CORPORATE GOVERNANCE 41 2.2 Structure of the corporate and executive bodies 43 2.3 Role and operating rules of the corporate bodies 73 2.4 Policies and rules for determining compensation and benefi ts of all kinds paid to members of the corporate bodies 83 2.5 Potential confl icts of interest 92 2.6 Chairman’s report on the internal control procedures 93 2.7 Statutory Auditor’s report on the report prepared by the Chairman of the Board of Directors 109
LEGAL INFORMATION 415 6.1 Natixis Bylaws 416 6.2 General information on Natixis’ capital 422 6.3 Distribution of share capital and voting rights 429 6.4 Information from Article L.225-100-3 of the French Commercial Code 431 6.5 Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 26, 2011 432
ADDITIONAL INFORMATION 457 7.1 Statement by the Person responsible for the registration document 458 7.2 Documents available to the public 459 7.3 Cross-reference table of registration document 460 7.4 Cross-reference table of annual fi nancial report 462
This registration document includes all elements of the annual financial report mentioned in section I of Article L.451-1-2 of the French Monetary and Financial Code and Article 222-3 of the general regulations of the Financial Markets Authority. A cross-reference table showing documents referred to in Article 222-3 of the general regulations of the Financial Markets Authority and the corresponding sections of this registration document appear on page 462.
Natixis is the corporate, investment and fi nancial services arm of Groupe BPCE, the 2nd largest banking player in France with 36 million customers spread over two networks, Banque Populaire and Caisse d’Epargne.
With close to 22,000 employees, Natixis has a number of areas of recognized expertise which are organized in three main business lines: Corporate and Investment Banking, Investment Solutions (asset management, private banking, insurance, private equity) and Specialized Financial Services.
Natixis is listed on the Paris stock exchange and is part of the CAC 40 index.
- Equity markets - Fixed income, credit, currencies and commodities - Strategic derivatives and M&A advisory
Structured finance - Commodities and energy - Asset financing: aircraft finance, project, shipping and international trade - Real estate - Strategic and acquisition financing - Securitisation
à Natixis Global Asset Management à 20 asset management companies: Natixis Asset Management, Loomis-Sayles, AEW, etc.
- “Multi-boutique” structure with around twenty management companies with multiple investment approaches - Global distribution platform covering Europe, the US, Asia and the Middle East
à Natixis Assurances - Individual and collective life insurance - Provident insurance - Property insurance
à Third-party asset management - Direct investment: venture capital, development capital and capital transmission - Funds of Funds
Sureties and Financial Guarantees à Compagnie Européenne de Garanties et Cautions - Design and development of multiple market surety and financial guarantee services
à Natixis Lease - Equipment and real estate lease financing (equipment leasing, operations leasing, leasing with option to buy, IT operational leasing, Sofergie loans and long-term leasing)
- Cash flow or structured loans - Medium-term or corporate loans
à Natixis Paiements - Payment management for every type of transaction and exchange system
Natixis was formed in 2006 through the combination of Natexis Banques Populaires and various subsidiaries of the Caisse d’Epargne Group, notably Ixis Corporate & Investment Bank (Ixis CIB) and Ixis Asset Management (Ixis AM): ● Natexis Banques Populaires itself was created from the combination in July 1999 of the operational activities of the Caisse Centrale des Banques Populaires, founded in 1921, with Natexis S.A., a holding company that was formed from Crédit National, founded in 1919 and which had gradually acquired a 100% stake in Banque Française du Commerce Extérieur, founded in 1946. As at December 31, 2000, Groupe Banque Populaire held 79.23% of Natexis Banques Populaires following an increase in its capital largely taken up by retail investors; ● Ixis CIB and Ixis AM were originally part of CDC Ixis, itself part of the Caisse des Dépôts. The Ixis CIB and Ixis AM businesses were then combined with the Caisse Nationale des Caisses d’Epargne (CNCE) as part of the transformation of the Groupe Caisse d’Epargne into a major full-service banking group at the end of 2004.
Natixis was formed by the realization of the following contributions: ● CNCE’s contribution to Natexis Banques Populaires of certain subsidiaries and shareholdings in corporate, investment and service banking businesses as well as a share of the Cooperative Investment Certificates (CCI) issued since 2004 by each Caisse d’Epargne et de Prévoyance; and
● the contribution to Natexis Banques Populaires by SNC Champion, a vehicule set up by the Banque Fédérale des Banques Populaires (BFBP), of the rest of the Caisse d’Epargne CCIs not contribud by CNCE and which had previously been acquired by SNC Champion from CNCE. In addition, CNCE and SNC Champion have contributed stakes in Ixis CIB and Ixis AM that they had previously acquired from San Paolo IMI.
After these contributions, CNCE and BFBP (directly and indirectly through SNC Champion) each had a 45.52% shareholding Natexis Banques Populaire, whose name was changed to Natixis.
Between November 18, 2006 and December 5, 2006 CNCE and BFBP (through SNC Champion) offered some of their Natixis shares to the market. This transaction took the form of a Retail Public Offering in France for retail investors and a Global Offering for institutional investors within and outside France. Once this transaction was completed CNCE and BFBP each held 34.44% in Natixis.
● The underlying principles of the BPCE, the central institution of Groupe BPCE created by Law No 2009-715 of June 18, 2009, were approved on June 24, 2009 by the BFBP Board of Directors and the CNCE Supervisory Board. The last step in the formation of Groupe BPCE was completed on July 31, 2009 with the votes at the General Shareholders’ Meetings of BFBP, CNCE and BPCE.
With Banque Populaire and Caisse d’Epargne, its two historic brands, and its expert subsidiaries specialized in their business domain, the Group is active in all commercial banking and insurance businesses while providing corporate investment banking solutions, as well.
As of December 31, 2010, BPCE held 71.5% of the share capital of Natixis (See section 1.2.2 Financial solidarity mechanism). The structure of Groupe BPCE as of December 31, 2010 was as follows: Insurance subsidiaries
(a) Restated for the reclassifi cation of interest expenses of the Deeply Subordinated Notes.
At December 31, 2010, Natixis’ Corporate and Investment Banking (CIB) division employed 4,266 people in 27 different countries. CIB generated a Net revenues of €3,027 million (€3,087 million excluding the impact of Credit Portfolio Management).
In line with the strategic plan, the “New Deal”, presented in August 2009, CIB implemented a new structure in mid-2010 built around the following objectives: BUSINESS DEVELOPMENT
Debt syndication businesses were merged with Debt Capital Markets to create an integrated Debt platform. This move was designed to encourage a “market” oriented approach starting with origination, to offer clients the entire range of possible fi nancing solutions, and to improve distribution capacity (within Groupe BPCE as well).
Securitization activities for investors were transferred from Debt and Financing to Fixed Income (FIC&T), with the aim of pooling expertise and improving the offering of high valueadded solutions, particularly with respect to the Basel 3 and Solvency 2 regulatory changes.
CHANGES IN REPORTING LINES FOR SOME BUSINESSES TO STIMULATE THEIR GROWTH
Lastly, a new platform was created in 2010 to develop business in Europe (excluding France), the Middle East and Africa (EMEA), in recognition of the region’s high priority for CIB.
Client relations are handled locally, in France and abroad, by: ● senior bankers dedicated to major clients in all sectors and to the Groupe BPCE shareholder networks; ● Corporate client relationship managers working in three economic sectors, combining sector-based groups and regional offices belonging to the French network; ● FIPS (1) senior relationship managers, specializing in major business categories: Insurance, Banking and the Public Sector.
Together with correspondent banking and trade fi nance, these activities employ over 400 people, including 70 outside France.
Global Energy & Commodities (GEC) handles overall client relations in the commodities fi eld (energy, mining and metals, agricultural commodities) and structures fi nancing solutions tailored to these markets. In 2010, Natixis confi rmed its positioning with major traders and producers of metals (Ferrexpo, Vitol, Glencore, Trafi gura, ...), oil (Gazpromneft, Tullow Oil, ...), and agricultural commodities (Cocobod, ...).
Asset and International Trade Finance combines arranging and advisory expertise in the fi elds of aviation fi nance (all types of new civilian aircraft), shipping fi nance (maritime assets used in energy and commodities transport), project fi nance (infrastructure, production of energy/renewable energy, natural resources, telecoms) and structured export fi nance (international contracts covered primarily by export credit agencies).
In 2010, Natixis was named “European Bank of the Year” for project fi nancing, and ranked 8th among MLAs (Mandated Lead Arranger) in the EMEA region and 14th worldwide (1). Natixis was also rated the world’s No. 6 bank for aviation fi nance (2). The Bank was commended for several emblematic fi nancing operations, including deals for Air France’s fi rst A380 and for the Brazilian airline GOL’s acquisition of seven B737s (3), as well as for a number of projects (Exeltium, Avenal Solar, Alta Wind, Sports Hub, Birmingham Highways, Castor, Barka 3, ...) (4). Shipping fi nance also had a busy year, with 25 new contracts signed. Structured Export Finance landed some 30 new contracts with names like Alstom (high-speed train in Morocco, tramway in Tunis), Iridium (satellites, US), CC3 (nuclear, US), Evraz, Gazprom Space Systems ...
Global Structured Credit & Conduit leverages its advisory expertise in portfolio restructuring and also arranges securitization and structured credit products for large international funds in Europe and the United States. In 2010, Natixis arranged the securitization of Hertz’s European fl eet.
The Fixed Income business proved resilient in a challenging market environment plagued by the sovereign debt crisis and historically low interest rates. It came through with strong performances and succeeded in developing international growth drivers to offset the decline in margins.
In 2010, the Treasury Department, operating in Paris, Singapore and New York, joined FIC&T in order to capitalize on the natural synergies between these activities. A single Borrowing & Lending desk is now responsible for optimizing management of the Bank’s collateral. Against a backdrop of increasingly scarce liquidity, a Treasury sales team was set up.
Natixis provides clients with a broad range of equity derivatives with a wide variety of underlyings and investment vehicles. In 2010, the business line focused on expanding client business, notably by developing a client transaction platform, providing clients with quantitative research, and developing CRM tools. The multi-asset class and emerging products offering was also expanded.
Corporate Solutions offers tailored balance-sheet optimization and risk transfer solutions within the framework of restructuring plans and acquisitions.
Corporate Solutions leverages a team of 150 staff in 9 countries to target a wide client base of international corporations and sovereign funds in Europe, the Middle East, Asia and South America.
Natixis develops third-party Asset Management activities offering substantial synergies with CIB and targeting French and international institutional investors. The business line employs some 100 people in: ● managing infrastructure funds (Cube, Fideppp); ● managing environmental and sustainable development funds such as carbon funds (European Carbon Fund) and renewable energy funds (Eurofideme, etc.); ● managing insurance risk transfer funds (alternative risk transfer); and
With 400 employees in 12 countries, the Asia-Pacifi c platform covers the majority of Financing and Capital markets. Its goal is to assist the Bank’s major clients and build up specialized business expertise in this fast-growing region by establishing a portfolio of large regional accounts.
In late 2010, an ambitious strategic redeployment plan was implemented in Capital markets, notably in order to systematize cross-selling with the fi nancing activities.
Commodities Finance continued to refocus on each country’s main producers and importers, while Shipping Finance focused on energy-related assets, particularly in Japan, Korea and Malaysia. Aviation Finance (Indonesia, China), Project Finance (Singapore, Australia), and Strategic and Acquisitions Finance (Australia) enhanced their positions as high-visibility arrangers. Meanwhile, Structured Export Finance continued to move up the value chain, especially in Vietnam. Finally, Debt Syndication is now the No. 12 arranger of syndicated loans in Asia (excluding Japan).
Expansion in the Asia-Pacifi c region is one of the Bank’s strategic priorities for the coming years. In 2011, there are plans to open a new offi ce in Beijing and to enhance operations in Japan.
Business was revived against a backdrop of tighter coordination with global business lines. Natixis is a leader in Project Finance on the North American market, with a solid position in the Renewable Energies sector, and is developing its activity in the Oil & Natural Gas sectors. Global Energy & CommoditiesUS arranged a number of benchmark deals and joint leadmanaged some 40 market transactions (debt and equity). Acquisition & Sponsor Finance improved results, whereas the non-core loan book fell sharply. As with Paris and Hong Kong, a Debt platform was set up for North America. Both credit and bond volumes increased by over 50% and revenues nearly doubled. Transaction volumes and revenue generated by Global Structured Credit and Conduits progressed in the Advisory and Credit Solutions segment.
In Markets activities, Fixed Income and Commodities Trading, which trades fi xed income, forex and commodities products (e.g. risk management products on the metals and energy markets), expanded its product offering to emerging markets (Latin America) and commodities (natural gas). Equity Derivatives developed an OTC derivatives offering and carried out several hedge monetization deals. Equity Finance also made progress, focusing on listed products such as equity options. The Cash Equities business cut costs signifi cantly, while a strategic review was conducted with the aim of improving consistency between Natixis’ business and the North American platform.
In 2010, Natixis created a new platform to cover the EMEA region (Europe excl. France, the Middle East and Africa), by grouping together its operations in 10 countries (including the London, Madrid, Milan, Frankfurt, Moscow and Dubai branches). The platform is geared to furthering CIB’s strategy in this high-priority region by building a franchise of major local clients and assisting the Bank’s global clients with their own international expansion. With a staff of over 600, Natixis offers the full range of CIB services to the EMEA region.
In 2010, Natixis reinforced its positioning with institutional clients in Europe, confi rming its leading position on the covered bond market and developing structured solutions to resolve its clients’ liquidity and ALM problems. For its corporate client base, Natixis established a sector-based policy, which emphasizes selective development with the Bank’s specialized business lines. In the structured fi nance fi eld, Natixis furthered its expansion, particularly in commodities, real estate and asset fi nance.
Now that the platform has been created, the focus has switched to regional development in order to facilitate decision-making processes and coordinate initiatives with the specialized business lines. Streamlining projects were also launched with a view to strengthening the sales structure, developing businessline expertise and improving operations effi ciency.
CIB research is an integral part of Natixis’ client-driven approach. Every day, the research function publishes analyses aimed at helping clients with their decision-making, while also contributing to the creation of fi nancial solutions tailored to client needs.
Investment Solutions plans to leverage its strength in its natural market to pursue international expansion. More than 50% of the 3,790 people employed by Investment Solutions already work outside France, mainly with Natixis Global Asset Management: (i) approximately 1,700 people in 15 asset management companies in the US, the world’s leading asset management market, and (ii) a global distribution platform employing 500 people throughout the world and a leading player in the US mutual fund segment.
Private banking also has a platform in Luxembourg, where some 100 people are working to build up the European private banking business, while private equity offers a range of funds of funds through asset management fi rms in the US and Asia.
Operating within the Investment Solutions division, Natixis Asset Management markets a wide range of investment solutions in the form of funds, dedicated products and mandates in all asset classes (money market, bonds, equities, real estate, alternative and diversifi ed).
Natixis Global Asset Management’s business model is based on a global distribution platform serviced by multi-specialist asset management companies meeting the needs of a large international client base. Its diverse range of skills, its distribution capacity and the fl exibility of its business model have enabled Natixis Global Asset Management to consolidate its position as a major international player in asset management and to improve its global positioning. As of year-end 2009, Natixis Global Asset Management was one of the top 15 asset managers in the world (1) improving on its top 20 ranking in 2008.
O Asset Management, a company specializing in “global macro” alternative management and the second in OSSIAM, a fi rm specializing in strategic ETFs (Exchange Traded Funds). Natixis Global Asset Management also acquired a 25% stake in IDCF AM, a leading asset manager in India.
Pierre Servant, CEO of Natixis Global Asset Management, was designated “CEO of the Year” by Global Investor magazine.
(1) Cerrulli Rankings - July 2010 based on AuM at end-2009.
The European asset management business had €318.9 billion in assets under management at end-2010, versus €320.6 billion at year-end 2009.
− Natixis Asset Management (€299.8 billion): money market, fi xed income, equities and diversifi ed, alternative and structured management, and SRI funds.
− Natixis Multimanager (€2.4 billion): funds of funds management, a range of absolute return funds.
− AEW Europe and NAMI AEW Europe (€16.7 billion): management of real estate assets, real estate investment trusts (SCPIs) and real estate mutual funds (OPCIs).
Natixis Global Asset Management operates in Europe through Natixis Asset Management and its multi-management subsidiary, Natixis Multimanager. The consolidation of the distribution entity dedicated to the Caisse d’Epargne and Banque Populaire networks in 2010 enhanced the company’s role in the development of investment solutions on the two networks.
Natixis Asset Management’s assets under management totaled €299.8 billion at end-2010 versus €301.5 billion at end2009. Net infl ows were affected by substantial redemptions of money-market mutual funds, primarily through the networks. Fixed-income infl ows, including life insurance products sold to customers in the Groupe BPCE network, improved over the year.
New funds were launched notably by Loomis Sayles and Harris Associates across various asset classes in response to the shifting environment in the US and abroad. A media campaign was launched under the slogan “Better Thinking. Together”. This campaign highlighted the diversity and strength of the investment solutions offered by the group’s US asset managers, including the “alternative” approach developed by asset management companies such as Gateway Investment Advisers and Alpha Simplex.
− Loomis Sayles ($151.6 billion): equities (growth, core, value) and bonds (core to high yield).
− Aurora Investment Management (€10.4 billion): of funds hedge funds management.
− Natixis Caspian Capital Management (51% equity stake, $0.5 billion): alternative and money market.
LIFE INSURANCE: SECOND YEAR OF SIGNIFICANT GROWTH FOR THE SIXTH-RANKED BANKASSURER IN FRANCE
Natixis Assurances Partenaires, the subsidiary dedicated to wealth management advisors and to private banking, overhauled its product offer in order to expand its distribution channels. More specifi cally, this overhaul was geared to capitalizing on growth possibilities within the Investment Solutions division (via Banque Privée 1818 and the pending acquisition of Sélection R), and on the potential harboured by various mid-sized external partners.
PROPERTY AND CASUALTY INSURANCE CONTINUED TO GROW, MAKING NATIXIS THE FOURTH-RANKED BANCASSURER IN FRANCE
Against a highly competitive backdrop, due in large part to the emergence of online products, property and casualty insurance business was again marked by substantial weather events. However, the ensuing impact was signifi cantly attenuated by various reinsurance treaties. Across the market, insurers increased rates to account for the fundamental escalation in claims, thus leading to a 1.5% increase in revenue in 2010. Natixis recorded strong growth in business. The number of policies sold rose 4% to exceed 1.2 million at end-2010. All told, earned premiums in the property and casualty business rose 6% to €214 million, with a stronger performance in the “professionals” segment, which improved by 9%.
Private bankers, portfolio managers, product specialists, wealth management experts and fi nancial engineers are all high-level professionals with multi-disciplinary skills that allow them to handle very complex issues. In terms of asset management, Natixis’ subsidiary 1818 Gestion was ranked 18th out of 260 companies in the Alpha League Table/Euro performanceEDHEC ranking in 2010.
As the multi-product and multi-service platform for Independent Wealth Management Advisers (IWMAs), 1818 Partenaires (a subsidiary of Banque Privée 1818) recorded strong growth in 2010, with net infl ows of nearly €400 million. This success was achieved by focusing on the market’s most active independent wealth management fi rms.
During 2010, private banking teams in charge of direct customers developed synergies with Natixis coverage teams, within the framework of cross-selling initiatives. These efforts increased their presence with the business owners and senior executives representing the core target markets in France and abroad. To meet the specifi c expectations of this demanding customer segment, private banking’s experts constantly seek to provide clients with innovative and customized solutions. Using this momentum and drawing on the team’s specialist fi nancial engineering expertise, Banque Privée 1818 was offi cially recognized for the fi rst time as “senior banker” in an LBO. It also set up fi ve dedicated investment funds managed by 1818 Gestion that were entirely tailored to the needs of very high net-worth clients.
Through its historic private equity specialist, Natixis Private Equity, Natixis has been a key private equity services provider focusing on SMEs and covering the various segments of venture capital, expansion capital and funds of funds both in France and abroad. Underpinned by this strength and experience, Natixis decided to restructure this core business and focus on private equity structures capable of meeting the needs of external investors. This shift in focus towards external investors involves making this business a new asset class and attaching it to the Investment Solutions division.
● Natixis is positioned in the real economy via a range of financing, growth and sustainable support solutions provided to more than 500 companies, most of which are in France and primarily innovative in nature.
This 20-person company manages €500 million via 19 funds, mostly innovation mutual funds (FCPIs) and venture capital funds (FCPRs) targeting the general public, marketed primarily through the Banques Populaires network. It fi nances the entire innovation chain, from seed fi nancing to last stage. It holds about 60 equity stakes solely in the IT, communications and life sciences sectors. With 13 years’ experience, Seventure ranks second in France’s venture capital market (7% market share), and among the leaders in Europe. Seventure’s strong reputation means it receives 1,200 projects for review each year, of which it fi nances less than 1%. This selective approach is required in order to offer high-performance products in a fi eld that demands a high degree of technical expertise.
1PRESENTATION OF NATIXIS Natixis’ business lines capital amounts ranging from €1 million to €30 million in the form of tailored solutions for business expansion, buyouts and startups, or capital restructuring solutions for business proprietors. Naxicap uses two types of structures: local investment funds (FIPs, €80 million) and the venture capital company, Banque Populaire Développement, which has grown by leveraging its close relationship with the Banques Populaires network.
● Caspian: Created in 2008 and based in New York, Natixis Caspian Private Equity comprises six professionals advised by a Strategic Committee featuring several renowned private equity professionals. With €540 million in capital under management, Natixis Caspian Private Equity provides investment opportunities through two funds: NPEC 1A, which mainly invests in buyout funds and mostly on the small- to mid-market, and NPEC 1B, which makes minority investments in SMEs alongside funds in which Natixis Caspian Private Equity is present.
Natixis’ Specialized Financial Services comprises two business lines and eight activities (Specialized Financing and Financial Services) with similar industry and distribution strategies.
These activities form a core part of the development of the commercial banking business.
❚ FACTORED TURNOVER OVER THE PAST 5 YEARS (IN BILLIONS OF EUROS)
The platform offers a highly diverse range of products tailored to various markets and businesses: individuals (joint-and-several mortgage guarantees), professionals (business start-ups/ transfers, equipment, commercial property), social economy and social housing, public-private partnerships, real estate companies and professionals (builders, developers, realtors, administrators).
Compagnie Européenne de Garanties et Cautions also guarantees more than 25,000 businesses in order to help them comply with regulatory requirements (payment guarantees), fi scal requirements (excise taxes and customs duties) or contractual obligations.
Lastly, the company has made a fi rm commitment to having its internal model approved by France’s prudential supervisory authority, the ACP (Prudential Supervision Authority), in order to meet European Solvency 2 requirements for insurance companies.
In 2010, Natixis enhanced its positions on the real-estate leasing market by acquiring Cicobail and on the equipment fi nancing market through the acquisition of BPCE IOM’s specialized international subsidiaries.
After shrinking by 25% in 2009, the equipment leasing market remained slack in 2010. However, although French businesses invested less in equipment in 2010 than in 2008, Natixis held new fi nancing business steady at €1.28 billion during the year (+1%).
Natixis Financement develops revolving credit products and manages personal repayment loans for Group banking networks.
Outstanding loans climbed 17% year-on-year to €10 billion, thus cementing the company’s No. 3 spot on the French market.
To cope with expanding business, a new Client Relations Center was opened in Bordeaux in 2010, in addition to the existing centers in Nantes, Marseilles and Reims.
❚ CHANGE IN OUTSTANDING CARRIED OR MANAGED LOANS (IN BILLIONS OF EUROS)
Operating through the Natixis Cofi ciné subsidiary and holding market-leading positions in France and Europe, Natixis fi nances the full range of audiovisual professions.
In 2010, Natixis Cofi ciné issued 484 new loans, totaling €369 million. Total new lending amounted to €506 million, up 10% year-on-year. This brought the portfolio to €578 million as of December 31, 2010.
In 2010, Natixis consolidated its leading position in employee savings account-keeping in France, with 3 million employees accounts under management, i.e. market share of 25.2% (source: AFG, June 30, 2010).
The collective pension plan (PERCO) offer posted robust growth in the corporate and institutional client segments, with accounts under management topping the €1 billion mark in 2010.
The virtual services offer was broadened to include new online simulation tools, an on-line employee savings account (with a virtual adviser) and the launch of e-statements for real-time information on employee savings accounts.
Special payment vouchers did brisk business as well, both in terms of Chèques de table® (meal vouchers) and CESU Domalin® (employment services vouchers), these being provided mainly to mid caps and local authorities. The total volume of vouchers issued increased by almost 9%, for an equivalent value of over €588 million at December 31, 2010. A new partnership was launched with Orange geared to providing a combined offering of remote management and prepaid CESUs to the French départements.
Titres Cadeaux, a joint-venture with La Banque Postale, recorded signifi cant annual growth, with almost 85 million “CA DO Chèque” gift vouchers issued in 2010 and an 11% increase in distributed vouchers. The range also added its fi rst multibrand “luxury” gift voucher under the “So Chic” name.
❚ CHANGE IN THE NUMBER OF CORPORATE CLIENTS WITH COLLECTIVE RETIREMENT PLANS
Natixis is now the No. 3 payments operator in France, with market share of over 20% in the exchange systems and electronic banking fi eld. In 2010, Natixis processed over 6 billion mass transactions in the Core system. On the international market, Natixis is one of the top 10 European players, with plans to develop industry partnerships. To this end, Natixis is continuing to build a joint electronic payment platform with BNP Paribas through the Partecis joint venture.
Its service offer is customizable and à la carte: clients can choose from the secure provision of offi ce service processing systems to all-inclusive back offi ce services (order routing, transaction accounting, client reporting, securities custody, etc.).
Overall, some 1.4 million accounts were migrated to the target platform, bringing the total number of securities accounts managed by Natixis to 4.5 million, up 18% from 2009.
In addition, Natixis held 15% of CACEIS’ capital after the sale of a 35% stake to Crédit Agricole in 2009.
More than one French person in two is a customer of a Groupe BPCE bank.
Created by and for entrepreneurs, the Banque Populaire banks are a group of banks operating closely with businesses. As France’s 4th largest retail banking network, they include 18 regional Banque Populaire banks, the Crédit Coopératif (supporting social and solidarity-based economy), and CASDEN Banque Populaire (a bank for staff of the French Ministry of National Education, Research, and Culture). Under the group’s strategic plan, the Banque Populaire banks have established ambitious targets based on ongoing customer support and the acquisition of a profi table market share.
As cooperative banks, the Banques Populaires are 80%-owned by 3.8 million cooperative shareholders. The remaining 20% is owned by Natixis in the form of cooperative investment certifi cates (CICs). In order to represent and develop the interests of the Banque Populaire banks and their shareholders and to promote the regional and cooperative model of the Banque Populaire banks, the Fédération Nationale des Banques
Populaires (FNBP) was created in 2009 at the initiative of Banque Populaire’s executive management.
In 2010, the Banque Populaire banks continued to grow. Their net revenues totaled €6.2 billion, their gross operating income was €2.3 billion, and their net income (group share) was €1.121 billion.
The Banque Populaire banks have made successful efforts to increase the number of products and services provided to their active customers and to acquire new clients, particularly among youths, young professionals, and public employees. The number of retail customers has grown by 40,000.
Attractive offers for young customers 21.5% of the Banques Populaires’ retail customers are under the age of 28, and 155,000 of them are new since 2010.
In 2008, the network became the fi rst to offer the “Prêt étudiant garanti par l’État” (student loan guaranteed by the French government). He also offers security deposits and loans not requiring a parent co-signer to LMDE (national student mutual group) subscribers in order to help fi nance their studies or rent an apartment.
Designed for young professionals, the Avance Premiers Salaires helps customers under 28 get off to a good start by offering them loans for up to two months of their salary, repayable over a period of 24 months. Launched in 2009, this loan became available in 2010.
The Banque Populaire banks are also partners of the Associations pour le Crédit et l’Epargne des Fonctionnaires (ACEF), created in order to provide savings and loan products to public workers under preferential terms. In 2010, business canvassing initiatives were geared mainly toward medical schools, with nearly 200 events held throughout France, and its fi rst appearance at the Salon National Infi rmier nursing tradeshow in Paris.
* TSMT: “Tout sous le même Toit” (“All under the same roof”), offered by CASDEN and BP since 1978.
New personal loans were up 33%, with new mortgages rising 44% and consumer fi nancing falling slightly. As of the end of 2010, these outstandings totaled €73.2 billion and €7.1 billion respectively.
In addition, lending activity generated €331 million in fi nancing during 2010. Revolving credit outstandings amounted to €399 million at the end of 2010, including €85 million from Facélia, for a portfolio of 452,000 accounts.
Customer deposits were up 6.9%. Savings account outstandings, term deposits, and regulated home savings plans also increased signifi cantly.
Life insurance assets were up by 7.7%, totaling €40.6 billion. Non-money-market UCITS were stable, reaching €6.5 billion at the end of 2010. Personal Equity Plan assets totaled €3.74 billion.
Three new Fructi Sécurité guaranteed funds were launched. Subscriptions totaled €400 million.
Banque Populaire develops a wide range of services, including income tax and wealth-tax-shelter products, a selection of investments in the French Overseas Departments and Territories, complex structured fi nance products (particularly available in life insurance), advisory service on the sale of businesses, and more broadly, assistance of customers as they build up, manage, and pass on their wealth.
One of the objectives of private banking is to develop a dual banking relationship (professional and family) with business owners, and best practices are followed within the Banque Populaire banks throughout the year.
The number of wealth management and high net worth customers increased by 10.2%. Infl ows continued at a sustained pace. Up 9.2%, assets under management totaled €42.4 billion at the end of 2010.
Highly active in all operations surrounding business startups and transfers, the Banque Populaire banks reaffi rm their operations through established professionals, particularly in savings, provident insurance, electronic payment systems, and cash fl ow solutions.
Sesam-Vitale reader terminals and credit card processing machines are very popular. The same is true for credit card payment processing fees.
With a stake in the national agricultural support initiative, they distribute stimulus loans to farmers who have been adversely affected by the crisis within their business or by climatic events. More than €90 million have been issued as part of this program.
Farm tourism activities and direct sales represent a growing share of income for many farmers. In the fi rst quarter of 2011, the Direct&Bon Internet portal will allow farmers to create e-commerce online stores.
In 2010, the Banque Populaire banks deployed theirs online market guarantee service, developed with the subsidiary CEGI, and with the support of Natixis Paiements, they launched Rémunération, an innovative prepaid card used to pay employees.
Much focus has been placed on implementing the EBICS and Swiftnet solutions to replace the ETEBAC protocols used by 45,000 business customers for payments and data exchanges. This is an opportunity to offer more integrated and more secure solutions with Click & Trust and CertEurope. It is also an opportunity to undertake projects to streamline payment processing and to adopt the new SEPA resources used throughout the euro zone.
In addition, the partnership established with the Moroccan Banque Populaire banks facilitates the operations of small- and medium-sized businesses in either country seeking to expand in France or Morocco.
Starting with Crédit Coopératif, which is dedicated to the social economy sector, the Banque Populaire banks serve more than 175,000 institutions and associations.
For nearly two centuries, the Caisses d’Epargne banks have combined confi dence, solidarity and modernity. As the second largest retail banking network in France, they are among the leading banks in their region. The Caisses d’Epargne serve retail customers, private banking customers and professionals, managing their savings and providing fi nancial support for their plans. Partners of the decision-makers of France’s regions, they are the leaders in public-sector fi nancing, public housing and the social economy. In 2010, the banks’ net revenues totaled €6.8 billion, their gross operating income amounted to €2.3 billion and their net income (group share) amounted to €1.3 billion.
The 17 Caisses d’Epargne are regional cooperative banks. They are 80% investments owned by 4.3 million cooperative shareholders through local investments companies (LSC). Natixis owns the remaining 20% in the form of cooperative investment certifi cates.
Caisse d’Epargne has based its growth on its high quality relationships, as well as improving its relationships with its customers. The group’s strategic plan structures the retail bank’s initiatives and actions around this dual objective. The challenges: to enhance business relationships and to retain and satisfy customers in all markets.
In 2010, Caisse d’Epargne continued to innovate in its service offering and relationship methods. In order to take into account its customers’ aspirations, the bank offers them personalized advice and a choice of services to meet their goals.
In terms of customer relationships, Caisse d’Epargne wants to enable each customer to manage his or her transactions or to contact the bank using any chosen method: in the branch, or via telephone, Internet or mobile banking. The customer may even choose to have a personalized advisor for a face-to-face meeting at in the branch or 100% remotely. This arrangement takes the form of the monbanquierenligne.fr project rolled out at the end of December in fi ve Caisses d’Epargne. All the banks will be operational in June 2011.
In this context, new dedicated offerings have been developed that meet their principal needs: managing their account on a daily basis with the Futéo package (essential services for €1 per month) or fi nancing their studies with student loans, among others. They can pay for housing with a special cotenancy offering and purchase multi-risk renter’s insurance at very reasonable rates. Lastly, to get from one place to another, Caisse d’Epargne offers solutions to fi nance a vehicle, like Lizauto, a leasing product with a purchase option starting at €99 per month.
This program has met with great success among young adults, particularly with 103,500 Futéo packages sold.
Caisse d’Epargne strengthened its positions in consumer fi nancing. New loan production reached €6 billion, an 8.1% increase compared to 2009.
New mortgage loans exceeded €22.2 billion, representing growth of 70% versus 2009. With close to €85.6 billion in loan outstandings managed at year-end 2010, Caisse d’Epargne’s market share continued to grow, reaching 10.26%.
Stock market volatility and the rise in regulated rates in the second half of the year slowed outfl ows from Livret A savings accounts and benefi ted the Livrets Grands Format savings products and PEL home savings plans. These two products also posted very good performance, with €2.1 billion in infl ows over the year.
Caisse d’Epargne’s Private Banking business serves close to 305,000 customers and relies on 550 private banking account executives. It posted strong growth in 2010 with a net surplus of €3.4 billion, a 46% increase over 2009. A new range of UCITS was established during the year to better meet demand.
The year saw a noticeable turnaround in business on the professional market, fuelled by relationships formed with new customers creating, developing or taking over a business.
Close to 1,200 specialized account managers are dedicated to serving small business customers’ needs. New training programs as well as data input and management tools were implemented in 2010 to support the ambitious objectives of the teams.
Net reverses topped €427 million threshold in 2010, a 9.1% increase.
From creating to transferring business, and all the business development needs in between, small business customers have a full range of simple and personalized products available to fi nance their needs. Professional solutions include equipment loans, fi nancial leasing, long-term leasing or factoring. On a daily basis, Caisse d’Epargne provides support to small business customers to facilite deposits and cash management.
Caisse d’Epargne offers corporate customers comprehensive, customized solutions: payment processing management and operating cycle optimization, cash management, investment fi nancing, risk-hedging fi nancial instruments, international transactions, employee benefi ts planning, acquisitions and disposals of businesses. 300 account managers are dedicated to 30,000 corporate customers.
Payment processing grew by 36% to exceed €58 billion, while loan origination rose by 62% with €3.3 billion in new loans. Net revenues was 27.7% higher and risks were managed.
By placing the customer at the center of its structure, regional development banking, in synergy with retail banking, is creating a 360° approach for company directors in order to develop a dual business relationship focusing on both their professional and private needs.
One in three people with social protection is a client of Caisse d’Epargne, or around 280,000 people at the end of 2010. 240 employees are dedicated to this customer base. Caisse d’Epargne provides protected people, their families and their trustees with an offering designed for them and an Internetbased management service, Webprotexion, which facilitates the task of legal representatives. Caisse d’Epargne provides information and support to them on a daily basis. Savings managed for these customers rose by 6.2% to €5.8 billion at year-end 2010.
Caisse d’Epargne simplifi es the management of the regional public sector on a daily basis by offering automatic cash management, remote transmission, payment for services by Internet (canteens, school transport, etc.), payment for services by CESU payment vouchers (aid for the elderly and the disabled, etc.), dedicated purchase cards, among other products. In 2010, remote banking services were supplemented by the addition of Direct Ecureuil Internet Secteur Public, which provides the public sector with an analytical tool and an overall view at any time of its outstanding debt with Caisse d’Epargne. The offering was expanded with new fi nancing products and approval to sell energy savings certifi cates.
(1) National Federation of Private Health and Social Organizations (Union nationale interfédérale des oeuvres et organismes privés sanitaires and sociaux).
Caisse d’Epargne is the leading private bank in the social housing sector. It fi nances more than one-third of the private debt of social housing enterprises and public housing offi ces, which fi nance their construction projects largely through Livret A savings deposits.
Located in the heart of France’s regions, Caisse d’Epargne participates in their development and offers local public companies practical knowledge of the economic challenges faced by the local authorities and enterprises operating in their areas.
Total infl ows amounted to €6.5 billion at year-end 2010, €3.8 billion of which were invested in Livret A savings plans.
Organizations that are part of the Habitat en Région network manage 154,000 social housing rental units and benefi t from the efforts and daily commitment of 2,200 employees.
Habitat en Région will enable social housing enterprises to share their expertise, innovative ideas and best practices. It will be a point of contact for local authorities in the regions, and for public authorities at the national level, and will enable social housing operators to make commitments collectively.
Habitat en Région is an open, scalable network. Operators that share its common vision of the challenges of housing and development in the region, but in which Caisse d’Epargne is not the majority shareholder, can join the network.
The main operators of Habitat en Région are Erilia, Logirem and SIA.
● The Logirem Group manages more than 28,500 housing units and hostels in the Provence-Alpes-Côte d’Azur, Corsica and Languedoc-Roussillon regions with its affiliates Un Toit pour Tous and Samopor for hostels and residences.
● The SIA Group operates in the Nord Pas-de-Calais, Picardie and Ile-de-France regions with Viléal Habitat. SIA Habitat and its affiliate Escaut Habitat, specializing in providing firsttime home ownership, work in partnership on projects that combine rental and home ownership opportunities. SIA Habitat’s 27,500 housing units are found throughout 175 town councils in the North and Pas-de-Calais regions. The affiliate LTO Habitat manages another 9,000 housing units.
In the event that approval is refused and the vendor does not abandon the proposed sale, the Banque Populaire concerned must repurchase the said CCIs (with the consent of the vendor) or must arrange for them to be purchased by a third party, at a selling price that takes account of the proportion of the net assets to which the Banques Populaires CCIs entitle the holder, and which complies with the valuation methods used to value Banques Populaires CCIs at the time of their issue. In the absence of agreement between the vendor and the relevant Banque Populaire, the purchase price of Banques Populaires CCIs shall be determined by an expert.
In addition, in the event that legislative or regulatory changes or changes in the assessment of the relevant regulators or of the Statutory Auditors of Natixis should make it necessary to increase Natixis’ infl uence or to alter it signifi cantly in order to enable Natixis to continue to consolidate Banques Populaires CCIs, Natixis must submit the precise terms of the changes made necessary to Banques Populaires in order for them to be able to determine whether they should incorporate these new aspects of infl uence into the existing arrangements or whether they should decide, on receiving prior authorization from the Board of Directors of BPCE, to exercise their right to buy back the CCIs that they have issued.
DESCRIPTION OF THE MAIN PROVISIONS OF THE CAISSE D’EPARGNE CCI MEMORANDUM OF UNDERSTANDING
The main provisions of the Caisse d’Epargne CCI Memorandum of Understanding are as follows: Restrictions on the free transferability of Caisse d’Epargne CCIs
The Caisse d’Epargne CCI Memorandum of Understanding stipulates that the transfer of all or part of Caisse d’Epargne CCIs by Natixis shall be subject to the prior approval of BPCE.
In addition, without prejudice to the benefi t of paragraph (iii), in the event of a legislative amendment conferring a voting right to the holders of CCIs, Natixis undertakes to act in concert with BPCE and the Caisse d’Epargne, to make the necessary adjustments while either maintaining the rights and characteristics of the securities issued or replacing Caisse d’Epargne CCIs with securities possessing the same characteristics, and particularly without voting rights and with Natixis having the ability to consolidate the results of Caisse d’Epargne in proportion to its investment in the capital.
In the event that the right to buy back Caisse d’Epargne CCIs is exercised under case (iii) above, the right of the Caisse d’Epargne concerned will have priority over that of BPCE.
The buyback value of Caisse d’Epargne CCIs will be calculated using the method of valuation used when they were transferred to Natixis and must take account of the proportion of the net assets to which the CCIs entitle the holder. If Natixis and BPCE or the Caisse d’Epargne concerned cannot reach agreement, this buyback value will be determined by an expert.
Upon expiry of this period, either of the parties may terminate, in whole or in part, the existing commercial and industry relationships described above, subject to one year’s prior notice and, if necessary, compliance with the specifi c contractual provisions governing these relationships.
Natixis is required to maintain its 20% stake in the capital of each Caisse d’Epargne
The memorandum of understanding relating to cooperative investment certifi cates issued by Caisse d’Epargne requires Natixis to maintain its stake in the event of a change in the capital of the Caisse d’Epargne.
In the event of a capital reduction through the redemption of shares, the Caisse d’Epargne may redeem, with a view to their cancellation, the number of CCIs required to maintain the stake, without the prior approval of Natixis.
In 2010, maintaining the 20% stake in the capital of each of the Caisses d’Epargne represented an investment of €230,009,540.00 for Natixis.
In France, Coface manages guarantees backing French exports, on behalf of the French State. These guarantees include prospecting insurance, export risk insurance, credit insurance for exports fi nanced over the medium and long terms, foreign exchange insurance and investment guarantees. These various guarantees cover risks that are not insured by the private sector. The state, which pays Coface for these management services under the terms of a fi nancial agreement, collects the premiums and pays out compensation to policyholders, where applicable.
No. 3 worldwide in credit insurance (source: Icisa – June 2010).
In the wake of historic losses in the credit insurance business and negative net income in 2009, Coface returned to growth and profi tability in 2010. Revenues reached €1,622 million, up 3.8% (+1.7% like-for-like) while the claims ratio was brought down from 98% at December 31, 2009 to 53% at December 31, 2010 and operating expenses were contained.
Credit insurance (excluding public procedures) was boosted by a substantial improvement in claims and revenue grew 4.7% (1.7% like-for-like) over the year (4.9% and 1.7% including public procedures, respectively).
The Factoring business line recorded double-digit growth of 18.6%, while maintaining good cost control.
TRANSPARENCY AND DIALOGUE BETWEEN COFACE AND CLIENTS REINFORCED DURING THE YEAR
As the credit crisis drew to an end in 2010, Coface maintained its policy of supporting its clients by strengthening transparency and dialogue.
● Furthermore, Coface offers its 30,000 credit insurance clients free, permanent access to the @rating Scores of their own clients on Cofanet, a dedicated web application (@ rating scores evaluate the probability that these clients will default within the year). Coface’s clients can therefore make adjustments to their sales and credit policies based on the actual creditworthiness of their own clients, and can better communicate with Coface if they do not agree with a given risk assessment.
● Coface provides its clients with information on the “weighted outstanding guarantees” of their risk portfolio. The clients of its clients are ranked by risk category depending on their score. The higher the risk, the higher the weighting. Each client can therefore access the weighted outstanding guarantees of its portfolio on the Cofanet site, and thus benefi t from a new credit management tool.
Since June 30, 2009, a portion of GAPC portfolios has been covered by a guarantee from BPCE, the mechanism, cost and accounting & prudential consequences of which are also described below.
● Decision on valuation (transfer to banking book) of segregated assets.
● Valuation of assets by external advisers using base case and stress case scenarios.
Overall, GAPC’s 2010 Net Revenues amounted to -€145 million after factoring in the Guarantee applicable in the second half.
On the credit assets, the change in the notional amount net of provisions in 2010 stemmed from: ● asset disposals and amortization; ● portfolio restructuring; ● the positive impact of commutations with the monoline insurers; In addition, in the case of non-credit assets, the change in 2010 in the Value at Risk (“VaR”) stemmed from: ● the disposal of all market risk in the complex credit derivatives portfolios; ● the closing of the convertibles book and the ongoing disposal of complex equity derivative positions; ● the ongoing hedging of complex interest rate derivatives; ● the liquidation of fund-linked structured products.
This study concluded that the valuation in the Natixis fi nancial statements of these assets refl ected the losses at completion expected in the event of a stress scenario. Indeed, the external valuation carried out amounted to a total portfolio value of €36.6 billion. The assumptions made were downgraded with respect to certain digital assets at the request of Natixis management, trimming €2 billion off this value (€34.6 billion), ending up very close to the value at which these assets are carried in the Natixis accounts (€34.4 billion).
The general mechanism behind the Guarantee is based on the establishment: (i) of two Total Return Swap agreements (“TRS”), one in dollars and the other in euros covering 85% of the net value of the assets recognized in the trading portfolio and risks on counterparties not providing collateral. The purpose of these TRS is to transfer 85% of the gains or losses of the accounting units in which the assets are recognized at their fair value through profit or loss. On top of these two TRS, Natixis purchased an option from BPCE (the “Option”) allowing it, should it be exercised, to recover, in 10 years’ time, the capitalized net performance of the portfolios covered by the TRS and to terminate the TRS; (ii) a financial guarantee covering 85% of the nominal value of the assets recognized pursuant to IFRS as Loans and Receivables (“L&R”) and as available-for-sale assets (“AFS”), as determined on the date of the coming into force of the guarantee (namely June 30, 2009), less any amortization expensed prior to June 30, 2009. Pursuant to the terms of this financial guarantee, in the event of nonpayment confirmed on the scheduled contractual payment date of sums due in respect of any of the assets in the guaranteed portfolio, Natixis will be paid by BPCE from the first euro up to 85% of the amount due. The payment will be made in the currency in which the defaulting asset is denominated. The expiry date of the guarantee enjoyed by Natixis is that of the asset in the guaranteed portfolio with the longest maturity – currently April 28, 2099 – plus nine months (it being noted that this date may be brought forward to the date of termination of the guarantee in the event of a change in control at Natixis within the meaning of Article L.233-3 of the French Commercial Code). The expiry date of the financial guarantee is the date from which Natixis is no longer required to pay over to BPCE the sums recovered on assets in the guaranteed portfolio having defaulted. It post-dates the expiry date of the guarantee by 15 years.
On the other hand, Natixis benefi ts from a substantial prudential impact, representing a reduction in its risk weighted assets and its regulatory deductions, resulting in an increase in its Core Tier 1 ratio at December 31, 2010.
The implementation of the Guarantee was accompanied by a change in governance at the end of summer 2009 resulting in: The establishment of a CSG (Comité de Suivi de la Garantie – Guarantee Monitoring Committee), responsible solely for the GAPC scope covered by the Guarantee: ● the members of the CSG are the Executive Chairman of BPCE and the Chief Executive Officer of Natixis. Heads of finance, risk, legal affairs and strategy of BPCE and Natixis are systematically invited to the meetings; ● the CSG meets every quarter and can also be convened at will when circumstances so require; ● in order to be in a position to properly carry out its responsibilities, the CSG receives regular reports of necessary information and follow-up on issues dealt with by other Committees connected with the Guarantee or the guaranteed assets; ● the CSG is the decision-making body for all issues relating to the Guarantee. It is notably responsible for monitoring the proper performance of the Guarantee and in this respect may intervene in any decision, or any plans, of the CGAC (Comité de Gestion des Actifs Cantonnés – Segregated Assets Management Committee), likely to have an impact on the Guarantee mechanism and/or the obligations of Natixis or of BPCE.
● Where decisions represent for BPCE a financial impact or specific risks as a result of the safeguard mechanism, BPCE’s representatives may request that the CSG look at the issue prior to the decision.
● Natixis Risk Department, Natixis Finance Department and BPCE’s representatives are each completely free to add items felt relevant to the CGAC agenda.
Stock market indexes CAC 40, SBF 80, SBF 120, SBF 250 and Euronext 100 1.6.2 BREAKDOWN OF SHARE CAPITAL AT DECEMBER 31, 2010
The average daily volume of Natixis shares traded on the market amounted to 6.3 million in 2010 versus 9.6 million in 2009.
The Individual Shareholder Relations team held 17 meetings in 2010 both in Paris and the rest of France to meet with members of the Shareholders’ Club.
● Nearly 450 individual shareholders attended the General Shareholders’ Meeting held on May 27, 2010 at the Carrousel du Louvre. Once again this year, the Individual Shareholder Relations team hosted members of the Shareholders’ Club as well as prospective members, at its dedicated stands.
2.2 STRUCTURE OF THE CORPORATE AND EXECUTIVE BODIES 43 2.2.1 Board of Directors as at March 1, 2011 43 2.2.2 Executive Management as of March 1, 2011 45 2.2.3 Executive Management Board and Executive Committee 45 2.2.4 List of corporate offi cers’ positions 46 2.3 ROLE AND OPERATING RULES OF THE CORPORATE BODIES 73 2.3.1 Board of directors 73 2.3.2 Specialized committees: set up by the Board of Directors 77 2.3.3 Executive management 79 2.3.4 Shareholder meetings 81 2.4 POLICIES AND RULES FOR DETERMINING COMPENSATION AND BENEFITS OF ALL KINDS PAID TO MEMBERS OF THE CORPORATE BODIES 83 2.4.1 Compensation and benefi ts of all kinds for board members 83 2.4.2 Compensation and benefi ts of all kinds for the CEO 84 2.5 POTENTIAL CONFLICTS OF INTEREST 92 2.5.1 Competence and integrity of directors 92 2.5.2 Contracts binding the company and the directors and the executive management 92 2.5.3 Confl ict of interest 92 2.6 CHAIRMAN’S REPORT ON THE INTERNAL CONTROL PROCEDURES 93 2.6.1 Internal control mechanisms 93 2.6.2 General organization 94 2.6.3 Control system participants 94 2.6.4 Risk monitoring and Control 100 2.6.5 Internal control procedures relating to accounting and fi nancial information 105 2.7 STATUTORY AUDITOR’S REPORT ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS 109
EU law, the Corporate Governance Code to which reference has voluntarily been made when preparing this report is the Corporate Governance Code for listed companies published in December 2008 by the French association of private sector companies Association Française des Entreprises Privées – AFEP and the French business confederation Mouvement des Entreprises de France – MEDEF (the “AFEP-MEDEF code”). The AFEP-MEDEF code is available for consultation at the Company’s head office and on the Natixis website.
2CORPORATE GOVERNANCE Structure of the corporate and executive bodies 2.2 Structure of the corporate and executive bodies (a)
Mr. François Pérol Date of birth: 11.06.1963 Natixis shares held: 60,000
Member, Audit Committee First appointed: Board Meeting of 08.25.2009 Term expires: 2015 AGM (a)
Mr. Vincent Bolloré* Date of birth: 04/01/52 Natixis shares held: 1,000
Chairman & CEO, Bolloré Group Tour Bolloré 31-32, quai de Dion-Bouton 92800 Puteaux
Director First appointed: Co-opted by the Board Meeting of 02.22.2011 Term expires: 2015 AGM (b)
Chief Executive Offi cer of Banque Populaire Rives de Paris, Member of BPCE Supervisory Board Immeuble Cirius 67 -78 avenue de France 75204 Paris cedex 13
Ms. Laurence Debroux* Date of birth: 07.25.1969 Natixis shares held: 1,000
Chief Financial and Administrative Offi cer and Member of the Executive Board, JC Decaux S.A. Zone Industrielle Saint Appoline 78378 Plaisir Cedex * Independent director.
Director First appointed: Co-opted by the Board Meeting of 08.05.2010 Term expires: 2015 AGM (b)
Member, Compensation Committee First appointed: AGM of 04.30.2009 Term expires: 2015 AGM (b)
Chairman, Executive Board, Caisse d’Epargne Bretagne – Pays de Loire Member of BPCE Supervisory Board 8 rue de Bréa – BP 835 44000 Nantes
Chairman and Chief Executive Offi cer of EDF Chairman of Veolia Environnement Board 38 avenue Kléber 75016 Paris
Director First appointed: Co-opted by the Board Meeting of 05.27.2010 Term expires: 2015 AGM (b)
❚ MEMBERS OF THE SENIOR MANAGEMENT COMMITTEE (CDG) AS OF MARCH 1, 2011
2 CORPORATE GOVERNANCE Structure of the corporate and executive bodies 2.2.4 LIST OF CORPORATE OFFICERS’ POSITIONS
Mr. Vincent Bolloré, aged 58, manages and controls the Bolloré group, which has a workforce of more than 30,000 people and holds a leading position in the industry, transport and logistics, energy distribution and media sectors
FRANCE Member of the Board of: Natixis Chief Executive Officer of: Bolloré, Bolloré Participations Chairman of Board of Directors of: Havas, Financière de l’Odet Chairman of: VEPB Chief Executive Officer of: Sofi bol, Omnium Bolloré, Financière V Member of the Board of: Batscap, Bolloré, Bolloré Participations, Direct 8, Direct Soir, Financière Moncey, Financière de l’Odet, Financière V, Havas, Havas Média France, Matin Plus, Omnium Bolloré, Sofi bol, VEPB Permanent representative for Bolloré Participations, member of the Board of: la Cie des Tramways de Rouen, la Société Anonyme Forestière et Agricole (Safa), la Société des Chemins de Fer et Tramways du Var et du Gard, la Société Industrielle et Financière de l’Artois, la Société Bordelaise Africaine, IER (up to 04.16.2010) Permanent representative for Bolloré Participations, Member of the Supervisory Board of: la Compagnie du Cambodge Permanent representative for Bolloré, Member of the Board of Directors of: Bolloré Média, Fred et Farid
FRANCE Member of the Supervisory Board of: Natixis Chief Executive Officer of: Bolloré, Bolloré Participations Chairman of the Board of Directors of: Financière de l’Odet, Direct 8 (previously known as Bolloré Média), Matin Plus (previously known as Compagnie de Bangor), Direct Soir, Havas Media France, Havas; Chairman of: Bolloré Production Chief Executive Officer of: Omnium Bolloré, Financière V, Sofi bol Member of the Board of: BatScap, Bolloré, Bolloré Participations, Direct 8 (previously known as Bolloré Média), Compagnie des Glénans, Matin Plus (previously known as Compagnie de Bangor), Direct Soir, Financière Moncey, Financière de l’Odet, Financière V, Omnium Bolloré, Sofi bol, Havas Media France, Havas Member of the Supervisory Boards of: Vallourec (until 05.03.2007) Permanent representative for Bolloré Participations member of the Board of: la Société Anonyme Forestière and Agricole (Safa), la Société des Chemins de Fer et Tramways du Var et du Gard, la Société Industrielle et Financière de l’Artois, la Société Bordelaise Africaine, la Compagnie des Tramways de Rouen, IER Permanent representative for Bolloré Participations to the Supervisory Board of: la Compagnie du Cambodge Permanent representative for Bolloré to the Board of: F.F.L Paris Permanent representative for Havas to the Board of: Médiamétrie
FRANCE Member of the Supervisory Board of: Natixis Chief Executive Officer of: Bolloré (previously known as Bolloré Investissement), Bolloré Participations Chairman of the Board of Directors of: Financière de l’Odet, Bolloré Média, Compagnie de Bangor, Direct Soir, Havas Chairman of: Bolloré Production Chief Executive Officer of: Omnium Bolloré, Financière V, Sofi bol; Member of the Board of: BatScap, Bolloré (previously known as Bolloré Investissement), Bolloré Participations, Bolloré Média, Compagnie des Glénans, Compagnie de Bangor, Direct Soir, Financière Moncey, Financière de l’Odet, Financière V, Omnium Bolloré, Sofi bol, Havas Member of the Supervisory Boards of: Vallourec Permanent representative for Bolloré Participations member of the Board of: la Société Anonyme Forestière et Agricole (Safa), la Société des Chemins de Fer et Tramways du Var et du Gard, la Société Industrielle et Financière de l’Artois, la Société Bordelaise Africaine, la Compagnie des Tramways de Rouen, IER Permanent representative for Bolloré Participations to the Supervisory Board of: la Compagnie du Cambodge
INTERNATIONAL Chairman of: Champ de Mars Investments, Financière Nord Sumatra, Nord Sumatra Investissements and Financière du Champ de Mars Vice-President of: Société des Caoutchoucs du Grand Bereby (SOGB), Bereby Finances Member of the Board of: BB Group, Centrages, Champ de Mars Investissements, Financière Nord Sumatra, Intercultures, Liberian Agricultural Company (LAC), Mediobanca, Plantations Nord Sumatra Limited, Plantations des Terres Rouges, Red Lands Roses (up to 27.01.2008), SDV Gabon, SDV Sénégal, Socfi naf Cy Ltd, Socfi nal, Socfi nasia, Socfi nco, Socfi ndo, Société de Gestion pour le Caoutchouc et les Oléagineux (Sogescol), Socfi n KCD Managing Director of: Nord Sumatra Investissements, Financière du Champ de Mars Permanent representative for Bolloré Participations, member of the Board of: Bereby Finance, SDV Cameroun, SDV Congo, SAFA Cameroun, Société des Palmeraies du Cameroun, Palmeraies du Cameroun, Société des Palmeraies de la Ferme Suisse, Société des Caoutchoucs du Grand Bereby (SOGB) Manager of: Huilerie de Mapangu Sprl
INTERNATIONAL Chairman of: Plantations des Terres Rouges Managing Director of: Nord Sumatra Investissements Vice-President of: Société des Caoutchoucs du Grand Bereby (SOGB), Bereby Finances Member of the Boards of: BB Group, Centrages, Compagnie Internationale de Cultures, Liberian Agricultural Company (LAC), Mediobanca, Plantations Nord Sumatra Limited, Plantations des Terres Rouges, Red Lands Roses, SDV Gabon, SDV Sénégal, Financière du Champ de Mars (previously known as Socfi n), Socfi naf, Socfi nal, Socfi nasia, Socfi nco, Socfi ndo, Socfi ninter, Société de Gestion pour le Caoutchouc et les Oléagineux (Sogescol) Managing Director of: Nord Sumatra Investissements Permanent representative for Bolloré Participations, member of the Board of: SDV Cameroun, SDV Congo
Ms. Laurence Debroux, aged 41, is Chief Financial and Administrative Offi cer and Member of the Executive Board of JC Decaux. Before joining JC Decaux in 2010, Laurence Debroux worked in various positions at Sanofi for 14 years. She started as Treasury Manager and was subsequently promoted to Financial Director and then Head of Strategy and member of the Sanofi -Aventis Executive Committee. Previously, Laurence Debroux worked for the Elf Aquitaine Group’s fi nance department. Laurence Debroux is a graduate of HEC.
Member of the Board of: Natixis (since 04.01.2010) Member of the Executive Board of: JC Decaux (Chief Financial and Administrative Offi cer) Director Board of Directors of: Merial Ltd (up to 05.19.2010)
Chairman of: Sanofi 1 Chief Executive Officer of: Sanofi Aventis Europe, Sanofi Aventis Participations Member of the Board of: Sanofi Pasteur Holding Managing Directof of: Sanofi 4, Sanofi Aventis North America
Chairman of: Biocitech Sas (up to 03.23.2007), Sanofi 1 Chief Executive Officer of: Sanofi Aventis Europe, Sanofi Aventis Participations Member of the Board of: Sanofi Pasteur Holding (since 05.29.2007) Managing Directof of: Sanofi 3 (up to 05.29.2007), Sanofi 4, Sanofi Aventis North America
Chief Operating Officer: Groupe La Poste Member of the Executive Committee: Groupe La Poste
Member of the Supervisory Board of: BPCE Member of the Board of: Natixis Chairman of the Board of Directors of: BRED Banque Populaire, Natixis Pramex International, SPIG, Natixis Institutions Jour Chairman of the Supervisory Board of: Banque Internationale de Commerce-BRED (BIC-BRED) Chairman of: BRED Gestion, Cofi bred, Agence Banque Populaire pour la Coopération et le Développement, Bureau International-Forum Francophone des Affaires Member of the Board of: Coface (up to 10.07.2010), Natixis Algeria (up to 12.31.2010), Natixis Pramex International Milan, Société Marseillaise de Crédit (up to 09.21.2010), Thales, BGF+, Promépar Gestion, BRED Cofi lease, Prépar Iard Member of the Supervisory Board of: Prépar-Vie Permanent representative to BRED Banque Populaire to the Board of Directors of: BICEC, BCI (Banque Commerciale Internationale)
Member of the Supervisory Board of: Natixis Chairman of the Board of Directors of: BRED Banque Populaire, Natexis Pramex International, BRED Gestion Chairman of the Supervisory Board of: Banque Populaire Asset Management Chairman of: Association Banque Populaire pour la Coopération et le Développement, Bureau international – Forum francophone des affaires Vice-Chairman of the Supervisory Board of: Banque Internationale de CommerceBRED (BIC-BRED) Member of the Board of: Banque Fédérale des Banques Populaires, Coface, Natexis Algeria, Natexis Pramex Italia Srl, Compagnie Financière de la BRED (Cofi bred), LFI, BGF+, BRED Cofi lease Permanent representative for BRED Banque Populaire to the Board of: BICEC
Member of the Supervisory Board of: BPCE (since 31/07/2009) Member of Supervisory Board (up to 30/04/2010) and member of the board of: Natixis Chief Executive Officer of: Banque Populaire Bourgogne Franche-Comté Member of the board of: Natixis Assurances, Natixis Lease (Vice-President), Natixis Paiements, Banque de Savoie, BP Participations, IPMPE Permanent representative for Banque Populaire Bourgogne Franche-Comté to the board of directors of: i-BP, Banques Populaires’ corporate start-up organisation
Member of the Supervisory Board of: Natixis Chief Executive Officer of: Banque Populaire Bourgogne Franche-Comté Member of the board of: Banque Fédérale des Banques Populaires (Secretary), Natixis Assurances, Natixis Lease, Natixis Paiements, Banque de Savoie, IPMPE Permanent representative for Banque Populaire Bourgogne Franche-Comté to the board of directors of: i-BP
Chief Executive Officer of: Banque Populaire Bourgogne Franche-Comté Member of the board of: Banque Fédérale des Banques Populaires, Nate4xis Banques Populaires, Natexis Assurances, Natexis Paiements, Natexis Lease, C.A.R, IPMPE, Institution de Prévoyance du Groupe Banque Populaire Permanent representative for Banque Populaire Bourgogne Franche-Comté to the board of directors of: i-BP
Chairman of the Executive Board of: Caisse d’Epargne Rhône Alpes (individual offi ce) Chairman of the Supervisory Board of: Rhône-Alpes PME Gestion Member of the Board of: Natixis, Coface, Natixis Consumer Finance (up to 12.31.2009), Natixis Global Asset Management, Natixis Financement, Neptune Technologies Member of the Supervisory Board of: Compagnie 1818 (up to 06.30.2009) Permanent representative for CE Participations, member of the Supervisory Board of: la Compagnie des Alpes Permanent representative for CERA, member of the Supervisory Board of: la Société des Trois Vallées, CGE Business Services
Member of the Supervisory Board of: Natixis Chairman of the Executive Board of: Caisse d’Epargne Rhône Alpes Chairman of the Supervisory Board of: Rhône-Alpes PME Gestion Member of the Board of: Coface, Natixis Consumer Finance, Natixis Financement, Natixis Global Asset Management, Neptune Technologies Member of the Supervisory Board of: la Compagnie 1818 – Banquiers Privés Permanent representative for CERA, member of the Board of: la Fédération Nationale des Caisses d’Epargne Permanent representative for CNCE, member of the Supervisory Board of: la Compagnie des Alpes Permanent representative for CERA, member of the Supervisory Board of: GCE Business Services, la Société des Trois Vallées Permanent representative for CERA: Manager of Terrae
Chief Executive Officer of: Banques Populaires Member of the Executive Board of: BPCE (since 07.31.2009) Member of Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis Chief Executive Officer of: BP Val de France (up to 08.01.2009) Deputy CEO of: BP Participations (up to 07.31.2009) Chairman of the Supervisory Board of: MA BANQUE (up to 12.31.2009) Vice-Chairman of the Board of Directors of: BP Participations (up to 03.16.2009) Member of the Board of: Coface, Natixis Private Banking, CCSO (up to 04.30.2009), Société Marseillaise de Crédit (since 03.11.2009), Financière Océor (since 07.15.2009), Banque Privée 1818 (since 30.06.2009), Member of the Supervisory Board of: FONCIA Groupe Permanent representative for BPCE, member of the Board of: BP Participations (since 07.31.2009), Informatique Banques Populaires (since 09.14.2009), Natixis Assurances (up to 10.07.2009), Permanent representative for BP Participations, member of the Board of: Natixis Assurances (from 03.04.2009 to 10.07.2009) Permanent representative for BP Participations: Chairman of SAS Ponant 2 (from 06.30.2009 to 07.31.2009), Chairman of SAS SISBP (from 06.10.2009 to 07.31.2009), associate Manager of SNC Bankeo (from 17.06.2009 to 07.31.2009), associate Manager of SCI Ponant Plus (since 06.30.2009)
Member of the Supervisory Board of: Natixis Chief Executive Officer of: Banque Populaire Val de France Chairman of the Supervisory Board of: MA BANQUE Vice-Chairman of the Board of Directors of: Banque Fédérale des Banques Populaires Member of the Board of: Coface, Natixis Pramex North America Corp, Natixis Private Banking Member of the Supervisory Board of: FONCIA Groupe paid by Natexis Banques Populaires Permanent representative for Banque Populaire Val de France, member of the Board of: i-BP Member of: Executive Committee of Confédération Internationale des Banques Populaires
Mr. Alain Lemaire, aged 59, is an alumnus of École Nationale des Impôts and ENA, and was Chief Executive Offi cer of Crédit Foncier de France from 1999 to 2002, then Chairman of Caisse d’Epargne Provence-Alpes-Corse from 2002 until June 2009. He was Chief Executive Offi cer of La Caisse Nationale des Caisses d’Epargne from October 2008 until the end of July 2009. He is currently a member of BPCE’s Executive Board.
Member of the Executive Board/Chief Executive Officer of: Caisse Nationale des Caisses d’Epargne (CNCE) Chairman of the Executive Board of: Caisse d’Epargne et de Prévoyance Provence Alpes Corse Chairman of the Board of Directors of: Crédit Foncier de France, Natixis Asset Management, Erixel Chairman of the Supervisory Board of: Banque Palatine, FLCP (Supervisory Committee), GCE Capital, SOCFIM Chairman of: Erixel Member of the board/of the Supervisory Board of: Natixis (permanent representative for CNCE), Nexity, Banca Carige, CNP Assurances, Sopassure, GCE Domaines, Marseille Aménagement, Erilia, Banque de la Réunion (permanent representative for CEP PAC), Banque des Antilles Françaises (permanent representative for CEP PAC), La Chaîne Marseille – LCM (permanent representative for CEP PAC), Natixis Epargne Financière, Natixis Epargne Financière Gestion, ANF, La Compagnie 1818 – Banquiers Privés, Proxipaca Finance (Executive Board), Financière Océor (permanent representative for CEP PAC), Viveris Management, Viveris (Executive Board) Manager of: SCF Py & Rotja Non-voting board member for: The Yunus Movie Project Partners
Chairman of the Executive Board of: Caisse d’Epargne et de Prévoyance Provence Alpes Corse Chairman of the Supervisory Board of: SOCFIM Vice-Chairman of the Supervisory Board of: Ecureuil Gestion, Ecureuil Gestion FCP Member of the board/of the Supervisory Board of: Caisse Nationale des Caisses d’Epargne (CNCE), Arpège, GCE Capital, La Compagnie 1818 – Banquiers Privés, Proxipaca Finance (Executive Board), Financière Océor (permanent representative for CEP PAC), Banque de la Réunion (permanent representative for CEP PAC), Banque des Antilles Françaises (permanent representative for CEP PAC), La Chaine Marseille – LCM (permanent representative for CEP PAC) Manager of: SCF Py & Rotja
Mr. Jean-Bernard Mateu, aged 46, is a graduate of École Polytechnique and a graduate engineer of École Nationale Supérieure des Télécommunications de Paris. After successively working as Methods Group Manager at La Compagnie Bancaire, Sales Development Director then IT Studies Director at Crédit du Nord and General Secretary then Head of Operations at La Banque Directe (Axa Banque), he joined the Caisses d’Epargne group in 2000. He fi rst joined Caisse d’Epargne de Picardie as a member of the Executive Board in charge of Networks and Sales Development. He then moved on to work as head of the Sales Planning and Supervision Department, then went to the Social Economy and Social Housing Department at Caisse Nationale des Caisses d’Epargne (now known as BPCE) before becoming Chief Executive Offi cer of Natixis Financement (formerly Caisse d’Epargne Financement) 2005 – member of Natixis’ Executive Committee. He joined Caisse d’Epargne Rhône Alpes on July 1, 2010 as Chairman of the Executive Board.
Chief Executive Officer of: Natixis (since 05.14.2009) Member of the Board of: Natixis Global Asset Management (since 09.11.2009), Sequana, Arkema, Coface (since 10.27.2009), Lazard Ltd (since July 28, 2009), Cogefi S.A. (up to 05.13.2009), Génération Vie (up to 05.13.2009) Non-voting member of: BPCE’s board (Permanent representative for Natixis) (since 08.25.2009) Associate Manager of: Oddo et Cie (up to 05.13.2009) Chairman and Chief Executive Officer of: Oddo Asset Management (up to 05.13.2009) Member of the Supervisory Board of: la Banque Postale Gestion Privée (up to 05.13.2009) Permanent representative for Oddo et Cie: associate Manager of Oddo Corporate Finance (up to 05.13.2009)
Associate Manager of: Oddo et Cie Chief Executive Officer of: Oddo Asset Management Chairman of the Supervisory Board of: Oddo Corporate Finance Member of the Supervisory Board of: la Banque Postale Gestion Privée Permanent representative for Oddo et Cie: associate Manager of Oddo Corporate Finance
Associate Manager of: Oddo et Cie Chief Executive Officer of: Oddo Asset Management Chief Executive Officer of: AGF Chairman of: the AGF France Executive Committee Deputy CEO of: AGF S.A., AGF Holding Chairman of the Supervisory Board of: Oddo Corporate Finance, AGF Informatique, AVIP Chairman of the Board of Directors of: Coparc, Génération Vie Vice-Chairman of the Supervisory Board of: Euler Hermès Member of the Supervisory Board of: Oddo & Cie SCA Member of the Board of: W Finance, AGF Holding, GIE Placements d’Assurance, AGF Asset Management Permanent representative for Oddo et Cie: associate Manager of Oddo Corporate Finance
Chief Executive Officer of: AGF Chairman of: the AGF France Executive Committee Deputy CEO of: AGF S.A., AGF Holding Chairman of the Supervisory Board of AGF Informatique, AVIP Chairman of the Board of Directors of: AGF Vie, Coparc, Génération Vie, AGF Iart Vice-Chairman of the Supervisory Board of: Euler Hermès Member of the Supervisory Board of: Oddo & Cie SCA, Member of the Board of: W Finance, AGF Holding, GIE Placements d’Assurance, AGF Asset Management, AGF International
Mr. Jean-Charles Naouri, aged 61, is Chief Executive Offi cer and founder of Euris, the holding company of Casino, one of France’s leading retail groups. He began his career as Inspector of Finance at the Treasury Department then worked as Cabinet Head for the minister of social affairs and national solidarity in 1982 and the minister of the economy, fi nance and budget in 1984. He was also associate Manager at Rothschild & Cie Banque from 1987 to 2005.
Member of the Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis Chief Executive Officer of: Casino, Guichard-Perrachon, Rallye Chairman of: Euris SAS Chairman of the Board of: Finatis Member of the Board of: Fimalac, Companhia Brasileira de distribuicao (CDB), Wilkes Participaçoes Manager of: SCI Penthièvre Seine, SCI Penthièvre Neuilly Member of the advisory Board of: Banque de France Chairman of: the “Promotion des Talents” organisation Vice President of: the Foundation Euris Honorary chairman and member of the Board of: the Institut de l’École Normale Supérieure
Member of the Supervisory Board of: Natixis Chief Executive Officer of: Casino, Guichard-Perrachon, Rallye Chairman of: Euris SAS Chairman of the Board of: Finatis Member of the Board of: Fimalac, Companhia Brasileira de distribuicao (CDB), Wilkes Participaçoes Manager of: SCI Penthièvre Seine, SCI Penthièvre Neuilly Member of the advisory Board of: Banque de France Chairman of: the “Promotion des Talents” organisation Vice President of: the Foundation Euris Honorary chairman and member of the Board of: the Institut de l’École Normale Supérieure
Chairman of the Board of Directors of: Euris S.A., Finatis Chief Executive Officer of: Casino, Guichard-Perrachon, Rallye Member of the Supervisory Board of: Super Boer (formerly Laurus), Natixis Member of the Board of: Finamac, HSBC France, Companhia Brasileira de Distribuicao (CDB) and Wilkes Participaçoes Non-voting board member of: Caisse Nationale des Caisses d’Epargne et de Prévoyance Representative for Casino, Guichard Perrachon: Chairman of Distribution Casino France Manager of: SCI Penthièvre Seine, SCI Penthièvre Neuilly Member of the advisory Board of: Banque de France Chairman of: the “Promotion des Talents” organisation Vice President of: the Foundation Euris Honorary chairman and member of the Board of: the Institut de l’École Normale Supérieure
Mr. Didier Patault, aged 49, is Chairman of the Caisse d’Epargne Bretagne Pays de Loire Executive Board and a member of the BPCE Supervisory Board. He is an alumnus of École Polytechnique and École Nationale des Statistiques et de l’Administration Économique (ENSAE). Throughout his career, Didier Patault has served as Chairman of the Executive Board of Caisse d’Epargne des Pays du Hainaut, Chairman of the Executive Board of Caisse d’Epargne des Pays de la Loire and Chairman and Chief Executive Offi cer of SODERO.
Member of the Supervisory Board of: BPCE Member of the Board of: Natixis Chairman of the Executive Board of: la Caisse d’Epargne et de Prévoyance de Bretagne Pays de Loire Chief Executive Officer of: SODERO Chairman of the Board of Directors of: SODERO Participations, S.A. des Marches de l’Ouest (SAMO), Mancelle d’Habitation (up to 11.17.2010) Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Bretagne – Pays de Loire Member of the Supervisory Board of: GCE Capital Member of the Board of: CE Participations (up to 08.05.2010), Natixis Global Asset Management (up to 09.01.2010), Compagnie de Financement Foncier – SCF, Natixis Cofi ciné (since 10.19.2010), La Mancelle d’Habitation (since 11.17.2010), CE Holding Promotion (since 06.30.2010) Permanent representative for CEBPL, member of the Board of: Pays de la Loire Développement, SEMITAN, NAPF , FNCE Permanent representative for CEBPL, member of the Supervisory Board of: GCE Business Services, GCE Technologies
2nd Vice-Chairman of the Supervisory Board of: Natixis Chairman of the Executive Board of: la Caisse d’Epargne et de Prévoyance de Bretagne Pays de Loire (since 04.11.2008) Chairman and Chief Executive Officer of: SODERO Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Bretagne – Pays de Loire, Grand Ouest Gestion (permanent representative for SODERO Participations) Chairman of the Board of Directors of: SODERO Participations, la Mancelle d’Habitation, S.A. des Marches de l’Ouest Member of the Supervisory Board of: GCE Capital, GCE Business Services (permanent representative for CEBPL), GIRCE Ingénierie (permanent representative for CEBPL) (up to 07.01.2008) Member of the Board of: Pays de la Loire Développement (permanent representative for CEBPL), SEMITAN (permanent representative for CEBPL), NAPF (permanent representative for CEBPL), Compagnie de Financement Foncier SCF, Oterom Holding (up to 12.11.2008), Meilleurtaux (up to 12.11.2008) GIRCE Stratégie (permanent representative for CEBPL) up to 07.01.2008, Caisse d’Epargne Group University (up to 06.16.2008), FNCE
Chairman of the Executive Board of: BPCE Chairman of the Board of Directors of: Natixis Chief Executive Officer of: BP Participations, CE Participations (up to 08.05.2010) Chairman of the Board of Directors of: BPCE IOM, Crédit Foncier de France (since 04.26.2010), Fondation des Caisses d’Epargne pour la Solidarité (since 06.30.2010) Chairman of CE Holding Promotion (since 06.30.2010) Chairman of the Supervisory Board of: Foncia Groupe Vice-Chairman of the Board of Directors of: Crédit Immobilier et Hôtelier (Morocco) Chairman: Fédération Bancaire Française (since 09.01.2010) Member of the Board of: BP Participations, CE Participations (up to 08.05.2010) CNP Assurances, Sopassure, Crédit Immobilier et Hotelier-CIH (Morocco), Musée d’Orsay (since 04.22.2010), CE Holding Promotion (since 06.30.2010)
FRANCE Member of the Board of: Natixis Chairman and Chief Executive Officer of: EDF Chairman of the Board of Directors of: Veolia Environnement (up to 12.12.2010), Veolia Propreté, Veolia Transport Member of the Board of: Dassault Aviation, CNP Assurances, Veolia Environnement (since 12.16.2010), EDF International (since 12.06.2010) Chairman of: EDF Energy Holdings Ltd (since 03.08.2010) Member of the Supervisory Board of: Veolia Eau and boards A and B of Dalkia (SAS) (up to 03.23.2010) Member of: the High Commission for Transparency and Information on Safety in Nuclear Facilities, the National Commission for Sectors of Vital Importance, the Committee for Atomic Energy. INTERNATIONAL Chairman of the Board of Directors of: Transalpina di Energia (since 02.08.2010) Director of: Veolia Environnement North America Operations (up to 09.13.2010) Member of the Board of: FCC Espagne (since 05.27.2010) and Edison (since 02.08.2010)
FRANCE Member of the Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis Chairman and Chief Executive Officer of: EDF (starting 11.25.2009), Veolia Environnement (up to 11.27.2009) Chairman of the Board of Directors of: Veolia Environnement (starting 11.27.2009), Veolia Propreté, Veolia Transport, Veolia Water (up to 11.27.2009) Member of the Board of: Dassault Aviation, Dalkia International (up to 11.27.2009), la Société des Eaux de Marseille (up to 11.27.2009), Sarp Industries (up to October 19, 2009), CNP Assurances Manager of: Veolia Eau – Compagnie Générale des Eaux (up to 11.27.2009) Member of the Supervisory Board of: Lagardère (up to 11.16.2009), Veolia Eau (starting 12.30.2009), boards A and B of Dalkia (SAS) Member and Chairman of the Supervisory Board of: Dalkia France (up to 11.27.2009), EOLFI (from 04.06.2009 to 11.27.2009) Member of: the High Commission for Transparency and Information on Safety in Nuclear Facilities (starting in 11.25.2009), the National Commission for Sectors of Vital Importance (starting in 12.08.2009), the Comité d’Energie Atomique (starting 11.25.2009) Non-voting member of: Caisse Nationale des Caisses d’Epargne (up to 07.31.2009)
FRANCE Member of the Supervisory Board of: Natixis Chairman and Chief Executive Officer of: Veolia Environnement Chairman of the Board of Directors of: Veolia Propreté, Veolia Transport, Veolia Water Member of the Board of: EDF, Casino, Guichard-Perrachon, Dalkia International, Société des Eaux de Marseille, Sarp Industries Manager of: Veolia Eau – Compagnie Générale des Eaux Member and Chairman of the Supervisory Board of: Dalkia France Member of the Supervisory Board of: Elior, Lagardère, CNP Assurances, A and B of Dalkia (SAS) Non-voting member of: Caisse Nationale des Caisses d’Epargne INTERNATIONAL Director of: Veolia ES Australia, Veolia Transport Australia, Veolia Environmental Services, Siram, Veolia Environmental Services Asia, Veolia Transport Northern Europe, Veolia Environmental Services North America Corp
Mr. Philippe Queuille, aged 55, graduated from the École Nationale Supérieure d’Arts et Métiers and joined Groupe Banque Populaire, via Banque Populaire du Sud-Ouest, in 1980. He was appointed Chief Executive Offi cer of Banque Populaire de la Loire in 1998, then Chief Executive Offi cer of Banque Populaire de l’Ouest in 2001. He subsequently became Chairman and Chief Executive Offi cer of i-BP in 2006, before being appointed Deputy Chief Executive Offi cer of Banque Fédérale des Banques Populaires in January 2008. On July 31, 2009, Philippe Queuille became a member of the Senior Management Committee and Deputy Chief Executive Offi cer in charge of operations for BPCE. Since April 7, Philippe Queuille has been BPCE’s Chief Executive Offi cer* in charge of operations and reorganization of the central body, and a member of the BPCE Management Board.
Member of the Management Board of: BPCE – Operations Member of the Board of: Natixis (since 05.27.2010) Chief Executive Officer of: Albiréo (up to October 2010), i-BP (up to March 2010) Chairman of the Board of Directors of: Albiréo, i-BP, GCE Paiements (up to 07.28.2010) Chairman of the Supervisory Board of: BP Covered Bonds (up to 03.15.2010), GCE Achats (up to 06.15.2010), GCE Business Services, GCE Technologies Member of the Board of: Partecis, ICDC (since January 2010), BPCE Achats (since 06.15.2010) Permanent representative for i-BP to the Board of Directors of: Natixis Altaïr IT Shared Services (S.A.) (up to 05.26.2010), BP Investissements (up to 06.22.2010), Natixis Paiements (up to in March 2010) Permanent representative for BPCE, member of the Board of: Natixis Paiements (since 10.06.2010) Permanent representative for BPCE, member of the Supervisory Board of (chairman): GCE Business Services, GCE Technologies
Deputy CEO of: BPCE – Operations Chairman of the Board of Directors and Chief Executive Officer of: Albiréo, i-BP, GCE Paiements (since10.26.2009) Chairman of the Supervisory Board of: Banques Populaires Covered Bonds (since 03.04.2009), GCE Achats (since 10.13.2009) Member of the Board of: Partecis, Crédit Commercial du Sud-Ouest – CCSO (up to 07.09.2009) Permanent representative for i-BP to the Board of Directors of: Natixis Altaïr IT Shared Services (S.A.), Natixis Paiements (since 08.03.2009) Permanent representative for BP Participations (formerly BFBP) to the Board of Directors of: Natixis (up to 08.25.2009) Permanent representative for BPCE, member of the Supervisory Board of (Chairman): GCE Business Services (since 09.24.2009), GCE Technologies (since 10.14.2009).
Member of the Supervisory Board of: Natixis Vice President of the guidance and Supervisory Board of: Caisse d’Epargne Île-de-France Chairman and Chief Executive Officer of: Semavo (Société d’Économie Mixte d’Aménagement du Val d’Oise) Member of the Board of: Sicav Association, Ecureuil Assurances IARD
Mr. Robert Zolade, aged 70, is Chairman of the Elior contract catering group, which he co-founded. He previously worked in various management positions in French hospitality and catering groups
FRANCE Member of the Supervisory Board of: Natixis (up to 04.30.2009) Chairman of: SOFIBIM (SAS), Bagatelle Investissement et Management-BIM (SAS), Octant Partenaires (SAS) (up to 03.31.2009) Legal representative for SOFIBIM: Chairman of Octant Partenaires (SAS) (starting 03.31.2009) Legal representative for Octant Partenaires SAS: chairman of JS Management SAS (formerly Octant Invest I) (starting 05.26.2009) Manager of: Servinvest (SARL), M.B.O.B. (SCI), L.M.D.B. (SCI)
FRANCE Member of the Supervisory Board of: Natixis Chairman of: SOFIBIM (SAS), Bagatelle Investissement et Management-BIM (SAS), Octant Partenaires (SAS) Manager of: Servinvest (SARL), M.B.O.B. (SCI), L.M.D.B. (SCI) Legal representative for Bercy Présidence: general managing company of Holding Bercy Investissements-H.B.I. (SCA)
2008 FRANCE Legal representative for H.B.I.: chair company of Bercy Participations (SAS) Legal representative for Bercy Présidence: general Manager of H.B.I., chairman of Bercy Participations, the general managing company of Elior (SCA) Chairman of: Bercy Présidence (SAS) Manager of: Bercy Patrimoine (SARL) Chairman and member of the Board of: Avenance (SAS), Eliance (SAS) Legal representative for Avenance SAS: chair company of Bercy Services I (SAS) Legal representative for Avenance SAS: chair company of Bercy Services V (SAS) Legal representative for Elior (SCA): which chairs Elior Gestion (SAS) Member of the Supervisory Board of: Pragma Capital (S.A.) INTERNATIONAL Member of the Board of Elior UK Ltd, Areas IbericoAmericana, Serunion (S.A.) Vice-President and member of the Board of: Areas (S.A.) Chairman and board member of: Avenance UK
Offi ces at December 31 of previous fi nancial years 2009 INTERNATIONAL Member of the Board of: Elior UK Ltd, Areas IbericoAmericana, Serunion (S.A.) Vice-President and member of the Board of: Areas (S.A.) Chairman and board member of: Avenance UK Legal representative for Avenance, member of the Board of: Avenance Nederland, Avenance Horeca
Natixis’ corporate governance, based on the Group’s current form as a French “société anonyme” with a Board of Directors as defi ned in Articles L.225-17 and subsequent of the French Commercial Code, is based on the corporate bylaws adopted by Natixis’ combined Ordinary and Extraordinary Shareholders’ Meeting of April 30, 2009.
Following the merger of Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des Caisses d’Epargne (CNCE) that resulted in the creation of BPCE, Natixis has been 71.54%-owned by BPCE since August 1, 2009.
As indicated above, Natixis’ Board of Directors, whose members are appointed for six years, had 15 members on March 1, 2011, including: ● four members from BPCE, namely Messrs Pérol, Klein and Queuille and BPCE; ● three members from Banques Populaires, namely Messrs. Criton, Gentili and Jeannin; ● three members from Caisses d’Epargne, namely Messrs. Mateu, Patault and Sueur; ● five independent members, namely Ms. Bories and Ms. Debroux and Messrs. Bolloré, Oppetit, and Proglio.
Ms. Christel Bories is President and Chief Executive Offi cer of Alcan Engineered Products, an international leader in engineered aluminum, lightweight materials and technology. Ms. Laurence Debroux is Chief Financial and Administrative Offi cer of JC Decaux S.A., the world’s second largest outdoor advertising group and inventor of the “street furniture” concept. Vincent Bolloré manages and controls the Bolloré Group, which occupies leading positions in several industrial, services and media sectors. Henri Proglio is Chairman and Chief Executive Offi cer of EDF as well as a member of the Board of Véolia Environnement. Bernard Oppetit is Chairman of Centaurus Capital.
At its meeting of December 16, 2010 and following the report submitted by the Compensation Committee, Natixis’ Board of Directors examined each director’s expertise, quality of judgment and freedom of thought and expression and, more generally, compliance with the independence criteria laid down in the AFEP-MEDEF code and incorporated into the Board’s Internal Rules (see 2.3.1.2 – Role and Powers of the Board of Directors below). The report noted that the fi ve independent members fully satisfy independence criteria requirements. Banking relations between Natixis and the groups chaired by each of the independent members are not of a nature as to affect their impartiality.
The term of offi ce for Natixis directors is set at six years (and not four years as recommended by the AFEP-MEDEF code), so as to be consistent with the terms of offi ce in place within BPCE Group.
● Changes made to the Board of Directors since January 1, 2011: − on February 22, 2011, following the resignation of Jean-Charles Naouri on December 31, 2010, Christel Bories was co-opted as board member for the remainder of the term of offi ce, i.e. until the Natixis General Shareholders’ Meeting called to approve the fi nancial statements for 2014.
In accordance with the law and the bylaws, the Board of Directors: ● defines the strategy governing the Company’s activities and oversees its implementation. Within the limits of the Company’s corporate purpose and the powers expressly granted by law or its bylaws to the General Shareholders’ Meetings, the Board concerns itself with all matters affecting the Company’s performance and governs by virtue of its deliberations. The Board of Directors is empowered to carry out all of the controls and verifications that it considers appropriate; ● defines the Company’s executive management policy, it being specified that the Board may only deliberate on this matter when it features on the agenda sent out at least 15 days prior to the Board Meeting and when at least two thirds of the board members are present or represented; ● may appoint a Chief Executive Officer from among the board members or otherwise, whom it may dismiss at any time; ● may, at the proposal of the Chief Executive Officer, appoint one to five individuals as Deputy Chief Executive Officers whose role is to assist the Chief Executive Officer; ● convenes all General Shareholders’ Meetings, sets the agenda and oversees the execution of all decisions taken; ● may, at the proposal of the Chairman, decide to set up its own 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.
In addition to the legal and statutory requirements with which it complies, the Board of Directors has adopted a set of internal rules governing its operation and setting out the rights and duties of its members. These are sent to each member at the time of his/her appointment.
● criteria used to qualify member of the Board of Directors as “independent”: An independent director is a person who has no ties with the management, Company or Group of a nature liable to compromise their freedom of judgment or create a confl ict of interest with the management, Company or Group.
− be a major customer, supplier, or corporate or investment banker to the Company or the Group, or derive a signifi cant portion of its business from the Company or its Group; − have close family ties with an executive of the Company or its Group; have been an auditor of the Company or a Group company in the previous fi ve years; have been an executive of the Company or one of the Group’s companies in the previous fi ve years; have been a member of the Company’s Supervisory Board/Board of Directors for more than 12 years; receive or have received additional material compensation from the Company or the Group other than their directors fees.
Board members representing major shareholders in the Company in either a direct or indirect capacity may be considered independent if these shareholders do not control the Company within the meaning of Article L.233-3 of the French Commercial Code. However, if a board member represents a shareholder of the Company that holds, directly or indirectly, more than 10% of the share capital or voting rights, the Board shall, based on a report from the Compensation Committee, systematically review the member’s independence, taking into account the structure of the Company’s share capital and the existence of any potential conflicts of interest.
The independent status of each member of the Board of Directors is examined by the Compensation Committee (the composition and role of which are described in greater detail below), which prepares a report for the Board.
Minutes of Board Meetings are prepared and sent out to the Company’s board members.
As and when required, the Chief Finance and Risk Offi cer, Corporate Secretary or one or more business-line heads were invited to provide further information on subjects raised in meetings, and the Works Council representatives also attended the meetings.
Throughout the year, the Board also examined the reports on the work of the Audit and Compensation Committees.
In terms of monitoring activities, the Board approved the Company and consolidated fi nancial statements and received and approved the Natixis strategic plan as well as the budget projections for 2011. It received regular updates on GAPC asset positions.
In addition to the business reports submitted by Natixis’ executive management on the events occurring between Board Meetings and the business trends over the period, the Board received regular updates on measures affecting the Company’s organization.
Over the course of 2010 and in accordance with the bylaws and the Internal Rules, the Board also met to approve the different restructuring operations between subsidiaries prior to the implementation of these operations, namely: ● Natixis Private Equity’s new strategy; ● Natixis Assurances’ repurchase of Crédit Foncier’s equity interests in Foncier Assurance; ● the agreement governing the merger by absorption between Natixis and Natixis Securities; ● the contribution/sale of Natixis North America Inc. shares to Natixis Global Asset Management Inc.; ● the transfer of Coface’s main holdings in Services business lines to Coface Holding; ● Natixis Lease’s acquisition of the shares in Cicobail from Crédit Foncier de France and Banque Palatine.
In accordance with current regulations, the Board approved a number of regulated agreements prior to their signing (see the special report by the Statutory Auditors in Chapter 4 “Financial Data” for more detailed information on regulated agreements).
In accordance with the Board of Directors’ Internal Rules and the AFEP-MEDEF code, the Board is required to assess its own work on a yearly basis.
Assisted by Spencer Stuart consulting fi rm as external consultants, Natixis carried out an assessment of the work of the Board of Directors in 2010, the conclusions of which were presented to the Board in early 2011.
The board members’ overall assessment of the work carried out by the Board is positive, the prevailing sentiment being that there was an improvement in the way the Board operates over the year. The Board’s performance is perceived as satisfactory on the whole and deemed to comply with the rules of corporate governance.
The assessment nonetheless identifi es certain areas for improvement, including: ● increasing the Board’s involvement in the strategy of the Bank and its subsidiaries, its corporate vision and risk management and its Human Resources,
● improving the time taken to submit documents to the board members and making these documents more concise.
As regards the Audit Committee, the assessment recommends that it meet at least three days before the Board of Directors’ Meeting. It also concludes that more concise information and scorecards would be helpful in making it easier to follow the report of the Committee.
As regards the Compensation Committee, the assessment recommends that it play a greater part in the appointment and recruitment of board members and suggests that it be subsequently renamed as the Appointments and Compensation Committee.
Natixis’ Board of Directors has two specialized Committees: an Audit Committee and a Compensation Committee. Each Committee is chaired by an independent member of the Board of Directors.
Natixis’ Audit Committee was made up of seven members including two independent members in the fi rst half of 2010, and six members including three independent members in the second half of the year.
The Committee was chaired by independent board member, Jean-Charles Naouri, throughout 2010.
On March 1, 2011, the Audit Committee had fi ve members: Mr. Oppetit, Chairman, Ms. Debroux and Messrs. Criton, Duhamel and Klein.
While the Audit Committee is chaired by an independent board member, two thirds of its members are not independent members as recommended by the AFEP-MEDEF code, in order to represent the different components of the Company’s main shareholders (members from the Caisses d’Epargne and Banques Populaires).
Members of the Audit Committee have extensive accounting and fi nancial expertise gained over the course of their professional careers.
Changes made to the Audit Committee in 2010: ● on April 1, 2010, following the resignation of Robert Zolade, Laurence Debroux was appointed to the Audit Committee; ● on May 27, 2010, following the resignation of Yvan de La Porte du Theil, Bernard Oppetit was appointed to the Audit Committee; ● on May 27, 2010, Alain Lemaire resigned from the Board of Directors and therefore from the Audit Committee; ● on December 16, 2010, Bernard Oppetit was appointed Chairman of the Audit Committee as of January 1, 2011, in replacement of Jean-Charles Naouri who resigned on December 31, 2010.
The Audit Committee has the following responsibilities: ● it assists the Board of Directors in preparing the financial statements and the Company’s management report. Within this context, it monitors the quality of the information issued to shareholders and, more generally, it performs the duties set out by banking regulations; ● it examines the parent and consolidated annual and interim financial statements as well as the Company’s budget projections and financial documents distributed when the financial statements are approved; ● it monitors the independence of the Statutory Auditors, gives its opinion on their selection or the renewal of their appointment and examines their schedule of works, the results of their audits and their recommendations as well as any actions taken on the basis of these recommendations; ● it gives an opinion on the procedures implemented by the Company to ensure compliance with regulations, and monitors the efficacy of internal control and risk management systems; ● it gives opinions on the appointment or dismissal of the Head of Group Internal Audit; ● it monitors the implementation of actions based on the conclusions of assignments undertaken by Group Internal Audit and the French Prudential Supervisory Authority (ACP); for this purpose, it may receive reports from Group Internal Audit and the ACP (Prudential Supervisory Authority) in relation to the Company and its subsidiaries; ● it approves the Company’s annual internal audit, including audits of subsidiaries, with this program being presented to the Committee at least one week prior to its approval; ● it gives its opinion on the report presented to it on an annual basis regarding commercial relations between the Company or one or more of its subsidiaries and all or some of the entities forming the BPCE Group.
The Company’s CEO provides the Audit Committee with any documents and information it needs to perform its duties. The following list is not exhaustive: ● parent and consolidated financial, accounting, and regulatory documents prepared periodically by the Company; ● summary reports by the Company’s Statutory Auditors;
● any audit reports concerning the Company; ● accounting policies and methods applied within the Company; ● internal control policies and procedures; ● projected parent and consolidated results at the end of March, June, September and December; ● consolidated budgets and financial statements of the main subsidiaries, as well as any related documents provided to the Supervisory Board or, if applicable, the Audit Committee of the principal subsidiaries.
The Audit Committee may submit to the Board of Directors any proposals to conduct an audit, especially concerning the fi nancial statements of the Company and its subsidiaries.
Minutes of the Audit Committee Meetings are prepared by the secretary of the Board of Directors. These minutes are distributed to members of the Audit Committee and the Board of Directors is made aware of the Audit Committee’s work so that it can be fully informed in its decision-making.
In 2010, the Committee’s duties focused on the following items in particular: ● the reappointment of two Statutory Auditors; ● the appointment of the Head of the Group Internal Audit; ● the review of reports on internal control processes and procedure (Article 42 of CRBF rule 97-02) and risk measurement and monitoring (Article 43 of CRBF rule 97-02); ● changes in liquidity management methods; ● GAPC portfolio assets; ● regulatory issues: risk of non-compliance, business continuity, outsourcing core services/activities; ● the proposed audit plan for 2011; ● the 2011 annual budget; and
● the acknowledgement of all correspondence from the ACP (Prudential Supervisory Authority) as well as all correspondence and information from the Autorité des Marchés Financiers and the answers to said correspondence from Natixis.
Natixis’ Compensation Committee was made up of six members including three independent members in 2010.
The scope of responsibility of Natixis’ Compensation Committee essentially relates to pay reviews and the selection of corporate offi cers. The Compensation Committee’s powers and operating procedures are described in greater detail in the Internal Rules of the Board of Directors, the latest version of which was approved on December 17, 2009.
Since the fi nal quarter of 2009, the Compensation Committee has also been responsible for an annual review of Natixis’ compensation policy, in particular for market professionals, and for checking, on the basis of an executive management report, that said policy complies with Chapter IV, Section VI of CRBF rule 97-02 and is in line with the provisions set out by the French Financial Stability Board and the professional standards to which the Company adheres.
Natixis’ Compensation Committee is also in charge of selections and appointments. The Committee gives an opinion and, upon request from the Board, makes proposals and recommendations to the Board on the appointment of a CEO and, when appropriate, one or more Deputy CEOs or board members.
The Company’s CEO provides the Compensation Committee with any documents that may assist it in performing its duties and to ensure it is fully informed. At the request of the Board of Directors, the Compensation Committee may also appoint outside experts to carry out reviews or analyze the compensation paid to the corporate offi cers of comparable companies in the banking sector.
The Compensation Committee met four times in 2010 to give an opinion on: ● the calculation of the CEO’s base and variable compensation for 2010 and 2011; ● the compensation of the Chairman of the Board of Directors for 2011; ● board members’ fees at the end of each quarter in 2010; ● compensation for market professionals in 2009 and 2010; ● the annual review of the classification of the status of board members as independent members; ● the annual review of AFEP-MEDEF code recommendations; and
The attendance rate was 88% for the year as a whole, compared with 78% in 2009.
On December 31, 2010, Board members included Ms. Aline Bec (Information Systems Purchasing Logistics) and Messrs. LucEmmanuel Auberger (Finance and Risks), De Doan Tran (Corporate and Investment Banking), Jean Yves Forel (Specialized Financial Services), André-Jean Olivier (Corporate Secretariat) and Pierre Servant (Investment Solutions).
Lastly, Natixis has an Executive Committee comprising the members of the Management Board and the heads of certain business lines and support functions essential to the Company’s success. The Committee’s role mainly focuses on information and monitoring.
The Chief Executive Offi cer may partly delegate his or her powers to any corporate offi cer of his/her choosing, with or without the option of substitution. In this respect, Natixis revised all of the provisions governing the delegation of authority and signature authority in 2010.
In agreement with the Chief Executive Offi cer, the Board of Directors determines the scope and duration of the powers conferred upon the Deputy Chief Executive Offi cers. They have the same powers with respect to third parties as the Chief Executive Offi cer.
Following Natixis’ conversion into a French “société anonyme” with a Board of Directors, a Management Board was set up in early May 2009 in order to serve as the ultimate decisionmaking body for Natixis’ day-to-day business. In 2010, the Board met on a weekly basis without exception, apart from during part of the summer holidays and the end-of-year holiday season. A total of 44 meetings were held in 2010 which were chaired by the Chief Executive Offi cer.
Except where circumstances prevented them from doing so, the members of the Senior Management Committee were present at all meetings during the year. Representatives from the business lines or different support functions were invited to present projects or policies falling within their departmental remits.
Natixis’ Senior Management Committee closely surveyed changes in the economic and regulatory climate within the banking and insurance sectors and their possible impact on the Company’s respective businesses. The Senior Management Committee reviewed and validated the Bank’s main strategic priorities, during specifi c work meetings where necessary. These priorities included implementing and monitoring the New Deal plan, downsizing GAPC (workout portfolio management) positions, introducing the new organizational structure for the Corporate and Investment Banking arm, enhancing commercial cooperation with Groupe BPCE’s networks as part of the “Groupe Ensemble” project and setting up non-business line support functions. The Senior Management Committee also oversaw operational execution of these priorities.
The Senior Management Committee regularly examined the Company’s business development and results during its meetings throughout the year. It reviewed the half-yearly and quarterly fi nancial statements before they were presented to the Board of Directors and was involved in the publication of the Company’s fi nancial communications.
The Senior Management Committee also validated the main management decisions and, in particular, reviewed and approved the Company’s budget; the terms and conditions governing mandatory annual negotiations and the compensation review policy; the defi nition of the general terms and principles governing variable compensation for market professionals; the appointment of senior executives and managers; the enhancement of supervisory tools and internal control and compliance procedures as well as all signifi cant projects and investments.
OGMs may also be used to appoint or re-appoint board members and non-voting members as well as to appoint or re-appoint Statutory Auditors and, if necessary, ratify the coopting of a member of the Board.
AGMs combine the two previous types of meetings (OGM and EGM) on the same date under the same notice of meeting.
Article L.228-1 of the French Commercial Code) in their name or in the name of an intermediary acting on their behalf, either in the registered share accounts held by the Company or in the bearer share accounts held by their authorized intermediaries, no later than three working days before the date of the meeting (by midnight Paris local time hereinafter referred to as D-3), may attend the meetings.
In the case of holders of bearer shares, authorized intermediaries keep accounts of bearer shares which serve to prove their clients’ status as a shareholder directly to the centralizing body of the meeting. They do so by producing a certifi cate that they attach to the voting form or admission card request in the name of the shareholder or the name of the registered intermediary acting on behalf of the shareholder. A certifi cate is also delivered to shareholders wishing to attend the meeting in person and who have not received an admission card by D-3.
In line with the provisions of Article 25 of the bylaws, each member of the Shareholders’ Meeting is entitled to the same number of votes as the shares he/she owns or represents.
2 CORPORATE GOVERNANCE Role and operating rules of the corporate bodies 2.3.4.6 Identifi cation of shareholders
2CORPORATE GOVERNANCE Policies and rules for determining compensation and benefi ts 2.4 Policies and rules for determining compensation and benefits of all kinds paid to members of the corporate bodies
The recommendations of the AFEP-MEDEF code on the compensation of executive corporate offi cers of listed companies are taken into account in the bank’s corporate governance approach. As shown above, the AFEP-MEDEF code is the one that the Company refers to when preparing the report provided for by Article L.225-37 of the French Commercial Code.
2.4.1.1 Compensation and benefi ts of all kinds for the Chairman of the Board of Directors
The Chairman of the Board of Directors waived all fi xed and variable compensation with respect to the performance of his duties at Natixis in 2010.
The members of the Board of Directors of Natixis received attendance fees with respect to 2010 under the terms and conditions stipulated below.
Attendance fees are granted according to the following rules, provided that Natixis’ results are positive: ● Members of the Board of Directors: − fi xed portion: €10,000 per year
− variable portion: €2,000 per meeting, up to a maximum of 5 meetings
Committee Chairpersons have no variable portion, in accordance with the principle that no Committee Meeting can be held in their absence.
Furthermore, in accordance with the rules applicable within the BPCE Group, the portion of attendance fees going to BPCE directors (including that of the Chairman) is granted and paid to BPCE and not to the directors.
The fi xed gross annual compensation of Laurent Mignon in relation to his duties as CEO of Natixis was €800,000 for 2010.
With regard to calculation of the variable compensation paid to the CEO for 2010, the Board of Directors, based on the opinion of the Compensation Committee, approved the proposal that, for 2010, said compensation should not exceed 150% of his fi xed compensation.
The variable compensation to be paid in 2011 for 2010 was calculated on the basis of quantitative and qualitative criteria defi ned by the Board of Directors in advance, as follows: ● Quantitative criteria relate to 70% of the variable compensation. These criteria depend on the BPCE Group’s performance (net income of BPCE) and on the performance of Natixis (net income of Natixis including GAPC, NBI of Natixis and RWA of GAPC, before guarantee); ● Qualitative criteria are assessed by the Board of Directors and are linked to the creation of the strategic New Deal plan, cross-function projects and performance. This in turn is assessed according to the CEO’s capacity for foresight, decision-making and implementation, investment in compliance and control systems and risk management and management of executive staff. These criteria are described in full and apply to 30% of the CEO’s basic variable compensation.
2.4.2.2 Compensation paid to the CEO in the form of stock options
With regard to calculation of severance payments for the duties of CEO, the Board of Directors, on the advice of the Compensation Committee, decided that no severance payments for duties as CEO would be paid during the fi rst year of offi ce and referred the task of reviewing this issue in relation to the AFEP-MEDEF code recommendations applicable, to a Compensation Committee Meeting to be held in the fi rst half of 2010.
As of December 31, 2010, the Board of Directors had not yet make a decision on this matter.
During its meeting of February 22, 2011, the Board of Directors authorized the commitment establishing the terms and conditions of the compensation due or liable to be due to Laurent Mignon in the event of him ceasing his functions as Chief Executive Offi cer. As indicated in the Board of Directors’ report concerning the resolutions submitted to the General Shareholders’ Meeting (§6.5.1), this commitment shall be submitted for approval to the General Shareholders’ Meeting of May 26, 2011.
Furthermore, members of the Board of Directors do not benefi t from severance payments in relation to their function with Natixis.
Summary of the compensation, stock options and shares granted to each executive director 2010 Fiscal year 2009 Fiscal year
(b) On February 22, 2011, the Board of Directors, on the advice of the Compensation Committee, decided to pay the CEO variable compensation, the latter having met the quantitative and qualitative criteria set. In accordance with applicable “Professional standards concerning the governance and variable compensations of employees whose professional operations have a signifi cant impact on the company’s risk profi le” and with the provisions of Regulation 97-02 of February 21, 1997, concerning the internal control of credit institutions and investment fi rms, as amended by the Decree of December 13, 2010, 71% of this variable compensation will be differed for three years and subject to performance criteria linked to Natixis’ results. This deferred portion will be in the form of Natixis securities and cash.
(c) The total amount corresponding to 37% of the variable compensation in relation to 2009 which had been frozen by the Board of Directors on February 24, 2010, and which, following the confi rmed recovery of Natixis in Q1 2010, was paid in May 2010.
Alain Lemaire (term of offi ce at Natixis up to 05.27.2009)
Jean-Charles Naouri (term of offi ce at Natixis up to 12.31.2010)
2CORPORATE GOVERNANCE Policies and rules for determining compensation and benefi ts
Valuation of options according to the method adopted for the consolidated fi nancial statements
Subscription or purchase options exercised during the period by each executive corporate officer
Performance shares that became available-for-sale during the period for each executive corporate officer
Date of the General Shareholders’ Meeting May 27, 2004 May 19, 2005 Nov. 17, 2006 May 24, 2007
Terms of exercise (for plans with several tranches) n/a n/a n/a n/a
Number of shares subscribed as at 12.31.2010 130,130 21,560 0 0
Options granted during the fi nancial year by the issuer and any company included in the scope for issue over the period, to the top ten salaried employees of the issuer and of any company included in this scope who hold the most number of options granted in this way 0 n/a n/a
Laurent Mignon, CEO Date term of offi ce commenced: May 14, 2009
Date term of offi ce expires: * Retirement plan benefi ts for all personnel.
2 CORPORATE GOVERNANCE Potential confl icts of interest 2.5 Potential conflicts of interest 2.5.1 COMPETENCE AND INTEGRITY OF DIRECTORS
In accordance with the enforcement decree of the EU directive 2003/71 (Article 14.1, paragraph 2), none of the members of the Board of Directors or the Executive Management Board has been convicted of fraud within the previous fi ve years at least, has been subject to bankruptcy, liquidation or receivership within the previous fi ve years at least, has been convicted or punished by offi cial or regulatory bodies, has been disqualifi ed from acting as a member of administrative, management or supervisory bodies of an issuer or from participating in the management or conduct of the business of an issuer within the previous fi ve years at least.
2.5.2 CONTRACTS BINDING THE COMPANY AND THE DIRECTORS AND THE EXECUTIVE MANAGEMENT
Natixis and its subsidiaries maintain business relationships with their main shareholder and board member BPCE or some of its subsidiaries.
Members of the Natixis Board of Directors include Natixis’ main shareholder BPCE, as well as salaried employees of Groupe BPCE. Moreover, Natixis maintains business relationships with its shareholder and board member BPCE. Natixis considers that this situation does not constitute a confl ict of interest.
Banking relationships between Natixis and the groups chaired by the independent members of the Board are not of a nature liable to affect the impartiality of their judgment.
2CORPORATE GOVERNANCE Chairman’s report on the internal control procedures 2.6 Chairman’s report on the internal control procedures
In reference to its regulatory requirements, to commitments made to the CECEI and to the governance framework established within Groupe BPCE, Natixis has structured its internal control system around a periodic control department that performs audits, together with entities responsible for permanently testing transaction compliance and security as well as overseeing the effectiveness of Natixis’ risk management and monitoring mechanisms.
The objective of these standards is to ensure the effectiveness and quality of the Company’s internal operation, the reliability of accounting and fi nancial information distributed both internally and externally, the security of operations, and compliance with laws, regulations and internal policies.
Permanent and periodic controls introduced by Natixis are organized from the fi rst operational or functional level up to the highest level. They are structured according to three principles: ● Natixis separates its risk-taking and control functions, as well as the different levels of control. This separation results in: − a distinction between front- and back-offi ce functions,
− the existence of fi rst-level controls at the operational level,
Although responsibility for fi rst-level internal control lies fi rstly with operational or functional departments, secondlevel permanent controls and periodic controls are carried out by independent central functional departments (whose heads as defi ned in Articles 7 and 11 of the CRBF rule, report directly to Natixis’ executive body as defi ned in Article 4 of the same rule); ● Concerning the scope of internal control, Natixis organizes its control functions on a global basis so as to ensure consistency of the internal control mechanism throughout the whole Company. The internal control system thus covers all risks and extends to all business lines and subsidiaries within Natixis. Local permanent and periodic control functions within subsidiaries or business lines report to Natixis’ corresponding central control departments, either on a functional basis in the case of subsidiaries or on a hierarchical basis in the case of business lines. The “risk”, “compliance” and “audit” functions constitute distinct business functions; ● Natixis structures its control mechanism in a manner consistent with the principles set out by BPCE, with the objective of ensuring a consolidated approach to risk under the framework of control exercised by the shareholder group and central body, as well as satisfying the consolidated monitoring requirements set out in the CRBF rule.
The Corporate Secretary is responsible for the second-level permanent controls system, which is carried out by two main participants: the Compliance Department (including IT Systems Security) and the Risk Department.
This opinion is accompanied by the right of blockage or appeal, under the New Product Committees framework set up within Natixis’ business lines and its subsidiaries, or centrally for products common to several business lines; − intervene in an advisory role in order to support activities with a view to ensuring security and compliance with standards; − contribute to employee training in conjunction with the Human Resources Department; − manage IT systems projects dedicated to monitoring and managing compliance risks on a consolidated basis at Natixis group level; centralize logging and reporting of dysfunctions resulting in non-compliance at subsidiary or business-line level, with a view to their consolidation by Natixis; − centralize logging and reporting of possible dysfunctions as set out in Article 11-2 of amended rule 97-02, at subsidiary or business-line level, with a view to their consolidation by the Natixis group and their communication to BPCE; and defi ning the conditions for exercising the alert mechanism provided for by this article whilst respecting the confi dentiality of declaring parties; − prepare regular summary reports, notably for Natixis’ and BPCE Executive Management; − oversee the consistency and effectiveness of permanent controls for compliance risk.
● The Compliance Department reports to the Corporate Secretary and functions independently of operational departments. The Corporate Secretary is responsible for permanent control, as defined in rule 97-02.
As part of a broader Compliance function, Natixis’ Compliance Department provides direction and impetus to Compliance managers in subsidiaries and branches, this being done through a strong functional link of a hierarchical nature. Compliance managers in subsidiaries and branches report to the executive body or, exceptionally, if the size of the entity warrants it, to a permanent control manager who, in turn, reports to the executive body, and to Natixis’ Chief Compliance Offi cer through a strong functional link of a hierarchical nature.
This strong functional link of a hierarchical nature expresses itself through: − Natixis’ Chief Compliance Offi cer being required to issue prior approval to the secondment, appointment or removal of a subsidiary’s Compliance manager; − Natixis’ Chief Compliance Offi cer participating in annual performance and career advancement reviews; − the obligation to send information to Natixis’ Chief Compliance Offi cer.
For business lines operated by the head offi ce, Compliance managers report directly and hierarchically to Natixis’ Chief Compliance Offi cer.
The professional ethics/compliance function ensures that regulations applicable to investment service providers and which thus concern Natixis, its subsidiaries and all of its employees, are fully known and enforced to ensure market integrity and primacy of customer interests.
In a busy year for regulatory matters in 2010, the goals were to continue to roll out the tool for detecting confl icts of interest abroad and to implement new professional certifi cation measures.
An organization, procedures and an IT tool were set up to prevent and manage any confl icts of interest. This tool, which is accessible to front offi ce operators, compliance offi cers and Compliance function controllers, is used to record planned transactions and detect those that could generate confl icts of interest through the diversity of Natixis’ activities and sites. It was operational in all of Natixis’ European sites in 2009, and was rolled out in Asia (Hong Kong and Singapore), Sydney and New York in 2010. Uptake by local teams is facilitated through periodic exchange between Paris and local compliance managers.
Since July 1, 2010, the AMF (French Financial Market Regulator) has also overseen checks to ascertain the degree of knowledge possessed by certain employees. These checks concern sales staff, asset managers, derivatives traders and fi nancial analysts. As a result, only “certifi ed” individuals may now work in these positions. Groupe BPCE and Natixis decided to set up an in-house training program leading to a test in order to verify employees’ knowledge in line with AMF requirements, rather than working with an external organization.
The Financial Security Department reports to Compliance management and is in charge of organizing the mechanism for countering money laundering and terrorist fi nancing within Natixis and its subsidiaries (in coordination with the heads of these entities). Financial Security thus plays an essential advisory, monitoring, training and informational role within the Natixis group.
Controls performed by the Compliance Department may take three forms: ● controls based on indicators arising from first-level controls; ● controls based on warnings issued by automated control systems, especially under the framework of anti-money laundering and market abuse detection plans; ● controls through checks on accounting documents and, if appropriate, on-site checks, so as to ensure that automated controls are relevant. They can also be used to check the application of more qualitative rules (knowledge and classification of the customer, application of Chinese walls, management of conflicts of interest, etc.).
As an extension of the compliance risk mapping work conducted within Natixis in 2009, the Compliance Department launched an exercise to identify Natixis’ major business line risks in the fi rst half of 2010.
This exercise, which was rounded out with a project undertaken within the Compliance function in the second half of 2010, helped set up new methods for assessing compliance risks and formalized the process for mapping and reporting on the function’s major compliance risks.
The Head of ITSS and Business Continuity (Head of ITSS and BC) works for Natixis and its subsidiaries in France and abroad. His/her role includes: ● ensuring at all times that security policy is appropriate to the risks incurred and to regulations; ● promoting security policy and ensuring its compliance at all levels; ● if necessary, identifying the security services to be implemented; ● verifying and monitoring compliance with this policy and ensuring overall tracking across the entire Natixis.
Natixis’ Head of ITSS and BC is in charge of the IT Systems Security and Business Continuity function, which includes the ITSS-BC Department (reporting to the Compliance Department) and all persons charged with implementing and controlling IT System Security and Business Continuity locally. These persons include: ● the Head of ITSS and the Head of BCP who report to Natixis’ subsidiaries or business lines and are in charge of applying security policy locally according to the context in the sector concerned; ● local correspondents within the business lines (notably Business Continuity Plan correspondents and logical security correspondents). They are responsible for relaying security policy locally and delivering advice and assistance on the subject within their area of responsibility; ● correspondents within IT project management teams responsible for implementing and maintaining security mechanisms.
To bring governance of IT system security and business continuity into line with the new objectives set out in the New Deal Plan, Natixis introduced an organizational and operating charter for the IT Security and Business Continuity function in 2010. This charter instigates a unifi ed ITSS-BC function with CIB, that includes a level of ITSS hierarchy within divisions in order to make it easier to enforce security in closer relation with the business lines.
Fundamental actions h ave been taken to reinforce and control logical security. These actions involve: ● setting up a security datawarehouse that performs multi-database and multi-environment queries on in-house user authorizations and improves control of authorizations; ● following the recommendations of the so-called Lagarde report, the continuation of the biometric authentication project for traders (authentication by automatic recognition of individual finger veins instead of entering user names and passwords); ● rolling out an “electronic safe” software package to secure high-privilege administrators’ passwords; ● managing client and server certificates;
● introducing a workstation compliance control solution (coding, USB port protection, etc.). The entire laptop PC stock is currently being coded, and high-sensitivity USB ports are being protected.
In 2010, ITSS-BC continued its IT project control program and employee awareness-building actions. Several thousand employees, in particular at CIB, participated in these awarenessbuilding actions.
In parallel, standards were written on various subjects, including incoming/outgoing staff management and email archiving.
Natixis’ continuity mechanism is placed under the responsibility of Natixis’ head of ITSS and BC. Work in 2010 focused on: ● continuing actions in relation to the H1N1 flu pandemic; ● the flood risk plan, with a special focus on the risk of flooding of the Seine, and participation in an exercise to assess robustness in this area; ● The implementation of a new scorecard for assessing the maturity of business continuity and compliance plans relative to business continuity and crisis management policies. This scorecard is consolidated and transmitted to business line managements; ● the introduction of remote working procedures and infrastructure. A related drill was conducted; ● monitoring and supervision. The monitoring and support unit set up to coordinate and steer the various crisis units and to inform executive crisis unit members in the event of a crisis was contacted for incidents that were quickly controlled; ● testing of business continuity plans. Natixis has over 1,500 backup positions for users, an IT backup site and crisis meeting rooms. In 2010, Natixis conducted 24 user backup drills, around 30 IT backup tests and four crisis management drills; ● raising employees’ awareness of business continuity: all employees were sent an informational brochure on how to react in the event of a crisis; ● nine BPCE working groups participated in this business continuity activity.
The work of Natixis’ Internal Audit Department is based on an annual Audit Plan drafted jointly with Groupe BPCE’s General Inspection and which aims to optimize the allocation of audit resources across the perimeter covered. It is part of a fouryear plan that sets out the intervention frequency and adapts resources to the risks to be controlled.
In addition to conventional audit assignments, the Internal Audit Deparment is also able to carry out ad hoc audits in order to address issues arising during the year and not initially included in the Audit Plan.
Natixis’ annual and multi-year audit plans are approved by its Chief Executive Offi cer and by BPCE’s General Inspection. The Annual Audit Plan is examined by the Audit Committee.
In 2010, Group Audit conducted audit assignments on all risk classes to which Natixis’ activities are exposed. It devoted a fairly signifi cant share of its resources to assignments of a regulatory nature, as part of the Bank’s Basel II certifi cation process undertaken by Natixis, as well as assignments conducted in Natixis subsidiaries pursuant to audit agreements entered into with them in 2008.
The Committee is chaired by the Natixis Chief Executive Offi cer, or his substitute the Corporate Secretary, and comprises the Chief Financial Offi cer, and the heads of Risk, Compliance and Internal Audit. The head of Compliance acts as the Committee’s secretary.
Natixis’ highest-level risk governance authority is the Natixis Risk Committee, which defi nes the key elements of risk policy, analyzes the main risks and validates the main risk standards and methods implemented.
The support function optimization project, which aims to ensure integrated and more effi cient oversight of Natixis’ three business divisions in accordance with regulatory requirements, led the Risk Department to revise its entire process and operating procedures with the business lines.
Each credit fi le submitted for a decision must include an internal rating proposal, an LGD (loss given default) proposal as well as limit recommendations.
Credit decisions are made either through mandates granted jointly to business lines and certain members of the Risk Department or by the relevant Credit Committees, following an independent analytical process. These mandates are set out formally and granted individually by the Chief Executive Offi cer or by any person whom he authorizes to that end. They are sized according to the counterparty’s category and internal credit rating, and the nature and duration of the commitment.
The Individual Risk Department was created on July 1, 2010 as part of the integrated Risk function, in order to centralize and counter-analyze credit fi les emanating from any entity or business line and to make joint decisions with the business lines within the scope of its mandates.
Two types of stress tests have been developed: ● macro-economic stress tests according to scenarios drawn up by Natixis’ economic research team; ● stress tests specific to certain Natixis business lines.
These credit stress tests were launched in the fi rst few months of 2010 and are presented each quarter to Natixis’ Global Risk Committee.
Natixis uses the advanced internal ratings based approach for each counterparty and each commitment for the purposes of managing credit risks (decision-making, monitoring, etc.). In concert with BPCE, it has defi ned the rating methods applicable to the asset classes held jointly. It intervenes in accordance with the organization that sets the roles of each participant in terms of ratings, rating information and rating monitoring, with a view to ensuring the uniformity and consistency of the methodologies used and ratings attributed throughout the whole Group. In the same way, Natixis’ LGD mechanism dovetails with that of Groupe BPCE.
Natixis’ commitments are measured and monitored on a daily basis using dedicated consolidation systems.
The Risk Department provides Executive Management and the Bank’s business line managers with reports analyzing Natixis’ risks and notably comprising analyses of trends and scorecards, etc. Natixis’ commitments as well as changes in them are presented according to risk indicators such as: ● the counterparty’s category, internal rating, business sector or geographic location; ● type of commitment, LGD; ● Basel II segmentation.
Business-line front-offi ces carry out day-to-day monitoring, the middle offi ce oversees fi nancing and the Risk Department conducts second-level controls.
As regards limit excesses, the monthly Limit Excess Committee analyzes changes in limit excesses using specifi c indicators (number, total, duration, business lines concerned, etc.), and examines signifi cant excesses and monitors their correction.
Quarterly monitoring of watch-listed counterparties and the process for determining specifi c additions to and reversals of provisions are examined concomitantly through a process that is organized in the fi rst instance by business line.
The breakdown by business line is then presented for validation by the Natixis Watch List and Provisions Committee.
This Committee is organized by the Risk Department and chaired by the Chief Executive Offi cer. It comprises the members of the Senior Management Committee in charge of the business lines, Finance and Risk, the head of Risk and the heads of the functions concerned.
The charter defi nes: ● the principles and system for managing Natixis’ market risks; ● the conditions under which market risk limits are examined, allocated and monitored; ● the respective roles of the business-line front offices, the Market Risk Department and the Natixis Market Risk Committee.
Natixis’ Market Risk Committee meets twice a month and is chaired by the Chief Executive Offi cer or his duly appointed delegate, a member of the Senior Management Committee.
The Committee Chairman is the only person authorized to rule on all the cases presented.
A local Market Risk Committee meets once a month in New York. This Committee does not make decisions, but informs local management of changes in the main risk zones.
As part of Natixis’ Risk function, the Market Risk Department plays a major role in the overall system: ● it provides a view of the market risk decision process that is independent of that of the business line; ● it defines risk measurement and fair value adjustment methods and submits them to the Market Risk Committee for approval; ● it suggests limits or examines limit requests (VaR (1), stress tests, operational limits, loss alerts); ● it proactively manages risks and advises the business lines and Executive Management, in particular by analyzing specific risks according to market events; ● it is responsible for the daily analysis and measurement of risks, daily reporting, and notifying front office and the management of any excesses; ● it approves the pricing models used by front office in its management tools.
The system is based on levels of delegation (front offi ce and risks) and determining factors such as VaR limit levels, stress tests, operational factors, type of indicators (quantitative, qualitative), percentage increase compared with limits, type of transaction.
An international market risk charter identifi es the global heads of market risk monitoring by business line. It also sets out the principles for greater interaction between central and local teams in order to refl ect the worldwide organization of front offi ce activities.
The calculation methodology is based on an econometric model whose standard deviations are calculated as being the maximum (risk factor by risk factor) standard deviations calculated over 12-month and 3-month roll-over periods. This method makes VaR more responsive if the markets become more volatile.
All decisions regarding risks factors are revised annually in Committee Meetings attended by all the parties concerned (Risk Department, front offi ce and Results Department, with the objective of ensuring consistency between VaR calculations, results and sensitivities (use of the same risk factors).
Natixis’ internal VaR model was approved by France’s Prudential Supervisory Authority in January 2009. Natixis therefore uses VaR to calculate capital requirements in respect of market risks across approved scopes.
Overall stress tests (hypothetical and historic) are calculated daily in the VaR calculation tool and revised as part of a permanent process. Two new historical stress tests (adding to the nine existing already) and one new hypothetical stress test (adding to the fi ve already existing) were put in place.
Specifi c stress tests, which are also calculated daily in management tools, were rolled out over all portfolios and supported by alerts. They were defi ned using the same severity standard and are used to identify the main loss areas by portfolio.
Natixis’ Market Risks Department is in charge of controlling second-level ALM indicators produced by the Financial division (mismatching ratios, etc.) and the liquidity management team (1- to 60-day static liquidity gaps).
The most signifi cant positions concern exposures over the short end of yield curves and are notably linked to timelags between LIBOR reset dates. This risk is measured in terms of the sensitivity of the economic value of portfolios by percentage point of the yield curve and by currency. It is controlled, for the most important portfolios, through limits confi rmed and monitored by the Finance and Risk Department. As regards Treasury, on which most positions are concentrated, this mechanism is rounded out with daily VaR measurements governed by limits and stress tests.
The Operational Risk Department is responsible for monitoring and controlling risks arising from failures attributable to operating procedures, employees and internal systems or arising from outside events.
− environmental indicators and variables; ● operational risk control procedures: − drawing up and monitoring action plans,
Business-line Operational Risk Committees are offshoots of Natixis’ Operational Risks Committee. They closely manage business lines’ exposure to operational risks. The Committees meet at least quarterly and are chaired by the head of the relevant business line with the participation of the Operational Risk Department, which acts as Committee secretary.
Natixis’ consolidated fi nancial statements are prepared by the Finance Department using the consolidation tools and standards developed and administered by Natixis S.A. As a listed company, Natixis is required to prepare its own consolidated fi nancial statements, although the sub-group of which it is the parent has been part of the BPCE consolidated group formed by the Banques Populaires and Caisses d’Epargne groups since July 1, 2009.
The reliability of this process is based on the following core principles: ● definition and dissemination of the accounting principles applicable to group companies, including the analysis and interpretation of new IFRS accounting regulations published during the period; ● use of the direct consolidation method, broadly rolled out throughout the group, allowing for the analysis and control of the consolidation reports of each consolidated company via a formal review process; ● preparation of consolidated financial statements on a quarterly basis. This allows for greater control over financial reporting, thus anticipating significant transactions over the fiscal year; ● reporting and reconciliation of intra-group transactions at M-1 and then at M, M being the reporting month, thus increasing the number of reconciliations and contributing to the preparation of quarterly statements; ● use of an automated control process for individual information provided by the consolidated entities through the use of consolidation reports that incorporate accuracy and consistency controls, which must be complied with before the data can be transmitted;
The efforts to reduce publication timeframes which began in 2009 and gathered pace in 2010 enabled the Company to: ● identify the processes that are part of the critical path of accounts production and suggest new optimization levers; ● schedule work and validation/control points, notably in order to anticipate certain tasks in the accounting process; ● bring together all participants in the process in order to devise action plans adapted to the timeframe reduction targets; ● further strengthen management and monitoring of periodends.
Thanks to this work, 2010 interim results were published in a shorter timeframe.
Permanent and periodic controls particularly involve conducting and monitoring: ● account justifications; ● clearing of suspense items; ● management/financial accounts reconciliation procedures (balance sheet and income statement); ● compliance with accounting rules regarding the correct allocation of income and expenses; ● correct processing of specific transactions in line with the relevant principles; ● adjustment of anomalies identified at the time of these controls as well as the corresponding analyses and documentation.
For all these systems, Natixis and its subsidiaries continue to upgrade their accounting and fi nancial control procedures
2CORPORATE GOVERNANCE Chairman’s report on the internal control procedures and equip themselves with suitable audit trail tools. In this respect, Natixis’ Finance Department supervises, manages and monitors the various controls performed by the subsidiaries.
As regards the scope of the Natixis entity, after the completion of work to implement the Reporting Systems Master Project (SDSS) in 2009, efforts in 2010 focused on the ongoing uptake of these new standards, data warehouses, databases and work methods by all accounting system users.
Under the impetus of the New Deal corporate plan, the organization of the Accounting Control mechanism has been adapted and is now based upon: ● accounting production teams within the business lines that handle all work related to the correct entry of transactions (recycling, management of manual cases, links with the product back offices and business-line project management, participation in different business-line Committees such as Provisions Committees, ad hoc Committees, etc.) and the implementation of day-to-day controls; ● first-level controls under the hierarchical and/or functional authority of the Accounting Department including all monthly and quarterly controls that make the accounts more reliable; ● second-level controls under the hierarchical authority of the Accounting Department and the functional authority of the Compliance Department and which, beyond managing period-end control processes, include reviewing all work carried out by first-level control teams.
Lastly, a think-tank has been set up to consider policy for deploying the head offi ce accounting system internationally, particularly in the US and Europe.
In 2010, work focused on the following areas: ● overhauling capital-market control procedures.
Consolidating the 2009 launch of the New Deal “Support Functions” project which culminated in the attachment of the CIB Capital Markets Accounting and CIB management control teams (markets and financing) to the Finance Department.
The 2011 fi scal year will be mainly dedicated to: ● continuing the deployment of the Matisse accounting system across the US; ● implementing a project for Financings, geared to equipping Natixis with a new transaction management system.
In addition to the control procedures followed by the fi nancial departments responsible for preparing individual or consolidated accounts, the quality of accounting controls is verifi ed by: ● ad hoc audit assignments conducted by BPCE’s and Natixis’ Group Audit; ● audits conducted by the French Banking Commission in its role as banking regulator; ● audits conducted by Statutory Auditors. This work is carried out by three firms working in a collegiate and standardized manner each quarter throughout all entities consolidated by Natixis. The conclusions from these audits taken into account compliance with group policies and the effectiveness of local internal control procedures.
2CORPORATE GOVERNANCE Statutory Auditor’s report on the report prepared by the Chairman of the Board of Directors 2.7 Statutory Auditor’s report on the report prepared by the Chairman of the Board of Directors
STATUTORY AUDITOR’S REPORT PREPARED IN ACCORDANCE WITH ARTICLE L. 225-235 OF THE FRENCH COMMERCIAL CODE ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
It is the Chairman’s responsibility to prepare, and submit to the Board of Directors for approval, a report on the internal control and risk management procedures implemented by the company and containing the other disclosures required by Article L.225-37 of the French Commercial Code, particularly in terms of corporate governance.
Information on the internal control and risk management procedures relating to the preparation and processing of accounting and fi nancial information
We hereby attest that the Chairman’s report includes the other disclosures required by Article L.225-37 of the French Commercial Code.
2 CORPORATE GOVERNANCE Statutory Auditor’s report on the report prepared by the Chairman of the Board of Directors
Natixis operates in an environment that presents inherent risks, some of which it cannot control. Certain risks to which Natixis is exposed are identifi ed below, it being emphasized that it is not an exhaustive list of all risks taken by Natixis in relation to its business or in consideration of its environment. The risks set out below, as well as other currently unidentifi ed risks or which are currently considered immaterial by Natixis, may have a material adverse impact on its operations, fi nancial position and/or results. The scale and impact that these risks could have on the results and assets of Natixis, as well as the organization and control of these risks, are more fully described in subsequent sections of Chapter [3] “Risk management”.
Natixis’ sensitive exposures are detailed in section [3.7], in accordance with the recommendations of the Financial Stability Forum.
3.1.1 RISKS RELATED TO THE MACROECONOMIC ENVIRONMENT AND THE FINANCIAL CRISIS
The potential tightening of regulations governing the fi nancial sector, dictated by the fi nancial crisis, could lead to the introduction of new compliance restrictions
Governments (including governments of countries where Natixis entities are established) have responded to the fi nancial crisis by adopting a certain number of precautionary measures. Others are still under consideration. The analysis and interpretation of these measures, which arise from diverse and sometimes contradictory sources, may generate new pressures for Natixis in its efforts to comply with the new precautionary measures.
The implementation and observation of these measures could raise Natixis’ costs and increase regulatory capital and liquidity requirements. The scale and impact of these measures (in particular those still being examined) on the situation of fi nancial markets in general and Natixis in particular are still diffi cult to precisely determine at this point.
Natixis has suffered signifi cant losses, and may continue to suffer losses, on its portfolio of assets affected by the fi nancial crisis (GAPC, i.e. workout portfolio, assets).
Natixis’ principal shareholder has a signifi cant infl uence on certain corporate actions
BPCE, Natixis’ principal shareholder, held 71.54% of its capital (and 71.65% of its voting rights) at December 31, 2010. As a result BPCE is in a position to exercise a signifi cant infl uence on the appointment of Natixis’ directors and offi cers as well as any other corporate decision requiring shareholder approval. BPCE’s interests in relation to these decisions may differ from those of other Natixis shareholders.
As the central body, BPCE is required to ensure that all of Groupe BPCE – to which Natixis belongs – complies with regulations in force governing the banking sector in France in areas such as regulatory capital adequacy and risk management requirements. As a result, BPCE has been vested with signifi cant rights of approval over important aspects of Natixis’ risk management policies. In particular, BPCE has the power to approve the appointment or removal of Natixis’ director of internal audit, as well as certain aspects of risk management such as the approval of credit limits and the classifi cation of loans granted to joint Natixis-Groupe BCPE customers as doubtful loans. For further information about the risk management policies and procedures at Natixis, please refer to section [2.6.4] “Chairman’s report on internal control”. BPCE’s interests (on behalf of Groupe BPCE) concerning risk management may differ from those of Natixis.
Natixis’ income depends partly on the performances of the Banque Populaire and Caisse d’Epargne networks, both through services provided to their customers and through the share of the net income from the 20% shareholding in each Banque Populaire and Caisse d’Epargne, in the form of cooperative investment certifi cates (“CCIs”) issued by each of these entities. For further information about the contractual relationships relating to these subjects, please refer to section [1.4.5] “Signifi cant contracts”.
Pursuant to agreements made when the CCIs were acquired, Natixis may only sell all or part of its 20% holding in Banques Populaires with the prior consent of the Board of Directors of the Banque Populaire concerned and all or part of its 20% holding in the Caisses d’Epargne with the prior consent of BPCE. In the event of refusal, the Banque Populaire in question will be required to repurchase the relevant equity interests from Natixis at a price determined based on the related proportionate share of net assets, according to the valuation methods used to value the interests at the time of their acquisition by Natixis. The repurchase price could thus differ from the price that Natixis would have obtained from the proposed buyer. In addition, the very fact that Natixis must obtain prior approval could make it diffi cult for Natixis to sell these holdings.
Moreover, if BPCE ceased to control Natixis, or if certain legislative or regulatory changes or other events occurred (for further information on the events liable to trigger a compulsory repurchase, please refer to section [1.4.5] “Signifi cant contracts”), Banques Populaires, Caisses d’Epargne or BPCE, depending on the case, would also have the right to purchase its 20% holding from Natixis at a price determined based on the related proportionate share of net assets, according to the valuation methods used to value the interests at the time of their acquisition by Natixis. The repurchase price could thus differ from the price that Natixis would have obtained through a sale to an independent third party.
There are fi ve main categories of risk (credit risk, market, liquidity and fi nance risk, operational risk and insurance risk) inherent to Natixis’ operations, which are summarized below and described more fully in the “Risk Management” section, repeated in sections [3.2.5 to 3.3, and 3.6] and in the Chairman’s report, repeated in section [2.6.4] “Chairman’s report on internal control” (the “Chairman’s report”), (concerning, notably, the scale and the impact that these risks could have on the results and assets of Natixis, as well as the organization and control of these risks).
The risk factors described in the following sections (and above under the heading “Risks related to the fi nancial crisis”) detail or illustrate these different types of risks using specifi c examples, and also describe other risks to which Natixis is exposed.
● the risk associated with other operations, notably real estate, which is indirectly affected by changes in the value of negotiable assets held in the normal course of business.
Overall interest rate risk is defi ned as the risk of loss on the bank book caused by an adverse change in interest rates due to a mismatch between the nature of interest rates on assets and liabilities. At Natixis this risk is essentially linear and focused on the euro and the US dollar, resulting primarily from mismatched positions between contractual transactions. The most signifi cant positions concern exposures to the short end of yield curves and are predominantly linked to the lag between IBOR reset dates.
Liquidity risk is the risk that Natixis will be unable to meet its commitments to its creditors due to a mismatch between the durations of assets and liabilities. This risk could arise, for example, in the event of massive withdrawals of customer deposits or a crisis of confi dence or an overall market liquidity crisis. As a corporate and investment bank, this risk for Natixis results primarily from mismatched positions between transactions with contractual maturities as Natixis does not have stable and permanent customer resources and partly funds itself on the markets.
Foreign exchange risk change is defi ned as the risk of loss of transferable equity caused by an adverse fl uctuation in exchange rates against the euro. Natixis’ foreign exchang risk for the most part concerns structural positions in the US dollar due to the consolidation of foreign branches and subsidiaries funded in USD.
The procedures for monitoring and managing these risks are described in section [3.3].
OPERATIONAL RISKS (FOR FURTHER DETAILS PLEASE REFER TO SECTIONS [3.2.5.5] AND [2.6.4])
Insurance risk is the risk to profi ts of any lag between expected and incurred claims. According to the insurance products concerned, the risk varies according to macroeconomic changes, changes in customer behavior, changes in public healthcare policy, pandemics, accidents and natural catastrophes (such as earthquakes, industrial accidents or acts of terrorism or war). As mentioned previously, the credit insurance business is also subject to credit risk.
The monitoring and control of these risks and their impact on the assets of Natixis and its subsidiaries are described in section [3.6].
In the second half of 2009, Natixis implemented a new strategy aimed at simplifying and clarifying its governance, increasing synergies with retail networks, reinforcing the integration of teams and “customer focus”, and improving the method of operation of support functions. While Natixis believes that these new strategic directions provide a number of opportunities, it will continue to face uncertainties given the current state of the global economy, and there is no guarantee the targets of this new strategy will be reached.
Future events may differ from those refl ected in the assumptions used by management in the preparation of Natixis’ fi nancial statements, which may cause unexpected losses in the future
Natixis conducts a signifi cant portion of its business outside France, in particular in the United States. Consequently, its net revenues and results can be affected by exchange rate fl uctuations. While Natixis incurs expenses in currencies other than the euro, these only partially offset the impact of exchange rate declines on net revenues. Natixis is particularly exposed to changes in the exchange rate between the United States dollar and the euro, as a signifi cant portion of its net revenues and operating income is generated in the United States. Natixis enters into transactions to hedge its exposure to exchange rate risks under its overall risk management policy. However, these transactions may not fully offset the adverse impact of foreign exchange rate fl uctuations on Natixis’ operating income and may even amplify them under some circumstances.
The processes for the management of information system security risks are described in greater detail in section [2.6.3.2].
Unforeseen events such as a severe natural disaster, a pandemic, terrorist attacks or any other states of emergency could lead to an abrupt interruption of Natixis’ operations and cause substantial losses insofar as they are not covered or are insuffi ciently covered by an insurance policy. These losses could relate to property, fi nancial assets, market positions and key employees. Such unforeseen events may, additionally, disrupt Natixis’ infrastructure, or that of third parties with which it conducts business, and could also lead to additional costs (such as relocation costs of employees affected) and increase Natixis’ costs (in particular insurance premiums). Subsequent to such events, Natixis may be unable to insure certain risks, resulting in an increase in Natixis’ overall risk.
Such changes could include, but are not limited to, the following: ● the monetary, interest rate and other policies of central banks and regulatory authorities; ● general changes in government or regulatory policy liable to significantly influence investor decisions, in particular in markets where Natixis operates; ● general changes in regulatory requirements, notably prudential rules relating to the regulatory capital adequacy framework, such as the modifications being made to the regulations implementing the Basel 2 requirements; ● changes in rules and procedures relating to internal controls; ● changes in the competitive environment and prices; ● changes in financial reporting rules; ● expropriation, nationalization, price controls, exchange controls, confiscation of assets and changes in legislation relating to foreign ownership rights; and
As a multinational banking group involved in complex and large-scale cross-border transactions, Natixis is subject to tax legislation in a large number of countries throughout the world and Natixis structures its operations globally in order to optimize its effective tax rate. Changes to tax legislation or its application by the competent authorities in these countries may have a signifi cant impact on Natixis’ results. Natixis has introduced management processes whose objective is to create value from the synergies and business capabilities of its different entities. Natixis also endeavors to structure the fi nancial products sold to its customers by optimizing their taxation. The structures of Natixis’ intra-group transactions and fi nancial products sold by Natixis are based on Natixis’ own interpretations of applicable tax laws and regulations, generally on the basis of opinions received from independent tax advisers and, on an ad hoc basis, to the extent necessary, on rulings or specifi c interpretations from the tax authorities. There can be no assurance that the tax authorities will not seek to challenge such interpretations in the future, in which case Natixis could be subject to tax adjustments.
Natixis could suffer losses if any of the various instruments and hedging strategies that it uses to hedge the various types of risk to which it is exposed proved ineffective. Many of these strategies are based on observation of historical market behavior and historical correlation analysis. For example, if Natixis holds a long position in an asset, it could hedge the risk by taking a short position in another asset whose change in the past has allowed it to off-set the change in the long position. In some cases, Natixis may only be partially hedged, or these strategies may not fully hedge future risks or effectively reduce risk in all market confi gurations, or may even cause an increase in risks. Any unexpected market development, such as the crisis plaguing the international fi nancial markets since the second half of 2007, may also reduce the effectiveness of these hedging strategies. In addition, the manner in which gains and losses resulting from certain ineffective hedges are recorded may increase the volatility of Natixis’ reported earnings.
Inadequate management of these issues could also give rise to additional legal risk for Natixis and cause an increase in the number of legal proceedings and the amount of damages claimed against Natixis, or expose Natixis to sanctions from the regulatory authorities (for further details please refer to section [3.5] “Legal risks”, and in particular the paragraph on “Legal and arbitration procedures”).
In certain of Natixis’ businesses, a prolonged fall in asset prices could threaten the level of activity or reduce liquidity in the market concerned. This situation would expose Natixis to signifi cant losses if it was unable to rapidly close out its potentially loss-making positions. This is particularly true in relation to assets that are intrinsically illiquid. Certain assets that are not traded on a stock exchange or on a regulated market, such as derivatives traded between banks, are generally valued using models rather than market prices. Given the diffi culty in monitoring changes in prices of these assets, Natixis could suffer unforeseen losses.
Pillar I sets minimum capital requirements. It aims to ensure that banking institutions hold suffi cient capital to provide a minimum level of coverage for their credit risk, market risk, and operational risk. To calculate its capital requirement, the fi nancial institution may use standardized methods or with the prior approval of the French Prudential Supervisory Authority, using its own internal models.
The following insurance companies are accounted for by the equity method under the prudential consolidation scope: ● Coface (insurance); ● Natixis Assurances; ● Compagnie Européenne de Garanties et de Cautions.
The French decree dated February 20, 2007 (amended by the decrees dated October 19, 2007, September 11, 2008, October 29, 2009, August 25, 2010 and December 13, 2010), is France’s version of the European CRD (Capital Requirements Directive), which implements the Basel 2 reform. It set out the “regulatory capital requirements applicable to banks and investment companies”.
Regulatory capital is determined in accordance with CRBF Regulation No. 90-02 of February 23, 1990 relating to capital, meaning it is divided into three categories: Tier 1 capital, Tier 2 capital and Tier 3 capital. Deductions are made from these categories with regard for statutory audit data.
These comprise innovative or non-innovative equity instruments, with progressive remuneration for innovative equity instruments. They are subject to limits as to the total of Tier 1 capital.
● Capital resulting from the issue of subordinated securities or loans (perpetual subordinated securities).
They include: ● equity investments representing more than 10% of the share capital of a credit institution or investment firm, as well as subordinated loans and any other element constituting capital; ● securitization positions with a rating of less than BB-; ● total expected losses for equity exposure.
Registered share capital amounted to €4,653,020,308.80, divided into 2,908,137,693 shares with a par value of €1.60 and was unchanged between December 31, 2009 and December 31, 2010.
Tier 1 capital totalled €16.8 billion at December 31, 2010, up by €4.1 billion for the year.
Market risks fell by €9.0 billion, primarily due to the divestment of the portfolio of complex credit derivatives (-€6.3 billion) and reduced VaR (-€1.4 billion).
Operational risks increased by €0.6 billion due to the replacement of 2007 net revenues with 2010 net revenues (standard practice is to calculate operational risk using average net revenues for the previous three years).
Regulatory capital requirements for credit risk, dilution risk and settlement risk 10,583 8,552
A calculation of economic capital requirements is conducted on a half-yearly basis and covers four areas of risk: credit, market (trading, ALM, investment portfolios and Private Equity, etc.), operational and business-related.
New regulations relating to liquidity risk took effect on June 30, 2010 (French decree dated May 5, 2009 concerning identifi cation, measurement, management and control of liquidity risk). The liquidity ratio is designed to ensure that liquid assets with maturities of less than one month are greater than or equal to liabilities falling due within the same period. It is defi ned as the ratio between cash/cash-equivalents and liabilities falling due in less than one month.
As part of the New Deal and guidance projects undertaken by the support functions, Natixis has launched an in-depth analysys of its governance and risk organization.
The Risk function’s operating methods and procedures are described in the Risk function charter.
The Risk Department recommends a risk policy to executive management that is consistent with that of Groupe BPCE.
Similarly, it makes proposals to the executive body concerning principles and rules in the following areas: ● risk acceptance procedures; ● limit authorizations; ● risk assessment; ● risk supervision.
The mechanism is based on: ● internal rating methodologies specific to the various Basel asset classes and consistent with Natixis’ risk profile; ● an IT system used for managing the successive stages of the rating process, from initiation of the process to validation of the final rating; ● processes, procedures and controls that place internal ratings at the heart of the risk-management system, from transaction origination to ex-post analysis of defaulting counterparties and the losses incurred on the relevant loans; ● periodic reviews of rating methodologies, the method of calculating LGD and underlying risk parameters.
Backtesting and performance-monitoring programs are also used to ensure the quality and reliability of LGD estimates and rating models and LGD grids or default probability 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 LGD measurements, and the predictive power of indicators used in statistical models.
In addition to quantitative work on models, Natixis has introduced standards and procedures and periodic controls undertaken at different levels within the Bank so as to ensure the quality of ratings and LGDs. As part of its oversight function, the Risk Department makes sure the rules and commitments underpinning the Bank’s IRBA approval are respected, and also ensures the proper operation of the tools and processes used and the quality and consistency of data. It also coordinates training and provides support to Bank employees.
The principles used in identifying, measuring and managing credit risk hedging instruments are determined by the recommendations of the Basel Committee accord. The decision on whether a guarantee’s risk-reducing effects make it eligible to be included in risk-exposure calculations is made on a caseby -case basis. Checkpoints are set up throughout the process. They cover the approval of the transaction, the monitoring of credit risk exposure and the calculation of the resulting capital requirements (predominantly calculated according to IRBA since September 30, 2010).
Collateral and netting agreements give rise to: ● an analysis undertaken when loan applications are approved or reviewed, assessing the suitability of the instrument or guarantee provided and the associated improvement in risk quality; ● verification, processing and documentation work based on the use of standard contracts or contracts approved by the Legal Department; ● registration and monitoring procedures covering risk administration and management systems.
Credit Portfolio Management took steps to reduce commitments in order to lower concentration risk on certain counterparties, sectors and geographic areas. Concentration risk is measured via stress test-type methods (migration of ratings according to macroeconomic scenarios).
Loans showing a deterioration in the level of risk are identifi ed as they arise and reported immediately to the Risk Department and the business line concerned, in accordance with counterparty watch list, individual provision and alert procedures.
They are then considered for the watch list, a decision which falls to the Risk Department or the competent Credit Committee depending on the level of exposure.
Signifi cant Corporate & Investment Banking risks are monitored by the Restructuring and Special Affairs (DRAS) Department, which intervenes in diffi cult cases as needed. The Litigation Department handles collections of loans in litigation.
The Natixis Watch List and Provisions Committee meets once a quarter and covers all the Bank’s business lines (CIB, Investment Solutions and SFS). It reviews all doubtful loans under watch that may give rise to provisions or adjustments to existing provisions, and decides on the level of provision necessary.
Other exposure recorded in the corporate entities category 147,285 104,858 101,537 97,513
SMALL and medium-sized enterprises recorded in the corporate entities category 4,974 4,657 4,576 4,157
Other exposure recorded in the retail customer category 9,885 3,275 2,582 1,846
Finally, as the “Securitization” asset class now incorporates exposures deducted from equity (weighting of 1,250%), 2009 data was restated accordingly.
Corporate Other exposure recorded in the corporate entities category 18.6% 9.5% 4.8% 4.5% 37.4% 40.0%
Small and medium-sized enterprises recorded in the corporate entities category 1.4% 0.2% 0.0% 0.2% 1.9% 1.9%
Corporate Other exposure recorded in the corporate entities category 17,518 18,685 17,261 33,934 17,461 104,858 97,382
Sovereigns Central administrations and central banks 5,276 4,837 9,866 983 1,566 22,527 6,996
Exposure at risk by asset class and by approach as at December 31, 2010
The tables below present the breakdown by rating of gross exposures and drawn and undrawn commitments, as well as the average weighting for credit conversion factors (CCF), Exposure at risk and risk-weighted assets.
They also present average loss-given default (LGD) and the average risk-weighting.
For each transaction, the risk-weighting is calculated not only on the basis of the counterparty’s internal rating (probability of default), but also depending on whether the exposure is senior or subordinated, on the type of assets received as collateral (percentage loss-given default), the type of off-balance sheet commitments (credit conversion factor), LGD and maturity.
❚ EXPOSURES COVERED BY FINANCIAL AND TANGIBLE COLLATERAL BY CATEGORY OF EXPOSURE (CLIENT ASSET CLASS) AS AT DECEMBER 31, 2010
Other physical collateral o/w tangible collateral o/w fi nancial collateral 12.31.2009
Other exposure recorded in the corporate entities category 5,688 200 4,187 13,000
Small and medium-sized enterprises recorded in the corporate entities category 982 39 190 1,044
Small and medium-sized enterprises recorded in the retail customers category 0 0 47
Small and medium-sized enterprises recorded in the corporate entities category 1,053 851
❚ SECURITIZATION (BANKING PORTFOLIO SECURITIZATION POSITIONS INCLUDING THOSE DEDUCTED FROM EQUITY)
(in millions of euros) Exposure at risk Risk-weighted assets Regulatory capital requirements
(in millions of euros) Exposure at risk Risk-weighted assets Regulatory capital requirements 3.2.5.4 Market Risk
Market risk control is primarily the responsibility of the front offi ce business lines, which manage and monitor on a daily basis the limits that are allocated to them beforehand.
The Market Risk Committee is tasked with defi ning the Bank’s market risk policy and ensuring compliance with it. As the operational extension of the executive body, the Committee is vested with decision-making powers to carry out its role with regard to market risk issues (methods and limits). It meets on a bi-monthly basis (though special sessions may be held) and is chaired by the Chief Executive Offi cer or his/her delegated representative who is a member of the Senior Management Committee. The Committee Chairman has sole decision-making authority on all matters presented, after discussion between the business lines concerned and the Risk Department.
The Market Risk Department comprises two units, namely an operational unit and a cross-functional unit.
The cross-functional unit is in charge of: ● all consolidated reports presented to management and control and supervisory bodies; ● introducing standards and procedures common to all entities (subsidiaries and branches) carrying market risks; ● international coordination; ● regulatory monitoring; ● relations with internal and external audit teams and tracking their recommendations; ● producing and backtesting VaR; ● project management.
Different techniques are used to measure market risk: 1- Synthetic measures of VaR to identify potential losses in each business, based on a pre-determined confidence level (99%) and time period (1 day).
To this end, a statistical model has been constructed to track the combined behavior of market parameters affecting portfolio value. The calculation method is based on an econometric model whose standard deviations are calculated as being the maximum (risk factor by risk factor) standard deviations calculated over rolling 12-month and 3-month periods. This method makes VaR more responsive if the markets become more volatile.
Stress tests to measure potential losses on portfolios in extreme market conditions. Natixis’ mechanism is based on two categories of stress tests: overall stress tests and dedicated stress tests for each business.
● Hypothetical stress tests are used to simulate variations in market parameters on all activities, on the basis of plausible assumptions concerning one market’s predicted response compared with another’s, depending on the nature of the initial stress. Stresses are determined through a joint effort involving the Risk Department, the front office and Natixis economists. Their scenarios can be defined on the basis of economic criteria (e.g. real estate crisis, economic crisis), geopolitical considerations (e.g. terrorist attacks in Europe, overthrow of a Middle East regime) or other factors (e.g. avian flu). A new theoretical stress test was calibrated in 2010, increasing the total to six.
BPCE guarantees most of the workout portfolio management assets in Paris and New York. Nevertheless, the Market Risk Department continues to manage risks on all transactions on a standardized and exhaustive basis, whether these transactions are guaranteed or not by BPCE. Overall VaR and stress tests taking into account the effects of this guarantee are now produced on a daily basis.
The 99% 1-day VaR level for Natixis’ trading portfolios averaged €12.9 million. It peaked at €20.6 million on June 10, 2010 and stood at €7.5 million on December 31, 2010.
❚ OVERALL NATIXIS VAR – TRADING PORTFOLIO (1 DAY VAR 99%)
Overall VaR including the BPCE guarantee GAPC VaR including the BPCE guarantee VaR CIB
Two backtesting exceptions were observed in 2010, both in May. The fi rst occurred after the sharp widening in index spreads and sovereign spreads, and the second after the sizeable market fl uctuations in the run-up to the G20 summit, which announced the Greek bailout plan.
Overall stress test levels remained relatively reasonable at December 31, 2010, with an average loss of €11.7 million.
The historic stress test that replicates the March 2008 corporate crisis (near-bankruptcy of Bear Stearns, record losses by mortgage agencies) resulted in the maximum loss (€76 million at December 31, 2010).
Fa ll in st oc k m ar ke t i nd ice s
Regulatory capital requirements as at December 31, 2010 were as follows: (in millions of euros) Type and nature of risk
Operational risk is defi ned as the risk of losses deriving from shortcomings or fl aws attributable to procedures, staff and internal systems or external events. The defi nition includes legal and the risk of internal and external fraud, but excludes strategic and reputational risks.
The Operational Risk Department is responsible for: ● procedures for analyzing and measuring operational risk: − recording incidents,
− key risk indicators and environment variables; ● operational risk control procedures: risk-reduction policy and follow-up according to the issues involved.
The Operational Risk Department is divided into four teams according to Natixis’ business lines and activities: ● a Capital Markets team for Corporate & Investment Banking and workout portfolio management; ● a Financing team for Corporate & Investment Banking and Investment Solutions, encompassing Private Banking, Natixis Assurance, Capital Investment and Natixis Global Asset Management; ● a Specialized Financial Services team for the following subsidiaries: Natixis Paiements, Natixis Interépargne, Natixis Intertitres, Cie Européenne de Garanties et Cautions, Natixis EuroTitres, Natixis Financement, Natixis Lease, Retail Services and Natixis Factor; ● a Support Functions team for Natixis head office support functions, i.e. Information Systems, Finance, Legal, Purchasing, Human Resources, etc.
Losses are listed from the very fi rst euro and as they are incurred. A single defi nition of “serious incident” is used throughout the Company. All serious incidents are reported to the Operational Risk Department and the Head of Risk as they occur. A departmental investigation is then conducted, and a report detailing the facts and recommended action plans is drawn up. The Operational Risk Committees decide on the necessary action plans.
In 2010, Natixis’ loss level declined 60% compared with previous years, although the number of incidents was stable. This lower loss level primarily stemmed from the divestment or segregation of complex derivatives and the completion of risk reduction measures.
In each of its operating entities, Natixis has implemented action plans geared towards reducing its exposure to operational risks. Structural action plans have also been identifi ed. These action plans are monitored by the Operational Risk Committees.
The Operational Risk Department maps the most critical risk situations in order to draw up preventative action plans to reduce exposure and to prioritize these situations.
Mapping is conducted in two phases; a qualitative phase based on interviews with the network of Operational Risk Offi cers and geared toward detecting and analyzing risks, and a quantitative phase aimed at measuring these risks. Taking into account all the situations identifi ed jointly with the business lines, more than 170 major risks were modelled in the form of a quantifi ed fault tree.
The control mechanism is consistent with the standard method applied for all Natixis’ operational divisions.
❚ BREAKDOWN OF AMOUNTS BY EQUITY PORTFOLIO AND BY TYPE AND NATURE OF EXPOSURE
Financial assets at fair value through profi t and loss 4,135 4,089 (46) 0 (46)
Financial assets at fair value through profi t and loss 75
Prudential restatement of unrealized gains or losses on available-for-sale equity instruments (97)
Prudential restatement of unrealized gains or losses on available-for-sale equity instruments as a percentage of upper Tier 2 capital 53
3RISK MANAGEMENT Overall interest rate, liquidity and structural foreign exchange risk 3.3 Overall interest rate, liquidity and structural foreign exchange risk
The ALM Committee is responsible for monitoring across the following scope: ● the banking portfolios of Natixis S.A. and of its credit subsidiaries for overall interest rate risk; ● Natixis’ entire scope of consolidation for liquidity risk (excluding insurance subsidiaries that do not present intrinsic liquidity risks and which are specifically monitored); ● Natixis’ entire scope of consolidation for structural foreign exchange risk.
Natixis’ overall interest rate risk is defi ned as the risk of losses on the banking portfolio stemming from mismatches between interest rates on assets and on liabilities.
The very large majority of Natixis’ exposure is in euros and US dollars and uses a fl oating rate; as a result, Natixis’ overall interest rate risk is essentially linear and concerns mismatching positions between contractual transactions. The largest positions concern exposures to the short end of yield curves and are notably linked to time-lags between IBOR reset dates.
This risk is measured in terms of the sensitivity of the economic value of portfolios by basis point on the yield curve and by currency. It is controlled for the largest portfolios through limits approved and monitored by the Risk Department. As regards Treasury, in which most positions are concentrated, this mechanism is rounded out with daily VaR measurements governed by limits and stress tests.
3 RISK MANAGEMENT Overall interest rate, liquidity and structural foreign exchange risk
Liquidity risk is defi ned as the risk of not being able to honor commitments to creditors due to the mismatching of maturities between assets and liabilities. As a corporate and investment bank, Natixis’ liquidity risk results primarily from mismatching positions on transactions with contractual maturities since it refi nances almost exclusively on the capital markets (see Chapter 4 “Financial data”, section [4.1.5] Refinancing).
− liability risk (civil operating and professional liability, as well as managers’ and executive corporate offi cers’ civil liability),
● The “Overall Banking,” “Company Civil Liability” (operational and professional) and “Management Civil Liability” insurance policies taken out by Natixis on behalf of the parent company and all subsidiaries were all renewed on July 1, 2010.
− Civil Liability Insurance policies covering directors and corporate offi cers, and providing coverage of up to €100 million per claim and per year of insurance; This coverage applies worldwide, except for professional civil liability, where the guarantee does not extend to permanent establishments in the United States (coverage for US operations is purchased locally by subsidiaries or branches).
● Coverage for the buildings housing Natixis’ operations in France, their contents, IT risks and the resulting loss of banking business (reconstruction and/or replacement cost, capped at €200 million per claim) was renewed on January 1, 2010.
● Coverage for intangible computer damage (damage to data without physical damage to the hardware containing it) and resulting loss of banking business was renewed on January 1, 2010, thereby providing coverage of €25 million per claim and per year.
All the insurance policies mentioned above were taken out with insurance companies deemed to be solvent on the market.
On February 27, 2007, the judge accepted all aspects of the Harris Associates L.P. motion and rejected the motion of the plaintiffs. On March 20, 2007, the plaintiffs appealed that decision. Both parties fi led written arguments and appeared before the Court of Appeals on September 10, 2007.
In a ruling handed down on March 30, 2010, the US Supreme Court dismissed the case before the Court of Appeals for the Seventh Circuit so that the Court could determine whether the decision of the District Court in favor of Harris Associates L.P. should be upheld or overturned.
Since March 13, 2008, Natixis and Natixis Funding have been named among the defendants in multiple class-action lawsuits fi led by and on behalf of certain state, county and municipal bond issuers in the US federal courts in New York, Washington D.C. and California. The plaintiffs allege a conspiracy between providers and brokers of municipal derivatives to fi x prices, rig bids and allocate customers between 1992 and the present time. The various plaintiffs have also named more than 30 other US and European banks and brokers as defendants. Some plaintiffs seek to certify a class of all state, local and municipal government entities, independent government agencies and private entities that purchased municipal derivatives from defendants or through brokers from 1992 to the present and to recover damages to the class that result from the alleged anticompetitive activities. Most of the federal cases have been consolidated in the United States District Court for the Southern District of New York under the caption “Municipal Derivatives Antitrust Litigation.”
The allegations against Natixis are that Natixis was Natixis Funding’s guarantor in derivatives transactions and that it was Natixis Funding’s agent. The defendants have responded to the grievances fi led by the plaintiffs. The parties have entered the discovery phase of litigation. The coming months are dedicated to requests concerning the communication of evidence and reviewing the documents requested by the plaintiffs. At the same time, the parties are preparing to take on the most important part of the litigation which is the attempt to certify the litigation as a class action suit by the plaintiffs. The plaintiffs are in the process of recruiting an expert economist and a statistician to analyze the data of all the transactions to prepare arguments against class action certifi cation. During this time, the 26 state prosecutors and the DOJ continue their investigations.
Natixis’ net exposure to Madoff assets was estimated at €365 million at December 31, 2010, based on the exchange rate on that date. The effective impact of this exposure will depend both on the amount of the assets deposited on behalf of Natixis that are recovered and the outcome of any action the bank can take, including legal action. Natixis intends to defend its rights by taking any reasonable legal action open to it, in France or abroad. In this perspective, Natixis has retained the services of a law fi rm to assist it.
Meanwhile, via a press release dated December 8, 2010, Irving H. Picard, the court-appointed trustee for Bernard L. Madoff Investment Securities LLC (BMIS), announced the fi ling of a Complaint to the United States Bankruptcy Court for the Southern District of New York against several banking institutions, including a $400 million Complaint against Natixis. Via a press release dated December 9, 2010, Natixis announced that it denied the allegations made and intended to take all steps to defend its position and protect its rights. The Complaint is currently under examination by the Bankruptcy Court of the Southern District of New York.
Basing their argument on a report by the French market regulator, Autorité des Marchés Financiers (AMF), which has not been made public, the plaintiffs allege that Lagardère SCA failed to comply with market regulations when it issued bonds redeemable in EADS shares, subscribed by Natixis, in April 2006.
Natixis has not been accused of any wrongdoing in the CIC Group’s complaint, whether with respect to the execution of the contracts or their performance. The legal arguments used by the Crédit Mutuel Group to challenge the validity of its purchases of EADS shares appear to be without merit.
In a ruling handed down on January 27, 2010, the Commercial Court of Paris refused to hear the suit fi led by CIC and Crédit Mutuel, and ordered them to pay €120,000 to Natixis and €50,000 to Lagardère in accordance with Article 700 of the French Civil Proceedings Code. The plaintiffs appealed against this decision. The appeal hearing took place on March 10, 2011 and the Court has adjourned for further deliberation until April 28, 2011.
Complaint fi led by Natixis shareholders against BPCE, Natixis and Messrs Philippe Dupont and Charles Milhaud
Natixis Assurances has identifi ed the policyholders for whom the risk of repurchase is high, the differential criteria being age, tax seniority and amount of capital. For these policyholders, Natixis Assurances has hedged the risk of interest rate increases with Cap policies, and has limited the scope covered by such policies to approximately a quarter of its interest rate assets. It has also subscribed to variable-rate bonds with a minimum yield.
According to the sensitivity analysis carried out on December 31, 2010: ● a drop by 10% in the stock market would have a negative impact of €18.2 million on equity (after taking into account the variation attributable to policyholders and taxation), i.e. 1.6% of equity; ● a drop by 10% in the real estate market would have a negative impact of €4.3 million on equity (after taking into account the variation attributable to policyholders and taxation), i.e. 0.4% of equity.
Natixis Assurances makes use of reinsurance to limit its exposure to the risk of dispersion of capital guaranteed upon death, personal accidents and loss of autonomy, as well as the frequency of claims for cessation of work, invalidity and loss of autonomy. A reinsurance treaty in the event of epidemics or pandemics has also been put in place in order to limit exposure to the increase in deaths that would ensue.