Business line Presentation1.1 12 History and links with BPCE1.2 14 Natixis’ businesses1.3 16 Natixis and its shareholders1.4 32 22 CORPORATE GOVERNANCE 37 Natixis Governance at March 1, 20192.1 38 Additional information on the directors’ 2.2 positions 40 Management and oversight of corporate 2.3 governance 66 Policies and rules established for determining 2.4 compensation and benefits of any kind for corporate officers 89 3333333333333333333333333333333 RISK FACTORS, RISK MANAGEMENT AND PILLAR III
Factoring, Sureties & guarantees, Leasing, Consumer transformation via the digitalization of our of initiatives are planned as we seek to develop and deepen our relationship with our clients using digital
Natixis is a singular, agile and useful company. Singular because we are at ease with and cherish our differences. We have competitors in all our activities, of course, but our business mix and our strategy are unique. Agile because the world and our business sector are changing ever more rapidly, and we can drive our performance by moving more quickly ourselves. Useful, intermediary that creates value and provides them with innovative solutions. This is our raison d’être.
It is also vital to take on board today’s main challenges, so we will move forward with our strategy to address climate change by focusing our resources on the energy transition and responsible within our teams. All these various issues enrich our corporate culture.
The aim of New Dimension is to take Natixis beyond the successes already achieved during New Frontier.
• Promote performance and innovation and encourage greater diversity within teams.
Further our CSR Commitment • Recognize clients and stakeholders with strong sustainable development commitments; pre-empt and manage environmental and social
• Extend the use of environmental, social and governance criteria in our asset management investment practices to better take on board responsible investors’ requirements.
• International culture 5 OVERARCHING LEVERS TO SUPPORT OUR STRATEGIC AMBITIONS
• Targeted communications efforts across our various business lines and geographies
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*** Consisting of an ordinary dividend of €0.30, and a special dividend of €0.48, as proposed to the General Shareholders’ Meeting of May 23, 2019. The payment of a special dividend is subject to the finalization of the plans to sell Natixis’ retail banking activities to BPCE SA, announced on September 12, 2018, including an regulatory approval.
Payments Full range of payment and prepaid businesses and solutions, in-store and via internet and mobile guarantees, leasing, consumer securities
Caisse Nationale des Caisses d’Epargne buys CDC IXIS, established in 2001. Caisse d’Epargne Group thus becomes a full-service bank. IXIS CIB and IXIS AM are established
Natixis launches its 20142017 strategic plan New Frontier centered on the goal of becoming a bank for high value added solutions, focused exclusively on its clients
Natixis is founded from the merger of IXIS and Natexis Banques Populaires
Natixis launches its 20092013 strategic plan New Deal; securing its position as the corporate and investment banking, savings, solutions and specialized financial services arm of Groupe BPCE
V Natixis creates the new Payments business line aimed at becoming a major player in the payments sector in Europe.
V Natixis unveils its new brand territory and new visual identity, reflecting its shared culture: the Purple Touch
Natexis Banques Populaires is founded from the contribution of the operating activities of Caisse Centrale des Banques Populaires to Natexis S.A.
V Natixis launches its 2018-2020 strategic plan New Dimension, founded on three pillars: Deepen, Digitalize & Differentiate.
V Groupe BPCE decides to transfer Natixis’ Specialized Financial Services business lines to BPCE SA in order to better meet clients’ needs across the Banques Populaires and Caisses d’Epargne networks
Natixis encounters financial difficulty, (i) BPCE would firstly provide support using its own capital in accordance with its duty as a shareholder; (ii) should this prove insufficient, it would use the mutual guarantee fund created by BPCE, which at December 31, 2018 totaled €362.6 million in assets provided
Natixis Investment Managers, one of the largest asset managers worldwide, remains the primary driver of the Asset & Wealth Management division at Natixis.
As a global multi-affiliate asset management business, Natixis Investment Managers boasts more than 20 specialized asset management companies in the US, Europe and Asia. Natixis Investment Managers’ brand platform is based on the Active ThinkingSM concept, encouraging an active, conviction-led investment style to help clients achieve their objectives irrespective of market conditions.
MV Credit, a high-quality pan-European private credit specialist founded in 2000 with offices in Luxembourg and London joined the group in June 2018. Natixis Investment Managers also launched a highly active, conviction-driven range of thematic strategies including safety, water, robotics and artificial intelligence. In addition, Natixis Investment Managers rounded out its offering in real asset private debt through a co-investment vehicle set up between its affiliate Ostrum Asset Management and Natixis’ Corporate & Investment Banking arm, thereby increasing synergies within Natixis.
The group enhanced its product range through acquisition anda recruited fund managers with extensive thematic expertise.
Natixis Investment Managers continued to improve operationala efficiency and created revenue synergies by combining two US-based affiliates: McDonnell Investment Management and Loomis Sayles. The merger will give McDonnell’s clients access to Loomis Sayles’ expansive investing, research and operational capabilities, and Loomis Sayles extensive municipal bond investment capabilities. Euro-PE, Caspian Private Equity and Eagle Asia, three existing private equity affiliates were brought together to create Flexstone Partners, which provide investors with a single point of access to private equity advisory services and a wide range of global private equity solutions.
AEW (€53.2 billion): real estate asset management, real estate investment trusts (SCPI) and real estate mutual funds (OPCI)j
Loomis, Sayles & Co. (€218.4 billion): equities (growth, core, value) and fixed income (core to high yield)j
Mirova (€10 billion): SRI equity and fixed income, infrastructure project financing;j
At the end of 2017, Natixis decided to reposition its wealth management business by focusing on the High Net Worth Individuals segment (HNWI), while also simplifying its business model, stepping up its digital transformation and better leveraging expertise within the Group. This led notably to a change in brand, from Banque Privée 1818 to Natixis Wealth Management, covering its business in France, Luxembourg and Belgium.
In 2018, Natixis Wealth Management sold its Sélection 1818 platform, which was dedicated to independent wealth management advisors and no longer fitted within the business's development strategy. In addition, consistent with its repositioning on the HNWI segment, it announced the acquisition of asset management and investment consulting company Massena Partners, with a clientele solely focused on the HNWI segment, and signed a partnership with Essling Capital to bolster its private equity and real estate club deal offerings.
Launched in January 2019, it brings together three of Natixis Investment Managers’ existing private equity affiliates: Euro-PE, Caspian Private(1) Equity and Eagle Asia.
It is positioned as a go-to bank in four strategic sectors—Energy & Natural Resources, Aviation, Infrastructure and Real Estate & Hospitality—and aims to offer clients in these sectors a continuum of expertise.
Corporate & Investment Banking has the following areas of expertise: Capital Markets: a wide range of diversified, standard anda bespoke products and solutions on the fixed income, credit, forex, commodities and equities markets; Financing: origination, arrangement and syndication ofa Structured Financing, as well as portfolio management for all vanilla and Structured Financing under an originate-to-distribute (O2D) model; Trade & Treasury Solutions: treasury solutions and tradea finance solutions; Investment Banking: acquisition & strategic finance, financinga on the primary markets for bonds and equities, financial engineering applied to holdings, and financial structure and rating advisory services; Mergers & Acquisitions: preparation and execution ofa disposals and mergers, fundraising, restructuring and capital protection.
them targeted advice for their projects. Organized by client type (banks and the international public sector, insurers, financial sponsors, asset managers and corporates), the Coverage function has a strong regional presence in France and is supported internationally by all Natixis' teams across 38 countries. This structure encourages responsiveness, close, personalized working relationships and in-depth strategic dialog with clients over the long term.
Corporate & Investment Banking has a cross-business Coverage team dedicated to Natixis’ client coverage. This team sees clients through every stage of their development, drawing on all areas of Natixis' expertise to anticipate their needs and offer
In May 2018, Corporate & Investment Banking and Ostrum Asset Management, an affiliate of Natixis Investment Managers, formed a partnership to give customers a single point of access to a vast range of real-asset finance solutions. Under this partnership, Natixis will be better aligned as a co-investor, and customers will also have access to a premium European asset manager.
In July 2018, Natixis’ Cash Equity and Equity Research teams were transferred to the broker ODDO BHF. This move is part of Natixis and ODDO BHF’s long-term partnership.
The Global Markets business model is structured around the following elements: the development of innovative solutions (as opposed toa standard flow products) in the main asset classes. This tailored approach enables Natixis to respond more pertinently to its clients’ needs and set itself apart from its competitors; in addition, access to a wide range of flow products viaa electronic platforms cover all client requests on the markets; the development of an investment policy targeted to clients’a local needs. The challenge for the bank is firstly to focus on products in which Global Markets enjoys a genuine competitive advantage, and secondly to achieve the necessary critical size in these activities to ensure the sustainability of franchises; the implementation of a targeted investment policy in line witha the local needs of clients; the further development of Global Markets’ international reach in terms of client and market coverage, drawing on Corporate & Investment Banking’s presence in the EMEA, Americas and Asia-Pacific regions.
In order to provide a holistic response to its professional clients, the Natixis Global Markets Department decided to group together its fixed income and equity derivatives sales and financial engineering teams.
Fixed income, credit, forex and commodities markets (FIC: Fixed Income & Commodities)
Business in this market segment was brisk across the three international platforms in 2018 after a record year in 2017.
In Europe, the Merius investment platform, set up in 2016, grew further to exceed €1.7 billion in investment commitments at the end of 2018, confirming investor interest in this innovative solution on the Dutch residential mortgage market. Natixis helped to drive activity on the European market with a number of major deals both in the United Kingdom, including a £315 million RMBS for the credit institution Paratus and a €508 million CLO deal for leading asset manager Carlyle, and in continental Europe, with the inaugural €1 billion RMBS deal for BPCE and the €217 million securitization in Belgian and Luxembourg credit card loans for specialty lender Buyway.
major CLO transactions conducted for the asset managers Voya ($607.7 million Voya CLO 2018-3) and Guggenheim ($402.5 million Guggenheim MM CLO 2018-1), activity also increased on the commercial real estate securitization segment ($600 million FORT CRE CLO for the FORTRESS fund) and aircraft leasing segment ($613 million AASET 2018-2 deal for Apollo Aviation).
In the United States, activity remained buoyed by the CLO market where Natixis is a recognized arranger and placement agent, ranking among the top ten CLO arrangers (sources: New Issues—Thomson Reuters or Bloomberg). Apart from the 2018 also saw confirmation of development in the Asia-Pacific region, with strong diversification of products and major offerings for Asian investors. This was particularly illustrated by two public RMBS deals for La Trobe (AUD 750 million) and Pepper (AUD 1.25 billion), which featured some tranches backed by green mortgages.
To ensure effective coverage of clients in the Energy & Natural Resources (ENR) sector in relation to price risk solution activities, a project is being considered to bring together GMC's marketing teams and ENR Finance's origination teams.
In compliance with the French law on the separation and regulation of banking activities, the Treasury and Collateral Management team, which used to report to Global Markets, was placed under the oversight of the Finance Department from April 1, 2017. A functional reporting line is maintained with the Global Head of Global Markets as well as with the Chief Financial Officer of Groupe BPCE.
On the equity derivatives market, Natixis offers solutions to match the goals and constraints of all its distributor and institutional clients. The bank caters to insurers, pension funds, asset managers, hedge funds, private banks, family offices, bank and insurance distribution networks and wealth management advisors.
The team also helps the bank adapt to changes in the market and regulatory constraints (relating to balance sheet, LCR, RWA, etc.), and provides an overview of the bank’s assets, mainly equities and fixed income (collateral) in order to manage them more efficiently and comprehensively.
BHF’s long-term partnership to provide equity brokerage and research service continuity to Natixis and Groupe BPCE clients.
In July 2018, Natixis’ equity research team was transferred to the broker ODDO BHF. This move is part of Natixis and ODDO
To enhance the search for innovative solutions for Natixis clients, particularly in the four key sectors identified as part of the New Dimension strategic plan, in October 2018, Global Markets Research announced the introduction of a new organization structure centered around teams devoted to specific themes combining macro and credit expertise in strategic sectors and complex asset classes that are insufficiently covered and/or growing strongly within the EMEA region: the ENR/Real Assets research team covers the Energy &a National Resources, Real Estate & Hospitality, Infrastructure, Green Bonds, Hybrids and High Yield sectors.
the Macro & Financial Institutions research team covers thea main EMEA economies and major players in finance (banks, insurers, etc.).
Quantitative research contributes to the adaptation of our offering on the Capital Markets. It supports the bank’s financial innovation process and ensures that it remains competitive in today’s fast-changing markets. Its teams help develop pricing and risk management models and quantitative asset allocation strategies.
Natixis’ ambitions in the Energy and National Resources (ENR) sector are underpinned by its involvement for over 30 years with producers, distributors and traders in the three underlying industries (energy, metals, agricultural products), and as a global organization. Established in 2018, the ENR franchise has been adapted across the bank’s three platforms (EMEA, APAC and the Americas) and has four pillars: ENR Industry Group: an industry bankers’ group made up ofa specialists tasked with developing solutions for investment banking; ENR Advisory: industry M&A advisory activity, mainly targetinga independent oil companies and mining groups, and a pool of engineers that provide Natixis with the capacity for technical analysis of the assets involved; ENR Finance: teams in charge of debt and both structureda finance and commodity trade finance (CTF); GMC: commodity price hedging activity, led by ENR ina partnership with the Capital Markets activities team.
ENR’s sector-based strategic approach was also reflected in the M&A advisory activity for clients in the sector with the completion of several significant mandates in the three major industries covered. Natixis is actively working to build up its own teams and relies on the network of affiliates (including PJ SOLOMON in the United States and Vermillion in China) to support the growth of its activities in this sector, which is central to strategic dialog with its clients.
In Structured Financing, Natixis led a number of high-profile landmark transactions with strong added value. It remained highly active across all parts of the world: In the EMEA region, Natixis arranged a $1.275 billion facility for Energean Israel to fund the development of the Karish gas field off the coast of Israel in the Mediterranean Sea and participated in the IPO referred to above. PFI named the financing deal “Middle East and Africa Oil & Gas Deal of the Year”. Natixis was also particularly active in Oman, where it arranged the Oman Gas company’s acquisition of natural gas transportation assets from the government and renewed a $4 million pre-export facility that monetizes Oman’s production of hydrocarbons. PFI also honored the bank’s achievements in the Middle East, naming the Duqm petrochemical project in which Natixis was MLA “Middle East and Africa Petrochemical Deal of the Year”. Finally, in Africa and the North Sea, the bank continued to finance independent oil companies to support their growth.
2018 saw sustained business activity in the three international platforms and across all asset types. Natixis made a strong mark in the Americas, where it was named “Bank of the Year” by PFI, underscoring its involvement in key Latin American deals. Natixis supported a large number of renewable projects in the region, such as Enel Green Power (“PFI Americas Solar Deal of the Year”) in Mexico, where it was also named “Bank of the Year” by the magazine LatinFinance, as well as the Cerro Dominador project (“PFI Americas Renewables Deal of the Year”) in Chile.
Finally, Natixis is very well positioned in the telecommunications sector which is developing rapidly as a result of the digitization of the economy. Among other things, it advised the investment fund Cinven on the disposal of Ufinet’s fiber optic networks in Spain and Latin America and arranged the financing for the deal.
Natixis has a dedicated Shariah Board, which gives it a leading position in Islamic finance. In 2018, it issued an aircraft asset-backed Sukuk that allows Islamic investors to access dollar-denominated high-yield investments involving real assets. This deal is a first for Abu Dhabi Global Market (ADGM).
Distribution & Portfolio Management (DPM) develops optimal financing solutions for business and attractive investment opportunities for investors. The experienced team of 215 professionals is spread over our three international platforms: the America, EMEA and Asia-Pacific. It proactively manages the financing put in place by Natixis, in terms of credit quality and profitability.
In 2018, Natixis continued to consolidate its O2D model, which is a central part of its strategy. The bank stands out for the strength of its distribution capabilities, enhanced by coordination between its three major international platforms. The Global Portfolio Management business lines, responsible for the active management of the loan portfolio, extended its scope to include syndication and was renamed Distribution & Portfolio Management (DPM). The syndication/distribution of corporate, acquisition and high yield financing for the four key sectors is now housed in a single department that reports to DPM and Global Markets. This restructuring supports the development of the sector-based approach in investment banking and strengthens the bank’s underwriting and distribution capabilities. Natixis also launched the digital platform “Singular”, the main purpose of which is to improve collaboration and visibility across the O2D chain and ultimately provide a better service for clients.
These measures have helped accelerate balance-sheet rotation and have led to a sharp increase in business levels despite increased regulatory constraints and steeper competition. Risk Magazine named Natixis “Credit Portfolio Manager of the Year” for its innovative, integrated approach of its portfolio management, which is central to its strategy.
In June 2018, Global Transaction Banking restructured its organization to become Trade & Treasury Solutions (TTS). This change is intended to offer clients more tailored, value-added solutions to capitalize on Natixis’ expertise.
In Treasury Management Solutions, TTS helps corporate clients manage, optimize and enhance their cash flow by providing them with a multi-bank, paperless centralized account statement service as well as automated multi-bank cash solutions. TTS delivers products that put their cash surpluses to work through interest-bearing accounts, including deposit accounts, securities accounts and market deposits.
It complements these solutions with security arrangements to protect against the risk of fraud.
In Trade Finance, TTS helps its clients' international development with its solutions for financing and securing their import and export operations (out of Dubai, Hong Kong, Moscow, New York, Paris, São Paulo, Shanghai and Singapore), and with its supply chain finance solutions for optimizing their cash flow and financing to their suppliers. The business is present in France and across the platforms in Asia-Pacific, the Americas and EMEA, and has strong banking risk coverage capabilities and a full range of market guarantees.
As part of TTS's digital strategy, clients can now track their international payments in real time and optimize their cash management with My Tracked Transfer, carry out transfers in real time within the SEPA area with Instant Payment, and secure their bank details with SEPAmail Diamond.
Natixis is a world-class player in strategic and acquisition finance, with over 25 years of experience in the sector and offices in the EMEA region (Paris, London, Milan and Madrid), Asia-Pacific (Hong Kong, Singapore and Sydney) and the Americas (New York). It offers corporate clients, investment funds, family offices and institutional clients a full range of financing (bonds, loans, private placements) for their various strategic requirements, including acquisitions, shareholder restructuring and investments, debt financing and post-IPO financing. Natixis arranges tailor-made solutions, drawing on the full range of its expertise in M&A advisory services, equity capital market transactions and bonds. It is also recognized for its structuring and placement capacity, thanks to its dedicated syndication and secondary-market teams.
In the cosmetics industry, Natixis acted as sole underwriter and MLA/bookrunner in the acquisition in the United States of the company Arbonne International by the Yves Rocher group. It also carried out the currency hedging and part of the interest rate hedging.
Natixis also provided sales advice and co-arranged the acquisition financing of two Ufinet entities operating in fiber optic networks: one in Spain by the fund Antin and the other in Latin America by the investment fund Cinven. The transaction consisted of two term loan B facilities, two revolving credit facilities and a credit line, and was named “Deal of the Year” by the magazine TMT Finance.
In 2018, Natixis continued its development and led a number of innovative landmark transactions in the following segments: Covered bond: As the winner of the “Best Euro Lead Managera for Covered Bonds” award (source: GlobalCapital), Natixis affirmed its expertise and leading role in this segment, including managing Nordéa’s dual-tranche issue (€1.25 billion at 5 years and €750 million at 15 years); Green bond: Natixis remained heavily involved in the energya transition, acting as joint bookrunner for Société du Grand Paris for an inaugural issue of €1.75 billion. The Asia-Pacific platform also demonstrated its expertise in this area yet again by leading China Everbright Bank’s $300 million issue; Social bond: Natixis also finances social-impact projects and leda issues by the African Development Bank (€1.25 billion) and Danone (€300 million); Hybrid: Natixis led La Poste’s €750 million perpetual bonda issue as bookrunner; Sukuk: in Dubai, Natixis carried out notable operations as jointa lead manager and bookrunner of the 10th public debt issue ($1.3 billion) of the Islamic Development Bank’s since 2013.
Natixis also led numerous dual-tranche issues in 2018, including those of Mizuho (5-year and 10-year €500 million senior unsecured issues) and Elkem (Schuldschein). It also acted as joint bookrunner in SCOR’s “Regulation S” perpetual deeply subordinated Tier 1 notes issue ($625 million), the first issue in France governed by Solvency 2 regulation.
On the emerging markets, Natixis was involved in the €750 million plain vanilla bond issue of the International Bank for Reconstruction and Development (IBRD).
Lastly, Natixis contributed to financing for Groupe BPCE and to expanding its investor base, both through the issuance of structured notes and the placement of plain vanilla uncovered bonds for the Group.
On the Equity Capital Markets (ECM), Natixis provides clients with tailored advisory services for all transactions that affect their capital structure: IPOs, capital increases and convertible or exchangeable bond issues. Natixis is also developing advisory services for public tenders or exchange offers.
It also maintains a Corporate Broking business that offers clients intermediation services for acquisitions and disposals on the equity market, share buybacks and liquidity contracts.
In Corporate Broking, Natixis consolidated its franchise thanks to very buoyant activity (up 14% compared with 2017) that included some of the biggest share buybacks in the market (Total, Sanofi, Safran, etc.).
Natixis/ODDO-BHF was also ranked No. 2 bookrunner in the French equity market by number of deals and by volume as at December 31, 2018 (excluding ABB) (source: Bloomberg).
The Strategic Equity Transaction team, which specializes in equity-linked finance, designs solutions to help clients manage their equity positions. These transactions use financing tools, derivatives and other financial instruments, which serve Natixis’ large European and international corporate clients and aim to cover their equity-related needs in equity interests, company-controlled stock and dilution/accretion.
This advisory business activity focuses on the analysis of financial structures and credit rating issues for Natixis’ corporate and financial institution clients. It aims to define the most appropriate equity and debt-based financing solutions for its clients. The internationalization and increasing disintermediation of the Capital Markets have increased clients’ reliance on ratings, giving this business line increasing strategic importance. The rating advisory expertise is applied to analyze and optimize the impact of major events on clients’ ratings, and even extends to assisting clients with obtaining their first rating.
Natixis’ mergers and acquisitions (M&A) teams help large and medium-sized commercial and industrial enterprises, institutional investors and investment funds prepare and execute disposals and mergers, fundraising, restructuring and capital protection.
In 2018, Natixis made strategic investments in three independent M&A consulting firms that are leaders in their respective market segments: Fenchurch Advisory Partners in the UK (Financial Services), Vermilion Partners in China, and Clipperton in France (technology sectors). These new investments are helping Natixis to speed up its business internationalization efforts, while furthering its expansion in Europe and Asia-Pacific.
Natixis’ M&A expertise in telecoms infrastructure was honored at the TMT M&A award ceremony in London in November 2018. The “TMT Infrastructure Deal of the Year 2018—EMEA” award was given to the Ufinet Telecom asset sale for a total of €2 billion, in which Natixis Partners was M&A advisor. The deal involved the acquisition by Antin Infrastructure Partners of Ufinet Telecom’s Spanish activities and the acquisition by Sixth Cinven Fund of Ufinet Telecom’s assets in Latin America. Natixis Partners Spain acted as financial advisor for Cinven and Natixis co-arranged the acquisition financing for both deals.
In 2008, Natixis established the GAPC division structure (Gestion Active des Portefeuilles Cantonnés—Workout Portfolio Management) in order to (i) isolate the assets that were most impacted by the crisis and that were no longer deemed to fit the new strategic direction of Natixis, and (ii) progressively offload these assets by means of active management, ensuring the proper balance between speeding up the return of capital and the resale price of the assets.
The general mechanism behind the guarantee is based on the establishment of: Two Total Return Swap (TRS) agreements, one in US dollarsi. and the other in euros, covering 85% of the net value of the assets recognized in the trading portfolio and risks linked to 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; A financial guarantee covering 85% of the nominal value ofii. the assets recognized under IFRS as “loans and receivables” (L&R) and “available-for-sale assets” (AFS), as determined at the effective date of the guarantee (i.e. June 30, 2009), less any amortization expensed prior to June 30, 2009.
Pursuant to the terms of this financial guarantee, in the event of non-payment 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
The Insurance division is composed of several legal entities (excluding investment vehicles): Group company Legal form Location % voting rights % of ownership
In geographic terms, most of the Insurance division’s activity is concentrated in France and handled by companies established in France. However, the Personal Insurance business line owns a Luxembourg-based entity that focuses on life insurance products for Wealth Management clients. This entity is a client of the BPCE networks and non-Group entities in various European Union countries. It also owns an entity in Lebanon through an equity interest in a subsidiary in partnership with a local private bank.
The Insurance division was created in 2014, in line with Groupe BPCE’s strategic ambition to become a fully-fledged bancassurance player primarily serving clients from the two main banking networks of Groupe BPCE: the Banque Populaire banks and Caisses d’Epargne savings banks. This strategic drive resulted in the following structure-changing transactions: in March 2014, Natixis Assurances acquired 60% of BPCEa Assurances, a non-life insurance company created to serve customers of the Caisse d’Epargne network. The acquisition enabled the Group to set up the Non-life Insurance business, in conjunction with BPCE IARD, to serve Banques Populaires customers. This was followed by the purchase of a 40% stake in BPCE Assurances’s capital (hitherto owned by MACIF and MAIF) on November 16, 2017. As a result of this transaction, Natixis Assurance became BCPE Assurances’s sole shareholder; in the first quarter of 2015, Groupe BPCE and CNP Assurancesa finalized the renegotiation of their partnership. Accordingly, the distribution of life insurance policies for retirement savings and personal protection insurance, handled by the Personal Insurance business line, was extended to the Caisse d’Epargne network, with effect from January 1, 2016.
Natixis’ Insurance division, through its different operational entities, now offers a comprehensive range of life and non-life insurance policies, with the Banque Populaire banks and Caisses d’Epargne being the main contributors to the business.
The division's New Dimension Plan for 2018-2020, which was presented at the end of 2017, aims to cement Natixis Assurances’s position as a front-running insurer in France, by delivering a differentiated customer experience and top-flight operating performances. The new plan will span the property & casualty arm’s entire value chain, by creating a single management platform run by Natixis Assurances to better serve Banques Populaires and the Caisses d’Epargne (the Innove#2020 project).
Finally, the rapid development of digital technology and its application in the development of new methods of distribution and customer interaction is a source of opportunities that the Insurance division is closely monitoring. Accordingly, it has pursued a policy aimed at: digitizing management processes: the business line intends toa continue pursuing the digitization and automation of low-value-added processes in order to become one of the most efficient players in terms of management costs relative to assets under management; In personal insurance, the division rolled out a new multi-site, multi-banner customer relationship model in 2018, with identical organization, tools and customer relations processes for both the Banque Populaire banks and Caisses d'Epargne A platform for processing inheritance claims was also set up;
PRESENTATION OF NATIXIS Natixis’ businesses 27Natixis Registration Document 2018 adapting subscription processes to incorporate new digitala tools and customer behaviors. A significant share of non-life subscriptions is already carried out and formalized remotely using an electronic signature. Steps have been taken to preempt rapid development in these approaches; continuing to scale down administrative management activitiesa in favor of in-branch transactions using applications installed on work stations and customer-initiated transactions through the self-care options gradually being rolled out for the majority of products and management operations; continuing to adapt information systems with the aim ofa improving operational efficiency and service quality. For example, the changeover from BPCE Vie’s “Life Insurance Savings” management information system, finalized in 2012, was followed in 2016 by changes to BPCE Assurances’ management information system for property and casualty insurance. The process of transforming and digitizing BPCE Assurance's claims management IT system (Purple#Care project), which launched in 2017, was successfully rolled out in Two-Wheeler (2 Roues) and Four-Wheeler (4 Roues) insurance in June and December 2018. Finally, plans to modernize Natixis Life’s IT system, with a view to speeding up growth in the business line, increasing profitability and operating performance through process digitization and automation, and improving risk control, were put into action in 2018; outsourcing low-value-added operations to address variationsa in business activity or to process specific operations for which adequate in-house skills or expertise is not immediately available; implementing a single operating model for non-life insurancea across all Groupe BPCE networks. The #Popt’Timiz project to pool Banques Populaires's and Caisse d’Epargne's Middle Office and Back Office activities took concrete form in November 2018, with the roll-out of the APS platform across three Banques Populaires banks. The #INNOVE2020 program, in which BPCE Assurance is to become the sole non-life insurance platform for Banques Populaires and Caisse d’Epargne retail customers by 2020, was launched in 2018.
Natixis Assurances’ strategy for these two business lines is therefore to develop a sustainable level of business activity, by maintaining the right balance between price competitiveness and the preservation of fundamental technical parameters.
Non-life insurance revenues continued to show growth: premium income from property and casualty insurance totaled €1,482 million, up 7%. Growth was driven by auto (+9%) and multi-risk home insurance (+7%). The contract portfolio grew by more than 5% in 2018, totaling 5.8 million policies. This result reflects strong sales performances in both networks.
As a reminder, in a press release on September 12, 2018, Natixis announced plans to sell its retail banking business to BPCE S.A. (Factoring, Sureties and Guarantees, Leasing, Consumer finance, securities).
The platform’s broad offering caters to individuals and banks, companies and professionals that use financial guarantees to ensure the reliability of credit transactions or to secure contracts, projects and transactions.
Equipment leasing in mainland France, overseas territories, Spain and Italy recorded a 5% increase with €2.6 billion in new leases. Front Lease, an equipment-leasing sales tool integrated into advisor workstations, contributed to this significant increase in the number of new leases.
Natixis Lease continued to roll out its offer in the Banque Populaire and Caisse d’Epargne banks, recording more than 9,000 new orders in long-term vehicle leasing in 2018, and launching a Lease-to-Own solution for retail customers.
Much of Natixis Lease's focus in 2018 was on the digitization of the customer journey, including developing a number of products and tools to meet the challenges of changing distribution methods and enhance the customer experience.
television programs and movie theaters. Natixis Coficiné managed a total of €925 million in loans at end-2018.
More than half of 2018 César-nominated films and nearly one-third of nominated and award-winning films at major European festivals were financed by Natixis Coficiné and its Film Industry Financing companies (SOFICA) in 2018.
In 2018, Natixis Interépargne consolidated its leading position in employee savings account administration in France, with over 2.9 million employee accounts under management, i.e. a market share of 28% (source: AFG at June 30, 2018).
Natixis’ EuroTitres Department provides custody services for retail and Private Banking and is the leader in custody services to retail outsourcing.
Natixis manages over 3.1 million securities accounts for a diversified client base comprising Groupe BPCE’s banking networks, other banking institutions with or without retail networks, financial companies and Private Banking Asset Management firms.
Its service offering is modular and customizable: secure provision of information systems, all-inclusive back-office services (order routing, transaction accounting, client reporting, securities custody, etc.), dedicated middle-office services, network assistance services and end customers.
Natixis also offers an online exchange solution, the online client range (“OIC"). This was developed as a white label for integration into each banking institution’s environment. In 2018, EuroTitres upgraded its website by providing Banque Populaire and Caisse d’Epargne retail customers with a new version that is optimized for all screens.
Natixis Payments is a payment services provider backed by Groupe BPCE. It offers all European public and private economic stakeholders a full range of payment solutions and services. Through its various entities (especially Natixis Payment Solutions for payment processing solutions Dalenys and S-money), Natixis Payments is active along the entire value chain, including issuance, acquisition, online payments, e-wallets, prepaid cards and everything in between.
Natixis Payments has led the way with a series of firsts on the French market: the launch of Samsung Pay mobile payments along with PayLib and ApplePay; being the first company to offer Instant Payment, which completes account-to-account payments in 10 seconds; the roll-out of contactless ticketing (i.e., the use of contactless payment cards as tickets) in Dijon's tram system.
Natixis Payments is now offering QR code payment solutions so that Chinese visitors to France can pay for their purchases using their WeChat Pay and AliPay e-wallets, with no need for a payment terminal.
Natixis Payments significantly expanded its Benefits range by acquiring Comitéo, a software platform aimed at works councils and employees; becoming the sole shareholder of Titres Cadeaux, a joint venture with La Banque Postale in 2006; Major brands such as SNCF and Casino have chosen Natixis Payments.
No. 1 card issuer in continental Europe 22 million cards managed 7.6 billion mass transactions processed €1.2 billion in service voucher issuance
The Group’s reorganization drive, which took effect from May 2018, comes in response to the recent changes in the credit insurance market and as a means of addressing one of the Group's main strategic challenges: improve operating efficiency to optimize customer service. The new organization system is firmly focused on clients and meeting the needs of group business lines, by strengthening the latter's role and fostering improved project steering.
This new organization structure has brought changes in the way Coface operates and given it the means to streamline and accelerate the decision-making processes affecting company life. It also fosters collaborative working between teams at the Business Technology Department, across Group business lines and at the Transformation Office.
Coface chalked up a solid performance in 2018, proving that its Fit to Win strategy is relevant. Consolidated revenue increased 4.6% relative to 2017 (on comparable scope and exchange rates), at €1,384.7 million. The net loss ratio improved by 6.2 points to 45.1%, while the net cost ratio shrunk 0.7 points to 34.5%. Coface ended the year on net income (Group share) of €122.3 million, an increase of 47% (compared with €83.2 million in 2017) and an estimated solvency ratio of ~169%(1), which is above the Group’s target comfort zone (140%-160%).
Coface is confident that its balance sheet is sufficiently solid for it to push ahead with its drive to leverage capital management, consistent with its Fit to Win plan, and commit to returning 100% of 2018 earnings to shareholders.
The scenario adopted by Coface for a gradual return to a normal risk environment was borne out at end-2018. Economic conditions have become visibly more volatile. Indeed, a number of new risk factors (slowdown in the Chinese economy, confidence in Europe, US government shutdown, and trade wars) can now be added to known sources of risk (Argentina and Turkey).
Against this backdrop, Coface is confident that its strategic drive to become the most agile credit insurer is on point, and remains focused on its implementation.
Meanwhile, the changes in the standard solvency capital requirement formula, which are expected to shave 15-20 points off Group solvency, are now expected to come into effect in 2020.
The Group is maintaining its targets to deliver a net combined ratio of around 83% across the cycle and generate a RoATE of 8% (+1%).
Consisting of an ordinary dividend of €0.30, and a special dividend of €0.48, as proposed to the General Shareholders' Meeting of May 23, 2019. (d) The payment of a special dividend is subject to the finalization of the plans to sell Natixis' retail banking activities to BPCE SA, announced on September 12, 2018, including a regulatory approval.
PRESENTATION OF NATIXIS Natixis and its shareholders 33Natixis Registration Document 2018
In 2018, Natixis’ share price decreased by 38% (from €6.60 at December 31, 2017 to €4.12 at December 31, 2018). Over the same period, the euro zone banking stocks index (DJ Euro Stoxx Bank) fell by 33%.
The average daily volume of Natixis shares traded on the market amounted to around 4.7 million shares in 2018 versus an average of around 4.9 million shares in 2017.
Natixis has established an individual shareholder relations and communication platform with three main access points: A toll-free number (from a landline in France: 0 800 41 41 41)a which shareholders can use to speak to an information officer, available Monday to Friday from 9. a.m. to 6 p.m. The interactive voice response system provides information on the share price, the Company’s financial calendar, the latest results and Shareholders’ Club events; a dedicated e-mail address for shareholders’ questionsa (actionnaires@natixis.com) managed directly by the Individual Shareholder Relations team; a website (www.natixis.com) that provides comprehensivea information on Natixis. In the “Investors & Shareholders” section, visitors can view or download press releases, key figures, Natixis’ calendar and financial news, while the “Shareholder Corner” contains extensive editorial content and documents for individual shareholders.
The following two bodies also coordinate relations with individual investors: Shareholders’ Club
Club members receive the monthly newsletter, the half-yearly shareholder newsletter and the shareholder guide, which is updated and updated with new sections every year.
The Shareholders’ Club website (clubdesactionnaires.natixis.com) contains comprehensive information about the Club and its services.
Recordings of these chats and web conferences were posted on our website and sent to our Shareholders’ Club members through our Newsletters.
In partnership with the École de la Bourse, three training modules on the new features of the 2018 Finance Act, the taxation of dividends and the taxation of capital gains were held for members of the Shareholder Club in 2018.
At the General Shareholders’ Meeting, there is a dedicated Shareholder Club stand where Club members or any shareholders can find information about Natixis or the Shareholder Club.
The CCAN is an advisory body and sounding Board composeda of 12 members who represent Natixis’ individual shareholders. These members are themselves individual shareholders chosen through an application process that includes interviews. The Committee is in charge of all aspects of financial communication to individual investors, and in particular the communication tools at their disposal.
Finally, Luc Bernaud, Natixis’ Chief Digital & Technologya Officer gave a presentation on Natixis’ ambitions and achievements in digital technology.
He said that the task of the Digital Office team was to lead and facilitate the digital transformation of Natixis’ various business lines as part of the New Dimension strategic plan. He noted that this transformation offers new opportunities for Natixis and is occurring in a changing environment, with the emergence of fintechs, new regulations, changing customer expectations and the arrival of breakthrough technologies.
All the topics discussed, reports of meetings and members’a video presentations are available on the website.
At the start of the meeting, the Chairman noted that the meeting’s proceedings had been drawn up from the issues arising from the preliminary survey open to shareholders in April.
After a review of the insurance market, Jean-François Lequoy, the member of Natixis’ Senior Management Committee in charge of insurance activities, explained the bank’s strategic objectives in this business line in more detail. These goals reflect an environment of digital and technological transformation, very low interest rates and changes in regulations that impact insurance companies in many different areas.
Since no one else asked to take the floor, the meeting proceeded to vote on the resolutions. The final quorum was 84.20% and all resolutions were adopted. The adopted resolutions included: the 2017 financial statements;a the payment of a dividend in cash of €0.37 per share,a representing a payout ratio of 74%. The dividend was detached on May 28, 2018 and paid starting on May 30, 2018; the compensation due in respect of fiscal year 2017 to thea Chairman and Chief Executive Officer (“Say on Pay”) and the budget for compensation paid in 2017 to the regulated population; the compensation policies for the Chairman and Chiefa Executive Officer in respect of fiscal year 2018; changes in the composition of the Board of Directors,a particularly in order to stagger directors’ terms of office.
From time to time, depending on current events, we also organize specific, themed presentations to give our financial partners and colleagues a better understanding of the general climate and Natixis’ specific challenges.
Natixis organizes meetings with analysts and institutional investors throughout the year at roadshows or conferences organized by brokers in the main financial marketplaces. In 2018, meetings were held in Paris, London, Frankurt, Dublin, Madrid, Milano, Geneva, Zurich, Boston, New York, Chicago, San Francisco Toronto, Stockholm, Helsinki, Copenhagen, Tokyo, Singapore, Hong Kong, etc.).
May 28, 2019 General Shareholders' Meeting (to approve the 2018 financial statements)
MANAGEMENT AND OVERSIGHT 2.3 OF CORPORATE GOVERNANCE 66 Board of Directors2.3.1 67
Chairman of the Board of Directors – Chairman of the BPCE
Chief Executive Officer, member of the Management Board in charge of Human Resources of BPCE SA
Chairwoman of the Strategic Committe 2 CORPORATE GOVERNANCENatixis Governance at March 1, 2019 38 Natixis Registration Document 2018
Beverly Bearden – Human Resources/ Natixis Investment Managers (Asset and Wealth Management)
Oliver Bilal – International Sales and Marketing/ Natixis Investment Managers (Asset and Wealth Management)
Georges-Eric De La Brunière – Natixis Wealth Management (Asset and Wealth Management)
François Riahi has served as Chief Executive Officer of Natixis since
Chairman of the Board of Directors of: Natixis Investment Managersa (since 01/06/2018), Natixis Assurances (since 07/06/2018), Coface SA(1)
(a) 2022 AGM convened to approve the financial statements for the year ending December 31, 2021
Born November 6, 1963 Nationality: French Natixis shares held: 60,000 Address: 50 avenue Pierre Mendès 75201 Paris cedex 13 - France
Attendance rate in 2018 Board of Directors: 100% Strategic Committee: N/A
From 2009 to June 1, 2018, François Pérol was Chairman of the BPCE Management Board.
Chairman of the Management Board of BPCE (from 31/07/2009 toa 01/06/2018)
Chairman of the Board of Directors of Crédit Foncier a (from 26/04/2010 to 16/05/2018)
Permanent Representative of a BPCE, Manager of SCI Ponant Plus (from 04/08/2010 to 03/12/2014)
Permanent Representative of a BPCE, Chairman of Banque Populaire Création (since 08/04/2011) � (until 28/12/2015)
Born December 28, 1963 Nationality: French Natixis shares held: 153,649 Address: 50 avenue Pierre Mendès 75201 Paris cedex 13 - France
A graduate of the HEC business school and Stanford Executive Program, Laurent Mignon worked in several divisions of Banque Indosuez over a period of more than ten years, including positions on the trading floor and in investment banking. In 1996 he joined Schroders in London, then AGF in 1997 as Chief Financial Officer. He was appointed to the AGF Executive Committee in 1998, then became Deputy CEO in charge of Banque AGF, AGF Asset Management and AGF Immobilier in 2002. He became CEO in charge of the Life Insurance and Financial Services and Credit Insurance divisions in 2003, before his appointment as Chief Executive Officer and Chairman of the Executive Committee in 2006. From September 2007 to May 2009 he was managing partner at Oddo et Cie alongside Philippe Oddo.
From May 2009 to May 2018, Laurent Mignon was Chief Executive Officer of Natixis. He has been a member of the BPCE Management Board since August 6, 2013. Laurent Mignon has been Chairman of the Management Board of BPCE since June 1, 2018.
Chairman of the Board of Directors of Crédit Foncier France a (since 17/05/2018)
Member of the Board of Peter J. Solomon Company LLC (froma 08/06/2016 to 30/05/2018)
Deputy Chairman of the French Banking Federation (from 01/06/2018 toa 31/08/2018) and then Chairman (since 01/09/2018)
Address: 50 avenue Pierre Mendès 75201 Paris cedex 13 - France
First appointed: co-opted by the Board of Directors on August 25, 2009 and ratified at the AGM of May 27, 2010
First appointed: Board meeting of December 21, 2017 (effective as of January 1, 2018)
Catherine Halberstadt was Chief Executive Officer of Banque Populaire du Massif Central from September 1, 2010, to March 25, 2016.
From January 1, 2016 to October 31, 2018, Catherine Halberstadt has served as the BPCE Management Board Member in charge of Human Resources, Internal Communications and the Corporate Secretariat of BPCE. Since November 1, 2018, Catherine Halberstadt has occupied the roles of Member of the BPCE Management Board in charge of Human Resources.
Member of the BPCE Management Board in charge of Humana Resources (since 01/01/2016)
Member of the Board of Bpifrance Financement (since 12/07/2013),a Chairwoman of the Appointments Committee and the Compensation Committee, Member of the Audit Committee and the Risk Committee of Bpifrance Financement (since 24/09/2015)
(a) 2019 AGM convened to approve the financial statements for the year ending December 31, 2018.
Member of the Board of Natixis(1) a (since 25/05/2012) � (until 16/11/2015)
Permanent Representative of a BPCE, Chairman of SAS Sociétariat BPMC (since 2011) � (until 25/03/2016)
Permanent Representative of a BPMC, Member of the Committee of Banques d’Auvergne(2) (since 2010) � (until 25/03/2016)
Born September 25, 1956 Nationality: French Natixis shares held: 1,000 Address: Immeuble le Concorde 4 quai Kléber - BP 10401 67000 Strasbourg Cedex
Since September 30, 2003, Thierry Cahn has been Chairman of the Board of Directors of Banque Populaire Alsace Lorraine Champagne.
Member of the Supervisory Board and Audit Committee of BPCE (sincea July 2009)
Member of the Supervisory Board of Banque BCP to Luxembourg (sincea 03/07/2018)
(a) 2022 AGM convened to approve the financial statements for the year ending December 31, 2021.
Key advisory skills: expertise in Human Resources issues and business transformation, extensive knowledge of banking businesses.
Chief Executive Officer of Banque Populaire Occitane a (since October 2006)
Member of the Supervisory Board and Risk Committee of BPCE a (since 16/12/2015)
Member of the Board of: Ostrum Asset Management (formerly Natixisa Asset Management) (since 15/03/2007), Caisse Autonome des Retraites des Banques Populaires (CAR-BP) (since 03/06/2016), Institution de Prévoyance des Banques Populaires (IPBP) (since 03/06/2016)
Permanent Representative of BP Occitane, Member of the Investmenta Committee of Multicroissance (since 01/11/2006)
Permanent Representative of BP Occitane, Member of the Board ofa IRDI (since 2006)
Permanent Representative of BP Occitane, Member of the Supervisorya Board of: SOTEL (since 2001), IRDI Gestion (since 19/06/2015)
(a) 2020 AGM called to approve the financial statements for the year ended December 31, 2019.
CORPORATE GOVERNANCE Additional information on the directors’ positions 47Natixis Registration Document 2018
Chairman of the Management Board of Caisse d’Epargne Rhône-Alpesa (CERA) (since 12/11/2018)
Chairman of the Board of Directors, Chairman of the Compensationa Committee and Member of the Audit Committee of SIA Habitat (from 06/12/2016 to 11/11/2018)
Member of the Supervisory Board of Société Immobilière Granda Hainaut (SIGH) (from 16/10/2017 to 11/11/2018)
Permanent Representative of CERA, Member of the Board of: IT-CEa (since December 2018), Fondation d'Entreprise CERA (since 30/11/2018), GIE BPCE IT (since 07/12/2018), Erilia (since 14/12/2018)
Permanent Representative of CERA, Manager of: SCI Dans La Villea (since 12/11/2018), SCI Garibaldi Office (since 12/11/2018), SCI Lafayette Bureaux (since 12/11/2018), SCI le Ciel (since 12/11/2018), SCI le Relais (since 12/11/2018)
Member of the Board of CE a Holding Promotion (since 26/06/2011) � (until 01/09/2015)
Non-voting member of the BPCE a Supervisory Board (since 19/05/2011), then Member of the Supervisory Board and the Audit and Risk Committee of BPCE (since 06/05/2013) � (until 22/05/2015)
Chairman of Lyderic Invest(1) (2) a (since 03/11/2011) � (until 09/03/2015)
Permanent Representative of a CENFE, Member of the Supervisory Board of Finovam(2) (since 24/12/2014) � (until 19/09/2016)
Permanent Representative of a Immobilière Nord France Europe, Chairman of SAS Euroissy Parc (since 24/04/2015) � (until 19/09/2016)
Bernard DUPOUY Chairman of the Board of Directors of Banque Populaire Aquitaine Centre Atlantique (BPACA)
First appointed: co-opted by the Board of Directors on Au gust 1, 2017 and ratified at the AGM of May 23, 2018
He was also Chairman of the Board of Directors of BPSO subsidiary Crédit Commercial du Sud-Ouest, from 2008 to 2011. From 2011 to 2015, he was a Member of the Board and Chairman of the Audit and Risk Committee.
Member of the Board of: Natixis Interépargne (from 30/11/2016 toa 03/08/2018) and BPCE Vie (from 28/03/2017 to 03/08/2018)
Vice-Chairman of the Board of Directors of Fédération Nationale desa Banques Populaires (since 06/06/2018), Member of the Board (since
Permanent Representative of BPACA, Member of the Board of Crédita Maritime Mutuel du Littoral du Sud-Ouest (from 29/01/2015 to 04/06/2018) and Chairman of the Audit, Risk and Accounts Committee of Crédit Maritime Mutuel (from 2012 to June 2018) and of Société Centrale des Caisses de Crédit Maritime Mutuel (since 05/06/2018)
Chairman and Chief Executive Officer of Groupe DUPOUY S.A. (sincea 22/07/1993)
Chairman and Chief Executive Officer of ETS DUPOUY SBCC (sincea 01/02/2004)
Chairman of: Villa Primrose (since 2000), Madikera Management 2Ma SAS (since 12/07/2016, liquidated at 31/12/2018)
Permanent Representative of BPACA, Member of the Board ofa Bordeaux Grands Événements (since 2013), Fondation Bordeaux Université (since 29/11/2017)
Member of the Board of: Union Maritime du Port de Bordeaux (sincea 2008), Congrès et Expositions de Bordeaux SAS (since 2008)
Member of the Board of Crédit Maritime a Mutuel du Littoral Sud-Ouest (since 2012) � (until 29/01/2015)
Nicole Etchegoïnberry has a PhD in Information Technology and began her career in information systems at Banque Courtois, followed by a stint at Fédération du Crédit Mutuel Midi Atlantique. She then joined the Caisse Régionale du Crédit Agricole Mutuel de Toulouse, where she held senior positions in development and markets. In 2001 Nicole Etchegoïnberry joined Caisse d'Epargne de Midi Pyrénées where she oversaw the bank’s IT migration and banking operations.
From 2005 to 2008 Nicole Etchegoïnberry was Chief Executive Officer of former Caisse d'Epargne subsidiary Gestitres, specialized in securities account management and custody of financial instruments. In 2008 she became Chairwoman of the Management Board of GIE GCE Business Services, which handles the Caisse d’Epargne group’s IT project management.
Since August 1, 2009, Nicole Etchegoïnberry has been Chairwoman of the Management Board of Caisse d'Epargne Loire-Centre.
Vice-Chairwoman of the Board of Directors of Touraine Logementa E.S.H. (since 29/06/2017, Member of the Board since 2014)
Permanent Representative of CELC, Member of the Board of: FNCEa (since 12/04/2018), GIE IT-CE (since 01/11/2016), ALBIANT-IT SA (since 26/06/2015), GIE BPCE IT (since 17/07/2015), Fondation d'entreprise Caisse d'Epargne Loire-Centre (since 18/12/2015)
Member of the Board of: Association Parcours Confiance Loire-Centrea (since 07/07/2009), Financi'Elles (since 24/03/2011)
Permanent Representative of CELC, Member of the Board of:a Association Habitat en Région (since 08/12/2010), cancer@workassociation (since 12/04/2018), Orléans Métropole (since 13/04/2018)
Member of the Board of a ALBIANT-IT (since 01/12/2011) � (until 26/06/2015)
Born April 14, 1965 Nationality: French Natixis shares held: 1,000 Address: 1 bis rue Jean Wiener Champs-sur-Marne 77474 Marne-La-Vallée Cedex 2
First appointed: co-opted by the Board of Directors on February 10, 2016 and ratified at the AGM of May 24, 2016
Member of the Board of Fondation d’Entreprise Banque Populairea (since 14/06/2016)
Member of the Board of Banque Palatine, Member of the Audita Committee and Risk Committee (since 05/10/2016)
Treasurer of the Fédération Nationale des Banques Populaires a (since 04/04/2017)
Anne LALOU Dean and Managing Director of Web School Factory, Managing Director of Innovation Factory
Anne Lalou is a graduate of ESSEC Business School who began her career as a manager and then Assistant Director in the Mergers & Acquisitions Department at Lazard in London. She was then appointed as Head of Customer Prospection and Development at Havas in Paris. She was the Chairwoman and Chief Executive Officer of Havas Édition Électronique before joining Rothschild & Cie as Managing Director.
Anne Lalou has been Dean and Managing Director of the Web School Factory since 2012.
Dean and Managing Director of the Web School Factory a (since April 2012)
Chief Executive Officer of Nexity a Solutions(2) (from July 2011 to end-May 2014)
Member of the Supervisory Board a of Foncia Groupe(2) (since February 2012) � (until 07/09/2016)
Chairwoman of the Appointments a and Compensation Committee of Korian Medica SA(1) (2)
Françoise LEMALLE Chairwoman of the Steering and Supervisory Board of Caisse d’Epargne Côte d’Azur (CECAZ)
First appointed: co-opted by the Board of Directors on July 30, 2015 and ratified at the AGM of May 24, 2016
In addition, she has been a Member of the Board of IMF Créasol(2) and a member of the association’s Audit Committee since 2013.
Key advisory skills: entrepreneurial experience, extensive knowledge in accounting, finance and auditing.
Member of the Supervisory Board and Risk Committee of BPCE (sincea 22/05/2015)
Chairwoman of the Board of Directors of SLE CECAZ (SLE Ouest desa Alpes-Maritimes) (since 1999)
First appointed: co-opted by the Board of Directors on November 12, 2009 and ratified at the AGM of May 27, 2010
Member of the Board of Centaurus a Capital International Limited(2) � (until 30/03/2015)
Born March 16, 1965 Nationality: French Natixis shares held: 1,093 Address: 110 avenue de France 75013 Paris
After working as an auditor and lead auditor at Banque Fédérale des Banques Populaires (1988-1994), she joined Banque Populaire Rives de Paris as regional director and then Head of Origination and General Organization (1994-2002). In 2002, she joined Natexis Banques Populaires, where she was Head of Operations Management and then Head of Cash Management and Operations (2002-2005). In 2006, she became Chief Executive Officer of Natixis Factor, then Chief Executive Officer of Banque Populaire Atlantique (2008-2011).
Chairwoman of the Management Board of Caisse d’Epargne Rhône-Alpesa (CERA) (from 05/12/2011 to 12/11/2018)
Member of the Supervisory Board and Risk Committee of BPCE (froma 22/05/2015 to 12/11/2018)
Permanent Representative of CERA, Member of the Board of IT-CE (froma 31/12/2011 to 12/11/2018)
Permanent Representative of CERA, Member of the Board of: Fondationa d’entreprise CERA (from December 2011 to 12/11/2018), Fédération Nationale des Caisses d’Epargne (FNCE) (from December 2011 to 12/11/2018), Habitat en Région (from 2012 to 12/11/2018), Club du Musée Saint-Pierre (from 2012 to 12/11/2018), Fondation entrepreneurs de la Cité (from 2014 to 12/11/2018), GIE BPCE IT (from 16/07/2015 to 12/11/2018), ERILIA (from 03/06/2016 to 12/11/2018)
Chairwoman of the Supervisory Board of Rhône Alpes PME Gestion (froma 13/03/2012 to 12/11/2018)
Member of the Board of Siparex Associés (from 30/03/2012 to 12/11/2018)a
Chairwoman of the Board of Directors of Rhône Alpes Cinéma a (from 26/07/2016 to 12/11/2018)
Permanent Representative of CERA, a Treasurer of Fondation Belem (since May 2013) � (until 01/03/2017)
Member of the BPCE Audit a Committee (from 22/05/2015 to 16/12/2015)
First appointed: co-opted by the Board of Directors on December 14, 2016 and ratified at the AGM of May 23, 2017
Member of the Audit Committee of a Eurodisney(2) (since 09/11/2016) � (until 13/09/2017)
Chairman of the Management Board of Caisse d'Epargne et de Prévoyance Bretagne Pays de Loire
Since April 27, 2018, he is Chairman of the Management Board of Caisse d'Epargne Bretagne Pays de Loire.
Chairman of the Management Board of Caisse d’Epargne et dea Prévoyance Côte d'Azur CECAZ (from 01/07/2013 to 26/04/2018)
Chairman of the Supervisory Board of: Batiroc Bretagne-Pays de Loirea (since 04/05/2018), Caisse d'Epargne Capital (since 14/06/2017), Sodero Gestion SAS (since 04/05/2018), CE Développement SAS (since 01/10/2014)
Chairman of the Board of Directors of Sodero Participations SAS (sincea 04/05/2018)
Permanent Representative of CECAZ, Member of the Board of: ERILIAa (from 03/06/2016 to 26/04/2018), GIE Caisse d'Epargne Syndication Risque (from 22/05/2014 to 26/04/2018)
Member of the Board of: FNCE (since 27/04/2018), BPCE Assurancesa (since 12/06/2007), Natixis Investment Managers (since 21/05/2013), Fondation Belem (since 02/07/2015), IXION (from 29/03/2018 to 12/11/2018)
Member of the Board of Natixis a Payment Solutions (since 24/09/2013) � (until 29/09/2016)
Born June 29, 1949 Nationality: French Natixis shares held: 1,000 Address: 151 boulevard Haussmann 75008 Paris
Chairman and CEO of EDF(1) (2) (from a 25/11/09 to 22/11/2014)
Member of the Board of Edison(2), a then Chairman of the Board of Directors (from 24/04/2012 to 25/11/2014)
Member of the Board of: EDF a International SAS(2) (from 06/12/2010 to 25/11/2014), EDF Energies Nouvelles(2)
Member of the Board of Dalkia2 a (from 25/07/2014 to 22/11/2014)
Member of the Board of a Fennovoima Ltd(2) (Finland) (from March 2015 to November 2015)
Philippe SUEUR Member of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France
Born July 4, 1946 Nationality: French Natixis shares held: 4,000 Address: 57 rue du Général de Gaulle 95880 Enghien-Les-Bains
Philippe Sueur holds a postgraduate degree in political science and history and a doctorate in law, and is also an Associate Professor in Roman law and Institutional History. He began his career in 1975 as a Lecturer before becoming a Full Professor at Université d’Amiens in 1978 and then at Université de Paris III - Sorbonne Nouvelle and Paris-Nord. From 1992 to 2002, he was Dean of the Faculty of Law and Political and Social Science at Université Paris XIII - Nord. As Mayor of Enghien-les-Bains since 1989, Philippe Sueur has also held various elected positions such as Regional Councilor until 2011 and Councilor at Large for the Val d’Oise region since 1994. He was Vice-Chairman of CG95, the Val d’Oise regional council, between 2001 and 2008 and then again in 2011. Since April 2015, he has been the first Vice-Chairman of the Val d’Oise Regional Council.
From April 29, 2014 to April 26, 2017, Philippe Sueur was Chairman of the Steering and Supervisory Board of Caisse d’Epargne Île-de-France. Since April 26, 2017, he remains Member of the Steering and Supervisory Board of Caisse d'Epargne Île-de-France.
Key advisory skills: recognized academic authority, extensive knowledge of local and regional authorities.
Vice-Chairman of the Steering and a Supervisory Board of Caisse d’Epargne Île-de-France (from 2008 to 29/04/2014)
Chairman of the Steering and a Supervisory Board of Caisse d’Epargne Île-de-France (from 29/04/2014) � (until 26/04/2017)
Member of the Board of BPCE a Assurances (since 23/05/2005) � (until 17/03/2017)
Member (since 18/12/2002) and Chairman of the Supervisory Boarda (from 02/10/2017 to 30/04/2018) of Ediradio SA (RTL/RTL2/FUN RADIO), Member of the Board of Directors of RTL France Radio (from 02/10/2017 to 28/06/2018)
Permanent Representative of Métropole Télévision, Member of thea Board of: SASP Football Club des Girondins de Bordeaux (from 2012 to 06/11/2018), Société Nouvelle de Distribution SA, Extension TV SAS, C. Productions SA (since 21/10/2012), IP France SA (from 02/10/2017 to 31/05/2018), IP Régions SA (from 02/10/2017 to 31/05/2018), Société d’Exploitation Radio Chic - SERC SA (since 02/10/2017), Société de Développement de Radio diffusion - SODERA SA (since 02/10/2017)
Permanent Representative of Métropole Télévision, Chairman of: M6a Publicité SA (since 2001), Immobilière M6 SAS (since 2001), M6 Bordeaux SAS (since 2001), M6 Interactions SAS (since 2001), M6 Digital Services (formerly M6 Web SAS) (since 2001), M6 Foot SAS (since 2001), SNC Catalogue MC SAS (formerly Mandarin Cinéma SAS) (since 22/07/2016), SNC Audiovisuel FF SAS (formerly Fidélité Films SAS) (since 20/07/2017)
Permanent Representative of C. Productions SA, Member of the Boarda of M6 Films SA (since 01/01/2015)
Permanent Representative of Métropole Télévision, Managing Partnera of SCI 107 avenue Charles de Gaulle (since 2001)
Representative of RTL group, Member of the Supervisory Board anda Vice-Chairman of the Compensation Committee of Atresmedia (formerly Antena3)(1) (since 29/10/2003)
Member of the Board of GL Events SA(1) (since May 2008)a
Volunteer member of the Board of the RAISE endowment fund a (since 22/11/2013)
CORPORATE GOVERNANCE Additional information on the directors’ positions 63Natixis Registration Document 2018
Member of the Board of TF6 a Gestion SA (2) (since 2001) � (until 01/03/2015)
55 100% French 01/06/2018 2019 AGM Expertise in strategic matters concerning banking and financial institutions, as well as the French and international economic and financial environment
French 18/02/2015 2022 AGM Entrepreneurial experience, M&A, finance, IT and corporate strategy
French 30/04/2009 2019 AGM Managing large businesses, proficiency in strategic issues
French 28/01/2013 2022 AGM Proficiency in legal issues, particularly business law; extensive knowledge of banking businesses
French 29/05/2012 2020 AGM Proficiency in human resources issues and business transformation, extensive knowledge of banking businesses
CORPORATE GOVERNANCE Additional information on the directors’ positions 65Natixis Registration Document 2018
French 30/07/2015 2022 AGM Entrepreneurial experience, extensive knowledge of the accounting, financial and audit fields
The information it contains takes into consideration, in particular, Annex I of European regulation (EC) No. 809/2004 of April 29, 2004 (amended) as well as recommendation No. 2012-02, consolidating the recommendations published since 2009, of the Autorité des Marchés Financiers (AMF—French Financial Markets Authority) report on corporate governance and executive compensation, and specifically the AMF’s 2018 report, published on November 26, 2018, the activity report from the High Committee on Corporate Governance (HCGE) published on October 24, 2018, and the Guide for compiling registration documents, also published by the AMF on December 10, 2009, and amended on December 17, 2013, and on April 13, 2015, and lastly, the June 2013 Guide to applying the Afep-Medef corporate governance code for listed companies, supplemented by the HCGE in December 2014, November 2015 and November 2016 and June 2018.
The Company refers voluntarily to the Corporate Governance Code for listed companies published by the Association Française des Entreprises Privées (Afep—French Association of Private Sector Companies) and the Mouvement des Entreprises de France (Medef—French Business Confederation), hereinafter referred to as the “Afep-Medef code”, which was revised in June 2013, November 2015, November 2016 and June 2018. The Afep-Medef code is available for consultation at the Company’s head office and on the Natixis website: www.natixis.com.
Independent directors no longer account for a third of Natixis' Board members, since Henri Proglio's term of office reached the recommended 12-year limit at the end of 2018.
Independent members do not make up two-thirds of the Natixis Audit Committee, as recommended by the Afep-Medef code, in order to represent the different components of the Company’s main shareholders (members from the Caisse d’Epargne and the Banque Populaire banks, in addition to a Groupe BPCE representative). Strictly following the Afep-Medef code recommendations on the composition of the Audit Committee would require Natixis’ independent directors to sit on more than three Special Committees, at the risk of negatively affecting the quality of those Committees’ work, in light of the resulting increased workload. That is why Natixis promotes a balance of directors within the Committees, which are, additionally, always chaired by an independent director. It should be noted that the opinions and recommendations of the Audit Committee are only adopted if the majority of members present, including the Chairman, voted for them.
The number of independent directors on Natixis’ Appointments Committee is not greater than half the total number of members, despite the recommendation by the Afep-Medef code. Until November 17, 2018, it had a balanced composition (50% independent, 50% non-independent), and the Committee was chaired by an independent director*. Like the Audit Committee, strictly following the Afep-Medef code recommendations on the composition of the Appointments Committee would require Natixis’ independent directors to sit on more than three Special Committees, at the risk of negatively affecting the quality of that Committee’s work, in light of the resulting increased workload. That is why Natixis promotes a balance of directors within the Committee, which is, additionally, always chaired by an independent director. It should be noted that the opinions and recommendations of the Appointments Committee are only adopted if the majority of members present, including the Chairman, voted for them.
Session of the Board of Directors held without the executive officers (Article 10.3 of the Code)
“It is recommended that at least one meeting not attended by the executive officers should be organized each year.”
Natixis’ Board of Directors does not have a formal arrangement to hold a session without the executive officer present. However, the Chief Executive Officer is not present at the part of the Board Meeting during which his performance is evaluated and his compensation is determined.
The Chief Executive Officer’s non-competition benefit is not be paid in installments.
This form of corporate governance was chosen to create a single custodian of Natixis' best interests and value creation. It permits unity of action, which is an essential requirement in terms of control, responsiveness and foresight in Company management.
Pursuant to Articles L.225-23 and L.225-27-1 I of the French Commercial Code, Natixis’ Board of Directors does not have any employee directors, or any employee shareholder directors. Conversely, two representatives of the Central Works Council attend every Board of Directors’ Meeting in an advisory capacity.
Until November 17, 2018, one third of the members of the Board of Directors was independent.
Natixis' Board of Directors therefore determined that Nicolas de Tavernost, Anne Lalou, Catherine Pariset and Bernard Oppetit meet the necessary independence criteria.
It also noted that, as of November 17, 2018, Henri Proglio could no longer be considered an independent director. The Board of Directors and Appointments Committee therefore began the process for selecting a new director to replace Henri Proglio. This process was still ongoing at the time this report was prepared.
Henri Proglio has informed the Board of Directors that he will stop performing his duties as a Board member as soon as his
Is not a major customer, supplier, or corporate or investment banker or advisor (or linked directly or indirectly to these persons) to the Company or the Group; does not derive a significant portion of business from the Company or its Group
Has not been an auditor of the Company in the previous five years
Does not receive variable compensation in cash or in shares, or any performance-linked compensation from Natixis or the Group
Henri Proglio began his term as a member of the Natixis Supervisory Board, which has since become the Board of Directors, on (b) November 17, 2006. Consequently, his term of office on Natixis' Board of Directors reached the recommended 12-year limit on November 17, 2018.
Changes made to the Board of Directors in 2018 and since January 1, 2019 that are likely to have a material impact on the Company's governance are as follows: on May 23, 2018, the Combined General Shareholders’a Meeting of Natixis: ratified the co-opting of Bernard Dupouy as a Director by thej Board of Directors, which took place during the meeting of the Board on August 1, 2017, to replace Michel Grass and serve out the remainder of the latter’s term of office, i.e. until the 2019 General Shareholders’ Meeting to approve the financial statements for the year ending on December 31, 2018,
CORPORATE GOVERNANCE Management and oversight of corporate governance 69Natixis Registration Document 2018 renewed the terms of office of Bernard Oppetit, Anne Lalou,j Thierry Cahn and Françoise Lemalle for four years, i.e. until the 2022 General Shareholders’ Meeting to approve the financial statements for the year ending on December 31, 2021. These four directors had resigned from their offices effective at the end of the Board of Directors meeting on May 23, 2018 preceding the Annual General Shareholders’ Meeting that met the same day, in order to avoid reappointing large numbers of directors in 2019 all at once, and to stagger reappointments more evenly; on May 23, 2018, the Board of Directors reappointed Thierrya Cahn, Anne Lalou, Françoise Lemalle, and Bernard Oppetit as members of the Special Committees of the Board, following their reappointments as directors; on June 1, 2018, the Board of Directors acknowledged thea resignation of François Pérol from his duties as Director and Chairman of the Board of Directors of Natixis and decided, following the approval of the Appointments Committee, to: co-opt Laurent Mignon as Director to replace François Pérolj for the remainder of the latter’s term of office, i.e. until the end of the 2019 General Shareholders’ Meeting to approve the financial statements for the 2018 fiscal year, appoint Laurent Mignon as Chairman of the Board ofj Directors for the duration of his directorship, i.e. until the end of the 2019 General Shareholders’ Meeting to approve the financial statements for the fiscal year ending December 31, 2018; on December 20, 2018, the Board of Directors decided to:a co-opt Nicole Etchegoïnberry to replace Stéphanie Paix, whoj resigned, to serve out the remainder of the latter’s term of office, i.e. until the end of the 2020 General Shareholders’ Meeting to approve the financial statements for the fiscal year ending December 31, 2019, co-opt Christophe Pinault to replace Alain Denizot, whoj resigned, to serve out the remainder of the latter’s term of office, i.e. until the end of the 2019 General Shareholders’ Meeting to approve the financial statements for the fiscal year ending December 31, 2018; on February 12, 2019, the Board of Directors of Natixis decideda to submit a resolution at the May 28, 2019 General Shareholders' Meeting to appoint Daniel de Beaurepaire as a replacement for Philippe Sueur, whose term of office is due to expire at the end of that General Shareholders' Meeting. Daniel de Beaurepaire is currently Chairman of the Steering and Supervisory Board of Caisse d'Epargne Ile-de-France.
In accordance with the staggered appointments procedure initiated at the Combined General Shareholders' Meeting on May 23, 2018, the current terms of office expire as follows: 2019 AGM BPCE, Laurent Mignon, Bernard Dupouy, Catherine Pariset, Christophe Pinault, Henri Proglio, Philippe Sueur 2020 AGM Alain Condaminas, Nicole Etchegoïnberry, Sylvie Garcelon 2021 AGM Nicolas de Tavernost 2022 AGM Thierry Cahn, Anne Lalou, Françoise Lemalle, Bernard Oppetit
After considering the report submitted by the Appointments Committee, the Board of Directors of Natixis discussed, as it does each year, the best way to balance its membership, especially in terms of the knowledge, expertise and experience contributed by its members, both individually and collectively. The Board concluded that the range of knowledge, expertise and experience of its members is sufficiently broad, complementary, and balanced to state that: individually, each one of the directors can contribute usefully toa the work of the Board and the Special Committees; and collectively, the Board has the ability to make informeda decisions and the breadth of expertise necessary to ensure that the Company is properly run and its business strategy is effective.
In addition to reiterating the rules governing the composition of the Board of Directors, this policy describes the criteria used to ensure the Board's diversity (in terms of education, professional experience, age, nationality, and the long-term target of at least 40% women), and the qualifications needed to perform the duties of a Board member (solid understanding of the banking and financial sector, awareness of all kinds of risk, strategic vision).
Accordingly, whenever a director is appointed, a “fit and proper” report outlining the candidate's experience and skills, as well as their status with respect to other offices held simultaneously, availability, integrity and conflicts of interest, accompanied by their résumé, is sent to the members of the Appointments Committee for review. The Committee then provides the Board with its opinion.
In accordance with Article 9 of the Natixis bylaws, each director must own at least one hundred and forty (140) Company shares during their term of office. Furthermore, in accordance with the recommendations of the Afep-Medef code and the provisions of Article 3 of the Compliance Charter for members of the Board of Directors (see Section 2.3.1.2-C), the Directors are asked to hold at least one thousand (1,000) Company shares within 18 months of joining the Board.
The duties of the Board of Directors are defined by the law and the bylaws.
The Board of Directors, assisted by the Board’s Special Committees: defines the strategy governing the Company’s activities anda) oversees its implementation. Within the limits of the Company’s corporate purpose and the powers expressly granted by law or its bylaws to the General Shareholders’ Meetings, the Board concerns itself with all matters affecting the Company’s performance and governs by virtue of its deliberations. The Board of Directors performs the controls and checks it deems appropriate; defines how senior management operates, and may onlyb) deliberate on this matter when it features on the agenda sent out at least 15 days prior to the Board Meeting and when at least two-thirds of the directors are present or represented. As a reminder, the Board of Directors of a credit institution may not be chaired by the Chief Executive Officer. Nevertheless, based on provided justification the Autorité de Contrôle Prudentiel et de Résolution (ACPR—French Prudential Supervisory Authority for the Banking and Insurance Sector) may authorize the accumulation of these functions.
It sets the rules for the distribution of directors’ fees allocated to the directors by the General Shareholders’ Meeting; verifies that the executive managers have properlyg) implemented the supervisory mechanisms, especially in terms of the separation of duties and the prevention of conflicts of interest, that ensure the Company is effectively and prudently managed; reviews the governance framework as set out inh) Article L.511-55 of the French Monetary and Financial Code, periodically assesses its effectiveness, and ensures that corrective measures have been taken to remedy any shortcomings; regularly approves and revises the policies and strategiesi) governing the taking, management, monitoring and reduction of the risks to which Natixis is or could be exposed, including risks created by the economic environment; reviews and approves the parent company and consolidatedj) financial statements of the Company, ensuring their accuracy and fairness.
The Chairman of the Board of Directors also sees to maintaining the quality of the relationships with shareholders, by participating in actions carried out in that arena.
Accordingly, an independent member of the Board of Directors cannot: be or have been within the last five years:j an employee or executive corporate officer of Natixis,j an employee, executive corporate officer or director of aj company consolidated by Natixis, an employee, executive corporate officer or director ofj BPCE or of a company consolidated by BPCE; be an executive corporate officer of a company in whichj Natixis directly or indirectly holds a directorship, or in which a designated employee of Natixis or an executive corporate officer of Natixis (currently or within the last five years) holds a directorship; be a customer, supplier, investment or corporate banker:j that is material for Natixis or the Group,j or that derives a significant portion of its business fromj Natixis or the Group; have a close family relationship with a corporate officer ofj Natixis or the Group; have been a Statutory Auditor of Natixis within the last fivej years; have been a member of Natixis’ Board of Directors for morej than 12 years. Independent director status is lost once a Board member has served for 12 years; receive variable compensation in cash or in shares, or anyj performance-linked compensation from Natixis or the Group; The independent status of each member of the Board of Directors is examined by the Appointments Committee (the composition and role of which are described below), which prepares a report for the Board (see summary table above); Board operating procedures specified in the internal rules:a
In particular, the internal rules stipulate that, except for decisions related to the preparation of parent company and consolidated financial statements and management reports (Company and Group), directors participating in a Board Meeting by conference call or through the use of telecommunication facilities transmitting at least the member’s voice and whose technical characteristics allow for continuous and simultaneous streaming of the proceedings, shall be deemed present for the purposes of quorum and majority.
Minutes of Board Meetings are prepared by the Corporate Secretary and sent to Natixis’ directors, and approved at every subsequent session by the latter.
Inside information In accordance with regulation 596/2014 of the European Parliament and Council (together with the delegated and enforcement regulations of Article 621-1 of the general regulation of the Autorité des Marchés Financiers (AMF—French Financial Markets Authority), the Market Abuse regulation (MAR)): “Inside information is any information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.”
Directors are advised of the risks posed by transactions executed on Natixis stock by persons closely associated with them, especially: a spouse, or a partner considered to be equivalent to a spousea in accordance with national law; a dependent child, in accordance with national law;a a relative who has shared the same household for at least onea year on the date of the transaction concerned; a legal person, trust or partnership:a the managerial responsibilities of which are discharged by aj person discharging managerial responsibilities or by a person who is closely associated with them, that is directly or indirectly controlled by such a person,j that is set up for the benefit of such a person, orj the economic interests of which are substantially equivalentj to those of such a person.
Permanent insiders As per the MAR regulation, Natixis places the names of directors on the list of permanent insiders provided to the AMF. A permanent insider is any individual or legal entity that, on account of the nature of their functions or position in an issuing entity, has continuous access to inside information held by that issuing entity. Directors are individually informed that they are on this list by a letter from the Head of Compliance with acknowledgment of receipt.
Directors undertake to strictly observe and comply with the provisions of the Natixis S.A. Compliance Manual regarding any transactions relating to Natixis shares or debt securities, as well as any other related derivatives or financial instruments.
CORPORATE GOVERNANCE Management and oversight of corporate governance 73Natixis Registration Document 2018
Should this transaction or business relationship be submitted to the Board of Directors, the director or the non-voting director in question must abstain from attending any part of the meetings of the Board of Directors or of any of its Committees in which they discuss the plan in question. Consequently, the director or non-voting director does not participate in the Board’s deliberations, or in the vote on the plan in question, and the section of the minutes relative to the plan in question is not submitted to them.
Should one of Natixis’ directors no longer be in a position to perform their duties in compliance with the Charter, either for their own reasons or for any other reason including those specific to Natixis’ rules, they must notify the Chairman of the Board of Directors, seek measures to remedy the situation, and, if none are found, suffer the personal consequences with respect to the performance of their duties.
Natixis' Chief Compliance Officer is available to each director for any questions about the Code of Conduct.
In particular, it sets out the procedure to be followed, from the notification of the Board of Directors to approval by the General Shareholders’ Meeting, in light of the Statutory Auditors’ special report (see Statutory Auditors’ special report on related party agreements in Chapter 7 “Legal Information”).
The Chief Executive Officer will not receive severance payments in the event of gross negligence or willful misconduct, or if he leaves the Company at his initiative to take another position or changes his position within Groupe BPCE; a non-compete agreement should his term of office as Chiefa Executive Officer be terminated. This non-compete agreement is limited to a period of six months, and includes a payment equal to six months of the fixed compensation in effect on the date when his corporate office is terminated. It should be noted that the total amount of the severance payment and the non-compete payment may not exceed a cap set at 24 months’ monthly reference compensation, as defined in the commitment relating to his severance payment.
At its meeting of February 12, 2019, it also reviewed all related party agreements that have been authorized by the Board over previous fiscal years, which continued to have an impact during the 2018 fiscal year.
Based on the criteria used for its initial approval, the Board of Directors upheld the authorization of all these agreements.
The main topics addressed by the Board of Directors in 2018 were as follows: Natixis’ financial and cash position, and its commitments
Update to the 2018 budget and review/approval of the 2019 budgeta
Reports on terms for exercising internal control and on measuring and monitoring riska
Review of whether the product and service prices offered to clients are in line with Natixis’ risk a strategy.
Overview of the senior management report (Volcker Rule) and update on the Volcker sector manuala
Review of the summary assessment of the Board of Directors’ worka
Determination of the variable compensation of the Chief Executive Officer for fiscal year 2017, setting a of the fixed compensation of the Chief Executive Officer for fiscal year 2018, and establishment of the criteria for determining the variable compensation of the Chief Executive Officer for fiscal year 2018
Approval of the performance conditions for the regulated population and renewal of the employee a retention and performance plan
Information on the capital increases following the allocation of free shares of February 2016a
Opinion of the Central Works Council (CCE) as part of the consultation on strategic orientations in a accordance with Article L.2323-10 of the French Labor Code
Update of Natixis’ authorization to borrow from the Federal Reserve Bank of New Yorka
Implementation of the process set out in Article L.2323-7-1 of the French Labor Code on strategic a guidelines
Assessment of the work 2.3.1.4 of the Board of Directors in 2018
Every three years (2010, 2013, 2016), Natixis enlists the services of an outside firm to assess the work of its Board and Committees.
For 2018, Natixis conducted an internal assessment to review the structure, operation, and composition of the Board of Directors and its specialized committees and evaluate their overall performance. In addition to that, this year the assessment focused on the themes most often handled by the Board, namely results and investor relations, definition and monitoring of strategies, external growth projects, and risks and internal control.
During an individual interview, each Board member completed a detailed questionnaire. They were asked to assess directors' individual contribution according to the following criteria: involvement, attendance, punctuality and adequacy of preparation for Board Meetings.
The representatives of the Works Council also took part in the assessment of the Board conducted in 2018.
The results of these interviews were presented at the meeting of the Board of Directors held on February 12, 2019.
The directors believe that the Board's and Special Committees' questions and requests for further information were satisfactorily answered.
Finally, it would be useful for risk appetite to be fully reviewed at the offsite Board meeting.
After the assessment of the Board of Directors and Special Committees conducted in 2017, corrective measures were enacted in 2018, including: a process to evenly stagger directors’ terms was implementeda at the May 23, 2018 General Shareholders' Meeting; with respect to the way the Board of Directors operates, ana update about ongoing projects is now on the agenda at each Board Meeting; a US Risk Committee meeting was held in New York ona December 6 and 7, 2018 and will be repeated on an annual basis.
In 2018, Natixis renewed the training program for Board members that it started in 2016. The resulting training program is also in line with the existing one for members of the BPCE Supervisory Board.
The training sessions provided by Natixis this year covered the following topics: main principles of compliance and current trends in regulation;a the Risk Appetite Framework;a a director’s liability (civil, criminal, and regulatory);a capital and financial market activities: rules, operation, controls;a compensation mechanisms;a ratings methodologies and internal models.a
CORPORATE GOVERNANCE Management and oversight of corporate governance 77Natixis Registration Document 2018
BPCE, represented by Catherine Halberstadt (position previously held by Marguerite Bérard-Andrieu until January 1, 2018)
Two-thirds of the Audit Committee are not independent members, despite the Afep-Medef code's recommendation. This is so that the different components of the Company’s main shareholder are represented (members from the Caisse d’Epargne and the Banque Populaire banks, in addition to a representative of BPCE). However, the Committee is always chaired by an independent director. (See summary table on compliance with Afep-Medef code recommendations in section 2.3 of this chapter.) Furthermore, the opinions and recommendations of the Audit Committee are adopted if the majority of members present, including the Chairwoman, vote for them.
The Audit Committee's Chairwoman and members have extensive accounting and financial expertise gained over the course of their professional careers. Catherine Pariset has a career in auditing spanning 35 years. Catherine Halberstadt was Chief Executive Officer of Banque Populaire du Massif Central for several years and possesses in-depth knowledge of retail banking and corporate financing. Sylvie Garcelon is Chief Executive Officer of CASDEN Banque Populaire, and as such has vast financial experience. Françoise Lemalle has extensive knowledge in accountancy, finance and auditing. Bernard Oppetit is a financial market specialist and has extensive experience in complex financial products and alternative investment companies.
Changes made to the Audit Committee in 2018 and since January 1, 2019: Director Capacity Date of change Replaced by
Under the authority of the Natixis Board of Directors, the Audit Committee’s primary duties are: checking the clarity of information published by Natixis,a assessing the relevance of the accounting methods adopted for the preparation of Natixis’ individual and consolidated financial statements, monitoring the process of preparing financial information (preparing the financial statements, the management report, etc.) and making recommendations to guarantee the integrity of this information; monitoring the statutory audit of the quarterly, half-yearly anda annual consolidated financial statements and annual individual financial statements, as well as Natixis’ draft budgets and material off-balance sheet commitments, far enough in advance to allow their presentation to Natixis’ Board of Directors; and the half-yearly and annual management reports; monitoring the effectiveness of the internal control and riska management systems with regard to the procedures for preparing and processing accounting and financial information; ensuring the Statutory Auditors’ adherence to thea independence conditions by which they are bound; accordingly, the Committee must: ensure that the fee amount paid by Natixis, or thej percentage of the net sales of the firms and networks represented by that fee, does not, by its nature, undermine the independence of the Statutory Auditors, establish the rules governing the services that the Statutoryj Auditors may provide and governing the authorization of services other than the certification of the financial statements; monitoring the Statutory Auditors’ performance of their duties;a submitting a recommendation to Natixis’ Board of Directors fora the appointment of Statutory Auditors or auditing firms; reviewing the Statutory Auditors’ work schedule, the results ofa their audits and recommendations, and any follow-up action thereof; issuing its opinion on the report presented to it on an annuala basis with regard to commercial relations between Natixis or one or more of its subsidiaries, and all or some of the entities forming Groupe BPCE; reporting regularly to the Board of Directors on thea performance of its duties. It also reports on the results of the certification of the financial statements, the way in which this duty contributed to the integrity of the financial information and the role it played in this process. Any difficulty encountered is reported without delay.
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 regulatorya documents prepared periodically by the Company; summary reports by the Company’s Statutory Auditors;a any audit reports concerning the Company;a accounting policies and methods applied within the Company;a consolidated budgets, as well as any related documentsa provided to the Board of Directors or, if applicable, the Audit Committee of the principal subsidiaries.
Depending on the agenda, various Audit Committee meetings were also attended by Natixis' Chief Financial and Strategy Officer (replaced by the Chief Financial Officer after August 6, 2018), the Chief Risk Officer, the Head of Accounting and Ratios, the Natixis Head of Internal Audit, the BPCE Head of Inspection Générale and/or the Corporate Secretary.
In order to enable it to audit the financial statements, the Audit Committee is sent a copy of the reports of the Finance Department and the comments of the Statutory Auditors regarding annual financial statements and the review of the half-year and quarterly financial statements.
Other items Progress made on the project to implement IFRS 16 and 17a
Information on prior authorizations given by the leader of the Audit Committee for the completion of a the Statutory Auditors’ services
Follow-up on Statutory Auditors’ fees for 2018 (certification and other assignments)a
In 2018, the Risk Committee had five members. At March 1, 2019 these members were: Bernard Oppetit Chairman
Catherine Halberstadt (position previously held by Marguerite Bérard-Andrieu until January 1, 2018)
Nicole Etchegoïnberry (position previously held by Stéphanie Paix until November 12, 2018)
Changes made to the Risk Committee in 2018 and since January 1, 2019: Director Capacity Date of change Replaced by
Presentation of the final results of the 2018 internal stress tests and progress made on the 2019 internal a stress tests
Follow-up on overall interest rate risk measurement —IRRBB (Interest Rate Risk on Banking Book)a
Evaluation of the effectiveness of the internal control framework and the procedures in place (risk view)a
Review of the VaR limits and alert threshold and of the operational risk indicators defined as part of the RAFa
Follow-up on current and future risks related to the macroeconomic and geographic environmenta
Internal control Review of assignments conducted by Natixis Internal Audit and BPCE Inspection Générale during the fiscal a year
Over the 2018 fiscal year, the US Risk Committee worked on the following: the review and annual approval of the documents formallya setting out the risk management and governance systems: review of the Committee’s charter, updating of Enterprise Risk Management, definition of the Risk Appetite Framework, the compliance risk mitigation system; the review and monitoring of the US Chief Risk Officer’sa priorities for 2018; the examination and approval of the frameworks that definea what to do in a major crisis, such as the Emergency Financing Plan or the US Resolution Plan; the periodic review of changes to the business and risks of thea US platform, including compliance risks;
CORPORATE GOVERNANCE Management and oversight of corporate governance 81Natixis Registration Document 2018 the periodic review of the platform’s regulatory environment,a observations made by local supervisors, and corresponding action plans; the periodic monitoring of the conclusions of Loan Review’sa work, a periodic control function dedicated to credit risk; the analysis of specific risk mitigation systems, such asa liquidity risks, operational risks, or the Code of Conduct.
At March 1, 2019, those members were as follows: Nicolas de Tavernost Chairman
Changes made to the Compensation Committee in 2018 and since January 1, 2019: Director Capacity Date of change Replaced by
B – Role and powers the Internal Rules, the latest version of which was approved on December 17, 2014 by the Board of Directors.
It confers with Natixis’ Internal Control Departments or outside experts as appropriate.
Each director’s individual attendance rate for Compensation Committee meetings is provided in Section 2.2 of this chapter (see directors' individual fact sheets).
Validation of the principles of the fixed and variable compensation for the new Chairman of the Board a of Directors and new Chief Executive Officer as of June 1, 2018
Renewal of the deferred variable compensation policy for compensation allocated for 2018a
Review of specific Risk and Compliance targets (2017 review & presentation of 2018 targets)a
Report of the annual BPCE Inspection Générale division's review of the regulated population under a CRD IV
The Appointments Committee has six members. As of March 1, 2019, these members were: Henri Proglio Chairman
Nicolas de Tavernost Member despite the recommendation by the Afep-Medef corporate governance code. It had until that date a balanced composition (50% independent, 50% non-independent) and was chaired by an independent director (see summary table on compliance with Afep-Medef Code recommendations in Section 2.3 of this chapter). Furthermore, the opinions and proposals of the Appointments Committee are adopted if the majority of members present, including the Chairman, vote for them.
Three of the six members were independent until November 17, 2018(1) (Anne Lalou, Henri Proglio and Nicolas de Tavernost). The number of independent directors on the Appointments Committee is not greater than half the total number of members,
Natixis’ CEO is involved as required with the Appointments Committee’s work.
Changes made to the Appointments Committee in 2018: Director Capacity Date of change Replaced by
See implementation of the “apply or explain” rule section 2.3 of this document (1)
CORPORATE GOVERNANCE Management and oversight of corporate governance 83Natixis Registration Document 2018
Qualification as an independent director is discussed by the Appointments Committee, which prepares a report for the Board. Each year, based on this report and before the publication of the annual report, the Board of Directors reviews the status of each of its members based on independence criteria set out in Article 2.3.2 of the Board of Directors’ Internal Rules (see Section 2.3.1.1 of this registration document).
The Appointments Committee met three times in fiscal year 2018. The attendance rate was 88%.
Each director’s individual attendance rate for Appointments Committee meetings is provided in Section 2.2 of this chapter (see directors’ individual fact sheets).
In 2018, the Committee focused on the following areas: Independence of directors Verification of independence criteria for each directora
Opinion on the co-option of a new director and their appointment as Chairman of the Board of a Directors
Review of the implementation of staggered reappointments of directors and the reappointment of a four directors
Analysis of the qualifications needed for the duties carried out on the Board of Directorsa
Evaluation of the balance and diversity of knowledge, skills and experience that the Board members a have, both individually and collectively
Identification of a person or a dominant group within the Board of Directors who might be a detrimental to Natixis’ interests
In 2018, the Natixis Strategic Committee met to analyze the following points: the initial results of the New Dimension strategic plan and thea economic and regulatory outlook; the environment of the Payments division and its opportunitiesa for external growth; focus on Asset Management and growth opportunities;a the strategic plan’s adaptation to CIB and the division'sa ambitions; progress made on major projects currently underway ina connection with the strategic plan for the Insurance division.
In accordance with the Afep-Medef code, during this meeting the Strategic Committee presented the Company’s significant achievements in terms of Environmental and Social Responsibility (ESR), particularly with regard to risk management, sustainable business development, communication and relationships with stakeholders, and initiatives developed to reduce Natixis’ environmental footprint or to consider CSR criteria when determining compensation.
On April 30, 2009, the Board appointed Laurent Mignon as Chief Executive Officer starting May 14, 2009 for a six-year term. Laurent Mignon’s term of office was renewed by Natixis’ Board of Directors on February 18, 2015 for a period of four years, ending after the 2019 General Shareholders’ Meeting called to approve the financial statements for the fiscal year ending on December 31, 2018. On April 27, 2018, the Board of Directors accepted the resignation of Laurent Mignon from his duties as Chief Executive Officer of Natixis, effective June 1, 2018, and decided, following the favorable opinion of the Appointments Committee, to appoint François Riahi as his replacement effective June 1, 2018, for a period of four years ending with the adjournment of the 2022 Natixis General Shareholders' Meeting held to approve the financial statements for the fiscal year ending December 31, 2021.
The Chief Executive Officer subsequently set up a Senior Management Committee (SMC), which he chairs. It consists of the heads of Natixis' four main businesses (Asset & Wealth Management, Corporate & Investment Banking, Insurance and Specialized Financial Services) and support functions.
At March 1, 2019, the Senior Management Committee's members were: Gils Berrous (Specialized Financial Services), Véronique Sani (Operations and Information Systems), Pierre Debray (Risks), Anne Lebel (Human Resources), Jean-François Lequoy (Insurance), Nathalie Bricker (Finance and Strategy), André-Jean Olivier (Corporate Secretary), Jean Raby (Asset & Wealth Management), Pierre-Antoine Vacheron (Payments) and Marc Vincent (Corporate & Investment Banking).
Lastly, Natixis has an Executive Committee that brings together the members of the Senior Management Committee and the heads of certain business lines and support functions essential to the Company’s success (see members of the Executive Committee, Section 2.1 of this chapter). The Committee’s role mainly focuses on information and monitoring.
In this context, the executive managers are authorized to request and receive all useful information from any division, department, controlled entity or subsidiary of Natixis.
In conjunction with the Chief Executive Officer, the Board of Directors determines the scope and duration of the powers conferred upon the Deputy Chief Executive Officers. They have the same powers with respect to third parties as the Chief Executive Officer.
2018 was the first year that the 2018-2020 New Dimension strategic plan was implemented across all Natixis business lines.
New Dimension sets out three powerful initiatives to give its clients a broader range of high added-value solutions: deepening the business model transformation that it successfully began under the New Frontier plan, allocating a significant portion of its investments to digital technologies and differentiating itself by taking the lead in the areas where Natixis’ teams are recognized for their exceptional skills.
After in-depth discussions with the businesses and support functions involved, the Senior Management Committee approved the main management decisions, and reviewed and approved the budget, capital trajectory, Risk Appetite Framework, internal stress tests and ICAAP report. In addition, it approved the terms and conditions governing mandatory annual negotiations and the compensation review policy, the appointment of senior executives and managers, and all significant projects or investments. It also examined and approved several reorganization projects, particularly for Natixis Investment Managers with the creation of Ostrum Asset Management, or for the Risk division, which became the Risk Monitoring division.
Furthermore, the Senior Management Committee monitored the management, risk management and compliance measures within Natixis, and regularly reviewed changes in the Company’s risks, as well as the consequences of audits. It paid special attention to cybersecurity issues. The creation of the Natixis Code of Conduct was accompanied by the training of all employees and the formation of a Conduct Committee, which met quarterly.
OGMs are held annually and their purpose is to inform shareholders about the running of the Company. Their principal objective is to give an opinion on the financial statements of the previous fiscal year, to determine the appropriation of income, and to set the dividend and the conditions for its payment.
EGMs are convened each time there are decisions concerning a change in the bylaws, notably in the event of a financial transaction affecting the share capital.
Under the terms and conditions set forth by law and regulations, shareholders may send their proxy and absentee voting ballots, either in paper format or, on the decision of the Board of Directors published in the notices of meeting, electronically. The Board of Directors may also decide that shareholders may participate and vote at any General Shareholders’ Meeting by conference call or electronic transmission under the terms and conditions set by the regulations.
CORPORATE GOVERNANCE Management and oversight of corporate governance 87Natixis Registration Document 2018
Any shareholders that hold more than 1% of the voting rights and have already declared that they have crossed the statutory threshold may obtain or consult the list of shareholders that have crossed the statutory threshold at Natixis’ registered office or by contacting Natixis’ Investor Relations (30 avenue Pierre Mendès-France 75013 Paris).
In accordance with regulations, a list of the functions performed by the corporate officers of Natixis is included in this document. The knowledge, skills and experience of the directors, both individually and collectively, give the Board of Directors the breadth of expertise necessary to ensure that the Company is properly run and its business strategy is effective.
To the best of Natixis’ knowledge, these situations do not affect those directors’ independence of judgment, decision, and action, and there is no potential conflict of interest between the duties that the Board members owe to Natixis and other duties or private interests. When needed, the Internal Rules of the Board of Directors and the Compliance Charter set out a conflict of interest resolution system for all members of the Board of Directors. They also require Board members to notify the Chairman of the Board (or the Corporate Secretary of Natixis) of any conflict of interest and to abstain from voting on the corresponding resolution.
To the best of Natixis’ knowledge, there are no service agreements binding members of the Board of Directors or Senior Management to Natixis that could confer benefits according to the terms of such an agreement and that might by their nature compromise the independence of members or interfere with their decision-making.
Summary of disclosed NATIXIS share transactions by persons discharging 2.3.5.3 managerial responsibilities and by persons closely associated with them
Directors’ fees are granted according to the following rules: Governing body
In addition, there are also directors’ fees earned for participation in the Board’s various Special Committees.
For example, a director who is a member of the Compensation Committee will collect, in addition to the fees earned for being a director, a fixed fee of €2,000 per year for participation in the Compensation Committee, plus €1,000 for each meeting of the Compensation Committee which they attended, with the number of meetings being capped at four, for a maximum total of €6,000 per year.
The directors’ fees paid to the Chairmen of the Special Committees is greater than that paid to members, given the workload responsibilities involved.
COMPENSATION AND BENEFITS 2.4.2 OF ANY KIND FOR THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE CHIEF EXECUTIVE OFFICER
The May 23, 2018 General Shareholders' Meeting approved the components of the compensation policy for the Chairman of the Board and for Laurent Mignon and François Riahi in their successive roles as Chief Executive Officer.
In accordance with the principles approved by the May 23, 2018 General Shareholders' Meeting: François Pérol received no compensation in 2018 for his dutiesa as Chairman of the Natixis Board of Directors, which he held until June 1, 2018;
Laurent Mignon received a gross €175,000 (corresponding to aa gross €300,000 on an annual basis) for 2018 for his duties as Chairman of the Natixis Board of Directors, which he held from
Compensation and benefits 2.4.2.2 of any kind for the director and Chief Executive Officer of Natixis in 2018
François Riahi’s fixed compensation for 2018 was €800,000 for the full year, or €466,667 for the period from June 1 to
The annual variable compensation in respect of fiscal year 2018 was calculated on the basis of quantitative and strategic criteria first reviewed by the Compensation Committee then validated by the Board of Directors, and submitted to a vote at the General Shareholders’ Meeting on May 23, 2018.
The variable compensation target for the 2018 fiscal year was set at 120% of the Chief Executive Officer’s fixed compensation, with a range of between 0% and 156.75% of the target, i.e. a maximum of 188.1% of fixed compensation. Laurent Mignon’s variable compensation target was therefore €1,152,000 for the full year, or €480,000 for the period from January 1 to June 1, 2018, and François Riahi’s variable compensation target was €960,000 for the full year, or €560,000 for the period from June 1 to December 31, 2018. The following targets were set for 2018: Quantitative criteria
With respect to strategic criteria in particular, the Board recognized the progress made on the strategic plan, as evidenced by the business lines' underlying results in 2018, and on Natixis' cultural transformation (simplification of the organizational structure, leadership model, implementation of the “new and modern workplace” plan), while taking the equity derivatives incident in South Korea into consideration.
In keeping with the principle of the admissibility of allocating performance shares to the Chief Executive Officer as part of the Senior Management Committee Long-Term Incentive Plans (“SMC LTIPs”), Natixis' Board of Directors made the following share allocations (2018 SMC LTIP), which are prorated for the portion of the year served in office: - at its meeting of May 23, 2018, 11,661 performance shares were allocated to Laurent Mignon. This means that, Laurent Mignon could receive a maximum of 13,933 shares based on performance conditions, which would be equivalent to a maximum of 0.00045% of share capital at the allocation date; - at its meeting of August 2, 2018, 13,605 performance shares were allocated to François Riahi. This means that, François Riahi could receive a maximum of 16,326 shares based on performance conditions, which would be equivalent to a maximum of 0.00052% of share capital at the allocation date; The allocated shares correspond to 20% of the gross annual fixed compensation for Laurent Mignon and François Riahi, prorated to reflect the length of time each of them served as Chief Executive Officer in 2018; Vesting of these shares is contingent upon meeting the continued service requirement and the performance conditions, which are based on both the relative Total Shareholder Return (TSR) achieved on Natixis stock and the fulfilment of ESR targets.
At the end of the four years, the average of the overall annual ratings shall determine the percentage of shares that vest in addition to those vesting under the TSR criteria. In the event that TSR and ESR performance is substantially above target, the percentage of shares of the annual tranche that shall vest is capped at 120%.
CHANGES TO THE CHIEF EXECUTIVE OFFICER LAURENT ■ MIGNON’S COMPENSATION SINCE 2013 (FIXED PORTION + ANNUAL VARIABLE COMPENSATION AWARDED + PERFORMANCE-RELATED FREE SHARE PLAN)
Free share plan (corresponding to the value on the allocation date) Annual allocated variable compensation Fixed compensation + fringe benefits in €
Like the rest of the staff, the Chief Executive Officer is covered by the mandatory pension plan. He is not covered by the kind of supplementary pension plans described in Article 39 (defined benefit plan) or Article 83 (voluntary defined contribution plan) of the French General Tax Code. Furthermore, in 2018, Natixis' Chief Executive Officer paid into an “Article 82” type life insurance policy (in reference to the French General Tax Code) put in place by BPCE. The premiums on this policy were paid by the Chief Executive Officer and not by Natixis. In 2018, as successive Chief Executive Officers of Natixis, Laurent Mignon paid €58,667 into his policy, while François Riahi paid €68,444 into his.
It is reiterated that, at its February 19, 2014 meeting, the Board of Directors approved a change to its agreement relating to a severance payment for Laurent Mignon and the establishment of a non-compete agreement. These obligations and agreements were submitted to a vote by the shareholders and approved during the Ordinary General Shareholders’ Meeting of May 20, 2014 (fifth resolution). At its meeting on February 18, 2015, the Board of Directors authorized the renewal of severance pay as well as the non-compete agreement upon the Chief Executive Officer’s reappointment. The corresponding commitments were approved by the General Shareholders’ Meeting on May 19, 2015.
Average performance achieved over the two years prior to leaving (the measurement shall be based on the known results for the four quarters(1) prior to leaving).
CORPORATE GOVERNANCE Policies and rules established for determining compensation and benefits of any kind for corporate officers 93Natixis Registration Document 2018
The Chairman is eligible for directors’ attendance fees, but in accordance with the rules applicable within Groupe BPCE, the portion of directors’ fees going to BPCE directors (including that of the Chairman) is paid to BPCE and not to the directors.
Methods for paying the Chief Executive Officer’s annual variable compensation comply with applicable regulations, especially regulatory provisions relating to control over compensation as set out in European Directive CRD IV of June 26, 2013, and its enactment into French law in the French Monetary and Financial Code, by the Ordinance of February 20, 2014, and the Ministerial Decree and Order of November 3, 2014. In particular, the payment of a fraction of the variable compensation awarded is deferred over time and is conditional. This payment is spread over at least the three fiscal years following the year in which the variable compensation is awarded and is contingent upon meeting presence and performance criteria.
The Chief Executive Officer also receives social protection benefits whose terms are identical to those applicable to Natixis’ employees or implemented by Groupe BPCE for its executive officers.
Compensation due or granted for the fiscal year €996,245 (c) -
Value of performance shares granted during the fiscal year €93,333 (d) -
François Riahi’s other compensation for his duties at BPCE €602,359 -
Laurent Mignon, Chairman of the Natixis Board of Directors from June 1, 2018
Value of performance shares granted during the fiscal year 0 -
CORPORATE GOVERNANCE Policies and rules established for determining compensation and benefits of any kind for corporate officers 95Natixis Registration Document 2018
In the tables below: the expression “amounts due or granted” refers toa compensation and benefits allocated to directors in connection with their duties over the year, irrespective of the payment date; the expression “amounts paid” refers to compensation anda benefits actually paid to directors in connection with their duties over the year, irrespective of the date granted, including securities delivery.
François Riahi, Chief Executive Officer (office held since June 1, 2018)
This amount includes payment of deferred variable compensation and securities delivery in respect of previous years. Excluding collective variable (b) compensation (collective incentive plan and profit-sharing) awarded to François Riahi for the 2017 fiscal year and for his duties as Co-Head of Corporate Investment Banking. Securities delivery under the Senior Management Committee Long-Term Incentive Plans is presented in AMF table No.7.
The reported amount comprises the family allowance. In addition, under social protection, €7,066 in benefits in kind were declared in 2018 for (c) Laurent Mignon.
At its meeting of August 2, 2018, Natixis' Board of Directors also allocated 13,605 performance shares to François Riahi, Chief Executive Officer (d) from June 1, 2018, prorated to reflect the length of the time served in office in 2018, valued at €93,333 on the allocation date.
Compensation paid to François Riahi in 2018 in connection with his duties as Chief Executive Officer of Natixis was composed of €468,055 in fixed compensation and fringe benefits and €827,706 in variable compensation, the breakdown of which is detailed below. The performance condition for the deferred portion of variable compensation granted to François Riahi is that Natixis’ net operating income be strictly positive. As this condition was met for the 2018 fiscal year, the portion relating to the three previous periods was paid to the beneficiary. The difference between amounts granted and the amounts actually paid is correlated to the market capitalization at the Euribor rate for the cash portion, and to the change in the share price for the portion indexed to the Natixis share price.
Directors’ fees and other compensation received by non-executive directors of Natixis from January 1 to December 31, 2018.
In respect of BPCE and its subsidiaries N/A N/A N/A N/A
Benefits in kind in respect of BPCE (company car, housing, other) 44,080(g) 44,080(g) 44,080(g) 44,080(g)
In respect of BPCE and its subsidiaries 10,000 10,000 7,500 7,500
Member, then Chairman, of the Natixis Strategic Committee 12,000 12,000 12,000 12,000
In respect of BPCE and its subsidiaries 27,400 52,400 26,800 1,800
Benefits in kind in respect of BPCE (company car, housing (m), other) 0 0 N/A N/A
In respect of BPCE and its subsidiaries 25,006.66 50,006.66 26,800 1,800
In respect of BPCE and its subsidiaries N/A N/A 600 600
Amount paid in 2018 for the variable compensation for fiscal year 2017, i.e. €224,800 for the deferred portion of the variable compensation for fiscal year (d)
Variable compensation for fiscal year 2017, of which €224,800 (50%) paid in 2018 and the balance (50%) deferred over three years in equal shares of (e) €74,933.
CORPORATE GOVERNANCE Policies and rules established for determining compensation and benefits of any kind for corporate officers 99Natixis Registration Document 2018
Name of executive corporate officer No. and date of plan Number of options exercised during the period Exercise price
30% of the shares issued will be subject to a lock-in period ending upon the termination of the Company CEO's office or of any management (b) function at Natixis, including that of Member of the Natixis Senior Management Committee.
Free shares that became transferable during the period for each executive corporate officer
30% of the shares issued will be subject to a lock-in period ending upon the termination of his office.(a)
Regarding principles of compensation for corporate officers, see section 2.4.2.2 "Annual variable compensation" and "Free allocation of (b) performance shares"
No free shares became transferable for François Riahi in fiscal year 2018.
Number of exercisable options, including those exercisable by: 1) Natixis directors in 2017: Thierry Cahn N/A
2) Natixis CEO in 2018: Laurent Mignon (from January 1 to June 1, 2018) N/A
Cumulative number of outstanding subscription options at end of period N/A
Stock options or call options granted to the top ten non-director employees and options exercised by them
Total number of options granted/shares subscribed or bought Weighted average price Plan
No subscription or call options were granted or exercised by Natixis employees in fiscal year 2018.
CORPORATE GOVERNANCE Policies and rules established for determining compensation and benefits of any kind for corporate officers 101Natixis Registration Document 2018
Record of the allocation of free shares for each executive corporate officer
(b) All vested shares are subject to a lock-in requirement for the full term of office.
Payments or benefits due, or likely to be due, as a result of the termination or change of office (a)
Like the rest of the staff, the Chief Executive Officer is covered by the mandatory pension plans. He is not covered by the kind of supplementary (b) pension plans described in Article 39 (defined benefit plan) or Article 83 (voluntary defined contribution plan) of the French General Tax Code set up by the Group. Furthermore, in 2018, Natixis' Chief Executive Officer paid into an “Article 82” type life insurance policy (in reference to the French General Tax Code) put in place by BPCE. The premiums on this policy were paid by the Chief Executive Officer and not by Natixis. In 2018, as Chief Executive Officers of Natixis, Laurent Mignon paid €58,667 into his policy, while François Riahi paid €68,444 into his.
The components of compensation concerned are: fixed compensation;a annual variable compensation;a deferred annual variable compensation;a multi-year variable compensation;a extraordinary compensation;a allocation of stock options/performance shares and any othera long-term compensation; signing bonuses;a contract termination payment: severance payment/a non-compete payment; supplementary pension plan;a directors’ fees;a benefits of any kind.a
François Riahi’s fixed compensation for 2018 was €800,000 for the full year, or €466,667 for the period from June 1 to December 31, 2018.
The variable compensation target for the 2018 fiscal year was set at 120% of the Chief Executive Officer’s fixed compensation, with a range of between 0% and 156.75% of the target, i.e. a maximum of 188.1% of fixed compensation. Laurent Mignon’s variable compensation target was therefore €1,152,000 for the full year, or €480,000 for the period from January 1 to June 1, 2018, and François Riahi’s variable compensation target was €960,000 for the full year, or €560,000 for the period from June 1 to December 31, 2018.
The amount of variable compensation for 2018, which will be put to a vote of the shareholders in May 2019, was set by the Natixis Board of Directors upon recommendation by the Compensation Committee at 94.32% of the variable compensation target, i.e. €452,734 for Laurent Mignon for the period from January 1 to June 1, 2018, and €528,190 for François Riahi for the period from June 1 to December 31, 2018.
one portion will be paid in 2019, 50% of it indexed to the Natixis share price, i.e. €156,889 a for Laurent Mignon and €194,853 for François Riahi; the other portion shall be deferred over three years, 50% of it indexed to the Natixis share a price, i.e. €295,845 for Laurent Mignon for the period from January 1 to June 1, 2018, and €333,337 for François Riahi for the period from June 1 to December 31, 2018. These deferred amounts will be paid in thirds in 2020 (100% in cash), 2021 (50% in cash and 50% indexed to the Natixis share price in securities) and 2022 (100% indexed to the Natixis share price or in securities), provided that the presence and performance conditions are met.
CORPORATE GOVERNANCE Policies and rules established for determining compensation and benefits of any kind for corporate officers 103Natixis Registration Document 2018
No stock options were granted to Laurent Mignon and François Riahi during fiscal year a 2018.
Based on the positive opinion of the Compensation Committee and in keeping with the a principle of the admissibility of allocating performance shares to the Chief Executive Officer as part of the Senior Management Committee Long-Term Incentive Plans (SMC LTIPs), Natixis' Board of Directors made the following share allocations (2018 SMC LTIP), which are prorated for the portion of the year served in office: at its meeting of May 23, 2018, 11,661 performance shares were allocated to j Laurent Mignon. This means that, Laurent Mignon could receive a maximum of 13,933 shares based on performance conditions, which would be equivalent to a maximum of 0.00045% of share capital at the allocation date, at its meeting of August 2, 2018, 13,605 performance shares were allocated to j François Riahi. This means that, François Riahi could receive a maximum of 16,326 shares based on performance conditions, which would be equivalent to a maximum of 0.00052% of share capital at the allocation date.
Vesting of these shares is contingent upon meeting the continued service requirement a and the performance conditions, which are based on both the relative Total Shareholder Return (TSR) achieved on Natixis stock and the fulfillment of ESR targets.
The performance of Natixis shares versus the Euro Stoxx Banks index will be compared a every year during the four-year period covered by the plan, i.e. fiscal years 2018, 2019, 2020 and 2021, for each of the annual tranches, each representing 25% of the shares allocated. Based on the relative performance of Natixis’ TSR compared with the average TSR of the Euro Stoxx Banks index, a ratio will be applied for each annual tranche, as follows: performance below 90%: no vesting of shares allocated out of the annual tranche;j performance equal to 90%: 80% of the shares of the annual tranche shall vest;j performance equal to 100%: 100% of the shares of the annual tranche shall vest;j performance equal to 120%: 110% of the shares of the annual tranche shall vest. The ratio j varies in a linear manner between each performance category.
30% of the shares issued to the executive corporate officer at the end of the vesting period a will be subject to a lock-in period ending upon the termination of his office.
Contract termination payment: severance payment/non-compete payment - It is reiterated that, at its February 19, 2014, meeting, the Board of Directors approved a change to its agreement relating to a severance payment for Laurent Mignon and the establishment of a non-compete agreement. These obligations and agreements were submitted to a vote by the shareholders and approved during the Ordinary General Shareholders’ Meeting of May 20, 2014 (fifth resolution). At its meeting on February 18, 2015, the Board of Directors authorized the renewal of severance pay as well as the non-compete agreement upon the Chief Executive Officer’s reappointment. The corresponding commitments were approved by the General Shareholders’ Meeting on May 19, 2015.
Rules for calculating severance payment: The monthly reference compensation is equal to one-twelfth of the sum of the fixed compensation paid in respect of the last calendar year in activity and the average variable compensation paid over the last three calendar years of activity.
*Average performance achieved over the two years prior to leaving (the measurement shall be based on the known results for the four quarters prior to leaving).
The amount of the payment shall be determined based on the number of performance criteria met: • if all three criteria are met: 100% of the agreed payment; • if two criteria are met: 66% of the agreed payment; • if one criterion is met: 33% of the agreed payment; • if none of the criteria is met: no payment will be made.
As a reminder, the amount of the Chief Executive Officer’s severance payment, combined with the non-compete indemnity if warranted, may not exceed the equivalent of 24 months of monthly reference compensation
The amount of the non-compete indemnity, together with the severance payment, if applicable, received by the Chief Executive Officer is capped at twenty-four (24) months of the monthly reference compensation (both fixed and variable).
Like the rest of the staff, the Chief Executive Officer is covered by the mandatory pension plan. He is not covered by the kind of supplementary pension plans described in Article 39 (defined benefit plan) or Article 83 (voluntarily defined contribution plan) of the French General Tax Code. Furthermore, in 2018, Natixis' Chief Executive Officer paid into an “Article 82” type life insurance policy (in reference to the French General Tax Code) put in place by BPCE. The premiums on this policy were paid by the Chief Executive Officer and not by Natixis. In 2018, as successive Chief Executive Officers of Natixis, Laurent Mignon paid €58,667 into his policy, while François Riahi paid €68,444 into his.
Benefits of any kind €818 for Laurent Mignon €1,388 for François Riahi
CORPORATE GOVERNANCE Policies and rules established for determining compensation and benefits of any kind for corporate officers 105Natixis Registration Document 2018
At its February 10, 2016 meeting, the Board of Directors approved a change to the personal protection insurance and supplemental health insurance of Laurent Mignon, with the intention of bringing his situation in line with that of the other members of BPCE's Management Board. Of particular note is the implementation of a scheme to maintain compensation for a period of 12 months in the event of temporary incapacity to work—a scheme benefiting the other members of the BPCE Management Board. In 2018, the declared value of in-kind benefits over the five months of the fiscal year was €7,066 for Laurent Mignon.
RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk factors 109Natixis Registration Document 2018
Risk factors3.1 The main types of risk to which Natixis is exposed are presented below. They may be captured through risk-weighted assets or other indicators when risk-weighted assets are not appropriate.
The risks to which Natixis is exposed across all its business lines may arise from several risk factors detailed below.
Should one or more of its counterparties fail to honor their contractual obligations, and in the context of a rise in corporate failures, Natixis could suffer some degree of financial loss depending on the concentration of its exposure to these defaulting counterparties. Natixis could therefore be exposed to heightened credit risk if the ratings of counterparties belonging to a single group or single business sector were to deteriorate significantly or if such counterparties were to default, or if a country's economic situation were to worsen.
commitments given (excluding those recognized at fair value through profit or loss), as well as to lease receivables (for detailed information please refer to Note 6 “Accounting principles and valuation methods” to the consolidated financial statements for the fiscal year ended December 31, 2018 included in Chapter 5.1 “Financial Statements” of this registration document).
Under this framework, performing loans (Stage 1) for which credit risk has not increased materially since initial recognition are provisioned in the amount of 12-month expected losses. Underperforming loans (Stage 2), i.e. for which credit risk has increased materially since initial recognition but not to the point that they must be classified as non-performing loans, are provisioned based on lifetime expected losses. Non-performing loans (Stage 3) are loans for which there is objective evidence of impairment loss. Natixis determines the provisions for non-performing loans based on an individual expected cash flow recovery analysis, whether these cash flows come from the counterparty's activity or from the potential execution of guarantees. Non-performing loans that are not impaired following the individual analysis are provisioned at a standard rate determined based on historical unexpected losses on unprovisioned loans. At December 31, 2018, Natixis’ non-performing loan ratio was 4.2% and its non-performing loan coverage ratio was 39.6%.
The increase in credit risk between S1 and S2 loans is measured based on the following criteria: the change in the counterparties’ rating (for the large corporates, banks and sovereigns loan books) since initial recognition, the change in the probability of default within one year (for the individual customer, professional customer, SME, public sector and social housing loan books) since initial recognition, their placement on the watchlist, their forborne status, the ratings of the sector or country of the counterparty, and the existence of one or more contracts that are more than 30 days past due.
In accordance with the “Originate to Distribute” model as defined in its strategic plan (see pages 4-5 of this registration document), Natixis originates or acquires certain assets with a view to their subsequent resale or distribution through channels such as syndication or securitization. A reduction in liquidity of the markets for such assets (especially the syndication or securitization markets), or the inability of Natixis to sell or reduce its positions in such assets,
As part of its capital markets activities and to meet its clients’ needs, Natixis is active on the financial markets, particularly the debt, forex, commodity and equity markets.
The carrying values of Natixis’ securities and derivatives portfolios and certain other assets, as well as its own debt, are adjusted as of each financial statement date (for additional valuation adjustments, see Note 6 “Accounting principles and valuation methods” in Chapter 5.1 “Financial Statements” of this registration document).
Natixis’s access to certain forms of financing may be adversely affected in the event of a financial crisis or a downgrade of its rating or that of the Group
Since 2011, Natixis’ funding structure has relied on a Joint Refinancing Pool shared by Natixis and BPCE. Natixis obtains a portion of the funding for its activities from Groupe BPCE through the public and private issuance of medium- and long-term vanilla debt (senior and subordinate) by BPCE SA. Natixis is the medium- and long-term issuer for the Group for structured private sector refinancing transactions.
An economic environment characterized by sustained low interest rates could adversely affect Natixis’ profitability and financial position
Low interest rates may also negatively affect the profitability of Natixis’ insurance activities, as insurance affiliates may not be able to generate enough investment returns to cover amounts paid out on some of their insurance products. Furthermore, if market interest rates were to rise in the future, a portfolio featuring significant amounts of lower interest rate loans and fixed income securities would be expected to decline in value. Low interest rates may also adversely affect commissions charged by Natixis asset management affiliates on money market and other fixed income products. This could adversely affect the profitability and financial position of Natixis.
The banking and insurance sectors are subject to increased regulatory oversight, both in France and abroad. In recent years, there has been a particularly substantial increase in the volume of new regulations that introduced significant changes affecting both the financial markets and relationships between investment service providers and clients or investors (for example, MiFID II, PRIIPs, Insurance Distribution Directive, Market Abuse Regulation, Fourth Anti-Money Laundering and Counter Terrorist Financing Directive, Personal Data Protection Regulation, Benchmarks Regulation, etc.). These new regulations have major impacts on the company's business processes.
Compliance risk could occur, for example, in the use of inappropriate means to promote and market the bank's products and services, inadequate management of potential conflicts of interest, the disclosure of confidential or privileged information, or failure to comply with new client due diligence procedures, in particular with respect to financial security (including anti-money laundering and counter terrorist financing, compliance with embargoes, anti-fraud and corruption).
At Natixis, the Compliance Department oversees the compliance risk prevention and mitigation system (see Section 3.2.8 of this registration document). Despite this system, Natixis remains exposed to the risk of fines or other significant sanctions by regulatory and supervisory authorities, as well as to civil or criminal legal proceedings that could have a material adverse impact on its financial position, business and reputation.
Despite the risk management policies and procedures in place, Natixis may be exposed to unidentified or inadequately anticipated operational or model risks likely to give rise to significant losses
Natixis’ risk management policies and procedures may not be effective enough or may be completely ineffective in limiting its exposure to changing market environments or any type of current or potential risk, including operational risks or risks related to the models that Natixis uses. It may not have been able to identify or anticipate these risks in its Insurance, Asset & Wealth Management, Corporate & Investment Banking or Specialized Financial Services businesses.
Natixis is in fact exposed to the risk of loss due to inadequate or failed internal processes, human resources and information systems or external events. Despite the controls and procedures in place, Natixis could be affected in terms of operational risk due, for example, to data entry errors, failures in collateral management, incorrect application of procedures, etc. These types of situations could generate significant compliance and control costs for the affected processes which could have an impact on Natixis’ financial position.
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An interruption or failure of Natixis’ communication and information systems, or those of third parties, could result in lost business and other losses and costs
Thus, any breakdown, interruption or failure of Natixis’ information systems, despite back-up systems and contingency plans, could result in considerable costs related to information retrieval and verification, as well as lost business or financial losses in its ongoing operations and portfolio transactions related, for example, to the failure to exercise an option or to unwind a transaction such as a hedging transaction.
Lastly, Natixis is exposed to the risk of an operational failure or interruption by its clearing agents, foreign exchange markets, clearing houses, custodians or other financial intermediaries or external service providers it uses to execute or facilitate its securities transactions. With growing interconnectivity with customers, Natixis may also be increasingly exposed to the risk of operational failure of its customers’ information systems.
Natixis cannot guarantee that such interruptions or failures in its communication and information systems or in the systems of third parties will not occur or, if they do occur, that they will be adequately resolved. The occurrence of one or more of the events described above may result in lost business and other additional costs and losses for Natixis.
Unforeseen events may interrupt Natixis’ operations and cause substantial losses and additional costs
Seine flooding, which led to the implementation of specific protective measures (see the risk management framework in Section 3.8.8.5 of this registration document for detailed information on the measures taken to ensure business continuity).
The losses and damage that Natixis could suffer should such events occur relate to its property, financial assets, market positions and key employees. Furthermore, these events may 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 its expenses (in particular, due to higher insurance premiums or the exclusion of certain risks from its insurance coverage). Subsequent to such events, Natixis may also be unable to insure certain risks, resulting in an increase in its overall risk.
Other adverse unforeseen political, military or diplomatic changes could occur and create social instability or an uncertain legal environment that may have an adverse impact on demand for the products and services offered, on the level of Natixis’ risks and more generally on all its activities.
Natixis is confronted with new types of risk that have emerged in recent years, in particular the risk relating to cybercrime, and may become exposed to other emergent risks in the future. Cybercrime refers to a range of malicious and/or fraudulent acts, perpetrated digitally in an effort to manipulate data (personal, banking, insurance, technical or strategic data), processes and users, with the aim of causing material losses to companies, their employees, partners, clients and counterparties. A company’s data assets are exposed to new, complex and evolving threats liable to have material financial and reputational impacts on all companies, and in particular those in the banking sector. Given the increasing sophistication of criminal enterprises behind cyber attacks, regulatory and supervisory authorities have begun highlighting the importance of Information and Communication Technology (ICT) risk management. Preventing cybercrime risk is a priority for Natixis and as such it makes every effort to implement the guidelines established by these authorities through cooperation between its Information Systems (IS) and IT Systems Security (ITSS) departments. This has resulted in a mapping of risks relating to IT systems security as well as a wide-ranging campaign to raise all employees’ awareness of ITSS.
In 2018, no major cybercrime-related incident occurred or had a material adverse impact on Natixis’ financial position or reputation. However, as cyber attacks are constantly evolving to become increasingly complex, the measures described above may not be sufficient in the future to fully protect Natixis, its employees, partners and clients. The occurrence of such attacks could potentially disrupt Natixis’ client services, result in the alteration or disclosure of confidential data or lead to business interruptions and, more broadly, have a material adverse impact on its business, financial position and reputation.
Natixis also requires that its suppliers and contractors act in compliance with the key principles of the Code of Conduct.
In order to implement the Code of Conduct on a day-to-day basis, Natixis has established a conduct system, consisting notably of a dedicated committee (the Global Conduct Committee) and a specific training program. For a detailed description of the Code of Conduct and the conduct system, please refer to Section 6.2 of this registration document.
Nevertheless, even with the adoption of a Code of Conduct and the development of a conduct system, Natixis is exposed to potential actions or behaviors by employees, suppliers and contractors that are unethical or not in the interest of the client, that do not comply with the laws and regulations on corruption or fraud, or that do not meet financial security or market integrity requirements.
Such actions or behaviors could have negative consequences for Natixis, hurt its reputation or its shareholder value and expose Natixis, its employees or stakeholders to criminal, administrative or civil sanctions likely to adversely affect its financial position and its business volumes.
A deterioration in Natixis’ reputation could adversely affect its financial results
Thanks to its current reputation, Natixis is able to maintain relationships of trust with its clients, employees, suppliers, partners and investors.
Adverse economic conditions in the main markets where Natixis operates could in particular have the following negative impacts: adverse economic conditions could affect the business anda operations of Natixis’ customers, resulting in an increased rate of default on loans and receivables and higher provisions for non-performing loans. A significant increase in these provisions or the realization of losses in excess of the provisions recorded could have an adverse effect on Natixis’ results and financial position; a decline in prices on the bond, equity or commodity marketsa could reduce business levels on these markets; macro-economic policies adopted in response to actual ora anticipated adverse economic conditions could have unintended negative effects, and are likely to negatively impact market parameters such as interest rates and foreign exchange rates, which could affect the results of Natixis’ businesses that are most exposed to market risk; perceived favorable economic conditions generally or ina specific business sectors could result in asset price bubbles decorrelated from the actual value of the underlying assets; this could in turn exacerbate the negative impact of corrections when conditions become less favorable and cause losses in Natixis’ businesses; a significant economic disruption (such as the global financiala crisis of 2008 or the European sovereign debt crisis of 2011) could have a severe negative impact on all the activities of Natixis, particularly if the disruption is characterized by an absence of market liquidity that makes it difficult to finance Natixis and to sell certain categories of assets at their estimated market value or at all.
The main markets on which Natixis operates may also be affected by uncertainties such as those regarding the future relationship between the United Kingdom and the European Union following the Brexit decision and those regarding global trade.
Legislation and regulations have recently been enacted or proposed with a view to introducing a number of changes, some permanent, in the global financial environment. These new measures, which aim to avoid a recurrence of the global financial crisis, have changed substantially, and may change in the future, the environment in which Natixis and other financial institutions operate.
The main risk to which Natixis’ insurance affiliates are exposed in their life insurance business is market risk. Exposure to market risk relates mainly to the capital guarantee and return commitments for the euro-denominated savings fund scope.
Among market risks, interest rate risk is structurally significant for Natixis as its general funds consist primarily of bonds. Interest rate fluctuations may:
Natixis uses both its own experience and industry data to develop estimates of future policy benefits, including information used in pricing the insurance products and establishing the related actuarial liabilities. However, there can be no assurance that actual experience will match these estimates, and unanticipated risks such as pandemic diseases or natural disasters could result in higher-than-anticipated payments to policyholders.
In addition to the option to use this “bail-in” mechanism, the BRRD provides resolution authorities with broader powers, allowing them to (1) require the financial institution to sell its activities to third parties, (2) replace it as obligor in respect of debt instruments with a third party, and (3) modify the terms of previously issued debt instruments.
As a member of Groupe BPCE, Natixis may undergo resolution proceedings in the event of the simultaneous failure of Natixis and Groupe BPCE. The relevant resolution authority would manage the resolution proceeding at the level of BPCE, which would be the “single point of entry” of Groupe BPCE.
Should the financial position of Natixis or of Groupe BPCE deteriorate, or be perceived as deteriorating, the existence of the powers provided for by the BRRD could cause the market value of Natixis financial securities to decline more rapidly.
If resolution proceedings were to be implemented at the Groupe BPCE level, the exercise by a competent authority of the powers provided for by the BRRD could result in: the full or partial write-down of Natixis equity instrumentsa leading to the full or partial loss of the value of these instruments; the full or partial conversion of eligible financial instrumentsa into Natixis shares resulting in the unwanted holding of Natixis shares and a possible financial loss when reselling these shares; a change in the contractual conditions of the financiala instruments that could alter the instruments’ financial and maturity terms; such a change could result in lower coupons or longer maturities and have a negative impact on the value of said financial instruments.
It is structured in a manner consistent with the principles set out by BPCE, with the objective of ensuring a consolidated approach to risk within the framework of the control exercised by the shareholding group.
Natixis’ internal control system comprises: first-level permanent controls, performed by operational staffa on the processing in their charge, following internal procedures and legal and regulatory requirements; second-level permanent controls, performed by foura departments that are independent of operational staff: the Compliance Department, which reports to thej Corporate Secretary, is notably responsible for managing compliance risk, organizing the first-level permanent control system, and performing second-level controls, the IT Systems Security and Business Continuityj (ITSS-BC) function, which reports to the Compliance Department, assesses the risks, establishes the information systems security and business continuity policies and ensures their correct application, the Risk division, which is headed by the Chief Risk Officer,j reports directly to the Chief Executive Officer, and is responsible for measuring, monitoring and managing the risks inherent to the business activities, in particular credit and counterparty risk, market and liquidity risk, operational risk and model risk, the Finance Review team within the Accounting and Ratiosj division, which reports functionally to the Compliance Department, verifies the quality and accuracy of accounting and regulatory information; periodic controls, performed by the Internal Audita Department. The Internal Audit Department reports to the Chief Executive Officer and performs periodic audits to assess the risks to which the businesses are exposed and ensure the effectiveness of the entire internal control system.
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BPCE's General Inspection, the Statutory Auditors, the regulators/supervisors, etc.) are reported to the Board of Directors via its extensions, the Audit Committee and the Risk Committee.
The conclusions of controls carried out under this system, supplemented with the results of external audits (carried out by
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The Risk division performs controls on credit and counterparty risk, market and liquidity risk, overall interest rate risk, operational risk and model risk. Specific risks related to the Insurance and Asset Management activities are included in these controls, and its scope of action extends to all the entities within Natixis’ consolidation scope. (For more detailed information, see section 3.2)
The Finance Review team within the Accounting and Ratios division reports functionally to the Compliance Department. This team plays a role in improving the accuracy of accounting and financial information through the implementation of control systems covering the accounting, tax declarations and regulatory reports produced by the Finance Department. (See Chapter 5 section 5.5—Internal control procedures relating to accounting and financial information).
In this respect, the Internal Audit Department is independent of all operational entities and support functions. With no operational role, it can never find itself in a position of conflict of interest. It reports to Natixis' Chief Executive Officer. The Internal Audit Department has a strong functional link with its BPCE counterpart, in accordance with the Natixis audit charter, revised at the end of 2018. In accordance with these principles, the Internal Audit Department coordinates a global audit function at Natixis and is part of the Groupe BPCE Internal Audit Function.
The Internal Audit Department reports on all its activities and projects to the Risk Committee, which then presents a summary report to the Board of Directors.
The reports are sent to BPCE's Chairman and General Inspection, to the Risk Committee Chairman and the Senior Management of Natixis, as well as to the audited units.
The work of Natixis’ Internal Audit Department is based on an annual Audit Plan drafted and executed jointly with Groupe BPCE’s General Inspection, and after consulting the various members of the Senior Management Committee. It is part of a four-year plan that sets out the intervention frequency and adapts resources to the risks.
Lastly, Natixis’ Internal Audit Department collaborated with its BPCE counterpart on a number of projects and assignments. The two departments held eight meetings in 2018. These meetings provided a forum for addressing matters related to auditing programs and practices, as well as matters related to risk assessment and assignment evaluation (General Inspections Coordination Committee).
The risk management function, carried out by the Risk division, is structured as an independent and global matrix that covers all scopes and geographic areas.
In addition, it regularly reports on its work, submitting its analyses and findings to Natixis’ executive managers, to Natixis’ supervisory body, and to Groupe BPCE. A risk consolidation team generates a consolidated risk overview using a scorecard that indicates the various risks (credit, market, liquidity, operational, modeling, etc.). To fulfill these responsibilities, the Risk division uses an IT system tailored to the activities of Natixis’ core businesses, applying its modeling and quantification methods for each type of risk.
The Compliance Function’s preventative actions—advice, raising awareness and training—are a key driver to improving Natixis’ management of compliance risk.
Risk management governance is a structured organization involving all levels of the bank: the Board of Directors and its specialized committeesa (Risk Committee, Audit Committee, etc.); the executive managers and the specialized Risk Committeesa they chair within the bank; the central divisions, independent of the businesses;a and the businesses (Asset & Wealth Management, Corporatea & Investment Banking, Insurance, Specialized Financial Services).
The Board of Directors (and its extension, the Risk Committee) gives the final approval of Natixis’ risk appetite and oversees its application.
Under the Natixis Board of Directors’ responsibility, the Risk Committee’s primary duties are: to advise the Board of Directors on the bank’s overall strategya and risk appetite, both current and future; to assist the Board of Directors when it checks thea implementation of that strategy by the executive managers and by the Chief Risk Officer; to monitor the effectiveness of the internal control and riska management systems.
In addition, and since July 2016, the Risk Committee meets as the US Risk Committee as per the US regulatory requirements of the Dodd-Frank Act. The US Risk Committee has the same structure as the Risk Committee, and is responsible for supervising the risks linked to Natixis’ activities on US soil (“Combined US operations”).
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk management 120 Natixis Registration Document 2018 to monitor the Statutory Auditors’ performance of their duties.a
Reporting to the Chief Financial Officer: the Accounting and Ratios division is responsible fora accounting and regulatory information; the Financial Management division oversees ALM and itsa framework (standards, limits, etc.); the Financial Oversight division is in charge of the budgeta process; the Taxation division ensures adherence to tax laws.a
The Compliance Department, reporting to the Corporate Secretary, is responsible mainly for managing compliance risk and for running the associated control system.
The central divisions provide senior management with necessary information on risk developments and on the management of the bank.
procedures, and in line with legislative and regulatory requirements. The controls can be performed by a functional department tasked with approving the relevant transactions.
Operational staff performs level-one permanent controls on the transactions they carry out in accordance with internal
Natixis is defined by its strong risk culture at every level of its organizational structure.
The risk culture is central to the Risk function’s guiding principles, as set out in the Risk Charter. Its priorities are threefold: harmonizing best practices within the bank by deploying aa compendium of risk policies, standards and procedures that cover all the bank’s major risks (credit, market and operational) and outline the bank’s strategic vision and risk appetite; running global awareness campaigns (posters, golden rules,a information on the intranet), and implementing a new e-learning module—now mandatory for all staff—on operational risks; promoting all-staff training on key subjects relating toa regulatory developments.
An analysis was then presented at conduct Committee Meetings held for each entity. These Committees have four parts, bringing together the business line, Human Resources, Compliance and the Risk division.
Lastly, Natixis’ compensation policy is structured to encourage the long-term commitment of the Company’s employees while ensuring risk is managed appropriately.
It is consistent with Natixis’ strategic plan, budget process and business activities, and falls within Groupe BPCE’s general framework on risk appetite,
The business model developed by Natixis is based on its recognized areas of expertise (corporate financing, capital market activities, asset management, insurance, services and specialized financing), in response to the needs of its clients and those of Groupe BPCE.
The Bank seeks sustainable and consistent profitability in balance with its consumption of scarce resources (capital, liquidity, balance sheet). It declines any engagement with activities that it does not master.
Natixis incurs risks intrinsically as part of its Corporate & Investment Banking, Asset & Wealth Management, Insurance and Specialized Financial Services (SFS) activities: credit risk generated by Corporate & Investment Banking asa well as SFS lending activities is managed under specific risk policies adapted by business and subsidiary, concentration limits defined by counterparty, sector and country, and through extensive portfolio monitoring. Natixis ensures the selective management of issuance commitments through independent analyses and various Credit Committees; leverage and liquidity risk are included in Groupe BPCE's riska framework. Since BPCE provides a liquidity and capital adequacy guarantee, Natixis applies BPCE’s risk policies to its own organization. These two risks give rise to specific objectives which contribute to the management of scarce resources using a dedicated framework and management objectives*. Natixis oversees the strategy to diversify its sources of financing as well as those of Groupe BPCE, and manages its solvency ratio to cope with stress situations; market risk is incurred from Natixis’ market activities withina the CIB, which aim to meet the needs of its clients and exclude all forms of proprietary trading. This risk is managed according to a body of risk policies and specific qualitative and quantitative indicators; operational risk is intrinsic to all the bank’s business lines anda functions and is managed using a shared data collection tool. The system, which has been rolled out across the business lines and geographic regions, is used to map risks and implement corrective and preventive action plans accordingly; model risk primarily affects CIB activities related to valuation,a risk and capital models; Natixis is committed to strictly observing the laws, regulationsa and norms governing its activities, in France and internationally, in the realm of financial security (anti-money laundering, terrorism, corruption and fraud), compliance and client protection; Natixis’ most important asset is its reputation and itsa relationship with its clients. Clients' interests are therefore put first and the bank—irrespective of the business activity, entity or geographic region—is dedicated to operating at the highest level of ethical standards, and in line with the best standards of transaction execution and security. Together with Groupe BPCE, Natixis closely monitors its reputation risk using indicators that combine an ex-ante/ex-post approach.
This operational framework is applied by type of risk (credit and concentration risk, market risk, liquidity and leverage risk, operational risk, solvency risk, etc.) and draws on Natixis’ pre-existing measuring and reporting systems.
It is regularly reviewed, consolidated and presented to the Board of Directors’ Risk Committee.
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Credit risk is the risk of financial loss due to a debtor’s inability to honor its contractual obligations. Assessing the probability of a debtor’s inability to repay and, in such cases, how much we can expect to recover is a key component of measuring credit quality. The debtor may be a bank, an industrial or commercial company, a sovereign State and its various entities, an investment fund, or a natural person. Credit risk increases in periods of economic uncertainty, insofar as such conditions may lead to a higher rate of default.
Counterparty risk is the risk of exposure to a counterparty defaulting on market transactions. Counterparty risk evolves as market parameters fluctuate.
Market risk bond prices, interest rates, securities and commodities prices, derivatives prices and foreign exchange rates.
Compliance risk is defined in French regulation as the risk of a legal, administrative or disciplinary penalty, accompanied by significant financial losses or reputational damage, that arises from a failure to comply with the provisions specific to banking and financial activities, whether these are stipulated by national or directly applicable European laws or regulations, or by instructions from executive managers, issued in accordance with the policies of the supervisory body. This risk is a sub-category of operational risk, by definition.
Cyber risk is caused by a malicious and/or fraudulent act, perpetrated digitally in an effort to manipulate data (personal, banking/insurance, technical or strategic data), processes and users, with the aim of causing material losses to companies, their employees, partners and clients. The transformation of banking information systems, the new technologies it heralds and the increased outsourcing of related services offer cybercriminals new opportunities to carry out increasingly sophisticated and automated attacks.
Legal risk is defined under French regulation as the risk of any legal dispute with a third party, arising from an inaccuracy, omission or deficiency that may be attributable to the Company’s operations.
Strategic risk is the risk inherent to the strategy chosen or resulting from Natixis' inability to implement its strategy.
The set is an integral part of the risk management framework and contributes to Natixis’ capital and regulatory requirements planning process.
Natixis’ stress test mechanism is structured as follows: comprehensive internal and external exercises;a periodic regulatory exercises;a specific exercises by scope.a
The scenarios proposed by the Economic Research team are discussed and approved at a Groupe BPCE Management Board Committee Meeting.
One stress scenario for 2018 featured plummeting US equity indices and a flattening yield curve due to an abrupt decline in growth and inflation. Equity volatility indices were supposed to climb significantly, along with risk aversion. This would cause long-term rates to nosedive in all sectors, causing central banks to stop tightening their monetary policies. Flatter yield curves would have impacted financial companies but did not generate much tension on the money market due to excess liquidity.
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These projections are based on internal modeling which are either based on the sensitivities or trends observed in financial and economic variables, or on internal historical data.
The results of the stress tests were approved by the Senior Management Committee and presented to the Risk Committee of the Board of Directors. They have been analyzed as part of building Natixis’ solvency trajectory. This impact was measured in terms of net income (Group share), net revenues and Common Equity Tier 1.
The risk control framework is overseen by the Risk division with the active involvement of all the bank’s businesses and support functions. All the internal standards, policies and procedures are consistent with BPCE’s framework and are reviewed periodically to take into account the results of internal controls, regulatory changes and the bank’s risk appetite.
Credit risk management and control are performed in accordance with the segregation of duties. Accordingly, together with the other divisions, the Risk division is in charge of monitoring credit risk through various departments that: define the credit risks policies and internal credit riska management procedures; set credit risk limits and exposure thresholds;a issue transaction authorizations after a counter-analysis of thea credit risk and the counterparty risk in line with the processes for credit approval and limit authorization; define internal rating methodologies and models;a implement second-level permanent controls;a monitor exposures and report to Natixis’ Senior Management.a
Working with the businesses, the main duty of the Risk division is to provide an opinion, based on all relevant and useful information, on the risks taken by the bank.
Natixis’ risk policies have been defined as a component of the bank’s overall risk appetite and credit risk control and management framework. The policies are the product of consultation between the Risk division and the bank’s various business lines, and are intended to establish a framework for risk-taking while outlining risk appetite and Natixis’ strategic vision by business line or by sector.
Checks are carried out as required during the individual processing of loan applications to ensure that the risk policy is being applied correctly. Overall monitoring also takes place on a quarterly basis (checking of compliance with ceilings and number of deviations) and is presented to the Global Risk Committees.
Natixis’ credit risk measurement and management procedures are based on: a standardized risk-taking process, structured via a system ofa limit authorizations and decision-making Committees; independent analyses carried out by the Risk division duringa the loan application review process; rating tools and methodologies providing standardized anda tailored assessments of counterparty risk, thereby making it possible to evaluate the probability of default within one year and the loss given default; information systems that give an overview of outstandinga loans and credit limits.
The principles of counterparty risk management are based on: measurement of exposure to counterparty risk;a counterparty risk limits and allocation procedures;a a value adjustment in respect of counterparty risk (credita valuation adjustment); counterparty risk mitigation;a incorporation of specific wrong-way risk.a
The limits are in line with Natixis’ credit approval process and are reviewed and approved either by means of delegated authority or by the Credit Committees.
These adjustments comprise the expected loss related to a counterparty’s default risk and aim to account for the fact that Natixis cannot recover the entire market value of the transactions.
Natixis reduces its exposure to counterparty risk using three measures: use of bilateral netting agreements under which, if aa counterparty goes into default, only the balance of the positive and negative valuations of the transactions carried out with the counterparty in question is considered as risk; riders to these agreements that govern the use of collaterala swaps that fluctuate according to the daily valuation of the portfolios of transactions carried out with the counterparties in question; use of clearing houses, which stand in for their members bya bearing most of the counterparty risk. To do this they use initial margins and a variation margin call system.
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Since September 30, 2010, Natixis has used internal rating methods specific to the different asset classes approved by the Autorité de Contrôle Prudentiel et de Résolution (ACPR—French Prudential Supervisory Authority), and that use the advanced internal ratings-based method (A-IRB) to rate “corporates”, “sovereigns”, “banks”, “Specialized Financing” and some categories of Consumer Finance exposures.
The rating scale varies according to the type of counterparty and also one of the criteria used to determine the level of authority includes 21 notches for major corporates, banks and specialized required to approve credit applications. financing institutions. It should be noted that internal ratings are
When a bank portfolio exposure does not have a directly applicable external credit rating, the Bank’s customer standards allow—on a case-by-case basis and after analysis—the application of a rating based partially on an internal or exposure rating of the issuer (or of the guarantor, if applicable).
Within the Model Risk & Risk Governance Department which reports to the Chief Risk Officer, Model Risk Management is responsible for the governance and standards applicable to a model’s life cycle. The various stages of a model’s life cycle—design, IT development, validation, and use—are clearly presented and the roles and responsibilities of each participant specified and detailed.
Internal rating models are validated by the validation team of the Groupe BPCE Risk, Compliance and Permanent Control division or, acting with the authorization of the Groupe BPCE Group Modeling Committee, by the Natixis Risk division’s Model Risk Management team. Pursuant to BPCE’s validation charter, the validation covers a review of the relevance, consistency and integrity of models and the reliability of input and output. The validation process comprises four steps: quantitative analysis: analysis of proxies, sizing methods, riska indicators, aggregation rules, etc.; performance and governance analysis: model backtesting anda benchmarking, precision and consistency analysis, stress tests, etc.; analysis of data quality and implementation of the model:a analysis of the quality and representativeness of data, integrity of controls, error reports, comprehensiveness of data, etc.; usage test: the validation team ensures that the internala models are used by qualified staff, that usage procedures are documented and up to date, that ex-post controls are performed, etc.
The design, modification and ongoing management of the model (including backtesting) are performed by the model designers on behalf of the model owner. Model Risk Management, an independent entity, is called upon for all new models as well as for all modifications or improvements to existing models. On an annual basis, this team regularly reviews the rating models which cover the analysis of backtesting and usage tests.
The third line of defense is the Internal Audit Department, which annually reviews internal rating models and compliance with the risk model management framework and the correct application by Model Risk Management of its own policies and procedures.
The findings and results of the model validation process performed at Natixis are presented to the Risk Model Oversight Committee for confirmation, then submitted to the Model Risk Management Committee for approval before being sent to the Standards and Methods Committee of the Groupe BPCE Risk, Compliance and Permanent Control division for final validation and possible submission to the regulator. The Risk Model Oversight Committee is chaired by the Head of the Model Risk & Risk Governance Department; the Risk Model Management Committee is chaired by Natixis’ Chief Risk Officer who is a member of the Senior Management Committee.
These checks are carried out through several processes, such as quarterly meetings of the Rating Analysis Committee (CANO) and the backtesting of the various rating models, which is carried out between once and four times a year depending on the scope.
The role of this Committee is to: provide a forum for the presentation of the results ofa performance and stability measurements; analyze the indicators whose alert thresholds have beena exceeded; decide on any measures to be taken to correct any deviationsa or anomalies. These measures may take different forms, including changes to rating practices, methodologies, performance analyses or alert threshold values.
The LGD, ELBE (see glossary) and CCF (see glossary) levels for the different lending scopes are backtested at least once a year (based on internal data), as are the rating models and the associated PD, to verify the reliability of the estimates over time.
The indicators defined for backtesting are used both to validate the model and measure its performance. Two types of indicators are used: population stability indicators: these analyses are used to verifya that the population observed is still similar to the population that was used to build the model. The model may be called into question if the segmentation variables or the LGDs result in excessively large distribution differences. All of these indicators are compared against the benchmark indicators (usually those calculated when the model was built or those issued by external data or agencies). These analyses are applicable to both expert appraisal-based models and statistical models; model performance indicators: the model’s performance isa measured to validate the segmentation and also to quantify, overall, the differences between the forecast and actual figures. This is achieved by using statistical indicators, which are compared against those calculated during modeling.
PD Sovereigns 1 Expert analysis-based rating models using macroeconomic criteria and the assessment of legal and political risks.
Banks 3 Expert analysis-based rating models using quantitative criteria (accounting balance sheet) and qualitative criteria (questionnaire). Model by type of counterparty and by geographic area.
Banks 1 Qualitative model based on internal and external defaults by type of counterparty. LGD assessed in this model include defaults occurring in periods of decline.
CCF Corporate Financing (incl. SMEs), Financial Institutions and Sovereigns 1 Model calibrated on internal defaults and segmentation by type of product and type of counterparty
Volatility correction Financial and other collateral 5 Stochastic models based on historical market prices with assumptions based on internal data and expertise.
Risk mitigation techniques involve two types of guarantee: non-financial or personal collateral:a
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Depending on their nature, collateral guarantees must meet specific eligibility criteria: Non-financial guarantee: the eligibility of personal guaranteesa depends on the quality of the guarantor and must fulfill several conditions: represent a direct claim opposite to the guarantor and referj to specific exposures, be irrevocable and unconditional,j if the counterparty defaults, the bank can take legal actionj against the guarantor within the permitted time frame to settle payment arrears under the legal document governing the transaction, the guarantee is an obligation secured by a legal documentj that established the guarantor’s liability, the guarantor covers all types of payment to be made by thej borrower in question.
In terms of monitoring, collateral and netting agreements are: analyzed, when a loan application is approved or reviewed, toa ascertain the suitability of the instrument or guarantee provided as well as any associated improvement in risk quality; checked, processed and documented based on standarda contracts or contracts approved by the Legal Department; subject to registration and monitoring procedures in the riska administration and management systems.
macroeconomic scenarios). Natixis may buy credit-default swaps and enter into synthetic securitization transactions in order to reduce all or part of the credit risk exposure attached to some assets by transferring the risk to the market. CDS-protected loans remain on Natixis’ balance sheet but bear the counterparty risk attached to the credit-default swap sellers, which are generally OECD banks. Transactions with non-bank third parties are fully collateralized in cash. These transactions are subject to decision-making and monitoring procedures that apply to derivative transactions.
Natixis may take steps to reduce commitments in order to lower concentration risk by counterparty, sector and geographic area. Concentration risk is rounded out with an analysis, based on stress test methodologies (migration of ratings according to
Exposures showing deterioration in the level of risk are identified as they arise and reported immediately to the Risk division and the business concerned, in accordance with both the counterparty watchlist, specific provisioning and alert procedures.
They are then placed on the watchlist, as decided by the Risk division or the competent Credit Committee depending on the amount of exposure.
This Committee is organized by the Risk division and chaired by the Chief Executive Officer and assembles the Chief Risk Officer, members of the Senior Management Committee in charge of the businesses, the Accounting and Ratios division and the heads of the relevant support functions.
Measurements of an increase in credit risk resulting in S2 classification are based on a combination of quantitative and qualitative criteria. The quantitative criterion is based on the change in rating since initial recognition. Additional qualitative criteria are used to categorize as Stage 2 any contracts included on a non-S3 watchlist, undergoing adjustments due to financial hardship (forbearance) or more than 30 days past due. Additional criteria based on the sector rating and level of country risk are also used.
The sector and country rating process is centered on a Geo-Sector Committee comprising the Finance division, the Risk division and CIB representatives. The main objective of this Committee, established for the purpose of implementing IFRS 9, is to validate sector ratings as well as country and sovereign scores on a quarterly basis. These ratings then serve as a basis for calculating ECL. Sector ratings in particular are based on the results of the semi-annual economic environment reports.
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Exposures to institutions and corporates with a short-term credit assessment 124 85 7 270 147 12
EXPOSURE AND EAD BY BASEL EXPOSURE CLASS (NX03)R (Data certified by the Statutory Auditors in accordance with IFRS 7)
Exposure class 31/12/2018 o/w off-balance sheet 31/12/2018 o/w off-balance sheet 2018 average
EAD BY INTERNAL RATING (S&P EQUIVALENT) (NX12)■ (Data certified by the Statutory Auditors in accordance with IFRS 7)
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Natixis has securitized assets on its acquired balance sheet: as an investor, through transactions for its clients, througha derivative transactions and, to a marginal degree, through its market-making activity on certain ABS (particularly Asset-Backed Commercial Paper); as a sponsor, i.e. on transactions for its clients to create anda manage ABS programs; as an originator, i.e. as part of its refinancing activities whena Natixis securitizes certain portfolios of loans granted to customers.
Natixis’ credit decision-making process is followed for all securitization transactions. Three criteria are considered, namely the amount, maturity and (external) rating.
Natixis relies on four external rating agencies for securitization transactions: Moody’s, DBRS, Fitch IBCA and Standard & Poor’s.
The Risk Division places great importance on the formal definition of all risk policies governing market transactions based on both a qualitative and forward-looking analysis. This approach is mainly based on the strategic review of global risk budgets, business targets and market trends and relies on a proactive early warning system for the most sensitive areas at risk.
The Risk Division: defines risk measurement and fair value adjustment methods,a then submits them to the Market Risk Committee for validation; examines annual limit reviews (including risk appetite) anda ad hoc requests for modifications (VaR, stress tests, operational indicators, loss alerts); provides alerts for areas at risk relating to the business lines ora to Natixis' Senior Management;
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk management 136 Natixis Registration Document 2018 is responsible for the daily analysis and measurement of risks,a daily reporting, and notifying front office and management of any breaches; approves and manages the pricing models (pricers) and riska measurement models used by front office management tools; defines and validates models and methodologies relating to thea institution’s internal model, which is primarily used to calculate regulatory capital requirements; introduces and manages changes in standards and proceduresa common to all entities (subsidiaries and branches) carrying market risks.
Natixis’ internal VaR model was approved by the Autorité de Contrôle Prudentiel et de Résolution (ACPR—French Prudential Supervisory Authority) in January 2009. Natixis uses VaR to calculate capital requirements for market risks within approved scopes, and to manage and supervise market risks. The model is based on a calculation by computer simulation, based on Monte Carlo-type methodology, taking into account a portfolio’s possible non-linear characteristics with respect to different risk factors.
The stressed period currently used by Natixis covers the period between September 1, 2008 and August 30, 2009, as it is the most conservative for calculating stressed VaR.
All stress test mechanisms are defined by the Risk division, which is responsible for defining principles, methodology and calibration and scenario choices. The Stress Test Committee is responsible for the operational implementation of stress tests and meets on a monthly basis. The Committee approves work to be carried out, its workload and determines the annual IT budget; loss alerts by portfolio and aggregated by business line,2) which alert management and the Risk division if losses reach a certain threshold over a given month or on a cumulative basis since the beginning of the year. These thresholds are set by the Market Risk Committee according to the characteristics of each portfolio, past performance and budgetary targets; finally, the supervisory framework includes operational3) indicators on an overall and/or by business basis, which focus on more directly observable criteria (sensitivity to changes in the underlying and to volatility, correlation, nominals, etc.). The limits of these qualitative and quantitative indicators are set in line with the VaR and stress test limits.
Valuation models used by the front office are subject to independent validation by Model Risk Management, a dedicated team within the Model Risk & Risk Governance Department of the Risk Division.
The Market Risk Department is tasked with defining and implementing the adjustment policy for Capital market activities’ management results.
Adjustments for market risks are divided into: adjustments for the cost of position reversals/liquidity positionsa in an active market; adjustments for uncertainty relating to observable anda unobservable valuation inputs and model risks in non-active markets; adjustments specific to risks inherent to positionsa (discontinuity risks, risks relating to uncertainty regarding size, etc.); adjustments for model risk to hedge model-relateda uncertainties (numerical method, calibration, etc.).
The following chart shows the VaR trading history between December 29, 2017 and December 31, 2018 for the entire scope.
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The rise in Natixis’ overall trading VaR versus 2017 is predominantly borne by the Equity Markets business.
3 RISK FACTORS, RISK MANAGEMENT AND PILLAR IIIRisk management 140 Natixis Registration Document 2018
The exception on October 23, 2018 was related to a trade booking error and amounted to -€12 million in profit and loss. This loss was neutralized when the booking was corrected.
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This indicator covers the regulatory scope. Natixis’ IRC level averaged €18.2 million. It peaked at €42.8 million on January 19, 2018, and bottomed out at €10.9 million on March 16, 2018, and stood at €22.7 million at December 31, 2018.
In cr ea se in In te re st ra te
It defines the operational risk management criteria, including: quantitative indicators: one historical indicator measuring thea cost of risk, one forward indicator measuring the risk exposure, one individual indicator identifying the occurrence of major incidents to be reported to the regulator (Article 98), a specific individual indicator raising the alert on internal fraud events, and an operational risk management indicator measuring the progress of corrective actions; a qualitative indicator measuring the compliance with thea governance of the framework; specific indicators monitoring Information and Communicationa Technology (ICT) risk, including cyber risk.
The operational risk management framework identifies, measures, monitors and controls the level of operational risks for all the Company’s business lines and support functions in France and abroad.
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The structure of the function mirrors the organization of: the divisions under the responsibility of the operational riska managers; the foreign offices under the responsibility of the operationala risk managers of the Americas, EMEA and Asia-Pacific platforms. They report hierarchically to the local Chief Risk Officer, and functionally to the Head of Operational Risk; activities within his or her remit—overall and systematic operational risks (loss of access to premises or information systems, or loss of employee availability) to which Natixis is exposed.
The function has some 70 staff members dedicated to operational risk management. Within their designated scopes (subsidiary, business line or support function), they are responsible for instilling the operational risk culture, recording and analyzing incidents, mapping risks, proposing and following up corrective actions, compiling reports and escalating information to management. Analyses are carried out across the Bank where the support or control functions are involved, or where the processes have an impact on teams, whether in the front, middle or back office.
incidents in the financial industry, especially for establishing frequency. Also factored in are assumptions on unrealized net revenue items and the effectiveness of risk management mechanisms, as well as contingency and business continuity plans.
The mapping of “global and systemic risks” (extreme risk situations occurring infrequently, such as major natural disasters, pandemics, and attacks) draws on external data on
In addition to risk mapping, there are over 600 key risk indicators (KRIs) in place with corresponding limits, and which are monitored regularly. KRIs dynamically detect any changes in the operational risk profile and cover the seven Basel categories of loss-generating events. They apply either to Natixis (overall indicators), to the business lines, or to the support functions that, with the operational risk manager, set the indicators as relevant early warning indicators during the mapping process. These indicators are submitted to the Operational Risk Committee for approval. Any breach of their thresholds, that is the subject of a systematic alert, may trigger action to be carried out immediately or requiring committee approval.
review their serious incidents and decide on the application of corrective actions, determine the deadlines and associated deliverables, and monitor the progress of these actions. The entities and business lines can decide to apply these measures to their own threshold, which is lower than that of Natixis and consistent with its activity and level of risk.
BREAKDOWN OF REPORTED INCIDENTS BY NET AMOUNT BY DATE AND BASEL CATEGORY■
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In 2018, a risk analysis was performed on all of Natixis’ business lines and support and control functions. Verifying consistency with the results from internal audits and the results of permanent controls highlighted the most important risks for each scope and helped prioritize corrective measures to be implemented in order to improve the risk management mechanism. The Corporate & Investment Banking business lines represent the majority of risks under review owing to the extensive nature of the division's activities and operations in both France and internationally.