Lalou (Director of Web School Factory and Chairwoman of Innovation Factory), Bernard Oppetit (Chairman of Centaurus Capital Limited, which he founded), Catherine Pariset (since released from her professional duties), Diane de Saint Victor (Corporate Secretary of ABB) and Nicolas de Tavernost (Chairman of the Management Board of Groupe M6).
The Board of Directors took care to appraise whether the companies in which the independent directors hold corporate office have a significant business relationship with Natixis or its corporate group.
Natixis applies the concept of a “reference banker”, i.e. “a banker essential to all requirements of the company”, to assess the importance of business relationships, identify any situation of dependency on Natixis, and finally gauge whether these relationships are likely to affect the independence of the director’s judgment.
Furthermore, to date, the independent directors are not in a position of conflict of interest in respect of the non-executive corporate offices they hold in other companies, in accordance with the compliance charter applicable to all Board of Directors' members under which they undertake to inform the Company of any conflict of interest in which they will be involved and to comply with the process related to the handling of the said conflict of interest.
Is not a major customer, supplier, or corporate or investment banker or advisor (or linked directly or indirectly to these persons) to the company or the group; does not derive a significant portion of business from the company or its group
Has no close family ties with a corporate officer OK OK OK OK OK
Has not been a Board member of the company for more than 12 years (independent director status is lost once a Board member has served for 12 years)
Does not receive variable compensation in cash or in shares, or any performance-linked compensation from Natixis or the group
In accordance with Article L.225-19 of the French Commercial Code, the number of directors who are over the age of 70 is limited to one third of the number of directors in office. There were no Natixis directors over the age of 70 at March 1, 2020.
The main changes made to the Board of Directors in 2019 and since January 1, 2020 that are likely to have a material impact on the Company’s governance are as follows: on April 4, 2019, the Natixis Board of Directors:V
co-opted with immediate effect Diane de Saint Victor as aV director to replace Henri Proglio, who resigned, for the remainder of his term of office, terminating at the end of the Natixis General Shareholders’ Meeting convened in 2019 to approve the financial statements for the year ending December 31, 2018, and appointed his successor as member and Chairwoman of the Appointment Committee and member of the Compensation Committee. Diane de Saint Victor is also a member as of right of the Strategic Committee, and appointed Henri Proglio as non-voting member for a term of fourV (4) years, terminating at the end of the Natixis General Shareholders’ Meeting convened in 2023 to approve the financial statements for the year ending December 31, 2022, and member of the Compensation Committee and Strategic Committee; on May 28, 2019, the Combined General Shareholders’ MeetingV of Natixis: ratified the co-opting of Laurent Mignon as director which tookV place during the meeting of the Board on June 1, 2018, to replace François Pérol for the remainder of his term of office, terminating at the end of the General Shareholders’ Meeting convened in 2019 to approve the financial statements for the year ended December 31, 2018, ratified the co-opting of Nicole Etchegoïnberry as director whichV took place during the meeting of the Board of Directors on December 20, 2018, to replace Stéphanie Paix for the remainder of her term of office, terminating at the end of the General Shareholders’ Meeting convened in 2020 to approve the financial statements for the year ended December 31, 2019, ratified the co-opting of Christophe Pinault as director whichV took place during the meeting of the Board of Directors on December 20, 2018, to replace Alain Denizot for the remainder of his term of office, terminating at the end of the General Shareholders’ Meeting convened in 2019 to approve the financial statements for the year ended December 31, 2018, ratified the co-opting of Diane de Saint Victor as director whichV took place during the meeting of the Board of Directors on April 4, 2019, to replace Henri Proglio for the remainder of his term of office, terminating at end of the General Shareholders’ Meeting convened in 2019 to approve the financial statements for the year ended December 31, 2018,
60 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019 reappointed Laurent Mignon, Diane de Saint Victor, BPCE,V Catherine Pariset, Bernard Dupouy and Christophe Pinault as directors for terms of four (4) years, terminating at the end of the General Shareholders’ Meeting convened in 2023 to approve the financial statements for the year ending December 31, 2022, appointed Daniel de Beaurepaire as director, replacingV Philippe Sueur, for a period of four (4) years terminating at the end of the General Shareholders’ Meeting convened in 2023 to approve the financial statements for the fiscal year ending ratified the co-opting of Henri Proglio as a non-voting member,V which took place during the meeting of the Board of Directors on April 4, 2019, for a term of four (4) years, terminating at the end of the General Shareholders’ Meeting convened in 2023 to approve the financial statements for the year ending December 31, 2022; On February 6, 2020, the Natixis Board of Directors co-optedV Dominique Duband to replace Françoise Lemalle, who resigned, for the reminder of her term of office, terminating at the end of the Natixis General Shareholder's meeting convened in 2022 to approve the financial statements for the year ending
In accordance with the staggered appointments procedure initiated at the Combined General Shareholders’ Meeting on May 23, 2018, the current terms of office expire as follows: 2020 AGM Alain Condaminas, Nicole Etchegoïnberry, Sylvie Garcelon 2021 AGM Nicolas de Tavernost 2022 AGM Thierry Cahn, Dominque Duband, Anne Lalou, Bernard Oppetit 2023 AGM Laurent Mignon, BPCE (represented by Catherine Halberstadt), Daniel de Beaurepaire, Bernard Dupouy, Catherine Pariset, Christophe Pinault, Diane de Saint Victor and the non-voting member, Henri Proglio
In the firm belief that the Board of Directors can only be improved by a balanced, skilled and ethical membership, Natixis wanted to establish a diversity policy that ensures that its Board of Directors is always able to make appropriate decisions as a group, while taking into account Natixis’ business model, risk appetite and strategy.
In addition to reiterating the rules governing the composition of the Board of Directors, this policy describes the criteria used to ensure the Board’s diversity (in terms of education, professional experience, age, nationality, and the long-term target of at least 40% women), and the qualifications needed to perform the duties of a Board member (solid understanding of the banking and financial sector, awareness of all kinds of risk, strategic vision, etc.).
This policy will be applied when a new director is appointed and when the Appointment Committee and the Board perform their annual review of the Board’s composition.
At the proposal of the Chief Executive Officer and after consulting the Appointment Committee, the Board of Directors may, in accordance with the conditions defined in Article 16 of the bylaws, appoint five individuals to assist the Chief Executive Officer, with the title of Deputy Chief Executive Officer. They have the same powers with respect to third parties as the Chief Executive Officer. Deputy Chief Executive Officers may be dismissed at any time by the Board of Directors on the proposal of the Chief Executive Officer; appoints the executive managers (dirigeants effectifs, asc) defined by Article L.511-13 of the French Monetary and Financial Code). In a joint stock company (société anonyme) with a Board of Directors, the role of “executive manager” must be performed by the Chief Executive Officer and the Deputy Chief Executive Officer(s), or by a senior executive who has the requisite powers to manage the business of the institution (see section 2.3.3.2 “Executive managers”); convenes all General Shareholders’ Meetings, sets the agendad) and oversees the execution of all decisions taken; may, at the proposal of the Chairman, set up its owne) Committees to deliberate on those issues submitted for examination by the Board itself or its Chairman. It determines the structure and powers of these Committees, which conduct their activities under its responsibility.
It sets the rules for the distribution of compensation allocated to the directors by the General Shareholders’ Meeting; verifies that the executive managers have properlyg) implemented the supervisory mechanisms, especially in terms of the separation of duties and the prevention of conflicts of interest, that ensure the company is effectively and prudently managed; reviews the governance framework as set out inh) Article L.511-55 of the French Monetary and Financial Code, periodically assesses its effectiveness, and ensures that corrective measures have been taken to remedy any shortcomings; regularly approves and revises the policies and strategiesi) governing the taking, management, monitoring and reduction of the risks to which Natixis is or could be exposed, including risks created by the economic environment; reviews and approves the parent company and consolidatedj) financial statements of the company, ensuring their accuracy and fairness.
The Chief Risk Officer may not be relieved of his duties without the prior agreement of the Board of Directors. Where applicable, he may raise this point directly with the Board of Directors; is required to issue an opinion before the Chief Executivem) Officer or the Deputy Chief Executive Officers can accept any offices outside the group.
In accordance with the law and the bylaws, the Chairman convenes and chairs the Board and organizes and guides its work. He chairs General Shareholders’ Meetings. The Chairman of the Board or the Chief Executive Officer are required to provide each director with all the documents and information needed to carry out their duties.
Among these Internal Rules, which were last amended on December 19, 2019, particular attention should be drawn to the following provisions: circumstances requiring the Board of Directors’ prior authorization:V
the extension of Natixis’ activities to include new coreV businesses not currently exercised by the company, the appointment or dismissal of the Chief Executive Officer or,V where applicable, one or more Deputy Chief Executive Officers, any acquisition or increase in shareholdings, as well as anyV investments, divestments or the formation of joint ventures by Natixis or any of its main subsidiaries, involving an amount in excess of €100 million, in the event that the group’s structure is modified, any asset transfers, mergers or spin-offs in which Natixis isV involved; criteria used to determine whether members of the Board ofV Directors are “independent”: An independent director is a person who has no ties with the management, company or group of a nature liable to compromise their freedom of judgment or create a conflict of interest with the management, company or group.
Accordingly, an independent member of the Board of Directors cannot: be or have been within the last five years:V
that derives a significant portion of its business from NatixisV or the Group; have a close family relationship with a corporate officerV of Natixis or the Group, have been a Statutory Auditor of Natixis within the last five years,V
In addition, with respect to the assessment of the Board of Directors’ work, the internal rules specify that, at least once a year, an agenda item will be devoted to evaluating the Board’s and its Special Committees’ operation, an account of which will be included in Natixis’ annual report (for 2019, see section 2.3.1.4 “Assessment of the Board of Directors’ work in 2019”).
Minutes of Board Meetings are drawn up in accordance with legal and regulatory provisions in force.
B – Compliance charter for members of the Board of Directors
All directors must devote sufficient time and attention to the performance of their duties and regularly attend the meetings of the Board and Committees of which they are a member, as well as the General Shareholders’ Meeting. Consequently, they must ensure that the number and commitment level of their directorships permit them to be available when required, especially if they also hold executive positions.
It is recommended that each director hold at least 1,000 Natixis shares. They have six months to acquire the 140 shares stipulated by the bylaws and another 12 months to bring their holding to 1,000 shares.
Together with the other members of the Board, they see to it that the guidance and control duties are accomplished in accordance with the laws and regulations in force.
If the Board of Directors has received inside information on Natixis, the directors and any individual attending Board or Committee Meetings must refrain from: performing or attempting to perform any insider trades (the termV “insider trades” refers to (i) the use of inside information by a person in possession of such information to buy or sell, for themselves or for a third party, directly or indirectly, financial instruments related to this information, and (ii) the use of the recommendations or inducements of a person in possession of inside information if the person using the recommendation or inducement knows, or ought to know, that it is based upon inside information); recommending to another person or inducing them to perform anyV insider trades; or unlawfully disclosing inside information.V
This duty to refrain concerns shares and any investment securities issued or to be issued by Natixis, as well as the rights that may be detached from those securities (e.g. preemptive rights) and any derivative whose underlying assets are the rights or securities issued by Natixis.
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the economic interests of which are substantially equivalent toV those of such a person.
As per the MAR Regulation, Natixis places the names of directors and non-voting members on the list of permanent insiders provided to the AMF. A permanent insider is any individual or legal entity that, on account of the nature of their functions or position in an issuing entity, has continuous access to inside information held by that issuing entity. Directors are individually informed that they are on this list by a letter from the Head of Compliance with acknowledgement of receipt.
A person’s omission from this list does not mean they are exempted in any way from complying with the laws and regulations and in no way does it prejudice their potential insider status.
Directors and non-voting members undertake to strictly observe and comply with the provisions of the Natixis S.A. Compliance Manual regarding any transactions relating to Natixis shares or debt securities, as well as any other related derivatives or financial instruments.
In particular, the director and the non-voting member agree not to perform any transaction during shutdown periods, also known as “negative windows,” which begin 30 calendar days before the publication dates of the quarterly, half-year and annual results and end on the publication date of these financial statements.
Each director and non-voting member must declare any trading in Company shares to Natixis and the AMF within the three business days following the date of the transaction and in accordance with the conditions set out by the MAR Regulation.
The Appointment Committee examines the situation of each director and non-voting member with regard to potential conflict of interest when they are first appointed and when their mandate is renewed. All directors and non-voting members endeavor to prevent, for the entire duration of their mandate, any conflict that could arise between their own interests and the interests of Natixis. As such, directors and non-voting members strive to preserve their independence in judgment, decision and action in all circumstances. They refuse to be influenced by any element that is not aligned with the corporate interest of Natixis, which it is their remit to defend.
their personal or professional relationships with owners ofV qualifying holdings in Natixis; their personal or professional relationships with Natixis personnel;V
All directors have a duty to learn and to ask, within the appropriate time frame, the Chairman of the Board of Directors, and/or the Special Committees of which they are a member, to provide the information needed for the Board or the Special Committees to take useful action on the matters on its agenda.
Should a member of Natixis’ Board of Directors no longer be in a position to perform their duties in compliance with the charter, either for their own reasons or for any other reason including those specific to Natixis’ rules, they must notify the Chairman of the Board of Directors, seek measures to remedy the situation, and, if none are found, suffer the personal consequences with respect to the performance of their duties.
To the best of Natixis’ knowledge, none of the members of the Board of Directors or Senior Management has been convicted of fraud, filed for bankruptcy, liquidation or receivership, convicted and/or punished by official or regulatory bodies, disqualified from acting as a member of administrative, management or supervisory bodies of an issuer, or from participating in the management or conduct of the business of an issuer within at least the previous five years.
To the best of Natixis’ knowledge, these situations do not affect those directors’ independence of judgment, decision, and action. When needed, the Internal Rules of the Board of Directors and the Compliance Charter set out a conflict of interest resolution system for all members of the Board of Directors. They also require Board members to notify the Chairman of the Board (or the Corporate Secretary of Natixis) of any conflict of interest and to abstain from participating in the part of the Board or Special Committee meeting addressing the conflict of interest, and from voting on the corresponding resolution.
The following table presents the summary of executive officers’ transactions involving the company’s shares in fiscal year 2019 as disclosed to the Autorité des Marchés Financiers (AMF — French Financial Markets Authority) in accordance with Article L.621-18-2 of the French Monetary and Financial Code and Articles 223-22 to 223-26 of the AMF’s General Regulation.
Gils Berrous 01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 19,960 N/A
Pierre Debray 01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 25,995 N/A
Anne Lebel 01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 24,548 N/A
01/03/2019 Bonus share allocation (2017 Bonus Share Plan) (c) 3,451 N/A
Jean-François Lequoy 01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 29,534 N/A
Laurent Mignon 18/02/2019 Bonus share allocation (2015 Bonus Share Plan) (a) 16,392 N/A
01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 57,510 N/A
André-Jean Olivier 01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 9,893 N/A
François Riahi 01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 18,828 N/A
Marc Vincent 18/02/2019 Bonus share allocation (2015 Bonus Share Plan) (a) 4,863 N/A
01/03/2019 Bonus share allocation (2016 Bonus Share Plan) (b) 45,980 N/A
Bonus share allocation plan approved at the Board of Directors Meeting of February 18, 2015 (PAGA 2015).(a) Bonus share allocation plan approved at the Board of Directors Meeting of July 28, 2016 (PAGA 2016).(b) Bonus share allocation plan approved at the Board of Directors Meeting of April 10, 2017 (PAGA 2017).(c)
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In particular, it sets out the procedure to be followed, from the notification 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 in Chapter 8 “General Shareholders’ Meetings”).
At its February 12, 2019 meeting, in accordance with regulations in force and Article L.225-38 of the French Commercial Code, the Board authorized Natixis' proposed sale of its Specialized Financial Services division's Securities & Guarantees (CEGC), Leasing (Natixis Lease), Factoring (Natixis Factor), Consumer Finance (Natixis Financement) and securities custody/account administration (EuroTitres) businesses to BPCE. It also reviewed the draft agreements for the sale by Natixis to BPCE of all shares held by Natixis in CEGC, Natixis Lease, Natixis Factor and Natixis Financement (the “Disposal Agreement”) and the agreement for the sale by Natixis to BPCE of EuroTitres' goodwill (the “EuroTitres Agreement”). After this review, the Board authorized Natixis to sign the Disposal Agreement and the EuroTitres Agreement, including their appendices.
The Board believes that Project Smith and the signing of the Disposal Agreement and the EuroTitres Agreement, which indicates a total sale price of €2.7 billion, is in the interests of Natixis, given the Project’s strategic benefit to the Company and the fair price. Project Smith has enabled Natixis to improve its strategic growth capacity and achieve, ahead of schedule, its 2020 target CET1 ratio of 11%. It also provides the Company with more strategic flexibility so it can accelerate the implementation of its asset-light model while consolidating its distinctive, high added-value expertise, which is light in capital and low on cost of risk.
At its meeting of December 19, 2019, the Board of Directors authorized new agreements between CNP Assurances, BPCE, Natixis SA and BPCE Vie. The Board of Directors deemed that these agreements were justified in terms of the corporate interest given that they are integrated within the Group’s overall bancassurance business model while at the same time preserving the interests of customers, the level of fees and commissions, and service quality during the period covered by said agreements.
The details of these agreements can be found in the Statutory Auditors’ Special Report on Related-Party Agreements and Commitments (see Section 8.2.3 of this universal registration document).
On December 19, 2019, the Board of Directors also approved, in accordance with Article L.225-39 of the French Commercial Code, the declassification of the preliminary agreement between Natixis and BPCE related to the protective arrangement for certain Workout Portfolio Management (GAPC) assets and certain agreements related to the guarantee, with the following being considered agreements entered into under normal conditions and pertaining to ongoing transactions: Preliminary agreement between Natixis and BPCE regarding theV guarantee mechanism covering certain GAPC assets; Financial guarantee contract between BPCE and NatixisV (as amended by rider no. 1 of August 5, 2010); “Euro” Total Return Swap agreement between BPCE and Natixis;V
Reciprocal financial guarantee contract between Natixis andV Natixis Real Estate Capital Inc.
At its meeting of December 19, 2019, the Board of Directors also reviewed all related party agreements that have been authorized by the Board over previous fiscal years, which continued to have an impact during the 2019 fiscal year.
A procedure for regularly reviewing agreements pertaining to ongoing transactions and entered into under normal conditions is currently being established and will be submitted to the 2020 Board of Directors.
The Board of Directors held a total of 12 meetings in 2019. The attendance rate was 91% for the year as a whole (versus 94% in 2018).
the secure DiliTrust electronic platform for review and analysis in preparation for the meeting.
The main topics addressed by the Board of Directors in 2019 were as follows: Financial, cash position and Natixis' commitments
Review of the quarterly and half-yearly financial statements and approval of the annual financial statements V (parent company and consolidated) Approval of the individual financial statements of Natixis S.A. at December 31, 2018 under IFRSV Review and approval of 2020 budgetV Economic and benchmark reviews/Business market review/Life of the stockV Review and approval of press releasesV Approval of the Board’s management report including the corporate governance report and the report V on the use of authorizations to increase the Company’s share capital in 2018 Feedback on the work of the Audit CommitteeV Approval of the audit program for 2020V
Corporate governance Feedback on the work of the Appointment CommitteeV Approval of the Board of Directors’ report on corporate governanceV Adoption of a diversity policy for members of the Board of DirectorsV Update of the directors’ Compliance Charter (appended to the Internal Rules)V Appointment of a non-voting memberV Reappointment of the Chairman of the Board of DirectorsV Co-opting of a new directorV Composition of Special CommitteesV Review of independent member statusV Review of the summary assessment of the Board of Directors’ work in 2018V Convening of the General Shareholders’ Meeting and the Annual Meeting for holders of participating securitiesV Review of the related party agreements and guarantees authorized during previous fiscal yearsV Authorization to sign regulatory guarantees and agreementsV
Compensation Feedback on the work of the Compensation CommitteeV Compensation of the Chairman of the Board of Directors for fiscal year 2018 and principles of compensation for fiscal V year 2019 Compensation of the Chief Executive Officer for fiscal year 2018 and principles of compensation for fiscal year 2019V Approval of the 2018 annual report on compensation for the regulated population under CRD IVV Allocation of bonus shares as part of the 2019 Long-Term Incentive PlanV Allocation of bonus shares as part of deferred variable compensationV Approval of the compensation policy for directors for fiscal year 2019V Review of the Risk and Compliance targets for compensation among the regulated population V (2018 summary and 2019 targets) Approval of the performance conditions for the regulated population and renewal of the Long-Term Incentive Plan V for Senior Management Committee members Compensation for the regulated populationV
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Renewal of the liquidity contractV Information on the capital increase following the bonus share allocations of the 2016 and 2017 plansV Examination and authorization of strategic projectsV Opinion of the Social and Economic Committee on the Company’s financial position in accordance with Article L.2312-17 V paragraph 2 of the French Labor Code Opinion of the Social and Economic Committee as part of the consultation on strategic orientations in accordance V with Article L.2312-17 paragraph 1 of the French Labor Code Total transfers of assets and liabilities (TUP) from Natixis subsidiaries to NatixisV
Other items Renewal of bond and warrant issue authorizations for fiscal year 2020V Approval of the declaration related to the Modern Slavery ActV Presentation of the Green Weighting FactorV
Assessment of the work 2.3.1.4 of the Board of Directors in 2019
This assessment covered the following areas: The role of the Board of DirectorsV
The results of the interviews were collated in a detailed evaluation report, a summary of which was presented at the meeting of the Board of Directors held on February 6, 2020. Furthermore, the outside firm provided each individual director with a copy of the other directors’ assessments of their contribution to the Board of Directors’ work.
The directors believe that Board meetings are conducted in a courteous and constructive environment, with open debates where participants are free to speak their minds. However, they did comment that meeting agendas could be less full and that decisions could be monitored more closely.
Finally, the directors believe that the work of the committees has improved over recent years and would like to discuss the creation of a CSR committee at a Board meeting.
As a reminder, following the assessment of the Board of Directors and Special Committees conducted in 2018, corrective measures were enacted in 2019, namely: the appointment of Diane de Saint Victor, an independent directorV with an international profile (in-depth knowledge of the industrial sector internationally, with part of her career spent in the United States), and enhancements to the training program, with 16 training sessionsV conducted in 2019 on 13 different topics and a focus on market expertise.
The program covers three areas: “fundamentals” training for new Board members and othersV interested in participating. It comprises modules to give Board members a useful understanding of the issues discussed at Board Meetings; liability (civil, criminal and regulatory), capital markets activities, compliance principles, cyber security, and so forth; “expertise” training on technical or complex issues so that BoardV members can properly understand, monitor and validate technical or complex matters discussed at Board Meetings. The modules are spread over the course of the year and cover areas such as accounting and financial matters, risk management, director
"ad hoc" training, provided as and when needed, to give BoardV members the necessary knowledge and skills to perform their duties. The aim is to deeply examine issues related to the business lines or other topical issues, and memos from the members' secure website that address economic, accounting, regulatory, compliance, legal and other matters.
The training provided by Natixis this year covered the following topics: Natixis’ business lines and the strategic plan (with a focus on CSRV challenges); prudential, solvency and liquidity regulations;V
capital and financial market activities: rules, operation, controlsV (with a focus on complex market products and associated risks); valuation mechanisms and the new accounting standards;V
In 2019, the Audit Committee had five members. As of March 1, 2020, these members were: Catherine Pariset Chairwoman
Daniel de Beaurepaire has extensive knowledge in accountancy, finance and internal control and auditing. Bernard Oppetit is a financial market specialist and has extensive experience in complex financial products and alternative investment companies.
Two-thirds of the Audit Committee are not independent members, despite the Afep-Medef code’s recommendation. This is so that the different components of the Company’s main shareholder are represented (members from the Caisse d’Epargne and the Banque Populaire banks, in addition to a representative of BPCE). However, the Committee is always chaired by an independent director. (See summary table on compliance with Afep-Medef code recommendations in section 2.3 of this chapter). Furthermore, the opinions and recommendations of the Audit Committee are adopted if the majority of members present, including the Chairwoman, vote for them.
Changes made to the Audit Committee since January 1, 2020: Director Capacity
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 February 9, 2017.
The company’s Chief Executive Officer provides the Audit Committee with any documents and information it needs to perform its duties. The following list is not exhaustive: parent and consolidated financial, accounting, and regulatoryV documents prepared periodically by the company; summary reports by the company’s Statutory Auditors;V
Each director’s individual attendance rate at Audit Committee Meetings is provided in section 2.2 of this chapter (see directors' individual fact sheets).
Depending on the agenda, various Audit Committee Meetings were also attended by Natixis’ Chief Financial Officer, the Chief Risk
In 2019, the Audit Committee’s duties focused on the following items in particular: Financial position Review of the quarterly, half-yearly and annual parent company and consolidated financial statementsV Review of 2020 budget including the reconciliation with the stress tests and the Risk Appetite FrameworkV Statutory Auditors’ observationsV Review of the results of the sharing arrangements for the US affiliates of Natixis Investment Managers and DNCAV
In 2019, the Risk Committee had five members. At March 1, 2020 these members were: Bernard Oppetit Chairman
Management and oversight of corporate governance 71NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com reviewing, without prejudice to the responsibilities of theV Compensation Committee, whether the incentives set out by Natixis’ compensation policy and practices are compatible with this latter’s situation with regard to the risks to which it is exposed, its capital, its liquidity and the probability and scheduling of the expected benefits; assisting the Board of Directors in reviewing the aforementionedV governance mechanism, assessing its effectiveness and ensuring that corrective measures have been taken to remedy any shortcomings; regularly examining the strategies and policies governing theV taking, management, monitoring and reduction of the risks to which Natixis is or could be exposed, including risks created by the economic environment. To that end, at least once a year the Risk Committee analyzes the documents used to define and monitor Natixis’ risk appetite, namely the Risk Appetite Statement and the Risk Appetite Framework. The Risk Committee studies all limit changes that took place between two annual reviews, including changes to industry-based limits; examining compliance risk monitoring-related items at least onceV a year, pursuant to Article 253 of the French Ministerial Order of November 3, 2014 on internal control of banking sector businesses, payment services, and investment services; giving its opinion on the appointment or dismissal of the Head ofV General Inspection at Natixis; a summary of General Inspection Department reports on Natixis and its subsidiaries is prepared for the Risk Committee, which also receives all reports from the regulatory and supervisory authorities (specifically the ACPR) on Natixis and its subsidiaries; ensuring that the findings of assignments carried out by theV General Inspection Department and by regulatory and supervisory authorities (specifically the Autorité de Contrôle Prudentiel et de Résolution, ACPR — French Prudential Supervisory Authority for the Banking and Insurance Sector) are followed up on; to that end, addressing Natixis’ annual General Inspection program, includingV audits of subsidiaries, with this program being presented to the Committee at least one week prior to its approval.
At the proposal of the Chairman, the Risk Committee may, if deemed appropriate by the committee and after consulting the Chairman of the Board of Directors, invite to its meetings any Natixis manager (including managers of one of the main subsidiaries or the Chairman of its Risk Committee) who is able to shed light on issues handled by the Risk Committee. It can also invite the Chief Financial Officer, the Chief Risk Officer, the Corporate Secretary, the Natixis Head of General Inspection, the BPCE Head of Inspection Générale, and Natixis’ Statutory Auditors. The Chief Risk Officer, the Compliance Officer, and the Natixis Head of General Inspection have permanent direct access to the Risk Committee.
The Risk Committee met nine times in fiscal year 2019. The attendance rate was 91% for the year as a whole.
Over the 2019 fiscal year, the US Risk Committee also worked on the following: approval of the revised US Risk Committee (USRC) charter;V
assessment and approval of Enterprise Risk Management andV follow-up on work on the ERM project, particularly on risk detection and assessment; assessment and approval of the 2019 Compliance Plan;V
At March 1, 2020, those members were as follows: Nicolas de Tavernost Chairman
Each director’s individual attendance rate at Compensation Committee Meetings is provided in section 2.2 of this chapter (see directors’ individual fact sheets).
In 2019, the Committee focused on the following areas: Executive corporate officers Senior Management Committee members
As of March 1, 2020, these members were: Diane de Saint Victor (position previously held by Henri Proglio until 04/04/2019)
Afep-Medef code recommendations in Section 2.3 of this chapter). Furthermore, the opinions and proposals of the Appointment Committee are adopted if the majority of members present, including the Chairwoman, vote for them.
The committee’s primary duties are: issuing an opinion and, upon request from Natixis’ Board, makingV proposals and recommendations to the Board on the appointment of a CEO and, when appropriate, one or more Deputy Chief Executive Officers of Natixis; issuing an opinion and making recommendations to the Board ofV Directors on the selection/appointment of directors; evaluating the balance and diversity of knowledge, skills andV experience that the Board members have, both individually and collectively; detailing the duties and the qualifications required for serving onV Natixis’ Board of Directors, and assessing the time to be spent on that service; deciding on a set of targets for the balanced representation of menV and women on the Board of Directors. The committee prepares a policy aimed at achieving those targets. Natixis’ target and policy as well as the implementation procedures are made public; periodically, at least once a year, assessing the structure, size,V composition and effectiveness of the Board of Directors with regard to the responsibilities that are assigned to it, and submitting any useful recommendations to the Board; periodically, at least once a year, assessing the knowledge, skillsV and experience of the Board of Directors, both individually and collectively, and presenting it with a report on this topic; periodically scrutinizing the policies of the Board of Directors onV selecting and appointing Natixis’ executive managers, Deputy Chief Executive Officers and the Chief Risk Officer and making recommendations thereon.
In 2019, the Committee focused on the following areas: Independence of directors Verification of independence criteria for each directorV
The Strategic Committee is made up of all the directors and the non-voting member. Depending on the topics being discussed, certain members of Natixis’ Senior Management Committee may be invited to participate on the Strategic Committee. External persons may also participate on the Committee.
The responsibilities assigned to the Strategic Committee are to thoroughly examine the overall strategy of Natixis and its business lines, and to share senior management’s vision for Groupe BPCE.
In addition, the meetings of this Committee are opportunities for the Board of Directors to get to know the management team that works with the Chief Executive Officer better and improve the Board’s working methods.
The Strategic Committee meets at least once a year. In 2019, the Strategic Committee met five times.
The Chief Executive Officer may delegate a portion of his powers to any corporate officer of his choosing, with or without the option of substituting one for another. In light of this fact, Natixis has a comprehensive system for assigning and monitoring delegations of authority, including signing authority, which encompasses the delegation of Senior Management responsibilities to members of the Senior Management Committee. Furthermore, each business line and support function has defined and regularly updates its own signing authority rules, in keeping with the fundamental principles laid down by Senior Management.
Barring exceptions, it meets weekly, chaired by the Chief Executive Officer. It consists of the heads of Natixis' four main businesses (Asset & Wealth Management, Corporate & Investment Banking, Insurance and Payments) and support functions.
In this context, the Senior Management Committee studied the opportunities for external growth in Asset Management, Payments, M&A and the Specialized Financial Services, and supervised various projects or initiatives. As such, the Senior Management Committee studied and approved all the strategic operations carried out by Natixis, before presenting them to the company’s Board of Directors.
In Corporate & Investment Banking, of note was Natixis’ acquisition of a majority stake in Azure Capital, an Australian M&A advisory boutique, and the opening of a subsidiary in Saudi Arabia.
The Senior Management Committee regularly examined the company’s business development and results during its meetings throughout the year. It studied the annual, half-yearly and quarterly financial statements, before they were presented to the Board of Directors, and was involved in defining financial communications for the company.
The Senior Management Committee also oversaw the implementation of Natixis’ CSR strategy. Specifically in terms of combating climate change, it oversaw the roll-out of the Green Weighting Factor project, which led to a favorable adjustment of risk-weighted assets for transactions that have a positive impact on climate and the environment, and an unfavorable adjustment for those that have a negative impact.
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.
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Information on the members, roles and powers of the Compensation Committee are detailed in the previous section of the corporate governance chapter (see section 2.3.2.3).
Pursuant to Article L. 225-100 III of the French Commercial Code, payment of variable and exceptional compensation to executive corporate officers for the 2019 fiscal year is subject to approval by the General Shareholders’ Meeting convened to approve the financial statements for said fiscal year.
of Directors. Together, they ensure compliance with conflict of interest regulations pursuant to applicable legislation and the Board of Directors’ internal rules.
The compensation policy strictly complies with regulations in Natixis’ countries and sectors of operation, including the CRD, the French law on the separation and regulation of banking activities, the Volcker Rule, AIFMD, UCITS V, MiFID II and Solvency II.
Compensation of executive corporate officers follows the principles of Natixis’ general compensation policy applicable to all employees, especially for employee categories whose professional activities have a significant impact on Natixis’ risk profile, details of which are set out in the annual report on compensation policies and practices published each year before the General Shareholders’ Meeting.
If there is a change in governance or a new corporate officer is appointed, the Board of Directors will ensure compliance with the core principles of the compensation policy and may decide to deviate therefrom depending on the interested parties’ profiles.
Directors’ compensation is granted according to the following rules: Governing body
Thus, a director who attends 100% of the Board Meetings will be paid the maximum compensation of €22,000 per year.
meeting of the Compensation Committee attended, with the number of compensated meetings being capped at four, for a maximum total of €6,000 per year, for a 100 % attendance rate.
The compensation paid to the Chairmen of the Special Committees is greater than that paid to members, given the workload responsibilities involved.
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members are referred to in article L. 225-18 paragraph 2 of the French Commercial Code. Any board member can also resign his position without reason. In the event of director's vacancy by death or resignation, the Board of Directors can, between two General Shareholders' meetings, make temporary appointments.It is specified that pursuant to article R.225-29-1(II)(5) of the French Appointments made by the Board of Directors are subjectCommercial Code, the term of office of the Board of Directors' to ratification to the next General Shareholders' meeting. At last,members is detailed in the composition of the Board of Directors no director is bound by an employment contract and/or a services(See section 2.2 of the present chapter). Furthermore, the agreement with the company. appointment and revocation conditions of the Board of Directors'
Pursuant to Article R. 225-29-1(II)(5) of the French Commercial Code, Laurent Mignon was appointed Chairman of Natixis’ Board of Directors on June 1, 2018, for the period ending with the adjournment of the 2023 Natixis General Shareholders’ Meeting held to approve the financial statements for the year ending December 31, 2022. In addition, the criteria for appointing and dismissing the Chairman of the Board of Directors are set out in Article L. 225-47 of the French Commercial Code.
The fixed compensation of the Chief Executive Officer is established based on the skills and expertise required to perform his duties and is in line with market practices for similar roles.
For fiscal year 2020, the criteria for determining the annual variable compensation approved by the Board of Directors on February 6, 2020, following a review by the Compensation Committee, and which will be put to a vote at the General Shareholders’ Meeting on May 20, 2020, are as follows: Rules for determining variable compensation for 2020
25% 12.5% net income (Group share)V 8.3% cost/income ratioV 4.2% net revenuesV
Methods for paying the Chief Executive Officer’s annual variable of November 3, 2014. In particular, the payment of a fraction of compensation comply with applicable regulations, especially the variable compensation awarded is deferred over time and regulatory provisions relating to control over compensation as set is conditional. This payment is spread over at least the three fiscal out in European Directive CRD IV of June 26, 2013, and its enactment years following the year in which the variable compensation into French law in the French Monetary and Financial Code, by the is awarded and is contingent upon meeting the requirement Ordinance of February 20, 2014, and the Ministerial Decree and Order for continued service with Groupe BPCE and performance criteria.
To meet the dual objective of (i) strengthening and ensuring the long-term alignment of shareholder and corporate interests, and (ii) ensuring continued service, the Chief Executive Officer is eligible to receive 20% of his gross annual fixed compensation as performance shares under the long-term compensation plans for members of the Natixis Senior Management Committee. The vesting of these shares is contingent upon continued service and the achievement of performance conditions.
The performance of Natixis shares versus the Euro Stoxx Banks index will be compared every year during the four-year period covered by the plan, i.e. fiscal years 2020, 2021, 2022 and 2023, for each of the annual tranches, each representing 25% of the shares allocated. Based on the relative performance of Natixis’ TSR compared with the average TSR of the Euro Stoxx Banks index, a ratio will be applied for each annual tranche, as follows: performance below 90%: no vesting of shares allocated out of theV annual tranche; performance equal to 90%: 80% of the shares of the annualV tranche shall vest; performance equal to 100%: 100% of the shares of the annualV tranche shall vest; performance greater than or equal to 120%: 110% of the sharesV of the annual tranche shall vest.
CSR objectives are based on the change in Natixis’ CSR performance over the four-year vesting period as assessed by the three CSR rating agencies. The vesting process includes a rating scale corresponding to the CSR assessments of each agency.
Like the rest of the staff, the Chief Executive Officer is covered by the mandatory pension plan. He is not covered by the kind of supplementary pension plans described in Article 39 (defined benefit plan) or Article 83 (voluntarily defined contribution plan) of the French General Tax Code. Furthermore, Natixis' Chief Executive Officer paid into an “Article 82” type life insurance policy (in reference to the French General Tax Code) put in place by BPCE.
Average Natixis net income (Group share) for the period1. in question equal to or higher than 75% of the expected budget average(1) for the period; Average Natixis ROE for the period in question equal to or2. higher than 75% of the expected budget average(1) for the period; Natixis’ cost/income ratio less than 75% at the time of leaving3. (last half-year closed).
The amount of the payment shall be determined based on the number of performance criteria met: if all three criteria are met: 100% of the agreed payment;V
As a reminder, the amount of the CEO’s severance payment, combined with the non-compete indemnity if warranted, may not exceed the equivalent of 24 months of monthly reference compensation.
The non-compete agreement is limited to a period of six months and carries an indemnity equal to six months of fixed compensation, as in force on the date on which the Chief Executive Officer leaves office.
The amount of the non-compete indemnity, together with the severance payment, if applicable, received by the Chief Executive Officer is capped at 24 months of the monthly reference compensation (both fixed and variable).
Upon the departure of the Chief Executive Officer, the Board of Directors must make a decision regarding whether to enforce the non-compete clause.
Average performance achieved over the two years prior to leaving (the measurement shall be based on the known results for the four half-year periods prior to leaving).(1)
The May 28, 2019 General Shareholders’ Meeting approved the components of the compensation policy for the Chairman of the Board of Directors and the Chief Executive Officer.
The components of the Chief Executive Officer’s compensation for 2019 comply with the principles approved by the General Shareholders’ Meeting on May 28, 2019.
The fixed compensation paid to François Riahi during the 2019 fiscal year for his duties as Chief Executive Officer of Natixis represents 41% of the total compensation granted.
Quantitative criteria performance quantitative targets (70%), 25% of which based on financialV performance in relation to the Groupe BPCE budget (net revenues 4.2%, net income (Group share) 12.5% and cost/income ratio 8.3%) and 45% based on the financial performance of Natixis (net revenues 11.25%, net income (Group share) 11.25%, cost/income ratio 11.25% and ROTE — Return on Tangible Equity 11.25%); individual strategic targets (30%), 15% of which related to theV implementation of the 2018-2020 strategic plan; the three other strategic targets, each assigned a weight of 5%, being related to oversight in terms of supervision and control as provided for in regulations (including the implementation of the RAF and the activation of the threshold breach remediation process); the implementation of Natixis transformation; and managerial performance assessed with regard to the ability to anticipate developments, make decisions and lead the Group, and manage executive officers.
Given the achievements observed by the Board of Directors after receiving the opinion of the Compensation Committee, the amount of annual variable compensation for 2019 was set as follows: in respect of BPCE quantitative criteria: €267,588, or 111.50%V of the target; in respect of Natixis quantitative criteria: €413,474, or 95,71%V of the target; in respect of strategic criteria: €307,200, or 106.67% of the target.V
The variable compensation amount for fiscal year 2019, which will be submitted to a vote of the shareholders in May 2020, was determined by the Natixis Board of Directors based on the Compensation Committee's recommendation of 102.94% of the target variable compensation, i.e. €988,262:
Policies and rules established for determining compensation and benefits of any kind for corporate officers 83NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com one portion will be paid in 2020, 50% of which will be indexed to theV Natixis share price, i.e. €348,212; securities) and 2023 (100% indexed to the Natixis share price or in securities), provided that the continued service requirement and performance conditions are met.the other portion will be deferred over three years, 50% of whichV
François Riahi, Chief Executive Officer in 2020 in 2021 in 2022 in 2023 65% of François Riahi’s variable compensation for 2019 is being deferred to 2021, 2022, and 2023, of which 50% is indexed to Natixis’ share price.
Vesting of these shares is contingent upon meeting the continued service requirement with Groupe BPCE and performance conditions, which are based on both the relative Total Shareholder Return (TSR) achieved on Natixis stock and the fulfillment of CSR targets.
CSR objectives are based on the change in Natixis’ CSR performance over the four-year vesting period as assessed by the three CSR rating agencies. The vesting process includes a rating scale corresponding to the CSR assessments of each agency, with requirements becoming more stringent over the last two years.
30% of the shares issued to the executive corporate officer at the end of the vesting period will be subject to a lock-in period ending upon the termination of his office.
Structure of fixed compensation granted to the Chief Executive Officer for fiscal year 2019
(12.5% net income (Group share), 8.3% cost/income ratio, 4.2% net revenues)
(11.25% net revenues, 11.25% net income (Group share), 11.25% cost/income ratio, 11.25% ROTE)
The Chief Executive Officer receives a family allowance inaccordance with the same rules as those applied to Natixis employees in France, i.e. €2,324.
Like the rest of the staff, the Chief Executive Officer is covered by the mandatory pension plan. He is not covered by the kind of supplementary pension plans described in Article 39 (defined benefit plan) or Article 83 (voluntarily defined contribution plan) of the French General Tax Code. Furthermore, Natixis’ Chief Executive Officer paid
The amount of severance pay is equal to monthly reference compensation x (12 months +1 month per year of seniority).
As a reminder, the amount of the Chief Executive Officer’s severance payment, combined with the non-compete indemnity if warranted, may not exceed the equivalent of 24 months of monthly reference compensation.
Information on compensation pursuant to Article L. 225-37-3 I, 2.4.2.3 paragraphs 6 and 7 of the French Commercial Code
Chg. vs. N-1 -2 pp -0.3 pp 2.4 pp 0.1 pp
Chairman’s pay ratio vs. average employee compensation 2.4 1.4 N/A N/A N/A
Compensation granted in respect of each fiscal year and for duties as Chairman of the Board of Directors of Natixis. For information, François Pérol was (2) Chairman of the Board of Directors of Natixis until May 31, 2018, and Laurent Mignon was Chief Executive Officer as of June 1, 2018.
Value of bonus shares granted during the fiscal year €160,000 (b) €93,333 (b)
François Riahi’s other compensation for his duties at BPCE 0 €602,359
Value of bonus shares granted during the fiscal year 0 0
Laurent Mignon’s other compensation for his duties at BPCE €2,458,800 €1,462,790
Including a family allowance of €2,384 in 2019 and €1,388 in 2018.(a) Corresponding to the value of the shares on the allocation date, for a fair value of €79,587 for 2019 and €55,372 for 2018.(b)
Policies and rules established for determining compensation and benefits of any kind for corporate officers 87NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
Laurent Mignon’s other compensation for his duties as Chief Executive Officer of Natixis (a) 0 €1,000,371(b) €853,552 €1,664,335 (b)
Laurent Mignon’s other compensation for his duties at BPCE €2,458,800 €1,428,837 €1,462,790 €700,000
At its meeting of May 23, 2018, Natixis’ Board of Directors also allocated 11,661 bonus shares to Laurent Mignon, Chief Executive Officer until June 1, 2018, (a) prorated to reflect the length of the time served in office in 2018, valued at €80,000 on the allocation date This amount includes payment of deferred variable compensation and securities delivery in respect of previous years and granted for his duties (b) as Chief Executive Officer of Natixis. Securities delivery under the Senior Management Committee Long-Term Incentive Plans is presented in AMF table No.7. In addition, under social protection, €7,066 in benefits in kind were declared in 2018 for Laurent Mignon. This amount includes payment of deferred variable compensation and securities delivery in respect of previous years and granted for his other duties. (c) Excluding collective variable compensation (group incentive and profit-sharing) awarded to François Riahi for the 2017 fiscal year and for his duties as Co-Head of Corporate Investment Banking. Securities delivery under the Senior Management Committee Long-Term Incentive Plans is presented in AMF table No.7. The reported amount corresponds to the family allowance.(d) At its meeting of August 2, 2018, Natixis' Board of Directors also allocated 13,605 bonus shares to François Riahi, Chief Executive Officer from June 1, 2018, (e) prorated to reflect the length of the time served in office in 2018, valued at €93,333 on the allocation date and, at its May 28, 2019 meeting, it allocated 31,708 bonus shares valued at €160,000 on the allocation date.
Compensation paid to François Riahi in 2019 in connection with income be strictly positive. As this condition was met for the 2019 his duties as Chief Executive Officer of Natixis was composed fiscal year, the portion relating to the three previous periods was paid of €802,384 in fixed compensation and fringe benefits and €749,248 to the beneficiary. The difference between amounts granted in variable compensation, the breakdown of which is detailed below. and the amounts actually paid is correlated to the market capitalization The performance condition for the deferred portion of variable at the Euribor rate for the cash portion, and to the change in the share compensation granted to François Riahi is that Natixis’ net operating price for the portion indexed to the Natixis share price.
Deferred securities or similar instruments portion of variable compensation for fiscal year
Member of the Natixis Audit Committee 6,000 6,000 o/w fixed compensation 3,000 3,000 o/w variable compensation 3,000 3,000
Member of the Natixis Risk Committee 9,000 9,000 o/w fixed compensation 3,000 3,000 o/w variable compensation 6,000 6,000
Member of the Natixis Strategic Committee 4,000 4,000 o/w fixed compensation N/A N/A
Member of the Natixis Strategic Committee N/A (b) N/A (b) N/A (b) N/A (b)
Compensation for his duties as Chief Executive Officer of Natixis N/A 1,000,371 (j) 853,552 (j) 1,664,335 (j)
Annual variable compensation in respect of BPCE 1,258,800 (k) 228,837 (l) 762,790 (m) 0
Annual variable compensation in respect of BPCE 419,600 (c) 352,158 (d) 435,970 (e) 280,829 (f)
Benefits in kind in respect of BPCE 44,080 (g) 44,080 (g) 44,080 (g) 44,080 (g)
In respect of BPCE and/or its subsidiaries 3,600 1,800 N/A N/A
Member of the Natixis Compensation Committee 5,000 5,000 6,000 6,000 o/w fixed compensation 2,000 2,000 o/w variable compensation 3,000 3,000
In respect of BPCE and/or its subsidiaries 20,400 20,400 10,000 10,000 o/w fixed compensation in respect of BPCE 4,000 4,000 o/w variable compensation in respect of BPCE 5,400 5,400
Chairman of the Natixis Strategic Committee 12,000 12,000 12,000 12,000 o/w fixed compensation N/A N/A
In respect of BPCE and its subsidiaries 26,800 26,800 27,400 52,400 o/w fixed compensation in respect of BPCE 8,950 8,950 o/w variable compensation in respect of BPCE 14,850 14,850
Chairman of the Natixis Audit Committee 27,000 27,000 27,000 27,000 o/w fixed compensation 17,000 17,000 o/w variable compensation 10,000 10,000
(in euros) Amounts due Amounts paid Amounts due Amounts paid o/w variable compensation 14,000 14,000
Natixis director then non-voting member 22,000 22,000 22,000 22,000 o/w fixed compensation 8,000 8,000 o/w variable compensation 14,000 14,000
Chairman of the Natixis Appointment Committee (until April 4, 2019) 7,821.92 7,821.92 19,000 19,000 o/w fixed compensation 3,821.92 3,821.92 o/w variable compensation 4,000 4,000
Member of the Natixis Strategic Committee 2,000 2,000 2,000 2,000 o/w fixed compensation N/A N/A
Member of the Natixis Appointment Committee 5,000 5,000 4,000 4,000 o/w fixed compensation 2,000 2,000 o/w variable compensation 3,000 3,000
Variable compensation for fiscal year 2018 of which €217,985 (50%) paid in 2019 and the balance (50%) deferred over three years in equal shares of €72,662.(e) Amount paid in 2018 for the variable compensation for fiscal year 2017, i.e. €224,800 for the deferred portion of the variable compensation for fiscal year 2016, i.e. €56,029.(f) Of which €40,000 in housing allowance and €4,080 under “company car” benefits in kind.(g) Under the terms of her employment contract, Catherine Halberstadt benefits from BPCE S.A.’s group incentive agreement. The individual amount granted to Catherine Halberstadt for the fiscal year in question was unknown (h) on the publication date of the universal registration document for the same fiscal year.
Policies and rules established for determining compensation and benefits of any kind for corporate officers 93NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019www.natixis.com
No subscription or call options were granted in fiscal year 2019.
Subscription or call options exercised during the period by each executive corporate officer
Value of options according to the method adopted for the consolidated financial statements Date vested Date of transferability (b) Performance conditions
Bonus shares awarded under the Long-Term Incentive Plan to members of Natixis’ Senior Management Committee.(a) 30% of the shares issued will be subject to a lock-in period ending upon the termination of his office.(b) Shares allocated as part of the deferred component of annual variable compensation in respect of 2018.(c) Corresponding to the value of the shares on the allocation date.(d)
Bonus shares that became transferable during the period for each executive corporate officer
Group (Natixis, BPCE, Caisse d’Epargne, Banque Populaire) — Record of purchase or subscription options granted
Number of exercisable options, including those exercisable by: 1) Natixis directors in 2019: Thierry Cahn N/A
No subscription or call options were granted or exercised by Natixis employees in fiscal year 2019.
All shares allocated in fiscal years 2015 to 2019 inclusive are subject to performance conditions.(a) 30% of the shares issued to the executive corporate officer at the end of the vesting period will be subject to a lock-in period ending upon the termination of his (b) office. Shares allocated as part of the deferred component of annual variable compensation in respect of previous years.(c)
Executive corporate officers yes no yes no yes no yes no
François Riahi, Chief Executive Officer Term of office began: June 1, 2018 Term of office ended: the May 2022 General Shareholders’ Meeting
See section 2.4.1.3 “Severance payments and consideration for non-compete agreement”.(a) Like the rest of the staff, the Chief Executive Officer is covered by the mandatory pension plans. He is not covered by the kind of supplementary pension plans (b) described in Article 39 (defined benefit plan) or Article 83 (voluntary defined contribution plan) of the French General Tax Code set up by Groupe BPCE. Furthermore, Natixis’ Chief Executive Officer paid into an “Article 82” type life insurance policy (in reference to the French General Tax Code) put in place by Gropue BPCE. The premiums on this policy were paid by the Chief Executive Officer and not by Natixis. In 2019, François Riahi paid €117,333 into his policy. Situation presented with respect to his term of office as Chairman of the Board of Directors of Natixis.(c)
Components of compensation due or granted with respect to the fiscal 2.4.2.5 year ended December 31, 2019 to the Chief Executive Officer of Natixis
Fixed compensation €800,000 François Riahi’s gross fixed compensation for 2019 for his duties as Chief Executive Officer was €800,000 and is unchanged from the previous year.
Annual variable compensation in respect of 2019 €988,262 The annual variable compensation in respect of fiscal year 2019 was calculated on the basis of quantitative and strategic criteria first reviewed by the Compensation Committee then validated by the Board of Directors, and submitted to a vote at the General Shareholders’ Meeting in May 2019 in accordance with the provisions of the Sapin II law. The variable compensation target for the 2019 fiscal year was set at 120% of the Chief Executive Officer’s fixed compensation, with a range of between 0% and 156.75% of the target, i.e. a maximum of 188.1% of fixed compensation. François Riahi’s variable compensation target for the 2019 fiscal year was €960,000. The following targets were set for 2019: quantitative targets (70%), 25% of which based on financial performance in relation to the V Groupe BPCE budget (net revenues 4.2%, net income (Group share) 12.5% and cost/income ratio 8.3%) and 45% based on the financial performance of Natixis (net revenues 11.25%, net income (Group share) 11.25%, cost/income ratio 11.25% and ROTE–Return on Tangible Equity 11.25%);
The amount of variable compensation for 2019, which will be put to a vote of the shareholders at the next Annual General Shareholders’ Meeting, is therefore 102.94% of the variable compensation target, i.e. 988,262: one portion will be paid in 2019, 50% of it indexed to the Natixis share price, i.e. €348,212;V the other portion shall be deferred over three years, 50% of it indexed to the Natixis share V price, i.e. €640,050. This deferred amount will be paid in thirds in 2020 (100% in cash), 2021 (50% in cash and 50% indexed to the Natixis share price in securities) and 2022 (100% indexed to the Natixis share price or in securities), provided that the continued service requirement and performance conditions are met.
Multi-year variable compensation 0 In 2019 François Riahi did not receive any multi-year variable compensation.
Allocation of stock options/ performance shares and any other long-term compensation 31,708 shares No stock options were granted to François Riahi during fiscal year 2019.V Based on the positive opinion of the Compensation Committee and in keeping with the V principle of the Chief Executive Officer’s eligibility to receive performance shares as part of Long-Term Incentive Plans for members of the Senior Management Committee of Natixis (“LTIP CDG”), at its meeting on May 28, 2019, the Board of Directors of Natixis allocated 31,708 performance shares to François Riahi, which can lead to the acquisition of a maximum of 38,049 shares, depending on the achievement of the performance conditions, i.e. a maximum of 0.00101% of share capital at the allocation date. This allocation corresponds to 20% of François Riahi’s gross annual fixed compensation. Vesting of these shares is contingent upon meeting the continued service requirement and V performance conditions, which are based on both the relative Total Shareholder Return (TSR) achieved on Natixis stock and the fulfillment of CSR targets. The performance of Natixis shares versus the Euro Stoxx Banks index will be compared V every year during the four-year period covered by the plan, i.e. fiscal years 2019, 2020, 2021 and 2022, for each of the annual tranches, each representing 25% of the shares allocated. Based on the relative performance of Natixis’ TSR compared with the average TSR of the Euro Stoxx Banks index, a ratio will be applied for each annual tranche, as follows: performance below 90%: no vesting of shares allocated out of the annual tranche;V performance equal to 90%: 80% of the shares of the annual tranche shall vest;V performance equal to 100%: 100% of the shares of the annual tranche shall vest;V performance greater than or equal to 120%: 110% of the shares of the annual tranche shall V vest.
Components of compensation due or granted for the fiscal year ended which are subject to approval or have been approved by the General
Shareholders’ Meeting with respect to the related-party agreements and commitments procedure Amount Comments
budget average* for the period; Natixis’ cost/income ratio less than 75% at the time of leaving (last half-year closed).3.
The amount of the payment shall be determined based on the number of performance criteria met: if all three criteria are met: 100% of the agreed payment;V if two criteria are met: 66% of the agreed payment;V if one criterion is met: 33% of the agreed payment;V if none of the criteria is met: no payment will be made.V
Pursuant to Article 16 of Regulation (EU) 2017/1129, known as "Prospectus 3", of June 14, 2017, whose provisions with respect to risk factors came into effect on July 21, 2019, the intrinsic risks of Natixis' business at the date of filing this universal registration document are presented as six main categories: credit and counterparty risk;V
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk factors 102 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
The increase in credit risk between S1 and S2 loans is measured against the following criteria: changes to counterparty ratings (for large corporates, banks and sovereigns loan books) since initial recognition; changes to probability of default within one year (for individual customer, professional customer, SME, public sector and social housing loan books) since initial recognition; placement on the watchlist; forborne status; the ratings of the sector or country of the counterparty; and the existence of one or more contracts more than 30 days past due.
Reduced or no liquidity of assets such as loans could it more difficult for Natixis to distribute or structure such assets and thus have a negative impact on Natixis' results and financial position
In accordance with the “originate to distribute” model, Natixis originates or acquires certain assets with a view to distribute them at a later stage by way of syndication or securitization. Natixis' origination activity is concentrated in large corporate lending and in specialized financing, while its distribution is at the service of banks and non-banking financial institutions.
If there is less liquidity on the syndication or securitization markets in particular for these assets, or if Natixis is unable to sell or reduce its positions, Natixis may have to bear more credit risk and market risk associated with these assets for longer than anticipated. If there is no liquidity in the secondary markets for these, Natixis may have to reduce its origination activities and thus affect its revenues and relations with its customers, which in turn could have a negative impact on its results and financial position (see section 4.2.1). Furthermore, depending on market conditions, Natixis may have to recognize a value adjustment on assets that are likely to adversely affect its results.
At December 31, 2019, the market risk (including CVA) associated with Corporate & Investment Banking activities represented 13% of Natixis’ total RWA (see paragraph 3.2.3.10).
Natixis could suffer losses if any of the instruments and hedging strategies it uses to hedge the various types of risk to which it is exposed prove ineffective. Many of these strategies rely on observations of past market behavior and on analyses of historical correlations, but could prove unsuitable in certain market configurations (e.g. sharp volatility due to trade tensions between the US and China, or Brexit) due to imperfections in the models used.
The fair value of the derivatives portfolio includes additional valuation adjustments that could affect Natixis’ net income and equity
Natixis’ access to certain forms of financing may be adversely affected in the event of a financial crisis or downgrade of its rating or that of the group
Since 2011, Natixis’ funding structure has relied on a Joint Refinancing Pool between Natixis and BPCE. Natixis secures a portion of funding for its activities from Groupe BPCE through the public and private issuance of medium- and long-term vanilla debt (senior and subordinate) by BPCE S.A. Natixis is the group's mediumand long-term issuer for structured private sector refinancing transactions.
If the credit ratings of BPCE and therefore of Natixis were downgraded by major rating agencies, or were BPCE struggle to secure funding from the markets, the liquidity of Groupe BPCE, and thus of Natixis, and the corresponding cost of funding could be adversely affected.
Moreover, another crisis affecting the financial markets and/or banking sector, or adverse trends in market conditions could adversely affect Natixis’ financial position in terms of CET1 (see glossary to the universal registration document) and leverage, its balance sheet, and its results.
This risk concerns Natixis-held shares in the banking book category which are designated at fair value to balance out other comprehensive income (OCI). Natixis is mainly exposed to this risk through the debt instruments it holds as part of its liquid asset buffer. This risk manifests as a decrease in the financial assets’ value resulting from changes to credit issuer quality for debt securities (CSRBB — credit spread risk in the banking book). At December 31, 2019, no material increase of the credit risk of the shares held for the purposes of liquidity reserves was observed (see Note 6.3 of Chapter 5).
Should Natixis fail to comply with applicable laws and regulations, it could be exposed to heavy fines and other administrative and criminal sanctions likely to have a material adverse effect on its financial position, business and reputation
The banking and insurance sectors are subject to increased regulatory oversight, both in France and abroad. In the last few years there has been a substantial increase in new regulations that have introduced significant changes affecting both the financial markets
In the course of business, Natixis is exposed to employee or third-party actions and behaviors that are unethical or violate laws and regulations, and that could damage its reputation and expose it to sanctions
Applicable to all Natixis employees, Natixis’ Code of Conduct formalizes the general principles of conduct in force at Natixis, and establishes guidelines for all employees regarding expected behavior when carrying out their duties and responsibilities.
To implement the Code of Conduct on a day-to-day basis, Natixis has established a conduct framework with its own committee (the Global Culture and Conduct Committee) and training program. (For a detailed description of the Code of Conduct and the conduct framework, see section 6.2 of this universal registration document.)
Such actions or behaviors could have negative consequences for Natixis, damage its reputation or shareholder value, and expose Natixis, its employees or stakeholders to criminal, administrative or civil sanctions likely to adversely affect its financial position and business.
An operational failure, or an interruption or failure of Natixis’ third-party partners’
Like most of its competitors, Natixis relies heavily on its communication and information systems to process a high volume of increasingly complex transactions for its businesses (for a description of Natixis’ communication and information systems, see the risk management system in section 3.2.8.5). Although Natixis has made data transmission security a priority, any breakdown, interruption or failure of these communication and information systems could result in errors or interruptions to the systems it uses for customer relationship management, the general ledger, deposit and loan processing transactions, and/or risk management. If, for instance, Natixis’ information systems shut down, even for a short period, it may not be able to meet customers’ needs in a timely manner, potentially resulting in lost business opportunities. Therefore, any breakdown, interruption or failure of Natixis’ information systems, despite back-up systems and contingency plans, could result in considerable costs related to information retrieval and verification, as well as lost business or financial losses in its ongoing operations and portfolio transactions related, for example, to the failure to exercise an option or to unwind a transaction such as a hedging transaction.
risks relating to IT Systems Security, as well as a far-reaching campaign to raise all employees’ awareness on ITSS matters. In 2019, no cybercrime-related incident had a material adverse impact on Natixis’ financial position or reputation. However, as cyberattacks are constantly evolving to become increasingly advanced, the measures described above may not be sufficient in the future to fully protect Natixis, its employees, partners and clients. The occurrence of such attacks could potentially disrupt Natixis’ client services, result in the alteration or disclosure of confidential data or lead to business interruptions and, more broadly, have a material adverse effect on its business, financial position and reputation. As an example, in 2019 Natixis' information system was targeted by the ransomware Payroll through a phishing campaign. While considered serious, this incident had no financial impact and therefore no consequences on Natixis' reputation.
Natixis cannot guarantee that such interruptions or failures of its communication and information systems, of the systems of third parties, or a breach of its information systems will not occur or, should they occur, that they will be adequately resolved. The occurrence of one or more of the events described above may result in lost business and other additional costs and losses for Natixis, or result in reputational damage.
Natixis’ reputation is pivotal to its ability to conduct its business and in particular to meet the objectives set out in its New Dimension strategic plan.
Unfavorable economic or market conditions, and an economic environment of persistently low interest rates can weigh on Natixis’ profitability and financial position
Natixis is the Groupe BPCE subsidiary operating in Asset & Wealth Management, Corporate & Investment Banking, Insurance and Payments across three key regions: the Americas, Asia-Pacific and EMEA (Europe, Middle East and Africa), representing 29%, 6% and 65% of net revenues respectively for the fiscal year ended
Adverse economic conditions in Natixis' main markets could have the following negative impacts in particular: an increased rate of defaults on loans and receivables and higherV provisions for non-performing loans due to the impact on the business and operations of Natixis’ customers. A significant increase in these provisions or the realization of losses in excess of the provisions recorded could have an adverse effect on Natixis’ results and financial position; a decline in prices on the bond, equity or commodity markets couldV reduce business volumes on these markets; macro-economic policies adopted in response to actual orV anticipated adverse economic conditions could have unintended negative effects, and are likely to negatively impact market parameters such as interest rates and foreign exchange rates, which could affect the results of Natixis’ businesses that are most exposed to market risk; perceived favorable economic conditions generally or in specificV business sectors could result in asset price bubbles decorrelated from the actual value of the underlying assets; this could in turn exacerbate the negative impact of corrections when conditions become less favorable and cause losses in Natixis’ businesses; a significant economic disruption (such as the global financial crisisV of 2008 or the European sovereign debt crisis of 2011) could have a severe negative impact on all the activities of Natixis, particularly if the disruption is characterized by an absence of market liquidity that makes it difficult to finance Natixis and to sell certain categories of assets at their estimated market value or at all; an adverse change in the market prices of various asset classesV could affect the performance of Natixis Investment Managers companies, especially due to a decrease in assets on which management fees are charged; low interest rates may also negatively affect the profitability ofV Natixis’ Insurance activities, as Insurance affiliates may not be able to generate enough investment returns to cover amounts paid out on some of their insurance products. Furthermore, were market interest rates to rise in the future, a portfolio featuring significant low interest rate loans and fixed income securities would be expected to decline in value. Low interest rates may also adversely affect commissions charged by Natixis Asset Management affiliates on money market and other fixed income products. This could adversely affect the profitability and financial position of Natixis. As an indication, the sensitivity of the economic value of the main entities within Natixis’ consolidated scope to a -200 bps shift calculated as per EBA guidelines represented -€12 million at December 31, 2019 (see section 3.2.7.4).
Natixis may be unable to meet the objectives set out in its “New Dimension” strategic plan for the period from 2018 to 2020, or in any subsequent strategic plan. Unveiled on November 20, 2017, the New Dimension plan is aimed at developing high value-added solutions for clients. The strategy is threefold: deepen the transformation of Natixis’ business models; invest in digital technologies and external growth opportunities; and endeavor to become clients’ point of reference in areas where Natixis’ teams are recognized for their strong expertise. (See pages 8-9 of the universal registration document for a detailed description of the New Dimension strategic plan).
The New Dimension strategic plan sets out objectives, and while Natixis believes the plan will create numerous opportunities, the company will still need to contend with the uncertainties of potentially volatile financial markets, and arising from changes to the macro-economic context. There is therefore no guarantee that Natixis will achieve the goals of this new strategic plan — any other strategy it announces or undertakes in the future. In particular, under the New Dimension strategic plan, Natixis announced certain financial targets, mainly profitability and risk-weighted asset growth rates, capital generation targets and shareholder dividend objectives, as well as targets for regulatory capital ratios and strategic initiatives and priorities. The financial objectives were established primarily for purposes of planning and allocation of resources on the basis of a number of assumptions, and do not constitute projections or forecasts of income. The actual results of Natixis are likely to vary significantly from these targets.
If Natixis does not meet these objectives, its financial position and the market value of its securities could be adversely affected.
Legislation and regulations have recently been enacted or put forward with a view to introducing a number of changes, some permanent, in the global financial system. These new measures, aimed at preventing a recurrence of a global financial recession, have changed significantly — and may continue to change — the environment in which Natixis and other financial institutions operate. Natixis is exposed to risk related to these legislative and regulatory changes.
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk factors 106 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
Strengthen internal control requirements, which would requireV investing heavily in human resources and materials for risk monitoring and compliance purposes.
Amend the capital requirement framework and necessitateV investment in internal calculation models. For example, changes related to Basel regulations (especially the revised Basel 3) may require the calculation models for risk-weighted assets in certain activities to be reviewed.
Tighten regulations on trading platforms and centralV counterparties (clearing houses) that could impact the operation of certain market activities (such as activities related to over-the-counter products).
In this changing legislative and regulatory environment, it is impossible to predict the impact these new measures will have on Natixis. Natixis is incurring, and could incur in the future, significant costs to update or develop programs to comply with these new legislative and regulatory measures, and to update or enhance its information systems in response to or in preparation for these measures. Despite its efforts, Natixis may also be unable to fully comply with all applicable legislation and regulations and could therefore be subject to financial or administrative penalties. Furthermore, the new legislative and regulatory measures may require Natixis to adapt its businesses, which could affect its results and financial position. Lastly, the new regulations may increase Natixis’ overall funding costs or require it to raise new capital at a time when it is costly or difficult to do so.
Preventing risks linked to climate change could have a negative impact on the performance of Natixis’ activities that operate in sectors with a negative environmental and climate impact
Natixis has committed to adhering to the Paris Agreement to limit global warming to below 2°C by the end of the century. Natixis has announced numerous initiatives to support the energy transition towards a low-carbon economy, and includes initiatives to reduce financing in sectors with a material climate impact.
Accordingly, Natixis has committed to stop financing companies whose main activities include the exploration, production, transportation and storage of oil sands. Natixis has also committed to stop financing projects to explore and produce oil in the Arctic region. Lastly, in 2015 Natixis committed to stop financing the exploration, production, transportation and storage of coal, and includes companies for which these activities represent 50% of their business. In 2019, this percentage was lowered to 25%.
Interest rate risk is one such market risk and is structurally significant for Natixis as its general funds consist primarily of bonds. Fluctuations in interest rates may: in the case of higher rates, reduce the competitiveness of theV euro-denominated offer (by making new investments more attractive) and cause waves of redemptions on unfavorable terms with unrealized capital losses on outstanding bonds; in the case of lower rates, in the long term make the return on theV general funds too low to meet their capital guarantees.
Due to the allocation of the general funds, widening spreads and a decline in the equity markets could also have a material adverse impact on the results of Natixis’ life insurance business.
The main risk to which Natixis’ Insurance affiliates are exposed in their Non-Life Insurance business is underwriting risk. This risk results from a mismatch between, first, the claims actually incurred and the benefits actually paid as compensation for these claims and, second, from the assumptions that the affiliates use to price their insurance products and to establish technical reserves for potential compensation.
To the extent that the actual benefits paid by Natixis to policyholders are higher than the underlying assumptions used to establish the future policy benefit reserves, or if events or trends were to cause Natixis to change the underlying assumptions, Natixis may be exposed to greater-than-expected liabilities, which may adversely affect Natixis’ Non-Life Insurance business, results and financial position.
At December 31, 2019, Natixis' CET1 capital stood at €11.2 billion, total Tier 1 capital at €13.3 billion, and Tier 2 regulatory capital at €2.3 billion. Natixis did not issue any senior non-preferred debt.
As a member of Groupe BPCE, Natixis may be subject to resolution proceedings in the event of the simultaneous failure of Natixis and Groupe BPCE. The relevant resolution authority would manage the resolution proceeding at the level of BPCE, which would be the “single point of entry” of Groupe BPCE. Should the financial position of Natixis or of Groupe BPCE deteriorate, or be perceived as deteriorating, the existence of the powers provided for by the BRRD could cause the market value of Natixis financial securities to decline more rapidly.
The objective is to ensure the effectiveness and quality of the Company’s internal operations, the reliability of accounting and financial information distributed both internally and externally, the security of operations, and compliance with laws, regulations and internal policies.
Natixis organizes its control functions on a global basis in order to ensure that the internal control mechanism is consistent throughout the Company. Second-level permanent and periodic control functions within subsidiaries or business lines report to Natixis’ corresponding central control departments, either on a functional basis in the case of subsidiaries or on a hierarchical basis in the case of business lines.
The Control Functions Coordination Committee (CFCC) is chaired by the Natixis Chief Executive Officer or his substitute, the Corporate Secretary. Its members are the Heads of Risk Monitoring, Compliance and General Inspection, as well as the Head of the Regulatory and Accounting Review team, the Corporate Secretary of BPCE’s Risk, Compliance and Permanent Control division and, as required, certain operational or functional managers. The CFCC coordinates the entire internal control system by: addressing all issues pertaining to the organization and planningV of control services; highlighting areas of emerging or recurring risk within the scopeV under consideration and reporting any significant anomalies observed to the executive body (for example, monitoring the backlog of the main corrective measures); and providing the executive body with updates on ongoing controlsV performed by internal or external control functions or by regulators, and ensuring that the conclusions from these undertakings are taken into account by the operational business lines.
The conclusions of controls carried out under this system, supplemented with the results of external audits (carried out by BPCE’s Inspection Générale, the Statutory Auditors, the regulators/supervisors, etc.) are reported to the Board of Directors via its extensions, the Audit Committee and the Risk Committee.
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk management 110 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
The Risk Supervision Division performs controls on credit and counterparty risk, market and liquidity risk, overall interest rate risk, operational risk and model risk. Specific risks related to the Insurance and Asset Management activities are included in these controls, and its scope of action extends to all the entities within Natixis’ consolidation scope (see section 3.2 for more detailed information).
Third-level controls, or periodic controls, as defined by the French Ministerial Order of November 3, 2014, are performed by the General Inspection Department.
The General Inspection Department reports on all its activities and projects to the Risk Committee, which then presents a summary report to the Board of Directors.
It conducts audits across Natixis’ full scope (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, confidential or otherwise. Its
Natixis’ annual and multi-year audit plans are approved by its Chief Executive Officer. The Annual Audit Plan is examined by the Risk Committees of Natixis and BPCE and approved by the Natixis Board of Directors.
The risk management function steers the risk appetite framework, recommends risk policies consistent with those of Groupe BPCE to Senior Management for approval, and makes proposals to the executive body on principles and rules in the following areas: risk-taking decision procedures;V
The Compliance Function’s preventative actions — advice, raising awareness and training — are a key driver to improving Natixis’ management of compliance risk.
Risk management governance is a structured organization involving all levels of the bank: the Board of Directors and its special committeesV (Risk Committee, Audit Committee, etc.); the executive managers and the special Risk Committees theyV chair within the bank; the central divisions, independent of the businesses;V
the business lines (Asset & Wealth Management, Corporate &V Investment Banking, Insurance, and Payments).
An e-learning module was made mandatory for all employees and was rolled out after adapting the performance indicators and dashboards to each entity.
It is consistent with Natixis’ strategic plan, budget process and business activities, and falls within Groupe BPCE’s general framework on risk appetite which is based on two items: the Risk Appetite Statement (RAS), which sets out, in1. qualitative and quantitative terms, the risks that the Bank is prepared to take; the Risk Appetite Framework (RAF), which describes the2. interface between the organization’s key processes and the implementation of the governance that puts the RAS into action.
Activities with high risk/profitability ratios are subject to strict selection and oversight. Market risk management in particular has a highly selective investment approach, coupled with limited tolerance for extreme risk, and very close monitoring.
In accordance with regulations concerning systemically important financial institutions, Groupe BPCE has drawn up a recovery and resolution plan (PRR).
Natixis is exposed to these risks because of the transactions it executes with its customers (for example, over-the-counter derivatives [swaps, options, etc.], and repurchase agreements).
Reputational risk is the risk of damage to the confidence 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.
This is the risk of direct economic loss or economic loss as a consequence of an image problem or legal dispute or reputational harm, due to errors made when defining, implementing or using valuation models, regulatory capital models or other models.
Spread risk is the risk of an increase in the cost of funding in the event of a liquidity crisis, given fixed-margin long-term assets, or when forced to reinvest long-term funds at higher rates relative to available assets.
Insurance business-related risk: Insurance risk is the risk to profits of any difference between expected and incurred claims. Depending on the Insurance product in question, the risk varies according to macroeconomic changes, changes in customer behavior, changes in public healthcare policy, pandemics, accidents and natural disasters (such as earthquakes, industrial accidents or acts of terrorism or war).
The scenarios proposed by the Economic Research team are discussed and approved at a Groupe BPCE Executive Management Committee meeting and presented at a Natixis Senior Management Committee meeting.
The first adverse scenario proposed for the 2019 comprehensive internal stress tests featured a return to import duties, sluggish emerging markets and poor macroeconomic prospects in Europe leading to a sharp downturn in US growth. This has a negative impact on the balance sheets of the most heavily indebted companies, leading to credit events and contagion among risky assets due to the high proportion of leveraged loans.
The second adverse scenario combines social tension with a decline in the power of the executive, which then takes steps to shore up purchasing power. The deficit grows, frightening off investors whose ensuing capital flight results in a slowdown.
A reverse stress test scenario featured plummeting US equity indices and a flattening yield curve due to an abrupt decline in growth and inflation. Share volatility indices shoot up, leading to a steep drop in long-term rates. The growth profile for 2020 reflects tighter financial conditions: disappointing earnings and a rise in volatility due to uncertainty over where the economic cycle is going.
Regulatory stress tests comply with the ad hoc requirements of the ECB, the EBA and any other supervisory body: the last regulatory exercise was performed in 2018 using the methodology published by EBA for the ECB. Natixis contributed to the exercise conducted for Groupe BPCE’s scope.
The specific stress test exercises run by the Natixis Risk Supervision Division are detailed in the dedicated sections of this document (and in particular the credit stress tests detailed in section 3.2.3, subsection 3.2.3.9 “Commitment monitoring framework”, as well as the market stress tests detailed in section 3.2.5, subsection 3.2.5.3 “Market risk measurement methods”).
Credit risk management and control are performed in accordance with the segregation of duties. Accordingly, together with the other divisions, the Risk Supervision Division is in charge of monitoring credit risk through various departments that: define the credit risks policies and internal credit riskV management procedures; set credit risk limits and exposure thresholds;V
Working with the businesses, the main duty of the Risk Supervision Division is to provide an opinion, based on all relevant and useful information, on the risks taken by the bank.
The quantitative framework is generally based on: commitment ceilings by business line or sector;V
Checks are carried out as required during the individual processing of loan applications to ensure the correct application of the risk policy. Overall monitoring also takes place on a quarterly basis (checking compliance with ceilings and the number of deviations) and is presented to the Global Risk Committees.
The limits are in line with Natixis’ credit approval process and are reviewed and approved either by means of delegated authority or by credit committees.
The internal rating mechanism is based on: internal rating methodologies specific to the various Basel assetV classes and consistent with Natixis’ risk profile; there is a unique rating procedure and methodology for each type of counterparty; an IT system used for managing the successive stages of theV rating process, from the initiation of the process to the approval and logging of the complete process; procedures and controls that place internal ratings at the heart ofV the risk management system, from transaction origination to ex-post analysis of defaulting counterparties and the losses incurred on the relevant loans; periodic reviews of rating methodologies, the method forV calculating the LGD and the underlying risk inputs.
Indicative equivalents between internal ratings based on expert appraisal and external agency ratings
The rating scale varies according to the type of counterparty and includes 21 notches for major corporates, banks and specialized financing institutions. It should be noted that internal ratings are also one of the criteria used to determine the level of authority required to approve credit applications.
The external rating agencies’ alphanumeric credit rating scales and the risk weighting coefficients are reconciled in accordance with the note published by the ACPR: Method for calculating prudential ratios within the CRD IV (Capital Requirements Directive IV).
When a bank portfolio exposure does not have a directly applicable external credit rating, the Bank’s customer standards allow — on a case-by-case basis and after analysis — the application of a rating based partially on an internal or exposure rating of the issuer (or of the guarantor, if applicable).
Internal counterparty risk models and rating models are validated by the validation team of the Groupe BPCE Risk Department or, acting with the authorization of the Groupe BPCE Group Modeling Committee, by the Natixis Risk division’s Risk Model Validation team. The Natixis Risk Model Validation team uses a six-fold validation process: data and parameters applied by the model: analysis of data qualityV and representativeness, integrity of controls, error reports, comprehensiveness of data, etc.; methodology: analysis of model’s underlying theory, analysis ofV estimates, sizing methods, risk indicators, aggregation rules, model benchmarking, analysis of precision and convergence; usage and robustness test: the validation team ensures that theV internal models are used by qualified staff, that usage procedures are documented and up to date, that ex-post controls and stress tests are performed; IT development: counter-implementation, code analysis, tests;V
The design, modification and ongoing management of the model are performed by the model designers on behalf of the model owner. Model Risk Management, an independent entity, is called upon for all new models as well as for all modifications or improvements to existing models. On an annual basis, this team in charge of designing the rating models and, more generally, calculating credit or counterparty risk, regularly reviews the models which cover the analysis of backtesting and usage tests.
Where authorization is granted, the findings and results of the model validation process performed at Natixis are presented to the Risk Model Oversight Committee for confirmation, then submitted to the Model Risk Management Committee for approval before being sent to the Standards and Methods Committee of the Groupe BPCE Risk, Compliance and Permanent Control division for final validation and possible submission to the regulator.
Backtesting and benchmarking are an integral part of the model validation process. Backtesting and performance monitoring programs are used at least once a year to ensure the quality and reliability of rating models, LGD estimates and probability of default scales. 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 CANO committee: serves as a forum for presenting the results of performance andV stability measurements; analyzes the indicators whose alert thresholds have beenV exceeded; decides on any measures to be taken to correct any deviations orV anomalies. These measures may take different forms, including changing rating practices, methodologies, performance analyses or alert threshold values.
Monitoring and backtesting of internal LGD, CCF and ELBE under the advanced method
The LGD, ELBE and CCF (see glossary) levels for the different lending scopes are backtested at least once a year (based on internal data), as are the rating models and the associated PD, to verify the reliability of the estimates over time.
Loss given default models (internal LGD) are calculated: on a statistical basis for the corporate asset class;V
This table provides a general summary of the system’s performance but differs from the annual backtests carried out within the Group, which are conducted on a model-by-model basis and not overall by portfolio. However, this table allows a comparison of estimates and actual results for each internal input over an extended period and for a significant, representative percentage of each exposure class. The results come from data warehouses used for modeling. This is based on all performing customers for default rates and PD, and on all customers in default for LGD.
The counterparty risk backtesting program is designed to validate the key assumptions on which the exposure model is built — stochastic processes for market risk factors, correlations and pricing models — and to identify notable discrepancies in specific model elements.
Specialized financing 6 Expert analysis-based rating models by type of financed asset
Banks 1 Qualitative model based on internal and external defaults by type of counterparty. LGD assessed in this model include defaults occurring in periods of decline
Calculating the EEPE requires simulating the potential changes in risk factors at future dates over a large number of scenarios using a Monte Carlo approach. The mark-to-market value of each transaction is then remeasured at each simulated time horizon and under each scenario. For offsetting, exposure is then calculated by price aggregation taking into account the legal framework (master agreements and credit support annex) allowing price offsetting and offsetting for collateral exposures. The exposure value for a given counterparty is equal to the sum of the exposure values calculated for all offsetting sets.
distribution models of the factors distributed and called during theV valuation stage.
Natixis uses a number of credit risk mitigation techniques, including netting agreements, personal guarantees, asset guarantees or the use of credit-default swaps (CDS) for hedging purposes.
one or more guarantors commit to pay the creditor in the event of borrower default. It includes personal guarantees, on-demand guarantees and credit derivatives.
The collateral is adjusted for its volatility and type. Collections on collateral are estimated quarterly or annually on the basis of conservative valuations and haircuts and take into account the actual enforcement of such collateral in times of economic slowdown.
In terms of monitoring, collateral and netting agreements are: analyzed, when a loan application is approved or reviewed, toV ascertain the suitability of the instrument or guarantee provided as well as any associated improvement in risk quality; checked, processed and documented based on standard contractsV or contracts approved by the Legal Department; subject to registration and monitoring procedures in the riskV administration and management systems.
The Risk Supervision Division provides Senior Management and the Bank’s business heads with reports analyzing Natixis’ risks: trend analyses, indicators, stress test results, etc.
As regards limit breaches, the dedicated monthly Committee Meeting analyzes changes in limit breaches using specific indicators (number, notional, duration, businesses concerned, etc.), and examines major breaches and monitors their correction.
Exposures showing deterioration in the level of risk are identified as they arise and reported immediately to the Risk Supervision Division and the business concerned, in accordance with both the counterparty watchlist, specific provisioning and alert procedures.
The Natixis Watchlist and Provisions Committee meets once a quarter and covers all the bank’s businesses. It reviews all non-performing loans under watch that may give rise to provisions or adjustments to existing provisions, and decides on the amount of provisioning necessary, based on the provision amounts submitted to it individually by the business lines, the Restructuring and Special Affairs Department and the Risk Supervision Division.
This Committee is organized by the Risk Supervision Division and chaired by the Chief Executive Officer and assembles the Chief Risk Officer, members of the Senior Management Committee in charge of the business lines and finance, the Accounting and Ratios division and the heads of the relevant support functions.
The credit stress test system covers Natixis scopes subject to the A-IRB, F-IRB and standardized approaches. It is based on choosing scenarios that replicate plausible crisis situations and high degrees of severity, in keeping with market practices, while taking past events, market trends and the environment into account so that purely historical or theoretical scenarios are eliminated.
New scenarios were reviewed in 2019 and presented to the Global Risk Committee as well as to the Senior Management Committee. These internal credit stress test scenarios are defined based on macroeconomic assumptions prepared in collaboration with the economic research and country risk teams and with Groupe BPCE. They consist of three scenarios for the 2020-2022 period: a baseline scenario and its practical adaptation via the bank’s provisioning policy, and two credit scenarios (a substantial and global slowdown in the economy and one of social tensions in France).
Exposures secured by mortgages on immovable property 221 91 7 1,195 559 45
Claims on institutions and corporates undergoing a short-term credit assessment 100 46 4 643 413 33
Central governments or central banks 3,807 120 10 7,584 193 16
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The following table shows the breakdown of exposures at risk by internal rating (S&P equivalent) for asset classes measured using the IRB approach, excluding: exposures to equities (calculated using a simple weighting);V
the first involves the daily identification of all rating downgradesV affecting Natixis’ securitization positions as well as the associated potential risks and, if necessary, deciding on an appropriate course of action; the second is underpinned by a quantitative (ratings, valuations)V and qualitative analysis of securitization positions.
The Risk Supervision Division, via the Markets Activities Risks, P&L and Liquidity division (MARPL), places great importance on the formal definition of all risk policies governing market transactions based on both a qualitative and forward-looking analysis. This approach is mainly based on the strategic review of global risk budgets, business targets and market trends and relies on a proactive early warning system for the most sensitive areas at risk.
Natixis’ internal VaR model was approved by the Autorité de Contrôle Prudentiel et de Résolution (ACPR — French Prudential Supervisory Authority) in January 2009. Natixis uses VaR to calculate capital requirements for market risks within approved scopes, and to manage and supervise market risks. The model is based on a calculation by computer simulation, based on Monte Carlo-type methodology, taking into account a portfolio’s possible non-linear characteristics with respect to different risk factors.
All the trading portfolios are subject to adequate risk monitoring and supervision systems, in accordance with the market risk policies in force. A VaR limit is set at an overall level and for each business.
Yields used by Natixis to simulate potential changes in risk factors are absolute yields for most risk factors. The exceptions to this rule are exchange rates, share prices and indices, precious metals prices and indices, commodity indices and commodity futures.
Natixis’ internal model is based on a calculation of VaR and stressed VaR.
In the event that negative real or hypothetical P&L levels exceed the VaR calculation for the same day, an analysis is performed and explanations provided according to internally-defined criteria.
The liquidity horizon, which represents the time required to sell a position or hedge it in unfavorable market conditions, used in the IRC calculation model is one year for all positions and all issuers.
In accordance with regulatory requirements, Natixis established an internal model validation policy as well as procedures. This model validation phase is a prerequisite for their use.
Overall stress tests are subject to continuous review. They are performed daily and can be grouped into two categories: historic stress tests consist of reproducing sets of changesV in market parameters observed during past crises in order to create an ex-post simulation of the P&L changes recorded. While stress tests do not have any predictive value, they do make it possible to gauge the exposure of the portfolio to known scenarios. There are 12 hypothetical stress tests covering the most significant events since 1987, the year of the stock market crash, including the Lehman Brothers collapse in the 2008 period and the terrorist attack of September 11, 2001, through to the sovereign debt crisis in 2011, hypothetical stress tests are used to simulate changes inV market parameters for all the activities, based on plausible assumptions regarding one market’s predicted response compared with another’s, depending on the nature of the initial stress. Stresses are determined through a joint effort involving the Risk Supervision Division, the front office and Economic Research. A set of seven scenarios have been defined: fall in stock market indices combined with a flattening of1. the yield curve and an increase in credit spreads, strong rise in European interest rates in an inflationary2. environment, failure of a financial institution with a rise in credit spreads3. and interest rates and a moderate fall in equity markets, commodity crisis based on a scenario of disruption to4. supply due to geopolitical events, emerging market crisis reflecting the consequences of a5. sudden withdrawal of capital from an emerging country during a global economic downturn (higher refinancing costs, stock market crash and depreciation of the currency against the US dollar), failure of a high-profile corporate based on a credit market6. shock, liquidity crisis characterized mainly by a sharp widening of7. European interbank spreads, a widening of the liquidity spread and higher “peripheral” yields.
Specific stress tests are also calculated daily in the management tools for all the portfolios and are governed by limits. They are set on the basis of the same severity standard and are aimed at identifying the main loss areas by portfolio.
In addition, reverse stress tests are used to identify the highest-risk scopes and market environments, as well as concentration and contagion links, while “ad hoc” stress tests are used to characterize any current event that could trigger major shifts in the market. Using plausible scenarios drawn from extremely adverse assumptions of risk factors leading to the breach of a loss threshold, reverse stress tests allow Natixis to implement a new risk monitoring and management tool, identify circumstances that may trigger such loss, and adapt the appropriate action plans where necessary. “Ad hoc” stress tests use expected market trends based on economic research that is translated into overall stress-test scenarios. They measure the banks resilience to major current events, and allow hedging strategies to be adapted accordingly.
All stress test mechanisms are defined by the Risk Supervision Division, which is responsible for defining principles, methodology and calibration and scenario choices. The Stress Test Committee is responsible for the operational implementation of stress tests and meets on a monthly basis. The Committee approves work to be carried out, its workload and determines the annual IT budget; loss alerts by portfolio and aggregated by business line, which2) alert management and the Risk Supervision Division if losses reach a certain threshold over a given month or on a cumulative basis since the beginning of the year. These thresholds are set by the Market Risk Committee according to the characteristics of each portfolio, past performance and budgetary targets; finally, the supervisory framework includes operational3) indicators on an overall and/or by business basis, which focus on more directly observable criteria (sensitivity to changes in the underlying and to volatility, correlation, nominals, etc.). The limits of these qualitative and quantitative indicators are set in line with the VaR and stress test limits.
In accordance with the provisions of IFRS 9, financial instruments are recognized at their fair value (see Chapter 5 of the Natixis 2017 universal registration document for further information on fair value accounting methodologies).
Fair value determination is subject to a control procedure aimed at verifying that the valuation of financial instruments is determined and validated by an independent function in terms of prices and/or valuation models.
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Independent price verification is carried out by MARPL’s IPV (Independent Price Verification) teams which, in line with the division’s policy, control the market inputs used in the valuation process for the bank’s transactions. The review of market inputs may lead to valuation adjustments recognized in economic results and the financial statement.
In accordance with regulatory requirements, Natixis has established internal model validation policies and procedures for evaluating market risk and valuation models. This independent model validation policy is part of its wider risk model management framework.
Internal market risk models are validated by the Natixis Risk Supervision Division’s Risk Model Validation team, under the authorization of the Groupe BPCE Group Modeling Committee. Valuation models are validated by the Valuation Model Validation team, under the authorization of the Groupe BPCE Group Modeling Committee. The Natixis Validation teams use a six-fold validation process: data and parameters applied by the model: analysis of data qualityV and representativeness, integrity of controls, error reports, comprehensiveness of data, etc.; methodology: analysis of model’s underlying theory, analysis ofV estimates, sizing methods, risk indicators, aggregation rules, model benchmarking, analysis of precision and convergence; usage and robustness test: the validation team ensures that theV internal models are used by qualified staff, that usage procedures are documented and up to date, that ex-post controls and stress tests are performed; IT development: counter-implementation, code analysis, tests;V
Specifically, the following aspects are assessed in respect of valuation models: the theoretical and mathematical validation of the model, theV analysis of assumptions and their justification in model documentation; algorithm validation and benchmarking;V
The third line of defense is the General Inspection Department, which annually reviews internal models and compliance with the risk model management framework and the correct application by Model Risk Management of its own policies and procedures.
The MARPL Department is tasked with defining and implementing the adjustment policy for Capital Market activities’ management results.
The VaR level for Natixis’ trading portfolios averaged €8.8 million. It peaked at €15.1 million on October 16, 2019 and amounted to €8 million at December 31, 2019.
The following chart shows the VaR trading history between December 31, 2018 and December 31, 2019 for the entire scope.
31/12/18 31/01/19 28/02/19 31/03/19 30/04/19 31/05/19 30/06/19 31/07/19 31/08/19 30/09/19 31/10/19 30/11/19 31/12/19
The following table presents the key VaR figures — (99% VaR, 1 day): (in millions of euros)
31/12/18 31/01/19 28/02/19 29/03/19 30/04/19 31/05/19 28/06/19 31/07/19 30/08/19 30/09/19 31/10/19 29/11/19 31/12/19
In 2019, three actual backtesting exceptions and two hypothetical backtesting events were noted at the Natixis regulatory level.
€13 million on February 13, and €28.4 million on February 27) had no impact on the income statement for the first half.
Change in regulatory stressed VaR (1-day 99% VaR) and stressed VaR (1-day 99% SVaR).
This indicator covers the regulatory scope. Natixis’ IRC averaged €15.6 million. It peaked at €35.6 million on January 18, 2019, and bottomed out at €9 million on December 19, 2019, and stood at €10.1 million at December 31, 2019.
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk management 134 NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019
Overall stress test levels reached an average level of €16 million at December 31, 2019, versus -€13 million at December 31, 2018.
F a ll i n s to c k m a rk e t in d ic e s
In c re a se i n I n te re st r a te
E m e rg in g m a rk e t c ri si s
The function in charge of monitoring operational risk ensures the monitoring and management of risks arising from failures attributable to operating procedures, employees and internal systems or arising from outside events.
Its duties as described in the operational risk policies and procedures validated by the Natixis Operational Risk Committee include: recording incidents via a network of Operational Risk OfficersV across all business lines and support functions; analyzing serious incidents using an escalation process;V
establishing key risk indicators and environmental variables of aV predictive nature.
The mechanism is managed by Natixis’ Operational Risk Committee which determines the operational risk policy, monitors Natixis’ operational risk exposure and makes final decisions on hedging and reduction. It is the operational extension of the executive body and of which it has full decision-making powers for issues within its area of responsibility. This Committee meets quarterly and is attended by the Finance Department, the Compliance Department, ITSS-BC and the General Inspection Department. It is chaired by the Chief Executive Officer, the Chief Risk Officer (his substitute), with the Head of the Operational Risk Department acting as secretary. The standing members of the Operational Risk function, apart from the Head of the department, are the departments’ Heads of Operational Risk and the Data, Methods & Projects Officer.
The Operational Risk Committees of the business lines and support functions are offshoots of Natixis’ Operational Risk Committee, which closely manages the operational risk exposure of each scope. These Committees are organized according to the function’s governance matrix (location and business lines). They are facilitated by the Head of the Operational Risk Department acting as Committee secretary. Each Committee is chaired by the head or manager of the scope (business line or support function, depending on the entity) with the participation of operational managers, support function representatives and the dedicated compliance managers.
The function has nearly 50 staff members dedicated to operational risk management. Within their designated scopes (subsidiary, business line or support function), they are responsible for instilling the operational risk culture, recording and analyzing incidents, mapping risks, proposing and following up corrective actions, compiling reports and escalating information to management. Analyses are carried out across the Bank where the support or control functions are involved, or where the processes have an impact on teams, whether in the front, middle or back office.
The capital requirements for operational risk are calculated using the standardized approach for all of Natixis’ operational divisions. For the purposes of managing its economic capital, 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 value at risk (VaR) calculation based on risk mapping, factoring in identified incidents for backtesting and known external losses.
ce na ri o an al ys is isRegulatory environment / Compliance Financial industry environment
Qualitative evaluation of business line and support function policies and procedures legal and regulatory impacts
Every year the department in charge of monitoring operational risks, in conjunction with the other control functions, works with each business line, entity and support function to map operational risks. The exercise involves identifying and descriptively analyzing risks, quantifying the risk situations (average frequency, average and maximum loss), and taking into account existing risk management mechanisms. This mapping is based on process analysis and is carried out for all the bank’s activities. Its consistency is verified through backtesting, in other words by using the incident history, as well as external data where relevant.
The mapping of “global and systemic risks” (extreme risk situations occurring infrequently, such as major natural disasters, pandemics, and attacks) draws on external data on incidents in the financial industry, especially for establishing frequency. Also factored in are assumptions on unrealized net revenue items and the effectiveness of risk management mechanisms, as well as contingency and business continuity plans.
regularly. KRIs dynamically detect any changes in the operational risk profile and cover the seven Basel categories of loss-generating events. They apply either to Natixis (overall indicators), to the business lines, or to the support functions that, with the operational risk manager, set the indicators as relevant early warning indicators during the mapping process. These indicators are submitted to the Operational Risk Committee for approval. Any breach of their thresholds, that is the subject of a systematic alert, may trigger action to be carried out immediately or requiring Committee approval.
Breakdown of reported incidents by net amount by date and Basel category
In 2019, a risk analysis was performed on all of Natixis’ business lines and support and control functions. Verifying consistency with the results from General Inspections and the results of permanent controls highlighted the most important risks for each scope and helped prioritize corrective measures to be implemented in order to improve the risk management mechanism. The Corporate & Investment Banking business lines represent the majority of risks under review owing to the extensive nature of the division’s activities and operations in both France and internationally.
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Natixis’ risk profile features two main risk categories in terms of high potential impact: business line risk, concentrated under Corporate & Investment Banking, and overall risk (cyber, regulatory, loss of access to premises or information systems, or of availability of employees) to which the Company as a whole is exposed. Tailored risk management mechanisms have been introduced to cover these risks, including the safeguarding of procedures and controls, raising employee awareness, Business Continuity Plans, IT Systems Security and insurance policies.
Reporting to the Natixis Insurance division, the Groupe BPCE Corporate Insurance Department is responsible for: analyzing insurable operational risks;V
which are pooled with Groupe BPCE (except for the risk describedV in point A/ below); Combined “Global Banking (Damages to Valuables and Fraud)”A/ & “Professional Liability” policy with a total maximum payout of €148 million per year of insurance (of which €133 million has been pooled with Groupe BPCE), of which: €15 million per year, combined “Fraud/Professional Civila) Liability” insurance available, subordinate to the amounts guaranteed set out in b) and/or c) and/or d) below, €38 million per claim and per year, solely reserved for “Globalb) Banking” risk, €25 million per claim and per year, solely reserved forc) “Professional Civil Liability” risk, €70 million per claim and per year, combined “Globald) Banking/Professional Civil Liability” insurance available in addition to or after use of the amounts guaranteed set out in b) and/or c) above.
The maximum amount that can be paid out for any one claim under this arrangement is €109.50 million under “Professional Civil Liability” coverage and €109 million under “Fraud” coverage in excess of the applicable deductibles.
In the interest of fulfilling its duties and in order to apply the main principles of ALM management and control, the ALM Committee delegates certain operational tasks to: the Financial Management Department, as first line of defense:V
The purpose of the overall liquidity risk management policy is to: ensure that Natixis meets its loan commitments while ensuringV that its funding needs and maturity transformation are in line with the Group’s short- and medium-term refinancing capacities; optimize funding costs within established risk constraints to helpV reach profitability targets; observe the internal limits set in close cooperation with BPCE andV adapted to the Group’s ability to meet Natixis’ ultimate liquidity needs; comply with national and international regulations;V
help diversify the sources of funding raised by Groupe BPCEV (by geographic area, product and counterparty); and specifically to promote inflows of non-financial resources.
Liquidity risk is controlled, managed and monitored as follows: management of each business line’s funding needs: to manage theV bank’s funding needs, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Consumption is monitored weekly for Corporate & Investment Banking business lines and monthly for other business lines; management of the bank’s contribution to Groupe BPCE’s netV market footprint: the objective is to match the liquidity allocation system with the Group’s strategic ambitions and operational oversight; management of short-term maturity transformation, which isV measured using liquidity gaps. This indicator is produced daily for a 365-day period in one-day intervals for all parent company transactions, including some 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; activities, and for Natixis on a consolidated basis, and are restricted by the minimum coverage ratios approved by the ALM Committee and monitored monthly. Furthermore, in compliance with regulations and within the framework of the Bank’s risk appetite, since 2015 Natixis has set up governance as well as a global limit and an alert threshold applied specifically to a coverage ratio, proposed by the ALM Committee and validated by the Board of Directors; management of medium-term maturity transformation, which isV performed using coverage ratios that are defined by maturity tranche, such as 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 medium-term management of the Bank’s contribution to the short-, medium- andV long-term transformation of Groupe BPCE. This is measured on the basis of Natixis’ consolidated liquidity gaps subject to limits at 60 days, 5 months, 11 months and 5 years. These indicators are produced on a monthly basis; simulations of liquidity stress scenarios: the purpose of theseV scenarios is to measure the Group’s ability to continue meeting its commitments and operating 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; funding structure: the funding structure is monitored to ensure thatV resources are well diversified, by type of counterparty, by market segment and by geographic area, in order to mitigate all concentration risk (see section on funding principles and structure on the following page); market depth tests conducted by the Joint Refinancing Pool: theseV liquidity tests aim to explore the limits established by our counterparties on our issues.
Given that Natixis is supervised by BPCE, in its capacity as the central institution, and given the close interactions between BPCE and Natixis in terms of liquidity management within the framework of the joint refinancing pool (see section 3.2.7.1), this plan is defined in accordance with the Groupe BPCE business continuity plan, in the event of a crisis affecting access to liquidity for Natixis, BPCE and/or the entire banking system.
A governance system (dedicated teams and Committees, activation and deactivation rules, reporting and communication procedure, etc.) and remediation plans to enhance liquidity and reduce funding requirements are defined and documented. In addition, the BCP is regularly tested to ensure that it is operational, in accordance with regulations.
The diversification strategy now needs to be taken on board at Group level; Natixis is not the Group’s only strategic arm. The strategy aims to extend the Group’s financing sources by geographic zone, currency, product and counterparty, to limit its stock market footprint while restricting the so-called “market” liquidity needs of consumer business lines. As for Natixis, implementing this strategy will notably involve structured issues made via private placement, as well as deposit taking via corporate bonds in Europe, Asia and the US.
Fi n a n ci a l cu st om er s
Sources: Management data. Restated following of the disposal of the retail banking activities.
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Under its annual medium-term funding program in 2019, Natixis raised €11.5 billion net (€7.4 billion net the value of buybacks and calls) in resources with a term of more than one year versus €14.6 billion in 2018 (€11 billion net the value of buybacks and calls).
The difference is attributable chiefly to the deconsolidation of SFS entities (mainly the long-term refinancing leasing activity).
Short-term funding 2019 was marked by rising uncertainties and by adjustments to developed countries’ monetary policies, which enabled the world economy not to suffer too badly from a decline in private investment. The Sino-American trade and Brexit sagas contributed to the anxiety-provoking climate throughout the year, but an agreement between Beijing and Washington, and a new majority in the British parliament allowed decisive progress on those issues. And while they are still far from being definitively settled, the markets are looking at them with less apprehension.
This transition stage is crucial, because many issues on the money market include a reference to Eonia.
For certificates of deposit, NEU CP program ceiling only (NEU: New European Medium Term Note)*
In the medium and long-term funding segment, the credit market performed well over the first-half period, in a highly liquid market (Investment Grade fund inflows) where investors searched for yield. The spread on the senior preferred 5-year € debt of French banks narrowed by -15/-20 bps in the first half to trade on average of E3M+45 bps. The ECB’s March announcement of a 3-year TLTRO3 helped tighten spreads. Among other things, it will allow Eurozone banks to reinvest returns on the TLTRO2, paid quarterly from June 2020 to March 2021. The launch of QE2 in November, in the amount of €20 billion monthly, narrowed spreads to by a further -5 bps to E3M+40 bps.
In these market conditions, Natixis raised a gross total of €14.1 billion in funding in 2019 (of which €590 million in self-held securities and €250 million via Pfandbrief Bank) under its mediumand long-term refinancing program. As the only long-term issuer in the public issues segment, BPCE provided Natixis with financing for a total euro-equivalent amount of €5.5 billion.
Targets and policy it purchases foreign currencies to fund net sustainable, strategic investments abroad, in proportion to the consumption of RWA in the currency in question. Net investments in non-core currencies are still funded by borrowings.
Natixis’ Common Equity Tier 1 (CET1) has a weighted currency risk exposure, mainly denominated in US dollars. Natixis’ general policy for managing structural exchange risk consists in immunizing the CET1 ratio (CET1 in currency, in relation to RWAs in the same currency) against changes in exchange rates. To this end, it establishes a “structural” foreign-exchange position when
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In 2019 the system for measuring and monitoring interest rate risk was adapted to factor in the new july 2018 guidelines of the European Banking Authority (EBA), “EBA-GL-2018-02”. It dovetails with the implementation of the IRRBB framework within Groupe BPCE, and includes calculations and limits that are adapted to Natixis’ prudential banking scope.
the Head of the Joint Refinancing Pool, and the Head of Financial Management of Natixis and his BPCE counterpart.
The indicators are: A static interest rate gap calculation: to check the (banking)V balance sheet’s exposure to interest rate risk.
Changes in net interest income calculations: to calculate theV sensitivity of net interest income.
Natixis analyzes the sensitivity of net interest income (∆NII) to changes in market interest rates using NII stress tests.
At December 31, 2019, the sensitivity of the Bank’s NII to changes in interest rates was as follows: Sensitivity of economic value and net interest income (IRRBB — Table B)
Stress tests are calculated using the progressive regulatory floor approach as well as the multi-currency aggregation method as per the EBA Guidelines of July 2018. The sensitivity presented below relating to NII is that of the first year.
The stress scenarios set by the European Banking Authority (200 bps parallel upward or downward shift in yield curves, steepening, flattening, rise or fall in short rates with a progressive floor) would lead to a variation of -€125 million in the economic value of the banking book (using the EBA’s currency offsetting rules) based on the yield curve steepening scenario at December 31, 2019.
Revaluation adjustments on portfolios hedged against interest rate risk 0.2 0.2
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The Compliance Department oversees compliance risk prevention and mitigation. It also oversees IT Systems Security, personal data protection and business continuity. Its scope of action encompasses Natixis and its subsidiaries and branches in France and abroad, thanks to its functional structure.
The Compliance Department advises and assists all Natixis employees on how to prevent compliance risks when performing their duties. It plays a key role in implementing the principles set out in the Natixis Code of Conduct (see 6.2.1 The Natixis Code of Conduct), which have been adapted for compliance in the Compliance Manual.