CORPORATE GOVERNANCE 65 3.2 Structure of the corporate and executive bodies 67 3.3 Role and operating rules of the corporate bodies 90 3.4 Policies and rules for determining compensation and benefi ts of all kinds paid to members of the corporate bodies 100 3.5 Potential confl icts of interest 109 3.6 Chairman’s report on the internal control procedures 110 3.7 Statutory auditors’ report on the report prepared by the Chairman of the Board of Directors 125
This registration document was filed with the French Financial Markets Authority on March 23, 2012, in accordance with Article 212-13 of the general regulations of the French Financial Markets Authority. It may be used in connection with a financial transaction only if accompanied by a transaction note approved by the French Financial Markets Authority. The document has been prepared by the issuer and its signatories incur liability in this regard.
This registration document includes all components of the annual financial report mentioned in section I of Article L.451-1-2 of the French Monetary and Financial Code and Article 222-3 of the general regulations of the French Financial Markets Authority. A cross-reference table showing documents referred to in Article 222-3 of the general regulations of the French Financial Markets Authority and the corresponding sections of this registration document appear on page 425 .
With close to 22,000 employees, Natixis boats a number of areas of recognized expertise which are divided into in three main business lines: Corporate and Investment Banking, Investment Solutions (asset management, private banking, insurance, private equity) and Specialized Financial Services.
Natixis Global Asset Management 20 asset management companies: Natixis Asset Management, Loomis-Sayles, Harris Associates, AEW, etc.
• “Multi-boutique” structure with around twenty management companies adapting multiple investment approaches
Natixis has a long-lasting commitment to its clients – corporates, fi nancial institutions and institutional investors –, and to the customers of Groupe BPCE’s two banking networks, i.e. personal banking, professional, and small and medium-size enterprises .
• Payment management for every type of transaction and exchange system
• Design and development of multiple market surety and fi nancial guarantee services
1 Natixis has been affiliated with BPCE since July 31, 2009 (not inclusive), replacing the dual affiliation of Natixis with CNCE and BFBP.
Groupe BPCE is No. 2 banking group in France with more than 8,000 branches, 36 million customers, 8.1 million cooperative shareholders and 117,000 employees.
At December 31, 2011, BPCE held 72.26% of the share capital of Natixis (see section 1.2.2 Financial solidarity mechanism). The structure of Groupe BPCE at December 31, 2011 was as follows: 20 Banques Populaires 17 Caisses d’Epargne 20% CCI* 20% CCI*
1 PRESENTATION OF NATIXIS 2011 Key fi gures 1.3 2011 Key figures 1.3.1 INCOME STATEMENT
1PRESENTATION OF NATIXIS 2011 Key fi gures 1.3.4 INCOME BEFORE TAX BY BUSINESS
After market close (subject to modifi cation) 2012 First Quarter Results
After market close (subject to modifi cation) 2012 Third Quarter Results
1 PRESENTATION OF NATIXIS Natixis’ business lines 1.4 Natixis’ business lines 1.4.1 CORPORATE AND INVESTMENT BANKING
At December 31, 2011, Natixis’ Corporate and Investment Banking (CIB) division employed around 4,600 people (FTEs) in 31 different countries. CIB generated net revenues of €2,760 million in 2011.
2011 was a year of contrasts. H1 was buoyant for CIB activities whereas H2 saw a sharp exacerbation in the global fi nancial crisis, which started to show signs of affecting the real economy. The most signifi cant impact was on European banks’ access to dollar funding, tension in liquidity and the increase in the cost of liquidity.
At the same time, CIB put the client fi rmly back at the heart of its strategy, by restructuring the Coverage business, automating the processing of cross-selling opportunities in the system, capitalising on its strengths and solid franchises in fi nancing and capital markets, and refocusing its expertise on value-added offerings. As a result, CIB reinforced its multi-specialist/multi-region model and maintained a satisfactory level of activity despite the deepening fi nancial crisis.
In order to adapt to the new economic and regulatory environment, the operation of certain businesses must be redefi ned. To this end, the CIB division will selectively build up its franchise with large corporate clients in France and abroad and concentrate on developing relations with institutional investors. The strategic offering targeting these clients (Capital Advisory, Equity and Debt Capital Markets, etc.) will be developed. Scarce resources (capital and liquidity) will be divided between core businesses and activities in which CIB has maintained a strong presence by optimising the use of the balance sheet. Finally, the division will continue to improve synergies between the fi nancing businesses, the debt platform and Fixed Income distribution.
The Debt and Financing division provides structured fi nancing solutions as an advisor and arranger for Natixis’ corporate and institutional clients. The division employs almost 500 people, comprises six global business lines and is established in each of the bank’s international platforms.
Asset and International Trade Finance combines overall expertise in project fi nancing (infrastructures, production of energy/renewable energy, natural resources, telecoms), aviation assets, maritime assets (offshore energy), structured export fi nance (international contracts covered primarily by export credit agencies). In 2011, Natixis confi rmed its ability to advise, arrange and distribute fi nancing solutions for its major clients, and was recognised for 19 fi nancing operations . The bank is ranked number
(1) International Fin ncing Review (IFR) “Latin America Loan of the Year 2011”.
1PRESENTATION OF NATIXIS Natixis’ business lines fi ve (1) worldwide in fi nancial advisory services for project fi nancing (Head quarter of the Ministry of Defence in Balard, etc.) and is among the top ten global arrangers of renewable energy projects (Terna-Rete, etc.). The bank was named “Innovative Aircraft Finance House of the Year” by Jane’s Transport Finance magazine for the technical nature of its aviation fi nance offering. Shipping successfully refocused on its offshore energy franchise (Bassdrill, SBM Offshore, etc.). Structured Export Finance consolidated its position in the funding of large international contracts for major clients (Alstom, Huawei, ENRC, ACS, etc.).
Real Estate Finance is specialized in advising on balance-sheet transactions and arranging all types of deals. In 2011, Natixis fi nanced 35 new transactions in Europe and 22 in the United States. These included Paris Hôtels Roissy Vaugirard’s takeover bid on Foncière Paris France and the construction or renovation of several BBC (2) buildings including the Carré Breguet, the fi rst BBC renovation in Paris.
Natixis is a fi rst-class player in Strategic and Acquisition Finance, for both its corporate clients and investment funds. In 2011, Natixis impressed when it fi nanced the acquisition of Parmalat by Lactalis (3) and served as MLA Bookrunner in 27 leveraged fi nance deals: in France (40% of transactions over €200 million), Europe (four out of eight of the biggest European LBOs: Spie, Delachaux, Foncia, Gruppo Coin), the United States (Cinedigm, Lantheus, etc.) and Asia (Home & Inns, etc.).
Equity Linked Finance (ELF) (4) originates, structures and executes fi nancial engineering transactions in listed and/or related holdings, using all types of fi nancial instruments, predominantly options. In 2011, Natixis set up an innovative convertible bond swap for Air France to offset the risk of the early redemption of the €450 million OCEANE issued in 2005.
FIC&T employs over 650 people, based in Europe (Paris, London, Milan, Madrid, Frankfurt, etc.), Singapore, Tokyo, Hong Kong and New York, and covering both sales and trading functions. FIC&T offers clients investment and hedging products in the Fixed Income, credit, foreign exchange and commodity markets of OECD countries, and is also positioned in emerging markets.
In an uncertain market, affected by the ongoing European sovereign debt crisis, the Fixed Income business proved resilient, boasting strong performances and fi nding new international growth drivers to offset the decline in margins.
(1) Ranking EMEA advisory mandates closed / Global advisory closed - Project Finance International, Project Finance Magazine, IFR Asia, Jane’s Transport Finance.
(5) S.F.H.: Société de Financement de l’Habitat (credit institution licensed as a home fi nancing company). (6) Joint venture with Debt and Financing (see 1.4.1.2).
In emerging markets, Natixis offers a full range of Fixed Income, credit and forex products, with a geographic positioning that supports the expansion of the Bank’s other activities. Natixis is expanding its emerging activities both at the local level (Moscow, Shanghai, Ho-Chi-Minh City) as well as in Paris and New York.
Equity Markets also set up a sales force dedicated to Equity Finance products, which is separate from the trading business.
Business slowed in 2011 compared to 2010 and the division was restructured, with origination teams in charge of Europe transferred to the Debt and Financing division to create the ELF business line (2 ) .
With 450 employees in 12 countries, the Asia-Pacifi c platform covers the majority of fi nancing and capital markets. Its goal is to assist the Bank’s international clients and build up specialized business expertise in this fast-growing region.
A development plan for the bank’s capital markets activities was implemented in 2011, aimed at broadening the product range, reinforcing distribution capacities and systematically practicing cross-selling with the fi nancing activities. Three major measures were taken: deployment of Equity and Fixed Income activities, targeted expansion of the sales team, and implementation of a debt platform combining syndication and primary bond market activities.
Corporate coverage was restructured in an effort to better focus sales initiatives on priority sectors and clients, in support of specialized business lines.
The Americas platform continued to grow – despite the liquidity crisis that transformed the second half of 2011, and the increase in regulation – playing leading roles in signifi cant fi nancing operations while decreasing its risk profi le and controlling expenses.
The platform took several steps to expand its client base and product offering. To enhance FIC&T capabilities, it created a Credit platform covering bond and loan origination, syndication, trading, distribution, and research, giving clients access to the US dollar-denominated bond market. IRD and FX sales and trading capabilities were developed. In Equities, a strategic review was conducted and overall coordination was tightened to offer clients integrated investment and hedging fi nancial solutions. The Global Structured Credit and Solutions team expanded the global reach of Natixis’ Insurance Solutions capabilities. Lastly, Coverage focused on developing relations with corporates and fi nancial sponsors in key CIB sectors.
Implementing a key strategic objective, the platform played a more prominent role in fi nancing, helping to raise $49.5 billion in 51 bond issues, including as Joint Bookrunner on eight deals totaling $11.2 billion. The most signifi cant deals were for Vale, the second-largest mining company in the world; Pemex/PMI Trading, the sixth-largest oil company in the world; and Cablevision, the fi fth-largest cable operator in the US.
The platform’s strategy was drawn up in line with the bank’s general aims: developing high value-added and low capital-intensive businesses, with particular attention given to key clients.
The EMEA platform is made up of the following sub-divisions: 1 Southern Europe, offering the full range of CIB services; 1 Northern Europe, with a selective positioning, specializing in financial institutions and offering high value-added products; 1 Emerging markets, with a more opportunistic approach depending on the local clients and markets.
CIB research is a strategic priority and an integral part of Natixis’ client-driven approach. Every day, the Research teams publish analyses to guide clients in their investment decisions, while also contributing to the creation of fi nancial solutions tailored to client needs.
Economic Research, headed by Patrick Artus, provides indepth expertise combining contextual overviews, economic and fi nancial forecasts, an analysis of the Fixed Income and equity markets, country assessments and investment strategies. With 350 European stocks tracked in 23 sectors, Natixis boasts one of the market’s leading equity research departments. The credit research teams analyse credit market trends and recommend ideal market/sector weightings for clients’ credit portfolios. Finally, quantitative research supports the Bank’s fi nancial innovation process and ensures that it remains competitive in today’s fast-changing markets by developing pricing and risk management models.
Natixis has merged all of its investment activities into one core business, centered on Asset Management, a fi eld in which Groupe BPCE has global ambitions, and rounded out by insurance, private banking and private equity activities, all of which are areas in which Natixis aims to accelerate growth.
Private Banking also has a platform in Luxembourg, where some 100 people are working to build up the European private banking business, while Private Equity offers a global range of funds of funds through asset management fi rms in the US and Asia.
Operating within the Investment Solutions division, Natixis Asset Management markets a wide range of investment solutions including funds, dedicated products and mandates in all asset classes (money market, bonds, equities, real estate, alternative and diversifi ed).
Natixis Global Asset Management’s business model is based on a global distribution platform serviced by multi-specialist asset management companies meeting the needs of a large international client base. Drawing on its diverse range of portfolio management skills, strong distribution capacity and fl exibile business model, Natixis Global Asset Management has consolidated its position as a major international player in asset management. As of yearend 2010, Natixis Global Asset Management was one of the top 15 asset managers in the world (1).
The global asset management market was burdened by weak economic growth, the euro crisis and underperforming European fi nancial markets in 2011, particularly in the second half of the year.
Natixis Global Asset Management performed well despite the challenging context for asset management, mainly in Europe, and recorded net infl ows of €3.7 billion in 2011. Assets under management increased slightly to €543.9 billion in 2011, due to net infl ows led by the United States and outfl ows in Europe, with a negative market effect in both Europe and the United States.
Sales performance in 2011 was boosted by Natixis Global Asset Management’s dynamic centralized distribution platform. This platform covers asset management infl ows from the United States, mainly for the retail activity, as well as from Europe (excluding France), the Middle East, Asia and Australia. The platform generated excellent net infl ows in 2011, endorsing its increasingly diversifi ed growth model by asset class, asset management company and geographic area.
Total assets under management generated by the platform amounted to $149.8 billion, or 21% of Natixis Global Asset Management’s total assets under management. In the United States, distributed assets under management exceeded $100 billion for the fi rst time during the fi rst half of the year and reached $101.2 billion by end-2011. International assets under management (excluding France and the United States) totaled $48.6 billion, up 26% compared to end-2010.
Natixis Global Asset Management’s multi-boutique model was strengthened by the acquisition of a majority share in Darius Capital Partners, an investment advisory fi rm specialized in alternative asset management. In addition, the strategic partnership agreement was fi nalized with IDFC AM, a leading Indian asset manager based in Mumbai, with Natixis Global Asset Management taking a 25% stake. Finally, Axeltis, a distribution company for the Group’s third-party funds, became part of Natixis Global Asset Management.
(1) Cerrulli Rankings - July 2011 based on AuM at end-2010.
The European asset management business posted €306.4 billion in assets under management at end-2011, down 3.9% compared to 2010. This drop was due to a negative market effect and net outfl ows in numerous categories of assets under management.
Natixis Asset Management’s assets under management totaled €283.9 billion at end-2011 versus €299.8 billion at end-2010. The net outfl ow, which remained limited, was the result of outfl ows from different asset classes due to the drop in the fi nancial markets and the intense competition in on-balance sheet investment products.
New collective products and packaged funds were launched for the Banque Populaire and Caisse d’Epargne networks. The reinforcement of Natixis Asset Management’s sales in Europe and the development of synergies within the Investment Solutions division remain major priorities.
The European asset management companies received numerous awards again this year for the performance and specifi c features of their investment funds and management expertise.
All the group’s US asset management companies directly provide distribution services for institutional clients in the United States. In the retail banking segment in particular, they received strong support from the distribution platform in 2011, which provides asset management products, advisory and structuring capabilities, and related services that can be tailored to differences in markets and distribution channels. This platform supplies both volume retailers and private investment advisors. It also assists US asset management companies in developing sales of their products in the Asia-Pacifi c region, Singapore, Taipei, Japan and Australia.
The “Better Thinking. Together.” media campaign that was launched in 2010 continued in 2011. This campaign highlighted the diversity and strength of the investment solutions offered by the group’s US asset managers, including the “alternative” approach developed by asset management companies such as Gateway Investment Advisers and Alpha Simplex.
These communication campaigns were launched under the brand name Natixis Global Asset Management as the distribution entity. Natixis Global Associates’ brand name was dropped at the beginning of 2012.
j Absolute Asia Management ($0.7 billion): Asian equities (excluding Japan), emerging Asian equities.
The life insurance market underperformed signifi cantly in 2011. Gross infl ows on the French market as a whole were down 14% and combined net infl ows fell sharply due to high outfl ows in the fourth quarter. Natixis Assurances proved resilient in these adverse conditions. Gross infl ows were less affected than the market as a whole (-9% for France) and combined net infl ows totaled almost €600 million, bringing assets under management to €37.7 billion at year-end 2011.
Natixis Assurances Partenaires, the subsidiary dedicated to wealth management advisors and private banking, fi nished 2011 on a high note, with gross infl ows up 34% year-on-year. 33% of infl ows were invested in unit-linked policies. In 2011, collective discretionary management was launched with Natixis Multi Manager, OFI Asset Management and Rothschild et Cie. A dedicated extranet was made available for these partners and a new website for institutional investors was launched.
The personal protection insurance business posted strong growth in 2011, with premiums increasing by 20% to €456 million. Natixis Assurances completed the roll-out of its payment protection insurance offer, which covers conventional loans, as well as consumer loans and Natixis leasing products distributed by the Banque Populaire and Caisse d’Epargne networks. Payment protection insurance accounted for 61% of personal protection insurance premiums in 2011.
Property and casualty insurance revenues in France increased at their strongest rate since 2004. The fi rst large-scale climatic event of 2011 was the serious fl ooding in the southeast of France at the beginning of November. Natixis Assurances recorded strong growth in business. The number of policies sold rose 5% to 888,919 at end-2011. On the whole, earned premiums in the property and casualty business rose 8% to €232 million, with a strong performance in the “professionals” segment, which improved by 48%.
As an expert in wealth management and fi nancial solutions, Private Banking offers a range of products and services tailored to the demands of high net worth French and international clients. This offering covers not only legal and tax engineering, wealth management advisory services, life insurance and asset management (discretionary management, advised management, UCITS, structured products, etc.) but also lending, which is essential to any wealth structuring solution. The offer is built on a simple principle, namely the search for the best-performing solutions, whether created by Natixis teams, Groupe BPCE entities or external players recognized for their serious commitment to providing quality services.
Private bankers, portfolio managers, product specialists, wealth management experts and fi nancial engineers are all high-level professionals with multi-disciplinary skills that allow them to handle very complex issues.
As Groupe BPCE’s partner of choice, Private Banking focuses on supporting the networks of Banque Populaire, Caisse d’Epargne and BPCE International et Outre Mer. It regularly provides the private banking teams of regional banks with all the wealth management and fi nancial solutions they need to meet customer needs. In this capacity, it provides Groupe BPCE networks with a range of products and services that covers all stages of wealth management (discretionary management, fund picking, life insurance policies, etc.). The implementation in 2011 of a network-based life insurance platform allowed Banque Privée 1818 to position itself as Groupe BPCE’s open architecture broker.
Sélection 1818 was created in March 2011 from the merger of 1818 Partenaires and Séléction R. The new entity is the fi rst multi-service and multi-product platform on the market solely dedicated to independent wealth management fi rms. With national coverage and dedicated contact points by region, Sélection R’s strategy is to focus on the market’s most active independent wealth management fi rms. In 2011, Sélection 1818 started to modernize its technical capabilities. This ambitious project is aimed at consolidating its leadership position and meeting the needs of IWMAs while improving quality of service.
With €5.8 billion in assets under management and with one in three IWMAs a client of the platform, Sélection 1818 generated gross infl ows of €1.1 billion in 2011. The entity was voted the second-best banking platform by the French monthly wealth management magazine Gestion de Fortune.
The Natixis Private Banking teams, housed within Natixis Bank in Luxembourg, have been serving expatriates and non-residents for more than 20 years in the fi eld of international wealth management. In 2011, gross infl ows reached €1.2 billion, including €629 million following the creation of two venture capital companies (SICARs). The new Management team formed at the end of 2011 has been tasked with continuing to reposition the sales strategy to target a wealth management client base.
Through its historic private equity specialist, Natixis Private Equity (NPE), Natixis has been a key private equity services provider focusing on SMEs and covering the various segments of venture capital, expansion capital and diversifi ed funds of funds in both France and abroad.
Seventure Partners. This 18-person company manages more than €390 million via 19 funds ( mostly FCPIs and FCPRs), marketed primarily through the Banque Populaire network.
Masseran Gestion Capital Risque. Initially created as part of the CNCE, Masseran Gestion’s six-person venture capital team manages more than €60 million via seven funds (all FCPRs), marketed primarily through the Caisses d’Epargne network and Banque Palatine.
Naxicap Partners. With 49 employees, 15 years’ experience and €910 million in assets under management, Naxicap Partners is one of France’s leading providers of expansion capital on the SME segment. It ensures regional coverage through fi ve offi ces around France.
Naxicap Partners recently acquired the asset management company AtriA Capital Partenaires, allowing it to consolidate its expertise and its portfolio of potential investors. The company now manages almost €1.2 billion.
Alliance Entreprendre. This 12-person company manages €145 million via ten funds – three FCPRs and seven local investment funds (FIPs) – marketed primarily through the Caisses d’Epargne network, but also through external investors.
Dahlia Partners. Dahlia Partners was created in 2006 and the fi rst primary fund of funds for €300 million was launched in partnership with the European Investment Fund (EIF). The company currently manages €500 million, with the majority invested on the primary market (68%), but also a share on both the secondary and co-investment markets. Through the state-owned France Investissement structure, Dahlia Partners created a €100 million venture capital fund in association with CDC Entreprises.
Eagle Asia Partners. Formerly TIF Ventures’ historic team, a Singapore government private equity structure, Eagle Asia Partners was founded in 2007 by six experienced professionals with a strong track record in Asia.
Natixis’ Specialized Financial Services division comprises two business lines, Specialized Financing and Financial Services, and eight activities with similar industry and distribution strategies.
These activities form a core part of the development of the BPCE networks .
J FACTORING REVENUES OVER THE PAST 5 YEARS (IN BILLIONS OF EUROS)
The platform offers a highly diverse range of products tailored to various markets and businesses: individuals (joint-and-several mortgage guarantees), professionals (business start-ups/transfers, equipment, commercial property), social economy and social housing, public-private partnerships, real estate companies and professionals (builders, developers, realtors, administrators).
In 2011, Natixis improved its position in the vehicle fl eet leasing business with the acquisition of GCE Car Lease, posting a 10% increase in business.
Natixis Financement develops revolving credit products and manages personal repayment loans for banking networks.
Outstanding loans climbed 13% year-on-year to €11.3 billion, thus cementing the company’s No. 3 spot on the French market.
The JV between Natixis Financement and BNP Paribas Personal Finance to develop a joint IT platform entered into the operational phase in 2011.
In 2011, Natixis Cofi ciné issued 328 new loans (up 14.5%) totaling €423 million. Total provision of funds amounted to €590 million, up 16.7% year-on-year. This brought the portfolio to €613 million at December 31, 2011.
Natixis broadened its virtual service offer in 2011, in line with its policy of continuing innovation in real-time information on employee savings accounts: launch of a new Internet portal divided into separate pages aimed at corporate, institutional and savings clients, fi rst natural language voice interactive server and fi rst smartphone application aimed at employee savings accounts (25,000 downloads in the fi rst three months).
Special payment vouchers, which are now issued by the Caisses d’Epargne, grew steadily with more than 96,000 new Chèques de table® (meal vouchers) and CESU Domalin® (employment services vouchers) issued, mainly to mid caps and local authorities. The total volume of vouchers issued increased by almost 16%, for an equivalent value of over €690 million in 2011.
Natixis, the No. 3 payments operator in France, with market share of over 20% in the exchange systems and electronic banking fi eld, processed over 6.3 billion mass transactions in the Core system in 2011. On the international market, Natixis is one of the top 10 European players, with plans to develop industry partnerships. To this end, Natixis is continuing to build a joint electronic payment platform with BNP Paribas through the Partecis joint venture.
J CHANGE IN NUMBER OF TRANSACTIONS PER PREPAID CARD (CARDHOLDERS AND RETAILERS) (IN BILLIONS OF TRANSACTIONS)
Coopératifs d’Investissement” (“Cooperative Investment Certifi cates”). As such, the retail banking business of the networks contributes to Natixis’ results.
j Services accessible on mobile terminals were enhanced and now each Banque Populaire bank has a remote branch. These e-BanquePopulaire offer the same services as a traditional branch, with an appointed advisor who can be reached by telephone, e-mail, videoconference or online chat. 17 e-BanquePopulaire branches were operational at year-end 2011.
j The Banque Populaire du Sud-Ouest and the Banque Populaire Centre Atlantique merged to create the Banque Populaire Aquitaine Centre Atlantique. This new major regional bank covers eleven departments in France.
Banque Populaire was the fi rst French bank to launch the Visa Platinum card, aimed at clients who want to enjoy many exclusive benefi ts: high limits for payments and cash withdrawals, concierge services and more. Like other Visa cards, the Facelia version is available, offering the choice between a debit or credit payment for each transaction.
The NRJ Banque Pop’ payment card, launched one year ago, has won over nearly 32,000 young cardholders. The card gives them opportunities to win concert tickets and to enjoy discounts with partner companies.
The exclusive partnership with LMDE, the main mutual insurance group for students, was renewed. Banque Populaire promotes the fi nancial independence of LMDE subscribers through loans not requiring co-signers to fi nance their studies or to rent an apartment.
In residential loans, Banque Populaire was the fi rst to offer the PTZ+, an interest-free loan open to all fi rst-time homebuyers and adjusted to the energy effi ciency of the home.
A new car insurance product was launched: Assur-BP Auto offers fully fl exible, complete coverage starting with the basic formula and may be purchased online.
An ambitious growth plan was implemented in order to make bancassurance a day-to-day business line of the Banque Populaire banks.
Regarding life insurance, outstandings were maintained despite a diffi cult context, with a slight decline of 0.7% recorded in 2011.
In mutual funds, three guaranteed-capital funds collected €635 million in infl ows, including €285 million in ordinary securities accounts and Personal Equity Plans.
Banque Populaire private banking supports its clients in building, managing and transferring their wealth. The expertise of private banking advisors is perfectly suited to help professionals, liberal professions and business owners in the context of a dual professional-personal banking relationship.
Long-standing partners of the Chambers of Trade and Craft Industries (Chambres de métiers et de l’artisanat), leading banks of franchise businesses, active with liberal professions and farmers, the Banque Populaire banks are the reference banking institutions for small businesses.
As the leading distributors of business start-up loans with 28.4% of the market (1) and partners with the top networks assisting entrepreneurs, the Banque Populaire banks facilitate new business start-ups and takeovers with loans backed by personal sureties or reduced fi nancial guarantees in partnership with small-business mutual guarantee companies (Socama) and the European Investment Fund.
In 2011, Banque Populaire formed the only partnership in France with the country’s professional accounting association, the Ordre des experts comptables, to facilitate the fi nancing of microenterprises in shorter timeframes.
A new electronic funds-transfer diagnostic tool helps clients optimize their choices, which include electronic commerce with the highly acclaimed CyberPlus Paiement tool.
Fodder purchases associated with the drought were facilitated by cash advances.
A product to hedge market prices of principal agricultural commodities was launched.
Medium- and long-term business loan outstandings amounted to €20 billion, a 4% increase at year-end 2011.
14 Banque Populaire banks signed a risk-sharing agreement that allows them to increase their fi nancing offerings.
Banque Populaire is the only banking network with national coverage in advisory services for business transfers. The network implemented software that centralizes information on sellers and buyers to facilitate transactions.
Payment processing 2011 was characterized by the migration of the electronic data interchange protocol. 75% of clients migrated easily and without any additional cost thanks to the dedicated Turbo Suite Entreprise software.
The development of an international correspondent network continued with the Confédération Internationale des Banques Populaires, which now has members in 22 countries and a newly created dedicated website.
Since 1818, the Caisses d’Epargne cooperative banks combine confi dence, solidarity and modernity. The second largest retail banking network in France, the 17 regional Caisses d’Epargne are among the leading banks in their regions. They support all economic players and are leaders in providing fi nancing for the public sector, social housing and the social economy.
j In 2011, the Caisses d’Epargne had business dealings with over 600,000 new customers.
j Caisse d’Epargne was ranked in fi rst place worldwide for its mobile banking application (1). Over one million customers use this application for iPhone, iPad, Android and Blackberry.
j All the Caisses d’Epargne have established an online branch, Monbanquierenligne, offering all the services of a traditional branch and an appointed advisor available on-line.
Caisse d’Epargne was the number two distributor of the PTZ+ (3) product, with a 16% market share.
In 2011, over 275,000 professional customers signed a national agreement with CAPEB (4), an association of craftspeople and small businesses in the building trades, and partnership agreements on commerce arranged with several brands. New products and services for factoring and employee savings were launched along with an electronic funds-transfer product for healthcare professionals and solutions designed for wine producers and the building craftsmen. New medium- and long-term loans grew by 9% to €2.5 billion. Average daily loan outstandings grew by 13% to €3.2 billion. Net infl ows, including Livret A savings accounts, amounted to €347 million.
Caisse d’Epargne continued to record strong growth among corporate customers with 12% market penetration (5), a fourpoint increase in two years. It signed partnership agreements with France Clusters and the APERE business support network. Caisse d’Epargne is a partner, through capital structure, in regional businesses, offering corporate customers and their managers 360-degree support.
(1) 2011 ranking by the independent fi rm “myprivatebanking.” (2) JDD/Postenak/IPSOS image barometer (January 2012).
(3) Source: Société de Gestion du Fonds de Garantie à l’Accession Sociale (SGFGAS), which provides services to banks that distribute special property mortgages established by the French government to promote home ownership.
(4) Confédération de l’artisanat et de petites entreprises du bâtiment. (5) Observatoire des entreprises et des banques 2011.
The Associatis savings account proved its appeal among associations with over €1 billion collected.
Debt-management transactions totaled €3.1 billion. Active asset management continued to grow steadily, as did electronic fundstransfer services, with the Carte Achat Public, the web-based collection service SP+, and the Chèque de Table®, CESU Domalin®, CA DO CHÈQUE , and Chèque Interservices® payment vouchers.
Caisse d’Epargne is one of the main private operators in social housing in France’s regions with 159,000 social housing units managed by its social-housing company affi liates (ESHs) and rent-subsidized housing cooperatives (HLMs). The largest are Erilia, Logirem and SIA.
The Habitat en Région association helps group entities share their expertise and benefi t from services at the best price: real estate research, energy audits, construction projects, equipment, energy savings certifi cates. In 2011, partnerships with Eiffage and Vinci were signed for this purpose.
DESCRIPTION OF THE MAIN PROVISIONS OF THE BANQUES POPULAIRES CCI MEMORANDUM OF UNDERSTANDING
(3) Fédération des établissements hospitaliers et d’aide à la personne privés non lucratifs/Federation of non-profi t private hospitals and personal assistance establishments.
In the event that approval is refused and the vendor does not abandon the proposed sale, the Banque Populaire concerned must repurchase the said CCIs (with the consent of the vendor) or must arrange for them to be purchased by a third party, at a selling price that takes account of the proportion of the net assets to which the Banques Populaires CCIs entitle the holder, and which complies with the valuation methods used to value Banques Populaires CCIs at the time of their issue. In the absence of agreement between the vendor and the relevant Banque Populaire, the purchase price of the Banques Populaires CCIs shall be determined by an expert.
In addition, in the event that legislative or regulatory changes or changes in the assessment by the relevant regulators or by Natixis’ Statutory Auditors should make it necessary to increase Natixis’ infl uence or to alter it signifi cantly in order to enable Natixis to continue to consolidate Banques Populaires CCIs, Natixis must submit the precise terms of the changes made necessary to Banques Populaires in order for them to be able to determine whether they should incorporate these new aspects of infl uence into the existing arrangements or whether they should decide, on receiving prior authorization from the Board of Directors of BPCE, to exercise their right to buy back the CCIs that they have issued.
The buyback value of Banques Populaires CCIs will be calculated using the method of valuation used when they were issued, particularly as regards the calculation of net assets, and must take account of the profi tability of the Banques Populaires and of the proportion of the net assets to which the Banques Populaires CCIs entitle the holder. If Natixis and the Banque Populaire cannot reach an agreement, this buyback value shall be determined by an expert.
Natixis and the Banques Populaires have agreed to maintain existing industry and commercial relations for a period of at least 10 years from the subscription date of Banques Populaires CCIs and, in particular, the provision of the following services: 1 provision of IT infrastructure; 1 provision of industry services (custodial services, payment systems, operational management of currency accounting); 1 design and management of customer products on behalf of Banques Populaires (asset management, the entire range of insurance products (life, personal protection, property and casualty), factoring and lease financing, financial engineering, expansion capital, employee benefits planning (and particularly company savings schemes), international financial engineering, credit insurance and commercial information (Coface).
Upon the expiry of the 10-year period, either of the parties may terminate these existing commercial and industry relationships subject to providing one year’s prior notice and, where applicable, complying with specifi c contractual provisions governing these relationships.
The memorandum of understanding pertaining to the issue of CCIs by the Banques Populaires requires Natixis to maintain the level of its equity stake in the Banques Populaires under the following terms: 1 Mechanism for regulating the capital of Banques Populaires possessing variable capital: The Banques Populaires are entities with variable capital (except BRED). In order to maintain the level of Natixis’ interest, a carrying structure was set up for each Banque Populaire in the form of a subsidiary of the Banque Populaire concerned, the said subsidiary being administered and managed by the issuing Banque Populaire. The carrying structure regulates the variability of the share capital by subscribing for a unit of the share capital each time a unit of the share capital is redeemed and, conversely, by requesting redemption of a unit of the share capital each time the Banque Populaire issues a new unit of share capital.
In the event of a capital reduction through the redemption of shares, not offset by subscriptions for shares in accordance with the above terms, the Banque Populaire may redeem, with a view to their cancellation, the number of CCIs required to maintain the stake, without the prior approval of Natixis.
In 2011, maintaining the 20% stake in the capital of each of the Banques Populaires represented an investment of €135,224,960.50 for Natixis.
DESCRIPTION OF THE MAIN PROVISIONS OF THE CAISSES D’EPARGNE CCI MEMORANDUM OF UNDERSTANDING
A memorandum of understanding relating to the CCIs issued by the Caisse d’Epargne banks and transferred to Natexis Banques Populaires (the Caisses d’Epargne CCIs) was entered into by each Caisse d’Epargne et de Prévoyance, CNCE, SNC Champion and Natexis Banques Populaires on November 16, 2006 (the “Caisses d’Epargne CCI Memorandum of Understanding”).
The Caisses d’Epargne CCI Memorandum of Understanding stipulates that the transfer of all or part of the Caisses d’Epargne CCIs by Natixis shall be subject to the prior approval of BPCE.
In addition, without prejudice to the benefi t of paragraph (iii), in the event of a legislative amendment conferring a voting right to the holders of CCIs, Natixis undertakes to act in concert with BPCE and the Caisses d’Epargne, to make the necessary adjustments while either maintaining the rights and characteristics of the securities issued or replacing Caisse d’Epargne CCIs with securities possessing the same characteristics, and particularly without voting rights and with Natixis having the ability to consolidate the results of the Caisses d’Epargne in proportion to its investment in the capital.
For the purposes of developing their industry and commercial cooperation, Natixis and Caisse d’Epargne have agreed to maintain their existing industry and commercial relationships described above for at least 10 years.
The memorandum of understanding relating to cooperative investment certifi cates issued by Caisses d’Epargne requires Natixis to maintain its stake in the event of a change in the capital of the Caisses d’Epargne.
In 2011, maintaining the 20% stake in the capital of each of the Caisses d’Epargne represented an investment of €10,000,000.00 for Natixis.
In France, Coface manages guarantees backing French exports, on behalf of the French State. These various guarantees cover risks that are not insured by the private sector. The State, which pays Coface for these management services under the terms of a financial agreement, collects the premiums and pays out compensation to policyholders, where applicable.
In 2011, Coface gradually implemented its end-2010 strategy of refocusing on credit insurance. This is its historic core business and accounts for more than 83% of the company’s revenues. The company has therefore retained its business information and receivables management businesses, the key components need to provide its clients with the best credit insurance services. Coface has also maintained its factoring activities in Germany and Poland within its strategic scope, in view of the high overlap with the credit insurance business (common clients, shared risk) and their profi tability, which brings added value to its core business.
Coface has set up a matrix-type organization, run by an Executive Committee drawing from seven regional platforms (Northern Europe, Western Europe, Central Europe, Mediterranean & Africa, North America, Latin America, Asia Pacifi c) and nine group functions (sales, arbitrage, litigation & information, communication, legal, information systems, fi nance, organization and corporate secretariat-human resources, reinsurance & asset management). The control functions are carried out by the group’s Audit and Risk Departments, which report directly to Coface’s Chief Executive Offi cer.
The process for determining the scope of the GAPC portfolio was as follows: December 2008 1 Approval of the plan to refocus Corporate and Investment Banking (CIB): CIB’s operations were split into a segment known as “CIB continuing activities”, consisting of the operations to be maintained, and another containing the assets to be run off within GAPC. This separation was intended to ensure optimal proactive management of the assets segregated within GAPC, to protect the operations retained within “CIB continuing activities”, and to highlight the performance of the operations within “CIB continuing activities”.
1 Formal approval of the Guarantee by the corporate bodies of BPCE and of Natixis, and implementation of the Guarantee in November 2009 (retroactive effect to July 1, 2009).
The identifi cation of assets for segregation was primarily based on three criteria: (i) assets or operations that did not offer, or no longer offered, synergies with the CIB continuing activities with regard to CIB’s new direction laid out in 2009; (ii) assets or operations offering poor returns on the capital or cash tied up; (iii) assets or operations with excessive risk profi les or offering insuffi cient liquidity.
In addition, in the case of non-credit assets, the change in Value at Risk (“VaR”) in 2011 stemmed from: 1 additional workout portfolio management of equity derivatives; 1 additional hedging transactions in complex interest rate derivatives, in a more volatile market compared to 2010; 1 further liquidation of structured funds.
The Guarantee covers credit assets, except for complex credit derivative portfolios and RMBS portfolios insured by US Agencies (FNMA known as Fannie Mae, FHLMC known as Freddie Mac) but including the hedging of risks linked to counterparties not providing collateral.
The general mechanism behind the Guarantee is based on the establishment of: (i) two Total Return Swap agreements (TRS), one in dollars and the other in euros covering 85% of the net value of the assets recognized in the trading portfolio and risks 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; (ii) a financial guarantee covering 85% of the nominal value of 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 expiry date of the guarantee granted to Natixis is that of the asset in the guaranteed portfolio with the longest maturity – currently April 28, 2099 – plus nine months (it being noted that this date may be brought forward to the date of termination of the guarantee in the event of a change in control at Natixis within the meaning of Article L.233-3 of the French Commercial Code). The expiry date of the financial guarantee is the date from which Natixis is no longer required to pay over to BPCE the sums recovered on assets in the guaranteed portfolio having defaulted. It post-dates the expiry date of the guarantee by 15 years.
The breakdown of the assets covered by the Guarantee as of December 31, 2011 is as follows: (in billions of euros)
The scope of the Guarantee, in net value terms, amounted to €19.3 billion (excluding “CDPC”) at December 31, 2011, down €5.9 billion compared to December 31, 2010 (see 5.1 – Management Report), due in large part to amortization and disposals.
The implementation of the Guarantee triggered two payments to BPCE: 1 the first for €1.183 billion in respect of the financial guarantee (including €1.035 billion for assets recognized as loans and receivables (L&R) and €148 million for available-for-sale assets (AFS)) versus €1.249 billion in provisions; and
The implementation of the Guarantee did not have an initial impact on Natixis’ earnings. Since, the consequences are as follows: 1 changes in the value of the portfolio guaranteed, from June 30, 2009, by the TRS will be offset by the TRS up to 85%; 1 the Option is measured at fair value through profit and loss primarily on the basis of the change in the value of the portfolio guaranteed by the two TRS; 1 the equivalent value of the €1.183 billion payment in consideration for the financial guarantee is amortized almost symmetrically with the reversal of the provisions for write-down that were funded for this portfolio at June 30, 2009 and the amortization of reclassification discounts.
Retention of existing governance structures and Committees as regards accounting, fi nancial, risk, asset and liability management (ALM) and other issues: 1 arrangements regarding ad hoc reporting (regular reporting and reporting of warnings) and specific monitoring of risks of GAPC assets covered by the Guarantee between the BPCE and Natixis Risk Departments; 1 arrangements which provide for procedures for obtaining the advice and assessment of the BPCE Risk Department on procedures implemented within Natixis regarding the GAPC assets, including in addition procedures to access information on the control of system reliability and model validation.
Transformation of the CRPC (Comité des Risques du Portefeuille Cantonné – Segregated Portfolio Risks Committee) into the CGAC (Comité de Gestion des Actifs Cantonnés – Segregated Assets Management Committee), responsible for the entire scope of GAPC, with the involvement of BPCE with respect to the sub-scope covered by the Guarantee.
1 Where decisions represent for BPCE a financial impact or specific risks as a result of the safeguard mechanism, BPCE’s representatives may request that the CSG examine the issue prior to the decision.
1 The Natixis Risk Department, Natixis Finance Department and BPCE’s representatives are each completely free to add items deemed relevant to the CGAC agenda.
1 PRESENTATION OF NATIXIS Natixis and its shareholders 1.6 Natixis and its shareholders 1.6.1 KEY SHARE DATA AT DECEMBER 31, 2011
Euronext 100 1.6.2 BREAKDOWN OF SHARE CAPITAL AT DECEMBER 31, 2011
(b) Calculated using the number of shares at December 31 of the year in question. (c) Adjusted price.
1PRESENTATION OF NATIXIS Natixis and its shareholders 1.6.4 SHARE PRICE INFORMATION
The average daily volume of Natixis shares traded on the market amounted to around 6.2 million in 2011 versus an average of around 6.3 million in 2010.
The Natixis individual shareholder relations and communication platform is manned by a four-person team and has three main access points: 1 A toll-free number (numéro vert) (+33 800 41 41 41) available Monday to Friday from 9 a.m. to 6 p.m. (except weekends and public holidays) to answer questions about Natixis. This number provides access to an interactive voice response system that provides round-the-clock access to the share price.
1 A dedicated e-mail address (actionnaires@natixis.com), managed directly by the Individual Shareholder Relations team, where individual shareholders can send questions to the Company.
1 The website: www.natixis.com: j provides round-the-clock access to information about the Company; j features Natixis press releases, calendar and fi nancial news in the “Investor Relations” section; j includes all editorial content and documents for shareholders and, in particular, all issues of the Shareholder Newsletter in the “Individual Shareholders’ Corner”.
Renewable energies are fi nanced through the project fi nance and “Sofergie” leasing activities and through investments of the dedicated funds EUROFIDEMEM 2, FIDEME, EKF and ECF.
The Corporate and Investment Banking division’s project fi nance activity continued to grow rapidly, with 11 new projects: • four solar PV projects with a capacity of 300MW; • three solar thermal projects with a capacity of 210MW; • three wind power projects with a capacity of 650MW; • a biomass project with a capacity of 100MW.
With a total of €311 million in funding arranged in 2011 (including Natixis Energéco’s contribution of €203 million), Natixis Energéco has strengthened its position as lead arranger on the French renewable energy market.
2011 Key event Natixis Energéco arranged funding for a biomass combined heat and power plant, with a capacity of 16 MWp (megawatt-peak) in Nesle-Mesnil Saint-Nicaise in the Somme region of France.
The EUROFIDEME 2(2), FIDEME, EKF and ECF funds invest in renewable energies and carbon credits, while the FIDEPPP(3) and Cube Infrastructures funds invest in regulated assets such as concessions or public-private partnerships.
2011 Key event In November 2011, 14 renovated and furnished secondary schools were delivered in the Alsace region, under France’s fi rst energy performance partnership agreement(4). With targets of a 35% reduction in energy consumption and a 65% reduction in CO
2 emissions over the course of the 20year agreement, the project will generate carbon savings of 90,000 metric tons.
2 SOCIAL AND ENVIRONMENTAL PERFORMANCE Directions and program of activities 2.1.1.2 A leading player in SRI (Socially Responsible Investment) and solidarity investment
The Equity Markets Department of the Corporate and Investment Banking division has a team of analysts dedicated to SRI issues. This team supplies research and customized services to the European SRI investor community (specialized publications, sector-based presentations, investment optimization and SRI management structuring assistance, organization of events, etc.). The approach taken by Natixis Equty Markets’ SRI team is to incorporate SRI criteria in the fundamental research carried out by all sector-based fi nancial analysts.
Natixis AM has developed three types of SRI and solidarity strategies: • “ESG selection”: selection of companies with an attractive financial and extra-financial profile within their sector; • “Theme-based”: selection of companies whose activity contributes to protecting the environment, improving quality of life or fighting global warming, while displaying sound ESG practices and an attractive financial profile; • “Solidarity”: strategy calling for a portion of assets (5% to 10%) to be invested in economic solidarity projects such as microfinance, employment of individuals experiencing financial difficulties, and social housing. The rest of the portfolio invests in companies that implement sustainable development policies while also offering an attractive financial profile.
Natixis AM ranks among the leaders in SRI and solidarity management in France and in Europe and is No. 1 in solidaritybased employee savings(1) through its fund distributor, Natixis Interépargne.
Moreover, in 2011 many of the SRI and solidarity funds managed by Natixis AM were awarded the Finansol label(2) for solidaritybased savings investments and the Novethic SRI label (3), which aims to encourage more transparent information on ESG criteria.
(2) Finansol is an association of solidarity-based fi nance professionals. (3) Novethic is a research center and leading French authority on Corporate Social Responsibility (CSR) and Socially Responsible Investment (SRI). Novethic also assesses the SRI quality of funds distributed in France.
Share of solidarity-based asset management market (as %) (a) 35 36.6
Share of SRI-based employee savings market (as %) (b) 13.7 26.6
Share of solidarity-based employee savings market (as %) (c) 52.6 48.4
Roll-out of ESG analysis of the portfolio of investments in unlisted companies
Solidarity-based private equity: sponsorship of the EVPA and partnership with PhiTrust Partenaires
Natixis’ private equity business has been a partner of the European Venture Philanthropy Association (EVPA) since 2007. At Natixis’ initiative, the AFIC Sustainable Development Club decided to promote the EVPA during the presentation of its “Venture Philanthropy for Private Equity” study in 2011.
In this case, venture philanthropy consists in investing capital without seeking a high return, with the Natixis teams volunteering their expertise in setting up and monitoring equity investments in small companies (governance, reporting, contact sharing networks, seeking partnerships to ensure the sustainability of small companies, etc.). Natixis AM and Crédit Coopératif also invested in PhiTrust Partenaires alongside Natixis. PhiTrust Partenaires was approved as a “solidarity-based investment” at the end of 2011.
Three evaluation tools are used: energy audits (energy consumption with a 10-year works program), Green Rating, which AEW Europe was instrumental in setting up (environmental performance criteria
(1) HQE: High Environmental Quality, a voluntary French standard; BREEAM: the UK voluntary Building Research Establishment Environmental Assessment Method; LEED: the US voluntary standard Leadership in Energy and Environmental Design.
Number and type of assessments on the portfolio of existing assets 152 CO
Compliance and observation of professional rules of conduct are among Natixis’ core values. Through its preventative and monitoring activities, the Compliance department enhances the trust afforded by our customers, the markets and the regulators.
As a founding member of the FATF(1), France has introduced measures to combat money laundering and terrorist fi nancing in compliance with European and French laws and regulations. The obligations imposed by these regulations apply to Natixis and their implementation is subject to audits by supervisory authorities. Natixis is approved and supervised by the ACP(2), which has the power to issue administrative or fi nancial penalties.
Natixis is opposed to all forms of corruption, regardless of the business or person in question. Accordingly, it has adopted procedures, increased staff awareness, and introduced controls to prevent corrupt practices. At Natixis, the prevention of corruption is part of an overall system of fi nancial security designed to combat all forms of fraud, money laundering and terrorist fi nancing.
As a leading global player in the fi nancial sector, fraud is a major concern for Natixis. As such, Natixis has invested heavily in combating fraud in order to provide a secure environment for its customers, partners and employees.
At the practical level, anti-fraud measures have been instituted throughout Natixis and employees are made aware of fraud risk, including through e-learning. Furthermore, special controls are carried out on activities that are particularly exposed to fraud risk.
A CSR team set up in 2011 has developed an evaluation and decision-making chart for the relevant business lines, the Risk Department and the other bodies associated with Natixis’ credit approval process. It has also commissioned an external consultant to help it set up training programs for the teams.
An E&S rider (attached to the credit application report) is created for all new projects that are submitted to the credit approval bodies for a decision. The rider summarizes the key elements to be taken into account in assessing the project. It is drafted by the business line and, in the case of A and B category projects, expanded by the CSR team, which validates or amends the project category and outlines its position on the project and any recommendations.
Coface, a credit insurance subsidiary of Natixis, takes into account the social and environmental risks of projects managed on behalf of the government. In line with the OECD’s Recommendation on Common Approaches on Environment and Offi cially Supported Export Credits, an environmental and social impact assessment is systematically carried out for all projects involving exceeding €10 million or located in sensitive areas. Such projects must comply with host country and applicable international standards, specifi cally certain standards developed by the World Bank in the area of environmental protection and social well-being in a broad sense: management of emissions, protection of populations, biodiversity, cultural heritage, working conditions, etc.
At least 30 days before deciding to grant a guarantee, Coface publishes information about the larger projects on its website, including information about the environmental and social aspects (essentially a project impact study) in order to gather comments from stakeholders and provide information to all interested parties.
Finally, Coface takes an active part in think tanks in order to promote certain types of projects, such as renewable energy projects and to grant them preferential guarantee terms.
This policy is taken into account during the decision-making process (e.g. credit or investment Committee) applicable to each activity concerned.
The Real Estate and Logistics Department has adopted a life cycle cost approach to its projects and investments that considers the environmental impacts of its activities, with precise monitoring of energy consumption in buildings, waste management and the company’s carbon emissions.
Energy surveys were launched for some buildings in 2011 with the aim of assessing the potential for energy savings and eventually setting targets in this area.
For example, various projects begun several years ago were continued in 2011 to further improve the environmental management of the “Grand Seine” building, such as automatic light switch-off during off-peak hours, installation of motion detectors and optimization of settings for building management systems. The consumption of heating and cooling utilities in this building was reduced by 27% from 2008 to 2011 as a result (data restated for annual climate variations).
The “Green Works Charter” established in 2010 is now used for all major works including fi tting-out, construction and renovations. The criteria set by this charter are included in the specifi cations of service providers and are later audited by an external fi rm. In 2011, the charter was used for the fi tting-out of a number of buildings in Nantes and Paris (Quai de Bercy Yonne).
Finally, the “Accessibility Charter” drafted in 2010 requires Natixis, in addition to the regulatory requirements, to facilitate access to and use of its facilities by persons with disabilities during the building, extension or fi tting out-of its offi ces. An accessibility audit was carried out on the “Grand Seine” building in 2011.
In 2011, there was a signifi cant decrease in energy consumption, while paper consumption remained stable (the environmental indicators are detailed in section [2.4] ‘‘Environmental information’’).
(1) French standard in accordance with ISO 9001:2000 (2) French standard in accordance with ISO 14001:2004
The feedback was unanimously positive. The employees liked the look, quiet and performance of the vehicle and remarked on the dynamic and innovative image of the company it conveys.
emission rate per vehicule was limited to 190g. The limit for motor pool vehicles was set at 110g in 2011 and the limit for personal company vehicles assigned to Category 1 sales representatives and managers, which account for the majority of fleet orders, at 150g; • hybrid or electric vehicles are now included in the list of possible company cars.
emission rate of the company fl eet of Natixis S.A. (in g of CO2/km) 148 147* 141
Other fl eets will be centralized in 2012 in an effort to reduce emission rates through an indirect system (for example by replacing vehicles reimbursed to employees through a mileage allowance with personal company cars listed in the car policy).
In 2008, Natixis developed a travel policy giving prority to rail travel, but still allowing air travel under certain conditions.
Finally, Natixis prefers the use of “green taxis” (hybrid vehicles) for short-distance employee trips.
Natixis’ activities generate carbon emissions and have a dual impact on climate change: • within the company, office activities use natural resources (water, paper, consumables, energy, meals and transport) and produce waste. The manufacture and use of these resources and removal of waste generate greenhouse gas (GHG) emissions; • GHG emissions from projects or businesses that the bank finances or invests in may be fully or partially included in the bank’s carbon footprint in line with the concept of broader responsibility.
Natixis applies environmentally and socially responsible principles to its purchasing decisions and helps to infl uence the practices of its suppliers in these areas.
According to the results: • 80% of the suppliers surveyed had an overall rating in the average range (5-6) and none of them had a high total risk score (below 2); • the area that is best addressed is that of labor and human rights (63% of firms have their head office in France): 87% of suppliers had an average rating on this issue; • in light of the results of these surveys, Natixis is determined to discuss these matters with its suppliers.
Natixis’ Human Resources function acts as a partner to the company’s managers and employees in their personal development and the development of their teams. In 2011, the HR function continued to implement the road map developed in 2010 under the New Deal strategic plan in line with BPCE’s HR strategy. Progress was achieved around a shared vision on a number of major projects: providing Natixis with a Human Resources function that is solid and effi cient, innovative and committed: • strengthening career management and mobility processes and tools, with career Committees for senior managers, mobility Committees and an overhaul of job classifications; • the Management Charter, centered on six key roles defined by the Executive Management Committee, which has become one of the pillars of managerial leadership coordination; • expansion of the range of training tools, with the establishment of a shared e-learning platform for consolidated Natixis; • the integrated, shared HR information system planned for late 2012, as well as enhancement of key HR tools, particularly those related to appraisals and time management, which will facilitate the implementation of HR policies; • further centralization of payroll; • enhanced formalization of the compensation policy based on clear and uniform processes, including, in particular, a compensation policy for senior managers combining targets and performance with the more systematic completion of benchmarks;
• formal definition of procedures and controls and the establishment of HR performance indicators with a preliminary external and internal benchmarking exercise; • increasing involvement of staff representative bodies at the consolidated level and signing of a number of major agreements in areas such as disability, profit-sharing and employee savings plans. This will reinforce the integration of Natixis and the feeling of belonging among employees.
In 2011, consolidated Natixis’ headcount rose by 5.2%, i.e. around 800 more contracts than at end-2010. The business lines’ HR departments and the heads of those departments were extremely active in the areas of external hiring, career management and mobility.
Disability Agreement (March 2011) A commitment: to double the overall percentage of disabled staff in the company.
Measures: − adaptation of workstations and working conditions, access to professional training and adaptation to technology changes to enable disabled people to remain in employment; − development of a hiring plan and improvement of professional integration conditions; − greater partnerships with disability-friendly companies; − awareness-raising initiatives for all employees; − specifi c support measures (parents and spouses of persons with disabilities).
2 SOCIAL AND ENVIRONMENTAL PERFORMANCE Directions and program of activities 2.1.5.2 Employee participation in solidarity initiatives
Like every year, Natixis rallied a large number of its employees around solidarity-based events and partnerships in 2011: • in partnership with the Works Council and the Athletic Union, more than 250 employees and their families took part in the 2011 Odysséa race organized to raise money for the fight against breast cancer. Many also took part in the 25th annual Stock Market and Finance Industry Telethon. The funds raised for the Odysséa race and the telethon were matched 100% by the company; • in partnership with the “Nos Quartiers ont des Talents” association, Natixis’ managers mentored young graduates from underprivileged neighborhoods looking for their first job; • Natixis Asset Management signed a sponsorship agreement with the “La Mie en Pain’’ association in relation to its work with the homeless. The association provides a combination of one-to-one support, emergency assistance, and reintegration through long-term follow-up; • Natixis Assurance formed a partnership with the ‘‘Planète Urgence’’ association, which works in the areas of international solidarity and development aid, and offers its employees the opportunity to spend part of their paid leave participating in humanitarian activities.
As part of the ‘‘New Deal’’ strategic plan, the defi nition of the Natixis integrated scope excludes fi nancial investments (in particular Coface S.A. and its subsidiaries).
(1) New Economic Regulations (Article 116 amending Article 225-102-1). (2) GRI: Global Reporting Initiative, a multi-stakeholder association that develops and disseminates an internationally recognized sustainable development reporting framework.
Natixis France Natixis and all of its subsidiaries in France 14,258
Natixis and all of its subsidiaries in France excluding fi nancial investments (see Note 16 in Chapter [5] ‘‘Financial Data’’) 11,995
Changes in the Natixis France scope between 2010 and 2011 are as follows: • Specialized Financial Services division: consolidation of new subsidiaries within the leasing business line (Océor Lease SAS, Océor Lease Réunion, Cicobail, GCE Car Lease), i.e. 144 additional employees, and deconsolidation of SLIB (-101 employees); • Investment Solutions: consolidation of Sélection R within the scope of Banque Privée 1818 (+30 employees); • Support functions: integration of 94 ICDC employees within Natixis S.A.; • Financial investments (Coface): disposal of La Librairie Informatique (-38 employees).
The company’s headcount increased by 840 FTEs as a result of scope changes but also following a new hiring campaign launched in the fi rst half, mainly in the following business lines: • CIB: impact of new hires until the end of September, hiring freeze starting in October; • Investment Solutions: increased number of employees mainly in asset management outside France; • Support functions: implementation of the ‘‘Mission P’’ service internalization plan; • Financial investments: continued expansion of Natixis Algérie’s workforce.
Compensation policy is integral to the implementation of Natixis’ strategy. The policy`s objectives are to: • provide incentive and be competitive in order to attract, retain and motivate employees; • be equitable whatever the position in order to ensure individual performance is fairly compensated ; • be compliant with current financial sector regulations.
Natixis’ compensation policy principles are proposed by the Human Resources Department, in collaboration with the relevant business lines. The policy complies with the principles laid out by the regulator, the professional standards of the French banking sector, local labor laws, and local tax regimes.
Overall remuneration includes the following components: • fixed compensation, which remunerates the skills and expertise that are expected of the employee in a given position. It is determined by taking into account other companies’ practices for similar positions and internal levels; • variable compensation depending on the business lin, which takes into account external practices and complies with the compensation policy; • collective compensation (employee savings plan), which comprises: – a common component for all employees of Consolidated Natixis: – a single profit-sharing agreement signed on July 4, 2011, – a collective Employee Retirement Savings Plan, – an employee savings plan signed in 2011; – a component that differs for each company of Natixis Consolidated: – a specific employee incentive agreement for each company.
The compensation system for employees in charge of controlling risks and compliance and, more broadly, for support staff and teams in charge of validating transactions, is founded on targets that are different from those of the departments whose transactions they validate. Variable compensation takes account of Natixis’ overall performance and market trends.
The details of the 2011 compensation policy for this category of employees, along with the associated quantitative data, will be published in a special report, which will be available on the Natixis website before the General Shareholders’ Meeting of May 29, 2012.
The current set of agreements on the management of working time covers a variety of proposed options (part-time, short-time, special working conditions for employees with disabilities, etc.) along with the associated terms and conditions of compensation and social security contributions (e.g. parent child-rearing leave can give rise to a social security contribution based on full-time working hours).
Employee Representative Bodies have been established by Natixis Consolidated, comprising Natixis S.A. and the French subsidiaries of the Corporate and Investment Banking, Investment Solutions, and Specialized Financial Services divisions, with the aim of creating a forum for employer-employee communications and ensuring that all staff within this scope are duly represented.
A Natixis Sub-Group Committee, combining elected representatives of the different companies making up Natixis Consolidated, has also been set up for this scope to ensure that all employees are duly represented. This Committee keeps Management and union bodies informed of the company’s strategy and results.
% of employees covered by these agreements 100% of consolidated scope
The collective bargaining negotiations carried out within the scope of Natixis Consolidated in 2011 resulted in the implementation of consistent measures gradually establishing a Groupwide employee representation framework: • companywide salary measures; • development of a companywide policy on the professional integration and retention of employees with disabilities (accredited by order of the prefecture on July 5, 2011), and extension of allocations for children with disabilities; • establishment of a single collective pension plan (PERCO); • establishment for the first year of a single employee profitsharing system for the entire scope of Natixis Consolidated; • establishment of a single Natixis employee savings plan, replacing the 31 individual plans previously in force, starting on January 1, 2012 and extension of allocations for children with disabilities.
In addition to the agreements covering the consolidated scope, several agreements were entered into with each of the Natixis companies. Two major agreements were signed at Natixis S.A., including an amendment (June 15, 2011) to the PERCO agreement of December 28, 2000, establishing a transition from the CET (time savings account) to the collective pension plan (PERCO), and an agreement on gender equality in the workplace (November 16, 2011).
The 2011 results of the Stress Observatory questionnaire confi rmed an improvement since its instigation in 2009, with an environment that on average is more favorable than that of the fi nancial sector as a whole.
The CHSCT’s ‘‘Offi ce Moves’’ Commission was also busy in 2011, though to a lesser extent than in 2010 when the company initiated vast offi ce redeployments. The Commission examines site plans and may issue remarks or ask for changes in the plans, with the aim of improving employees’ physical working conditions.
On the medical front, Natixis has a full-service medical department (three company physicians, fi ve clinics, nine nurses) and three company social workers.
(number of days of work incapacity per thousand hours worked) 0.10 - -
Absentee rate for sick leave (including for occupational illness) (c) 2.2% - -
(a) Frequency rate: (number of accidents with leave/hours worked) x 1,000,000, source INSEE (b) Severity rate: (number of days lost due to temporary incapacity/hours worked) x 1,000, source INSEE (c) It is not possible to isolate days of sick leave related to occupational illness.
In addition, Natixis defi ned and deployed its Management Charter, which was distributed to all of its managers. The managerial training offer was expanded to meet the individual and collective requirements identifi ed. Over 700 operational managers and managers of managers took one or more managerial development modules out of the twenty or so choices available. Training initiatives were stepped up in 2011, with the integration of the Natixis management framework in all the modules, in the interest of harmonizing managerial practices within the company.
Training topics as % of training hours a Offi cial qualifi cation courses (in %) 7.7 4.7 6.7 * Temporary Consolidated at February 3, 2012.
The 2010-2011 action plan, based on the conclusions from the 2009 assessment, is primarily focused on gender equality in the workplace, extending the careers of senior staff and supporting employees with disabilities. Diversity in the workplace was another key focus alongside these three priorities.
As regards gender equality, action plans have been implemented in the companies comprising the consolidated scope. A special initiative aimed at bridging the gap between men’s and women’s salaries, launched in 2009, continued in 2010 and 2011. Concerning career management, a specifi c career path for women with high potential was introduced. Natixis Ltd signed a three-year agreement in December 2011 to maintain this policy over the long term. This agreement provides for measures to guarantee equitable treatment in terms of hiring, training, career management and parenting, as well as increased hiring of women to top management positions.
Natixis has confi rmed the place of employees with disabilities within the Company as an important corporate responsibility issue. Based on an assessment conducted in 2010, an agreement was entered into between Management and union bodies in March 2011. This agreement was subsequently accredited by DIRECCTE (Regional organization for businesses, competition, consumption, labor and employment).
The Mission Handicap program was signifi cantly enhanced, with the appointment of disability offi cers and contacts to the business lines, with the aim of assisting employees with disabilities and providing them with equitable working conditions and appropriate compensation. A number of initiatives were carried out, including partnerships with hiring associations, participation in specialized job forums, development of purchases with service providers specialized in working with disabilities, and support for handicapped workers. Additional awareness-raising initiatives were carried out, during events such as Disabled Persons Employment Week and two information campaigns conducted in partnership with Agefi ph (French association for the professional integration of disabled persons).
Percentage of employees aged 55 and over in the workforce 13.3 11.1 11.4 * Natixis Consolidated France
Men Women 25 years and under 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55 years and over
(a) The direct rate is the ratio of disabled workers to all staff. (b) The overall rate takes account of service contracts with entities that work with people with disabilities and of weightings for age.
This chapter presents the results of the programs and measures described in section [2.1.2] ‘Managing our direct impact on the environment’.
The resources allocated to the prevention of environmental risks and pollution: mock spill exercises are carried out in each building.
Waste sorting, which began in 2006, has now been made a widespread practice (see section [2.1.2] ‘Managing our direct impact on the environment’).
Ordinary industrial waste - not sorted (in metric tons) 614 550 -
The signifi cant increase in the number of batteries sorted is due to a change in scope: since 2011 included are the inverter batteries replaced at Natixis as well as the batteries collected from employees.
In order to prevent, reduce and compensate for emissions, work has been carried out in three car parks to ensure compliance with regulations. A contract has been established for the treatment of dangerous waste.
No noise pollution or any other specifi c pollution as a result of Natixis’ activity has been identifi ed.
2 SOCIAL AND ENVIRONMENTAL PERFORMANCE Environmental information 2.4.3 SUSTAINABLE USE OF RESOURCES
Natixis carried out GHG assessments in 2006, 2010 and 2011 (based on data from the previous year) of activities relating to the internal functioning of Natixis Consolidated France. The assessment includes regulatory constraints as well as other emissions (see detail below).
a Active and inactive employees a Individual shareholders a Shareholders’ Meetings, a Meetings and newsletters (specifi c process for individual shareholders)
and its subsidiaries a Staff representatives and unions a In-house information a Specifi c committees (e.g. Committee for
NGOs a Environmental protection a Human rights and banking transparency groups a Responding to questions a Meetings
Measures taken in favor of human rights in terms of purchasing are described in section [2.1.3] ‘Responsible purchasing policy’.
• This report was prepared in application of Article L.225-37 of the French Commercial Code.
3CORPORATE GOVERNANCE Structure of the corporate and executive bodies 3.2 Structure of the corporate and executive bodies (a)
Member Main role in the Company Main role outside the Company
Member, Appointments and Compensation Committee First appointed: Board Meeting of 04.30.2009
Board 5 avenue de Bourgogne – BP 63 21802 Quetigny Cedex
(a) A brief curriculum vitae of each of Natixis corporate offi cers as well as a list of the offi ces held in 2011 and in previous years appears in the section [3.2.4].
3CORPORATE GOVERNANCE Structure of the corporate and executive bodies 3.2.2 EXECUTIVE MANAGEMENT AT MARCH 1, 2012
(a) A list of the offi ces held by the Chief Executive Offi cer in 2011 and in previous years appears in the section 3.2.4.
❚ MEMBERS OF THE SENIOR MANAGEMENT COMMITTEE (CDG) AT MARCH 1, 2012
3 CORPORATE GOVERNANCE Structure of the corporate and executive bodies 3.2.4 LIST OF CORPORATE OFFICERS’ POSITIONS
Mr. Vincent Bolloré, aged 59, manages and controls the Bolloré group, which has a workforce of more than 30,000 people and holds a leading position in the industry, transport and logistics, energy distribution and media sectors.
Chief Executive Officer of: Bolloré (1), Bolloré Participations Chairman of Board of Directors of: Havas (1), Financière de l’Odet (1)
Chairman of: VEPB (until 04.27.2011) Chief Executive Officer of: Sofi bol, Omnium Bolloré, Financière V Member of the Board of: Batscap, Bolloré (1), Bolloré Participations, Direct 8, Direct Soir, Financière Moncey (1), Financière de l’Odet (1), Financière V, Havas (1), Havas Média France, Matin Plus, Omnium Bolloré, Sofi bol, VEPB (until 04.27.2011)
Permanent representative for Bolloré Participations, Member of the Supervisory Board of: la Compagnie du Cambodge (1)
Permanent representative for Bolloré, Member of the Board of Directors of: Bolloré Média, Fred et Farid Paris, Fred et Farid Group (since 08.30.2011)
INTERNATIONAL Chairman of: Nord Sumatra Investissements, Financière du Champ de Mars, Financière Nord Sumatra, Champ de Mars Investissements
Member of the Board of: BB Group, Centrages, Champ de Mars Investissements, Financière Nord Sumatra, Generali (1), Socfi nal (1) (ex Intercultures), Liberian Agricultural Company (Lac), Mediobanca (1), Plantations Nord Sumatra Limited,
Société des Chemins de Fer et Tramways du Var et du Gard, la
Permanent representative for Bolloré Participations, Member of the Supervisory Board of: la Compagnie du Cambodge
Permanent representative for Bolloré, Member of the Board of Directors of: Bolloré Média, Fred et
Chairman of the Board of Directors of: Financière de l’Odet, Havas, Havas Média
Permanent representative for Bolloré to the Board of: Bolloré Média (starting December 17, 2009), Fred et Farid (formerly
Permanent representative for Bolloré Participations member of the Board of: la Société Anonyme Forestière and
Member of the Board of: BB Group, Centrages, Champ de Mars Investissements,
Permanent representative for Bolloré Participations, member of the Board of: Bereby Finance, SDV Cameroun, SDV Congo,
Member of the Boards of: BB Group, Centrages, Compagnie Internationale de Cultures, Liberian
Permanent representative for Bolloré Participations, member of the Board of: SDV Cameroun, SDV Congo
Ms. Christel Bories, aged 47, a graduate of HEC, worked for 7 years as a strategy consultant with Booz-Allen & Hamilton, followed by Corporate Value Associates. She joined Umicore (formerly Union Minière) in 1993 as Head of Strategy and Control and served on Management Committee. On April 1, 1995, Ms. Bories joined Pechiney Group as Head of
Member of: the Cercle de l’Industrie (Association of the Chairmen of the leading
Chairman and CEO of: Alcan Member of: the Cercle de l’Industrie (Association of the Chairmen of the leading
He has worked for the group throughout his career: after several years with the central body, he occupied management functions in three regional Banques Populaires banks – Banque Populaire du Centre, Banque Populaire Nord de Paris and
Chairman of the Board of Directors of: Turbo S.A. Member of the Board of: Banque Privée 1818 (up to 09.30.2010),
Permanent representative for Banque Populaire Rives de Paris to the Board of Directors of: i-BP (VicePresident )
Member of the Executive Board of: JC Decaux (Chief Financial and Administrative Offi cer) Member of the Board: Média Aéroports de Paris (SAS) (since 09.07.2011) Member of the Supervisory Board of: Médiakiosk (SAS) (since 11.30.2011)
Ministry for the Economy until 1984. He then held fi nancial posts in several companies: Head of France Telecom’s
Deputy Chief Executive Offi cer of Vivendi Universal’s Publishing division until 2001. Nicolas Duhamel moved to Groupe
Committee. Since July 31, 2009, he has been Chief Executive Offi cer (2) and a member of the Management Board of BPCE
Chief Financial Officer and Member of the Management Board of: BPCE Chief Operating Officer of: CE Holding Promotion Member of the Supervisory Board of: Fonds de Garanties des Dépôts (since March 29, 2010) Member of the Board of: BPCE IOM Permanent representative for BPCE on the Boards of: Natixis (1), Crédit Foncier de France, CE Holding Promotion
Permanent representative for BPCE on the Boards of: Natixis, Crédit Foncier de France, CE Holding
Permanent representative for BPCE on the Board of: Natixis (since 08/25/2009)
Permanent representative for CE Participations on the Board of: Crédit Foncier de France (since 10/15/2009)
Chairman of the Board of Directors of: BRED Banque Populaire Chairman of the Board of Directors of: Natixis Pramex International (until 02.23.2011), SPIG, Natixis Institutions Jour, Banque Internationale de Commerce-Bred, Bred Gestion, Cofi bred, NRJ Invest, Fondation d’entreprise de la Bred
Member of the Supervisory Board of: Prépar-Vie Permanent representative to BRED Banque Populaire to the Board of Directors of: BICEC, BCI (Banque Commerciale Internationale)
Vice-Chairman of the Board of Directors of: BP Participations (until 05.14.2009)
Member of the Supervisory Board of: Natixis Chairman of the Board of Directors of: BRED Banque Populaire, Natixis Pramex
Member of the Supervisory Board of: Prépar-Vie, LFI Permanent representative for BRED Banque Populaire to the Board of: BICEC, BCI Permanent representative for Cofibred to the Board of: LFI
Mr. Bernard Jeannin, aged 62 , Chief Executive Offi cer of Banque Populaire Bourgogne Franche-Comté He holds a master’s degree in Economic Science and joined Groupe Banque Populaire via Banque Populaire Franche-
Comté in 1972. After a period in the Loans Department and in operations (notably branch management), he joined senior management and successively held the posts of central director in charge of Human Resources, then commitments and lastly general control. In 1992, he was appointed Deputy Chief Executive Offi cer of Banque Populaire Bretagne-
Atlantique, in charge of development and subsidiaries. He subsequently became Chief Executive Offi cer of Banque
Mâconnais et de l’Ain in 2001. He was appointed Chief Executive Offi cer of Banque Populaire Bourgogne Franche-Comté
in 2002, at the time of its creation through the merger of Banque Populaire Bourgogne and Banque Populaire de Franche-
Chief Executive Officer of: Banque Populaire Bourgogne Franche-Comté Member of the Board of: IPMPE Permanent representative for Banque Populaire Bourgogne Franche-Comté to the Boards of Directors of: i-BP, BPCE Domaine, Banques Populaires’ corporate start-up organisation
Member of the Board of: Natixis Assurances, (until 09/20/2010) Natixis Lease
Permanent representative for Banque Populaire Bourgogne Franche-Comté to the Boards of Directors of: i-BP, BPCE Domaine (since 06/18/2010), Banques
Member of Supervisory Board (up to 04/30/2010) and member of the Board of: Natixis
Permanent representative for Banque Populaire Bourgogne Franche-Comté to the Board of Directors of: i-BP
Mr. Olivier Klein, aged 54 , graduated from ENSAE and holds an advanced degree in fi nance from HEC. He has had various responsibilities within BFCE and notably created and managed the investment bank specialized in M&A and private equity. He joined Groupe Caisse d’Epargne in 1998 and became Chairman of the Management Board of Caisse d’Epargne Ile-de-France Ouest in 2000. He was subsequently appointed Chairman of the Management Board of Caisse d’Epargne Rhône-Alpes in 2007. Olivier Klein is Chairman of the national retail banking commission for the Caisses d’Epargne banks. He is also a member of the Boards of Natixis and Coface and an associate professor of Economics and
Member of the Executive Board of: BPCE – Banque Commerciale and Assurances Member of the Board of: Natixis (1)
Member of the Supervisory Board of: Banque Palatine, GCE Capital, Socfi m Permanent representative for BPCE, member of the Board of: SAS Ecureuil Vie Développement, GCE Business Services (until 03.01.2011)
Chairman of the Board of Directors of: Rhone-Alpes PME Gestion (up to September 2010)
Chairman of the Executive Board of: Caisse d’Epargne Rhône Alpes (individual offi ce)
Member of the Supervisory Board of: Compagnie 1818 (up to 06.30.2009)
Permanent representative for CE Participations, member of the Supervisory Board of: la Compagnie des Alpes
Permanent representative for CERA, member of the Board of: la Fédération Nationale des Caisses d’Epargne
Permanent representative for CERA, member of the Board of: SALT Permanent representative for CERA, member of the Supervisory Board of: ARPEGE
Committee. He was Chairman of the Executive Board of Caisse d’Epargne Rhône Alpes from 07.01.2010 to 12.05.2011.
Chairman of the Executive Board of: Caisse d’Epargne et de Prévoyance de
Permanent representative for CERA to the Board of: Fédération Nationale des
Mr. Laurent Mignon, aged 48, has been Chief Executive Offi cer of Natixis since May 2009. A graduate of HEC and the Stanford Executive Program, for 10 years, Laurent Mignon has worked in various positions at Banque Indosuez, from the trading fl oor to corporate banking. In 1996, he joined Schroders Bank in London before going on to AGF in 1997 as CFO; he was appointed to the Executive Committee in 1998. He then worked on Investments in 2002 at Banque AGF, AGF Asset
Management, and AGF Immobilier, and then for the Life and Financial Services and Credit Insurance divisions in 2003.
Member of the Supervisory Board of: la Banque Postale Gestion Privée (up to 05.13.2009)
Permanent representative for Oddo et Cie: associate Manager of Oddo Corporate
Chairman of the Supervisory Board of: Oddo Corporate Finance, AGF Informatique,
Member of the Supervisory Board of: Oddo & Cie SCA Member of the Board of: W Finance, AGF Holding, GIE
Member of the Supervisory Board of: HLD Trustee of: the École Polytechnique Charitable Trust, Tigers Alliance Fund Management (Vietnam) (since 07.01.2010) Member of the advisory Board of: Ondra Partners
Member of the advisory Board of: Ondra Partners Offi ces below end on
Throughout his career, Didier Patault has served as Chairman of the Executive Board of Caisse d’Epargne des Pays du
Hainaut, Chairman of the Executive Board of Caisse d’Epargne des Pays de la Loire and Chairman and Chief Executive
Chairman of the Executive Board of: la Caisse d’Epargne et de Prévoyance de Bretagne Pays de Loire Chief Executive Officer of: SODERO Chairman of the Board of Directors of: SODERO Participations, S.A. des Marches de l’Ouest (SAMO) Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Bretagne – Pays de Loire Member of the Supervisory Board of: GCE Capital Member of the Board of: Compagnie de Financement Foncier – SCF, Natixis Cofi ciné, La Mancelle d’Habitation, CE Holding Promotion
Permanent representative for CEBPL, member of the Supervisory Board of: GCE Business Services, GCE
Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Bretagne – Pays de Loire
Chairman of the Board of Directors of: SODERO Participations, Mancelle d’Habitation, S.A. des
Chairman of the Supervisory Board of: SODERO Gestion, BATIROC Bretagne – Pays de
Director to Nicolas Sarkozy, the Minister of State for the Economy, Finance and Industry, in 2004.
Chief Executive Offi cer of La Banque Fédérale des Banques Populaires.
Directors of Natixis, Crédit Foncier de France and BPCE International et Outre-Mer, and Chairman of the French banking federation.
Chairman of the Executive Board of: BPCE Chairman of the Board of Directors of: Natixis (1), BPCE IOM, Crédit Foncier de France, Fondation des Caisses d’Epargne pour la Solidarité (until 03.09.2011)
Chairman of: CE Holding Promotion, Fédération Bancaire Française (until 09.01.2011) Chairman of the Supervisory Board of: Foncia Groupe (until July 2011) Vice-Chairman of the Board of Directors of: Crédit Immobilier et Hôtelier (Morocco) Member of the Board of: Natixis (1), BPCE IOM, BP Participations, Crédit Foncier de France, CNP Assurances (1), Sopassure, Crédit Immobilier et Hotelier-CIH (Morocco), Musée d’Orsay
Permanent representative for BPCE, Manager of: SNC Bankeo, SCI Ponant Plus
Chairman of the Executive Board of: BPCE Chairman of the Board of Directors of: Natixis Chief Executive Officer of: BP Participations, CE Participations (up to 08.05.2010)
Chairman of the Supervisory Board of: Foncia Groupe Vice-Chairman of the Board of Directors of: Crédit Immobilier et Hôtelier
Vice-Chairman of the Executive Committee of: Fédération Bancaire Française (since 07.08.2009)
Supervisory Boards of several French fi nancial and industrial groups. Since November 2009, he has been Chairman and
Chairman of: EDF Energy Holdings Ltd (since 03.08.2010) Member of the Supervisory Board of: Veolia Eau Member of: the High Commission for Transparency and Information on Safety in Nuclear Facilities, the National Commission for Sectors of Vital Importance, the Committee for Atomic Energy
INTERNATIONAL Chairman of the Board of Directors of: Transalpina di Energia Member of the Board of: FCC (1) Espagne and Edison Chairman of: EDF Energy Holdings Ltd
Chairman of the Board of Directors of: Veolia Environnement (starting 11.27.2009), Veolia Propreté, Veolia
Member of the Supervisory Board of: Lagardère (up to 11.16.2009), Veolia Eau (starting 12.30.2009), Boards A and B of
Member and Chairman of the Supervisory Board of: Dalkia France (up to 11.27.2009), EOLFI
Member of: the High Commission for Transparency and Information on Safety in Nuclear Facilities
Chairman of the Board of Directors of: Veolia Propreté, Veolia Transport, Veolia Water
Mr. Philippe Queuille, aged 55, graduated from the École Nationale Supérieure d’Arts et Métiers and joined Groupe Banque Populaire, via Banque Populaire du Sud-Ouest, in 1980. He was appointed Chief Executive Offi cer of Banque
Since April 7, Philippe Queuille has been BPCE’s Chief Executive Offi cer(2) in charge of operations and reorganization of the central body, and a member of the BPCE Management Board.
Chairman of the Board of Directors of: Albiréo, i-BP, GCE Paiements (up to 07.28.2010)
Permanent representative for BPCE, member of the Board of: Natixis Paiements (since 10.06.2010)
Chairman of the Board of Directors and Chief Executive Officer of: Albiréo, i-BP, GCE Paiements
Permanent representative for i-BP to the Board of Directors of: Natixis Altaïr IT Shared Services (S.A.),
Permanent representative for BP Participations (formerly BFBP) to the Board of Directors of: Natixis (up to 08.25.2009)
Permanent representative for BPCE, member of the Supervisory Board of (Chairman): GCE Business Services (since 09.24.2009),
Permanent representative for BFBP to the Supervisory Board of: Natixis Permanent representative for BFBP to the Board of Directors of: Partecis, Crédit Commercial du Sud-Ouest
Mr. Philippe Sueur, aged 65, is Vice-Chairman of the Caisse d’Epargne Île-de-France Steering and Supervisory Board. Mr. Sueur is a university law professor and has held various elected positions in the Paris region.
Member of the Supervisory Board (up to 04.30.2010) and member of the Board of: Natixis
Chairman and Chief Executive Officer of: Semavo (Société d’Économie Mixte d’Aménagement du Val d’Oise)
3 CORPORATE GOVERNANCE Role and operating rules of the corporate bodies 3.3 Role and operating rules of the corporate bodies
The term of offi ce for Natixis directors is set at six years (and not four years as recommended by the AFEP-MEDEF C ode). This term is in line with provisions set out in the Natixis bylaws and is consistent with the terms of offi ce in place within Groupe BPCE.
Since April 30, 2009, the Board of Directors has been chaired by François Pérol, Chairman of the BPCE Executive Board.
• Changes made to the Board of Directors in 2011: – on February 22, 2011, following the resignation of JeanCharles Naouri on December 31, 2010, Ms. Christel Bories was co-opted as Board member for the remainder of the term of offi ce, i.e. until the Natixis General Shareholders’ Meeting called to approve the fi nancial statements for 2014. This decision was ratifi ed by the Combined General Shareholders’ Meeting of May 26, 2011.
• Changes made to the Board of Directors since January, 1, 2012: – on January, 10, 2012, Jean-Bernard Mateu resigned as Director of Natixis.
In order to comply with the AFEP-MEDEF recommendation that terms of offi ce are staggered so that not all are renewed at the same time, and so that the members of the Board of Directors are replaced in a harmonious nature, Natixis decided, following the resignation during the fi rst quarter of 2012 of three members of the Board of Directors, to wait until the Combined Shareholders’ Meeting on May 29, 2012 to appoint their replacements. Henceforth, the terms of offi ce of three members of the Board of Directors will be staggered compared to the other members.
In accordance with the law and the bylaws, the Board of Directors: • defines the strategy governing the Company’s activities and oversees its implementation. Within the limits of the Company’s corporate purpose and the powers expressly granted by law or its bylaws to the General Shareholders’ Meetings, the Board concerns itself with all matters affecting the Company’s performance and governs by virtue of its deliberations. The Board of Directors shall perform the inspections and verifications it deems appropriate; • defines the Company’s Executive Management policy, it being specified that the Board may only deliberate on this matter when it features on the agenda sent out at least 15 days prior to the Board Meeting and when at least two thirds of the Board members are present or represented; • may appoint a Chief Executive Officer from among the Board members or otherwise, whom it may dismiss at any time; • may, at the proposal of the Chief Executive Officer, appoint one to five individuals as Deputy Chief Executive Officers whose role is to assist the Chief Executive Officer; • convenes all General Shareholders’ Meetings, sets the agenda and oversees the execution of all decisions taken; • may, at the proposal of the Chairman, decide to set up its own Committees to deliberate on those issues submitted for examination by the Board itself or its Chairman. It determines the structure and powers of these Committees, which conduct their activities under its responsibility.
In accordance with the law and the bylaws, the Chairman convenes and chairs the Board and organizes and manages its work. He chairs General Shareholders’ Meetings.
The Chairman of the Board or the Chief Executive Offi cer are required to provide each Board member with all of the documents and information needed to carry out their duties.
Amongst these Internal Rules, which were last amended on December 15, 2011, particular attention should be drawn to the following provisions: • circumstances requiring the Board of Directors’ prior authorization: – the extension of Natixis’ activities to a new core business not currently carried out by the Company; – the appointment or dismissal of the CEO or, where applicable, one or more Deputy CEOs; – any acquisition or increase in shareholdings, as well as any investments or divestments (including the transfer of cooperative investment certifi cates issued by the Caisses d’Epargne or Banques Populaires) or the formation of joint ventures by Natixis or any of its main subsidiaries, involving an amount in excess of €100 million in the event that the group’s structure is modifi ed; – any asset transfers, mergers or demergers in which Natixis is involved.
Accordingly, an independent member of the Board of Directors may not: – be an employee or a corporate offi cer of the Company or Group, or an employee or Board member of a shareholder with a controlling interest, either on its own or in concert, in the Company (as per Article L.233-3 of the French Commercial Code) or in a Company consolidated by it, or have served in such a capacity during the previous fi ve years; – be a corporate offi cer of a company in which the Company holds a directorship either directly or indirectly, or in which a designated employee of the Company or a corporate offi cer of the Company holds a directorship; – be a major customer, supplier, or corporate or investment banker to the Company or the Group, or derive a signifi cant portion of its business from the Company or its Group;
The independent status of each member of the Board of Directors is examined by the Appointments and Compensation Committee (the composition and role of which are described in greater detail below), which prepares a report for the Board.
The Board of Directors held a total of seven meetings in 2011. The attendance rate was 86% for the year as a whole, compared with 78% in 2010.
Throughout the year, the Board also examined the reports on the work of the Audit and the Appointments and Compensation Committees.
All draft press releases were examined and approved by the Board at each meeting held to discuss the fi nancial results of the Company and Group.
For the 2010 fi nancial year, Natixis hired the services of the Spencer Stuart consulting fi rm. For the 2011 fi nancial year, Natixis carried out an internal assessment, based on individual interviews and a questionnaire.
The main aims of the assessment were to: 1. Take stock of the organization, running and composition of the Board; 2. Ensure that the main questions are correctly prepared and the subjects debated; 3. Judge the relationship between members of the Board and Executive Management; 4. Appraise the work of the specialized Committees; 5. Measure the general performance of the Board.
On the whole, the assessment of the Board’s work in 2011 was positive, with more than 83% of the Board members indicating that the Board’s overall performance had improved in comparison with fi scal year 2010. 75% of the Board members found this overall performance to be satisfactory or very satisfactory (versus 55% in 2010). Finally, 25% found Natixis’ Board of Directors to be more effective than the other boards on which they were seated, while 66% found it equally effective.
Furthermore, while the Board members feel they are able to ask the questions they want and are satisfi ed with the answers given, they nevertheless believe that more time should be reserved for deliberation.
With respect to specialized committees, the Board members were satisfi ed with their role, their composition and the frequency of their meetings. The Strategy Committee was deemed useful, or very useful, although after the fi rst meeting the Committee members expressed an interest in more open-ended discussons.
During 2011, the Audit Committee comprised fi ve members: Mr. Oppetit, Chairman, Ms. Debroux and Messrs. Criton, Duhamel and Klein.
Two thirds of the Audit Committee are not independent members, as recommended by the AFEP-MEDEF Code , in order to represent the different components of the Company’s main shareholders (members from the Caisses d’Epargne and Banques Populaires).
The Chairman and the members of the Audit Committee have extensive accounting and fi nancial expertise gained over the course of their professional careers.
Natixis’ Audit Committee has internal rules specifying its powers and its operating procedures, the latest version of which was approved by the Board of Directors on February 22, 2011.
On the subject of internal control and compliance, the Committee received a presentation of risk monitoring and internal control reports submitted to the ACP. It also reviewed the activity and results of the Natixis compliance and internal control functions, as well as the work program of Natixis’ Internal Audit.
Three of the six members are independent (Ms. Bories and Messrs. Bolloré and Proglio).
Changes made to the Committee in 2011: • on February 22, 2011, following the resignation of Mr. Oppetit from his function within the Appointments and Compensation Committee, the Board of Directors appointed Ms. Bories.
The Appointments and Compensation Committee is responsible for submitting proposals to the Company’s Board of Directors on the following issues: Compensation for corporate officers
Since the fi nal quarter of 2009, the Committee has also been responsible for an annual review of Natixis’ compensation policy, in particular for market professionals, and for checking, on the basis of an Executive Management report, that said policy complies with Chapter IV, Section VI of CRBF rule 97-02 and is in line with the provisions set out by the French Financial Stability Board and the professional standards to which the Company adheres.
The Committee is also in charge of selections and appointments. The Committee gives an opinion and, upon request from the Board, makes proposals and recommendations to the Board on the appointment of a CEO and, when appropriate, one or more Deputy CEOs or Board members.
The Appointments and Compensation Committee met four times in 2011 to give an opinion on: • the calculation of the CEO’s base and variable compensation for 2011 and 2012; • the calculation of the CEO’s compensation for early termination of service; • the compensation of the Chairman of the Board of Directors for 2012; • Board members’ fees at the end of each quarter in 2011; • compensation for market professionals for 2010 and 2011; • the implementation of the CRD 3 Directive - concerning material risk takers (1); • the Corporate and Investment Banking (CIB) and GAPC’s policy regarding variable compensation; • the compensation of control functions; • the strategy and organization of Asset Management in the US and the consequences on the compensation structures; • the annual review of the classification of the status of Board members as independent members; (1) Employees whose professional activities have a signifi cant impact on the Group’s risk profi le.
The attendance rate was 92% for the year as a whole, compared with 88% in 2010.
The Committee is chaired by Ms. Laurence Debroux, an independent Board member.
The scope of responsibility of the Strategic Committee relates to exploring in depth the global strategy of Natixis and its business lines, and sharing the same vision as Executive Management for Groupe BPCE.
The Chief Executive Offi cer may delegate a portion of his powers to any corporate offi cer of his choosing, with or without the option of substituting one for another. In this respect, Natixis revised all of the provisions governing the delegation of authority and signature authority in 2010 and 2011.
On the Chief Executive Offi cer’s proposal, the Board of Directors may appoint one to fi ve Deputy Chief Executive Offi cers from among the Board members or otherwise to assist the Chief Executive Offi cer.
Natixis’ Senior Management Committee closely surveyed changes in the economic and regulatory climate within the banking and insurance sectors and their possible impact on the Company’s respective businesses. In particular, the Board monitored changes related to European sovereign debt and steered the management of Natixis’ exposure in this fi eld. The Senior Management Committee also oversaw the development of existing measures to safeguard Natixis’ growth in a time of heightened liquidity and solvency constraints. The Committee launched and validated projects to reinforce Natixis’ fi nancial structure (issue of P3CI) and to diversify its sources of fi nancing (creation of a Pfandbriefbank in Germany).
The Senior Management Committee continued the implementation and monitoring of the New Deal strategic plan, downsizing GAPC (workout portfolio management) and enhancing commercial cooperation with Groupe BPCE’s networks as part of the “Groupe Ensemble” project. It also paid particular attention to the strengthening of the common social standards within Natixis. The Senior Management Committee also oversaw the operational execution of these priorities.
The Senior Management Committee also supervised Natixis’ business restructuring projects. The Committee reviewed and validated the Group’s strategic transactions prior to their submittal to the Board of Directors, including in particular: Natixis Global Asset Management’s acquisition of a majority stake in Darius Capital Partners (hedge fund analysts), the strategic partnership between Natixis Global Asset Management and the Indian fi nancial group IDFC (acquisition of a 25% stake in IDFC Asset Management Company), the disposal of Natixis’ proprietary private equity business in Brazil, and the disposal of a controlling stake in software solutions editor SLIB to BNPP. The Senior Management Committee regularly examined the Company’s business development and results during its meetings throughout the year. It reviewed the half-yearly and quarterly fi nancial statements before they were presented to the Board of Directors and was involved in the publication of the Company’s fi nancial communications.
Meetings take place either at the head offi ce or at another location specifi ed in the notice.
Shareholder meetings may take the form of Ordinary, Extraordinary or Combined Ordinary and Extraordinary Meetings depending on the topics on the agenda.
Those shareholders that are able to justify their status with an accounting entry (pursuant to paragraph seven of Article L.228-1 of the French Commercial Code) in their name or in the name of an intermediary acting on their behalf, either in the registered share accounts held by the Company or in the bearer share accounts held by their authorized intermediaries, no later than three working days before the date of the meeting (by midnight Paris local time hereinafter referred to as D-3), may attend the meetings.
Any individual or legal entity that owns, directly or indirectly, alone or jointly, a 1% share of the voting rights, or any multiple of this percentage, must notify the Company, by registered letter, of the number of voting rights that they possess. This notice must be made within a period of 15 days following each acquisition or sale of this fraction.
3 CORPORATE GOVERNANCE Policies and rules for determining compensation and benefi ts 3.4 Policies and rules for determining compensation and benefits of all kinds paid to members of the corporate bodies
The AFEP- MEDEF C ode is available for consultation at the Company’s head offi ce and on the Natixis website.
The members of the Board of Directors of Natixis received attendance fees with respect to 2011 under the terms and conditions stipulated below.
Attendance fees are granted according to the following rules, provided that Natixis’ results are positive: • members of the Board of Directors: – fi xed portion: €10,000 per year, – variable portion: €2,000 per meeting, up to a maximum of 5 meetings, i.e. €20,000 maximum in total; • Specialized Committee members: – Audit Committee: Chairman: €20,000,
Members of the Audit Committee: – fixed portion: €5,000, – variable portion: €1,000 per meeting, up to a maximum of 5 meetings,
Furthermore, in accordance with the rules applicable within Groupe BPCE, the portion of attendance fees going to BPCE directors (including that of the Chairman) is granted and paid to BPCE and not to the directors.
After each quarter in 2011, the Appointments and Compensation Committee and the Board of Directors assessed whether or not there were grounds for paying attendance fees given the results for the period in question.
The fi xed gross annual compensation of Laurent Mignon in relation to his duties as CEO of Natixis was €800,000 for 2011.
With regard to calculation of the variable compensation paid to the CEO for 2011, the Board of Directors, based on the opinion of the Compensation Committee, approved the proposal that, for 2011, said compensation should represent 83.7% of his fi xed compensation.
For 2011, Laurent Mignon benefi ted from a Company car valued at €5,1 80 gross.
With regard to calculation of severance payments for the duties of CEO, the Board of Directors, on the advice of the Compensation Committee, authorised during its Meeting of February 22, 2011 the commitment establishing the terms and conditions of the compensation due or liable to be due to Laurent Mignon in the event of him ceasing his functions as Chief Executive Offi cer. This commitment was also approved by the Combined General Shareholders’ Meeting of May 26, 2011 (Cf. sixth resolution).
❚ TABLE 1 Summary of the compensation, stock options and shares granted to each executive director 2011 Fiscal year 2010 Fiscal year
Value of performance shares granted during the fi scal year n/a n/a
❚ TABLE 2 Summary table of the compensation of each executive corporate officer In the tables below: • the expression “amounts due” corresponds to compensation and benefits allocated to corporate officers within the context of their duties over the year irrespective of the payment date; • the expression “amounts paid” corresponds to compensation and benefits actually paid to corporate officers within the context of their duties over the year irrespective of the date of allocation.
Ms. Christelle Bories (appointed to Natixis Board on February 22, 2011)
In respect of BPCE and its subsidiaries 27,000 25,000 27,500 27,250
In respect of BPCE and its subsidiaries 4,750 4,750 6,097.96 6,097.96
3 CORPORATE GOVERNANCE Policies and rules for determining compensation and benefi ts
Table showing director’s fees and other compensation received by non-executive corporate officers
In respect of BPCE and its subsidiaries 26,443.72 24,943.72 26,443.72 25,443.72
In respect of BPCE and its subsidiaries 19,000 17,000 23,000 26,341.67
In respect of BPCE and its subsidiaries 21,176.80 19,176.80 26,376.80 29,543.47
3CORPORATE GOVERNANCE Policies and rules for determining compensation and benefi ts
(3) Variable compensation in respect of fi scal year 2010, of which €316,800 (30%) paid in cash in 2011 (4) and the balance deferred (70%) over three years in three equal shares of €246,400. For 2012, the fi nal amount paid will be €224,851 (after application of the indexing factor). (5) Variable compensation in respect of fi scal year 2011, of which €213,675 (40%) paid in cash in 2011 and the balance deferred (60%) over three years in equal shares of €106.838.
(6) Variable compensation in respect of fi scal year 2010, of which €144,000 (50%) paid in cash in 2011 (8) and the balance deferred (50%) over three years in equal shares of €48,000. For 2012, the fi nal amount paid will be €43,802 (after application of the indexing factor). (7) Variable compensation in respect of fi scal year 2009 and of his previous offi ces at BFBP. (8) Equals 50% of the 2010 variable compensation (€144,000) and in respect of his previous offi ces at BFBP (€24,000). (9) Variable compensation in respect of fi scal year 2011, of which €129,500 (50%) paid in cash in 2012 and the balance deferred (50%) over three years in equal shares of €43,167.
❚ TABLE 5 Subscription or purchase options exercised during the period by each executive corporate officer
Name of executive corporate offi cer No. and date of plan
❚ TABLE 7 Performance shares that became available-for-sale during the period for each executive corporate officer
Performance shares that became availablefor -sale during the period for each executive corporate offi cer No. and date of plan
❚ TABLE 8 Group (Natixis, BPCE, Groupe Caisse d’Epargne, Groupe Banque Populaire). Record of purchase or subscription options allocated.
Information on purchase and subscription options 2005 Plan 2007 Plan 2008 Plan
Number of shares subscribed as at Dec. 31, 2011 21,560 0 0
(a) In consideration of the individual waivers of stock options granted in 2008, given the material losses recorded over the 2008 fi scal year. (b) The subscription price corresponds to the average price of Natixis shares in the 20 trading days prior to the date of the Executive Board’s decision.
❚ TABLE 9 Subscription or purchase options allocated to the top ten non-executive employees and options exercised by them
Total number of options allocated/shares subscribed or bought Weighted average price Plan
3CORPORATE GOVERNANCE Potential confl icts of interest 3.5 Potential conflicts of interest 3.5.1 COMPETENCE AND INTEGRITY OF DIRECTORS
Members of the Natixis Board of Directors include Natixis’ main shareholder BPCE, as well as salaried employees of Groupe BPCE. Moreover, Natixis maintains business relationships with its shareholder and Board member BPCE. Natixis considers that this situation does not constitute a confl ict of interest.
3 CORPORATE GOVERNANCE Chairman’s report on the internal control procedures 3.6 Chairman’s report on the internal control procedures
• for permanent and periodic control, Natixis applies the standards defined in Groupe BPCE’s control function charters; • Natixis complies with recommendations from international organizations dealing with prudential regulation issues for international banks, the most important being the Basel Committee.
These controls are carried out by operational or functional departments under managerial supervision. These departments are responsible for: • checking transaction processing procedures are adhered to and compliant; • justifying account balances for active accounts relating to the transactions they execute.
• The Compliance Department’s main responsibilities are to: – ensure legal and regulatory watch relating to compliance, in conjunction with the legal function; – defi ne standards and methods for assessing compliance, control and reporting risks. These standards are devised in order to ensure market integrity and the primacy of customer interest, and to prevent confl icts of interest (including independence in third-party account management) as well as to counter money laundering and terrorist fi nancing; – ensure the execution of permanent second-level controls (including controlling compliance with standards and the application of procedures); – establish and maintain a compliance risk map;
– implement a system of cooperation and links with the Risk Department, concerning the observation of operational defects that may entail compliance risks and measures to rectify them; – issue a written compliance opinion regarding all new activities, structures, processes, products and transactions, as well as signifi cant changes to existing products. This opinion is accompanied by the right of blockage or appeal, under the New Product Committees framework set up within Natixis’ business lines and its subsidiaries, or centrally for products common to several business lines; – intervene in an advisory role in order to support activities with a view to ensuring security and compliance with standards; – contribute to employee training in conjunction with the Human Resources Department; – manage IT systems projects dedicated to monitoring and managing compliance risks on a consolidated basis at Natixis group level; – centralize logging and reporting of malfunctions resulting in non-compliance at subsidiary or business-line level, with a view to their consolidation by Natixis; – centralize logging and reporting of possible malfunctions as set out in Article 11-2 of amended rule 97-02, at subsidiary or business-line level, with a view to their consolidation by the Natixis group and their communication to BPCE; and defi ning the conditions for exercising the alert mechanism provided for by this article whilst respecting the confi dentiality of declaring parties; – prepare regular summary reports, notably for Natixis’ and BPCE Executive Management; – oversee the consistency and effectiveness of permanent controls for compliance risk.
As part of a broader Compliance function, Natixis’ Compliance Department provides direction and impetus to Compliance managers in subsidiaries and branches, this being done through a strong functional link of a hierarchical nature. Compliance managers in subsidiaries and branches report to the executive body or, exceptionally, if the size of the entity warrants it, to a permanent control manager who, in turn, reports to the executive body, and to Natixis’ Chief Compliance Officer through a strong functional link of a hierarchical nature.
This strong functional link of a hierarchical nature expresses itself through: – Natixis’ Chief Compliance Offi cer being required to issue prior approval to the secondment, appointment or removal of a subsidiary’s Compliance manager; – Natixis’ Chief Compliance Offi cer participating in annual performance and career advancement reviews; – the obligation to send information to Natixis’ Chief Compliance Offi cer.
A special effort designed to raise awareness concerning rules of good conduct was rolled out in 2011 and 1,300 employees, including all major stakeholders, received classroom training. In addition, a special e-learning module on personal behavior and ethics was created for roll-out in early 2012.
The monitoring of personal transactions by employees resulted in several reminders and one-on-one meetings on the arrangement in force. Oversight of market professionals identifi ed as “material risk takers” was strengthened.
The mapping of potential confl icts of interest was updated to account for changes in the organization of operating activities in 2011. This work and new advances in IT have strengthened the prevention of confl icts of interest and the improper circulation of inside information.
Controls performed by the Compliance Department may take three forms: • controls based on indicators arising from first-level controls; • controls based on warnings issued by automated control systems, especially under the framework of anti-money laundering and market abuse detection plans; • controls through checks on accounting documents and, if appropriate, on-site checks, so as to ensure that automated controls are relevant. They can also be used to check the application of more qualitative rules (knowledge and classification of the customer, application of Chinese walls, management of conflicts of interest, etc.).
The “First-Level Internal Control” Project, launched in late 2011, was designed to strengthen the fi rst-level control system and its monitoring. Its roll-out, which concerns all of the Natixis consolidation scope, is being carried out in waves of entities or business lines. By late December 2011, deployment had taken place in seven entities and was in progress in four. Control reporting assessments have been issued since June.
The Compliance function made detailed maps of compliance risk by business line and entity. These maps are a supplement to the comprehensive risk mapping conducted in 2010. Nearly 80 generic risks were identifi ed in addition to specifi c risks to the business lines.
Natixis’ Head of ITSS and BC is in charge of the IT Systems Security and Business Continuity function, which includes the ITSS-BC Department (reporting to the Compliance Department) and all persons charged with implementing and controlling IT System Security and Business Continuity locally. These persons include: • the Head of ITSS and the Head of BCP who report to Natixis’ subsidiaries or business lines and are in charge of applying security policy locally according to the context in the sector concerned; • local correspondents within the business lines (notably Business Continuity Plan correspondents and logical security correspondents). They are responsible for relaying security policy locally and delivering advice and assistance on the subject within their area of responsibility; • correspondents within IT project management teams responsible for implementing and maintaining security mechanisms.
Governance of the IT Systems Security and Business Continuity function is ensured by the following Committees: • a strategic ITSS Committee, which is Natixis’ highest-level decision-making body in the field of IT security and business continuity. This Committee is chaired by a member of the Senior Management Committee and is responsible for approving the annual security plan prepared for Natixis. All business lines are featured in it; • an IT Systems Security Coordination Committee that regularly brings together the various participants involved in security, and especially the Heads of ITSS within subsidiaries. It is responsible for monitoring the annual security plan, coordinating and steering all the function’s actions and pooling security projects; • a Plenary Business Continuity Committee that regularly brings together all persons involved in business continuity to ensure that continuity actions are monitored; • Business Line or Subsidiary Security Committees that steer IT security and business continuity actions for their subsidiary or business line.
A plan covering more than 200 controls classifi ed according to the COBIT and ISO 27002 standards and organized by business line has been developed and implemented. It includes intrusion tests, vulnerability tests and internal investigations, as well as permanent IT monitoring (correlation of security events, Internet monitoring and security breach monitoring).
Fundamental actions have been taken to reinforce and control logical security. These actions involve: • control of access to company information and compliance with the different regulations on “information barriers”; • protecting Natixis against information leaks (laptop PC encryption, protecting sensitive USB ports, etc...). The area will be subject to further development in 2012 throughout the company; • the consolidation of a security data warehouse that performs multi-database and multi-environment queries on in-house user authorizations and enables wider control of authorizations; • IT infrastructure security, notably rolling out an “electronic safe” software package to secure high-privilege administrators’ passwords.
In 2011, ITSS-BC continued its IT project control program. Mandatory controls were instituted to verify the smooth integration of security into IT applications. Project management methodology now includes a “Security Criticality Checklist” to identify information system security and business continuity needs before a project starts up.
The Internal Audit Department reports directly to Natixis’ Chief Executive Offi cer. It has strong functional ties with Groupe BPCE’s General Inspection, in accordance with the principles approved by the CECEI in its decision on November 15, 2007 and the BPCE General Inspection’s charter. Also in accordance with these principles, the Internal Audit Department leads a global audit function.
The Internal Audit Department conducts audit assignments across the whole of Natixis (parent company, subsidiaries and branches) and covers all classes of risk arising from the business lines involved. It has full and unrestricted access to all information, confi dential or otherwise. Its fi eld of investigation encompasses all of Natixis’ operational activities (including run-off activities under the GAPC framework, for further information, please refer to Chapter 1 “GAPC”), its functional activities – notably including entities in charge of permanent control assignments – and its outsourced activities. In all business lines, it carries out in-depth analyses of operations, as well as the “front-to-back” processes by which operations are carried out. These analyses lead to an evaluation of existing control points in processes audited as well as an assessment of risks arising from the activities concerned. They lead to recommendations to strengthen the comprehensiveness and robustness of the mechanisms for controlling or managing the risks audited. These recommendations are ranked by order of priority.
Natixis’ Internal Audit is responsible for following up on progress in implementing its recommendations. It conducts follow-up audits and checks, making use of recurrent work in the area carried out by permanent control teams where necessary.
In addition, efforts were made to continue consolidating the Natixis’ “Audit” function in three main directions: • measures were taken to strengthen Audit function governance mechanisms with enhanced standards and procedures rolled out to local auditing departments, in particular those existing in foreign Natixis subsidiaries; • in application of the principles adopted when the Groupe BPCE “Audit” function was put together, Natixis’ Internal Audit continued the work started to consolidate its methods with those of the BPCE General Inspection; • in 2011, General Inspection conducted a major effort to refine its risk assessment methods and to evaluate its missions in order to increase the relevance of its interventions, better meet regulators’ requirements on streamlining auditing efforts and to ensure the alignment of its methodology with that of BPCE’s General Inspection; • finally, in 2011, as during the last two reporting periods, the treatment of auditing recommendations were given special attention. Efforts conducted in 2010 on the follow-up of priority recommendations were actively continued. General Inspection provided assistance in strengthening monitoring mechanisms within Natixis’ business lines with the active cooperation of BPCE’s General Inspection. To this end, nine meetings were held during the year. These meetings provided a forum for addressing issues related to auditing programs and practices (Internal Audit Coordination Committee), as well as topics associated with risk assessment and mission evaluation (the Risk Assessment Committee instituted in 2011).
It may also meet with operational managers when necessary. Four CFCC meetings were held in 2011.
The Natixis Risk Department belongs to the BPCE mechanism organized into functions, with the relationship between the shareholding central body and its subsidiary Natixis being governed by the Group Risk Charter.
Natixis’ highest-level risk governance authority is the Natixis Global Risk Committee, which defi nes the key elements of risk policy, analyzes the main risks and validates the main risk standards and methods implemented.
• define methods and standards that make it possible to measure risks and approve risk taking (models, reporting, limits, delegation systems) in compliance with Groupe BPCE’s standards; • provide a second opinion on business-line cases based on workflow and Committees, for which the Risk Department undertakes preparation and supervision and acts as secretary; • set out supervision and risk monitoring procedures at the individual and consolidated level; • produce risk reports for the Senior Management Committee, the business lines, BPCE and regulatory authorities.
Credit decisions are made either through mandates granted jointly to business lines and certain members of the Risk Department (“workfl ow” process) or by the relevant Credit Committees, following an independent analytical process. These mandates are set out formally and granted individually by the Chief Executive Offi cer or by any person whom he authorizes to that end. They are sized according to the counterparty’s category and internal credit rating, and the nature and duration of the commitment.
The credit risk management system has been based on the advanced internal ratings based approach since 2010.
To date, two types of stress tests have been developed: • macro-economic stress tests according to scenarios drawn up by Natixis’ economic research team; • stress tests specific to certain Natixis business lines.
Cases showing a deterioration in the level of risk are identifi ed as they arise and reported immediately to the Risk Department
The Natixis Watch List and Provisions Committee meets once a quarter and covers all the Bank’s business lines. It reviews all doubtful loans under watch that may give rise to provisions or adjustments to existing provisions, and decides on the level of provision necessary.
The charter defi nes: • the principles and system for managing Natixis’ market risks; • the conditions under which market risk limits are examined, allocated and monitored; • the respective roles of the business-line front offices, the Market Risk Department and the Natixis Market Risk Committee.
Specifi c reports by activity are sent to the traders and managers concerned on a daily basis. A global market risk report is also distributed daily to Executive Management, BPCE and front offi ce managers. Finally, specifi c reports covering the scope of BPCE’s guarantee are sent to BPCE daily.
Only one backtesting exception was observed in 2011 relative to regulations. The loss responsible for this exception exceeding VaR by more than 20% was reported to the Audit Committee and the Prudential Supervision Authority in connection with the alert thresholds defi ned under Regulation No. 97-02 (Articles 17 ter and 38).
In connection with changes in regulatory requirements, Natixis instituted a Stress VaR (SVaR) calculated based on a fi xed economic model spanning a period of one year and including a representative crisis for the bank’s portfolio as well as an IRC (Incremental Risk Charge) calculation to make provision for migration risk and a market securities default. The regulator has authorized Natixis to use these new indicators to determine capital requirements at December 31, 2011.
The structural balance sheet risks of Natixis (the parent company) are managed and monitored under the authority of the Asset/ Liability Management Committee (the “ALM Committee”), chaired by the Chief Executive Offi cer, and attended by members of the Senior Management Committee in charge of Finance and Risks and Corporate & Investment Banking, the Head of Risk, the head of the single treasury and central bank collateral management pool, the Head of Financial Management and BPCE’s Head of Asset/Liability Management. This umbrella Committee meets every two months and its main responsibilities are to: • validate the main asset/liability management rules (including those relating to internal liquidity pricing), agreements, indicators and limits (including liquidity budgets allocated to the business lines as part of budgetary procedure) to monitor, manage and supervise structural balance sheet risks, all within the standard ALM framework set up by BPCE; • validate the overall funding policy; • monitor the main balance sheet aggregates and changes affecting them; • monitor structural balance sheet risks and compliance with limits.
The ALM Committee is responsible for monitoring across the following scope: • the banking portfolios of Natixis S.A. and of its credit subsidiaries for overall interest-rate risk; • Natixis’ entire scope of consolidation excluding insurance subsidiaries that do not present intrinsic liquidity risks and which are specifically monitored and managed in respect of liquidity risk; • Natixis’ entire scope of consolidation for structural foreign exchange risk.
Natixis’ ALM organization is as follows: • Natixis S.A.’s Treasury aims to refinance all the business lines within the rules and limits set by the ALM Committee; • subsidiary and non-subsidiary activities without ALM risk management mandates from the ALM Committee transfer management of their risk to the Treasury through individual matching contracts. The activities concerned primarily correspond to the Corporate and Investment Banking division’s financing activities; • subsidiary and non-subsidiary activities that possess ALM risk management mandates match their net needs with Treasury subject to rules and limits set by the ALM Committee. The activities concerned include capital markets and specialized credit subsidiaries.
All of Natixis’ ALM indicators are sent to BPCE. Natixis’ Risk and Finance Department’s ALM system is interfaced with BPCE’s so that it can monitor ALM risks across the entire Group.
The Natixis Market Risks Department is responsible for secondlevel monitoring of ALM indicators produced by the Financial division (mismatching ratios, liquidity stress tests, etc.) and third-level control of the indicators established by the liquidity management team (1- to 60-day static liquidity gaps); second-level control falls under the remit of the Financial division.
The very large majority of Natixis’ exposure is in euros and US dollars and uses a fl oating rate; as a result, Natixis’ overall interestrate risk is essentially linear and concerns mismatching positions between contractual operations.
Liquidity risk is controlled, managed and monitored in the following manner: • management of each business line’s liquidity consumption: to manage balance sheet growth, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Consumption is monitored weekly for CIB business lines and monthly for all other business lines; • supervision of short-term mismatching: this is measured on the basis of liquidity gaps. In order to manage estimated forecast short-term liquidity requirements, this indicator is produced daily for a three-month horizon in intervals of one day, based on all the parent company’s contractual transactions. It is supervised by two permanent limits approved by the ALM Committee and monitored daily; one on overnight market exposure and the other on the two-month static liquidity gap; • supervision of medium-term mismatching: this is measured on the basis of liquidity gaps and asset-liability hedging ratios. These ratios include minimum coverage ratios approved by the
Natixis’ structural forex risk for the most part concerns structural positions on the US dollar refl ecting the presence of foreign branches and subsidiaries funded in this currency within Natixis’ scope of consolidation. Given the existence of weighted risks denominated in currencies other than the euro (in particular the US dollar), the ALM Committee has approved currency purchases to fund long-term investments in order to immunize the bank’s capital adequacy ratio against changes in the euro-US dollar exchange rate.
The duties and organization related to operational risk are described in the operational risk policies and procedures validated by the Natixis Operational Risk Committee in May 2011. This document defi nes:
The duties and organization related to operational risk are described in: • the procedures for detecting, analyzing and measuring operational risk: – recording incidents, – investigating serious incidents, – risk mapping, – environmental indicators and variables; • operational risk control procedures: – drawing up and monitoring action plans, – risk limiting policies in the form of caps on some activities.
The Operational Risk function is deployed globally on a matrixtype basis according to the two axes of activity and location.
Business-line Operational Risk Committees are offshoots of Natixis’ Operational Risk Committee. They closely manage each business line’s operational risk exposure. The Committees meet at least quarterly and are chaired by the head of the relevant business line with the participation of the Operational Risk Department, which acts as Committee secretary.
The reliability of this process is based on the following core principles: • definition and dissemination of the accounting principles applicable to Natixis companies, including the analysis and interpretation of new IFRS accounting regulations published during the period; • use of the direct consolidation method, broadly rolled out throughout the group, allowing for the analysis and control of the consolidation reports of each consolidated company via a formal review process; • preparation of consolidated financial statements on a quarterly basis. This allows for greater control over financial reporting, thus anticipating significant transactions over the fiscal year; • reporting and reconciliation of intra-group transactions at M-1 and then at M, M being the reporting month, thus increasing the number of reconciliations and contributing to the preparation of quarterly statements; • use of an automated control process for individual information provided by the consolidated entities through the use of consolidation reports that incorporate accuracy and consistency controls, which must be complied with before the data can be transmitted; • individual analysis of all entries impacting consolidated shareholders’ equity and the preparation of a tax proof, including proof of deferred taxes, for each consolidated entity, thus contributing to the final calculation of consolidated shareholders’ equity; • an audit trail justifying all accounting entries published in the financial statements and their notes based on the individual accounts of each of the consolidated entities and consolidation entries; • data archiving and security procedures; • provision of support and appropriate training to the accounting teams of those consolidated entities where the consolidation system is rolled out, thus allowing for best practices to be spread within the Company.
Natixis has a system enabling it to: • produce a local IFRS-compliant reporting package, including, for foreign entities, a reporting period foreign currency conversion feature; • guarantee the consistency of data relating to the banking and insurance consolidation scopes; • benefit from the transparency of Natixis sub-group reports; • offer retrieval features that can be used to input data into the various reports; • enable BPCE to access Natixis data through dedicated interfaces; • secure the integration process for consolidation reports received from international entities through the implementation of local first-level controls followed by centralized second-level controls.
In 2011, Natixis introduced a version enhancement of the system , which has enabled it to reinforce the data integration process as well as the process of controlling and tracing consolidation restatements.
Apart from the consolidation tool, Natixis has continued the effort, begun in 2009, to reduce publication timeframes.
As part of the regulatory process introduced by the French Prudential Supervisory Authority (CRBF rule) concerning the internal control systems of credit institutions, Natixis’ Internal Audit Department uses the results of the periodic audits it performs to assess internal control procedures. There is a particular focus on accounting and fi nancial procedures of all consolidated entities, whether or not they have credit institution status.
The fact that most subsidiaries have their own management and control functions means that internal control procedures are decentralized and are tailored to the organization of each of the consolidated entities and rely on a multi-tier accounting control process: • a first-level control where permanent and local controls in operational business lines are integrated into the operating process and formalized in clearly-defined work programs; • an intermediate level overseen by each entity’s financial or accounting departments where independent controls of operating processes are performed to ensure the reliability and exhaustive nature of the financial statements; • a final level of control carried out by the Group Audit as part of its regular audits.
Permanent and periodic controls particularly involve conducting and monitoring: • account justifications; • clearing of suspense items; • management/financial accounts reconciliation procedures (balance sheet and income statement); • compliance with accounting rules regarding the correct allocation of income and expenses; • correct processing of specific transactions in line with the relevant principles; • adjustment of anomalies identified at the time of these controls as well as the corresponding analyses and documentation.
For all these systems, Natixis and its subsidiaries continue to upgrade their accounting and fi nancial control procedures and equip themselves with suitable audit trail tools. In this respect, Natixis’ Finance Department supervises, manages and monitors the various controls performed by the subsidiaries.
Since 2010, the organization of the Accounting Controls function has been based on: • accounting production teams within the business lines that handle all work related to the correct entry of transactions and the implementation of day-to-day controls; • first-level controls under the hierarchical and/or functional authority of the Accounting Department including all monthly and quarterly controls that make the accounts more reliable; • second-level controls under the hierarchical authority of the Accounting Department and the functional authority of the Compliance Department and which, beyond managing periodend control processes, include reviewing all work carried out by first-level control teams.
Accounting Control draws upon: • dedicated tools that allow for the automat ed reconciliation of account entries and centralization of control results in an internal application; • formalized documentation, governed by a charter established by Groupe BPCE and specifically containing detailed procedures describing the mechanism’s structure as well as a map of controls spelling out the nature, execution frequency and responsibility of the two levels of control.
• continuing with a program of periodic auditing tasks, defined within an annual plan, reviewed mid-year and which, in addition to reporting, allows further investigation of specific subjects or enhances the control mechanism; • designing a regulatory reporting control process, which includes account closing activities and periodic auditing tasks; • launch of a facilitation process for the Auditing function within Natixis subsidiaries via the introduction of scorecards on the organization of accounting control mechanisms and their effectiveness.
Elsewhere, 2011 was characterized by continued improvement in the internal control environment (including real-time processes, introduction of a new funding management tool, etc.).
Internationally, Natixis has introduced a plan to revamp the accounting information system in the United States which will entail the roll-out of the Natixis S.A. accounting solution to US entities. Further, in this respect, the documentation of accounting production and control processes was redefi ned.
The accounting control mechanism will continue to be developed and upgraded in 2012 through: • strengthening controls in the area of funding through the continuation of the recent reorganization and, in the example of what was initially done, in the area of market operations; • extending the areas covered by regulatory audit work; • providing support to Natixis subsidiaries in bringing their accounting control mechanisms into line with the principles established by BPCE.
In addition to the control procedures followed by the fi nancial departments responsible for preparing individual or consolidated accounts, the quality of accounting controls is verifi ed by: • ad hoc audit assignments conducted by BPCE’s and Natixis’ Group Audit; • audits required by the Prudential Supervision Authority in its role as banking regulator; • audits conducted by Statutory Auditors. This work is carried out by three firms working in a uniform manner each quarter on most of the entities falling within Natixis’ scope of consolidation and whose opinions rely, in particular, on compliance with Natixis policies and the effectiveness of local internal control procedures.
STATUTORY AUDITORS’ REPORT, PREPARED IN ACCORDANCE WITH ARTICLE L.225-235 OF THE FRENCH COMMERCIAL CODE ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS
Information on the internal control and risk management procedures relating to the preparation and processing of accounting and financial information
The professional standards require that we perform the necessary procedures to assess the fairness of the information provided in the Chairman’ s report in respect of the internal control and risk management procedures relating to the preparation and processing of the accounting and fi nancial information. These procedures mainly consisted of: • obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of the accounting and financial information on which the information presented in the Chairman’ s report is based and the existing documentation; • obtaining an understanding of the work involved in the preparation of this information and the existing documentation; • determining if any significant weaknesses in the internal control procedures relating to the preparation and processing of the accounting and financial information that we would have noted in the course of our engagement are properly disclosed in the Chairman’ s report.
Risk management 4.1 RISK FACTORS 129 4.1.1 Risks related to the macroeconomic environment and the fi nancial crisis 129 4.1.2 Risks related to the links with BPCE and the banque populaire and caisse d’epargne networks 130 4.1.3 Risks relating to natixis’ operations and the banking sector 131 4.1.4 Other risks 132 4.2 PILLAR III 135 4.2.1 Basel 2 regulatory framework 135 4.2.2 Scope of application 135 4.2.3 Capital adequacy ratio 135 4.2.4 Composition of capital 136 4.2.5 Risk management 139 4.3 OVERALL INTEREST RATE, LIQUIDITY AND STRUCTURAL FOREIGN EXCHANGE RISKS 166 4.3.2 Balance sheet risk management 166 4.4 INSURABLE RISKS 169 4.5 LEGAL RISKS 170 4.5.1 Legal and regulatory issues and constraints 170 4.5.2 Legal and arbitration procedures 171 4.5.3 Situation of dependency 173 4.6 INSURANCE RISKS 174 4.7 SENSITIVE EXPOSURES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE FINANCIAL STABILITY FORUM 179
4.1.1 RISKS RELATED TO THE MACROECONOMIC ENVIRONMENT AND THE FINANCIAL CRISIS
Over the course of 2011, the intensifi cation of the sovereign debt crisis, beginning with peripheral European countries, profoundly impacted the economic environment in which Natixis operates. The handling of the crisis and its repercussions can generate major disruptions both in terms of credit and market volatility. Furthermore, this crisis of confi dence could also continue to impact the bank’s refi nancing conditions and the liquidity of the fi nancial assets it holds.
In addition to the European sovereign debt crisis that dominated 2011, the fi nancial (and banking) markets were also adversely affected by other signifi cant events, often of a political nature, such as the revolutions in Northern Africa and the Middle East, as well as the nuclear disaster in Fukushima, the loss of the United States’ AAA rating and the political debates surrounding the increase of the US federal debt ceiling.
As a result of political advances in the euro zone, central banks could decide at any time, with or without prior consultation, to change their monetary policy and adjust their liquidity policy, which could cause liquidity to suddenly dry up in these markets and in the economy at large. Against this backdrop, such developments could have a negative impact on the environment in which fi nancial institutions operate and, as a result, have an adverse impact on Natixis’ fi nancial position and results.
Natixis has incurred signifi cant losses in recent years, and may continue to post losses, on its portfolio of assets impacted by the fi nancial crisis (GAPC - workout portfolio - assets). As 85% of the GAPC credit portfolio is still covered by the guarantee granted by BPCE, described in Chapter [1] of this registration document, this risk is now associated with a lower volume of assets. For further information on the workout portfolio and its assets, refer to section [1.5] ‘‘GAPC’’.
On the whole, signifi cant disruptions to the overall economic situation could negatively impact Natixis’ results and fi nancial condition.
The scale and impact of these measures (in particular those still being examined or not yet fi nalized) on the situation of fi nancial markets in general, and Natixis in particular, are still diffi cult to precisely determine at this point.
BPCE, Natixis’ principal shareholder, held 72.26% of its capital (and 72.38% of its voting rights) at December 31, 2011. Consequently, BPCE is in a position to exercise signifi cant infl uence over the appointment of Natixis’ corporate offi cers and executive managers, and on any other corporate decisions requiring shareholder approval. BPCE’s interests in relation to these decisions may differ from those of other Natixis shareholders.
Natixis’ result depends partly on the performances of the Banque Populaire and Caisse d’Epargne networks, both through services provided to their customers and through the share of the net income from the 20% shareholding in each Banque Populaire and Caisse d’Epargne, in the form of cooperative investment certifi cates (“CCI s”) issued by each of these entities. For further information about the contractual relationships relating to these subjects, please refer to section [1.4.5] “Major contracts”.
Natixis has no voting rights with respect to the cooperative investment certificates representing 20% of the share capital of Banques Populaires and Caisses d’Epargne
However, Natixis has signifi cant infl uence over Banques Populaires and Caisses d’Epargne as a result of various rights it has been granted in relation to agreements entered into at the time C CIs were acquired by Natixis.
Pursuant to agreements made when the CCI s were acquired, Natixis may only sell all or part of its 20% holding in Banques Populaires with the prior consent of the Board of Directors of the Banque Populaire concerned and all or part of its 20% holding in the Caisses d’Epargne with the prior consent of BPCE. In the event of refusal, the Banque Populaire in question will be required to repurchase the relevant equity interests from Natixis at a price determined based on the related proportionate share of net assets, according to the valuation methods used to value the interests at the time of their acquisition by Natixis. The repurchase price could thus differ from the price that Natixis would have obtained from the proposed buyer. In addition, the very fact that Natixis must obtain prior approval could make it diffi cult for Natixis to sell these holdings.
For further information on the contractual relationships relating to these subjects, please refer to section [1.4.5] “Major contracts”.
Pursuant to the agreements entered into at the time the CCI s were acquired, Natixis is obliged to maintain its holding in the capital of each Banque Populaire and Caisse d’Epargne at 20%. As a result, during any issue of new shares liable to dilute Natixis’ shareholding, Natixis must subscribe to additional CCI s so as to maintain its shareholding at 20%. For further information on the contractual relationships relating to these subjects, please refer to section [1.4.5] “Major contracts”.
Natixis is exposed to several categories of risk inherent to banking operations
CREDIT RISK (FOR FURTHER DETAILS REFER TO SECTION [4.2.5.3] OF CHAPTER [4] AND SECTION [3.6.4] OF CHAPTER [3])
Overall interest rate risk, liquidity and structural foreign exchange risk (for further details please refer to sections [4.3] and [3.6.4])
Natixis’ ability to attract and retain qualified employees is critical to the success of its business and any failure to do so may significantly affect its performance
Natixis’ risk management policies and procedures may not be effective in limiting its exposure to all types of market environments or all types of risk, including risks that Natixis has not been able to identify or anticipate. Furthermore, the risk management procedures and strategies used by Natixis cannot guarantee risk reductions in all market confi gurations. These procedures may not be effective against certain risks, particularly those that Natixis has not previously identifi ed or anticipated. Some of Natixis’ qualitative tools and metrics used
4RISK MANAGEMENT Risk factors to manage risk are based on its use of observed historical market behavior. Natixis uses tools to analyze these observations, notably statistically, to quantify its risk exposure. The tools and metrics used may provide erroneous conclusions as to future risk exposures, notably because of factors that Natixis has not anticipated or correctly assessed in its statistical models, or because of unexpected and unprecedented market trends. This would limit Natixis’ ability to manage its risks. The losses borne by Natixis could prove to be signifi cantly greater than those forecast in light of historical averages. In addition, Natixis’ quantitative models do not incorporate all risks. Certain risks are subject to a more qualitative analysis that could prove insuffi cient and thus expose it to signifi cant and unanticipated losses. In addition, while no material issue has been identifi ed to date, the risk management systems are subject to the risk of operational failure, including fraud. (Please refer to section [4.2.5.5] “Risk management” for a more detailed presentation of the policies, procedures and methods used by Natixis to identify, monitor and manage its risks).
Even though external growth does not constitute a signifi cant part of its current strategy, in the future, Natixis may consider external growth or partnership opportunities from time to time. Even though Natixis performs in-depth reviews of companies that it plans to acquire or joint ventures it plans to carry out, it is generally not feasible for these reviews to be comprehensive in all respects. As a result, Natixis may have to assume liabilities unforeseen initially. Similarly, the results of the acquired company or joint venture may prove disappointing and the expected synergies may not be realized in whole or in part, or the transaction may even give rise to higher-than-expected costs. Natixis may also encounter diffi culties in consolidating a new entity. The failure of an announced external growth operation or the failure to consolidate the new entity or joint venture is likely to materially affect Natixis’ profi tability. This situation could also lead to the departure of key employees. Insofar as Natixis may feel compelled to offer its employees fi nancial incentives in order to retain them, this situation could also result in increased costs and an erosion of profi tability. In the case of joint ventures, Natixis is subject to additional risks and uncertainties in that it may be dependent on, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under its control. In addition, confl icts or disagreements between Natixis and its joint venture partners may negatively impact the benefi ts sought by the joint venture.
Competition is intense in all of Natixis’ primary business areas in France and in other areas of the world where it has signifi cant operations. Consolidation, both in the form of mergers and acquisitions and through alliances and cooperation, is increasing competition. Consolidation has created a number of fi rms that, like Natixis, have the ability to offer a wide range of products and services. Natixis competes with other entities on the basis of a number of factors, including transaction execution, products and services offered, innovation, reputation and price. If Natixis is unable to maintain its competitiveness in France or in its other major markets with attractive and profi table product and service offerings, it may lose market share in important areas of its business or incur losses on some or all of its operations. In addition, downturns in the global economy or in the economy of Natixis’ major markets are likely to increase competitive pressure, notably through increased price pressure and lower business volumes for Natixis and its competitors. More competitive new competitors could also enter the market, subject to separate or more fl exible regulation, or other requirements relating to prudential ratios. These new market participants may therefore be able to offer more competitive products and services. Technological advances and the growth of e-commerce have made it possible for nondeposit taking institutions to offer products and services that traditionally were banking products, and for fi nancial institutions and other companies to provide electronic and Internet-based fi nancial solutions, including electronic securities trading. These new players may exert downward price pressure on Natixis’ products and services or may affect Natixis’ market share.
The losses that could result from the above-mentioned risks could have a signifi cant bearing on Natixis’ results.
An extended market decline may reduce the liquidity of assets and make it more difficult to sell them. Such a situation could give rise to significant losses
In some of Natixis’ businesses, a prolonged fall in asset prices could threaten the level of activity or reduce liquidity in the market concerned. This situation would expose Natixis to signifi cant losses if it was unable to rapidly close out its potentially lossmaking positions. This is particularly true in relation to assets that are intrinsically illiquid. Certain assets that are not traded on a stock exchange or on a regulated market, such as derivatives traded between banks, are generally valued using models rather than market prices. Given the diffi culty in monitoring changes in prices of these assets, Natixis could suffer unforeseen losses.
Natixis has also strengthened its supervision system by adopting risk policies, including specifi c risk budgets, for the Bank’s main businesses/sectors. These risk policies defi ne in particular the risk budgets.
The following insurance companies are accounted for by the equity method under the prudential consolidation scope: • Coface (insurance activities); • Natixis Assurances; • Compagnie Européenne de Garanties et de Cautions.
The French decree dated February 20, 2007 (amended by the decrees dated October 19, 2007, September 11, 2008, October 29, 2009, August 25, 2010 and December 13, 2010) is France’s version of the European CRD (Capital Requirements Directive), which implements the Basel 2 reform. It set out the “regulatory capital requirements applicable to banks and investment companies”. It was amended by the French decree dated November 23, 2011 transposing the new CRD3 Directive, which introduced new provisions for calculating requirements in respect of market risk and securitization.
Natixis applies these directives to the management of its risks and capital.
• Reserves, including revaluation reserves, and unrealized or deferred gains or losses.
Unrealized capital gains or losses on available-for-sale fi nancial assets are recorded in equity and restated as follows: – for capital instruments, net unrealized capital gains are deducted from Tier 1 capital net of the amount of tax already deducted. Of these pre-tax gains 45% is included in Tier 2 capital. Net unrealized capital losses are not restated; – unrealized capital gains or losses recorded directly in equity due to a cash fl ow hedge are eliminated; – for other fi nancial instruments, including debt instruments or loans and receivables, unrealized capital gains or losses are also eliminated; – impairment losses on any available-for-sale assets recognized in the income statement are not restated.
• Net income (group share), after deducting an estimated portion of this income for cash-settled dividends.
The following deductions are made: • treasury shares held and stated at their carrying value; • intangible assets, including set-up costs and goodwill; • unrealized capital gains and losses for own credit risk.
• Equity instruments: 45% of pre-tax net unrealized capital gains recognized as Tier 2 capital.
Since December 31, 2010 and in accordance with the French Prudential Supervisory Authority (ACP), Natixis’ investments in the Caisse d’Epargne and Banque Populaire banks, in the form of Cooperative Investment Certifi cates (CCI s ), are no longer deducted from capital but are included in risk-weighted assets. For further details on CCI s , see section [1.4.5] “Presentation of Natixis - Major contracts”.
Registered share capital amounted to €4,931,753,420.80 at December 31, 2011 (i.e. 3,082,345,888 shares with a par value of €1.60) versus €4,653,020,308.80 at December 31, 2010. The increase was due to the payment of dividends in shares.
The entity EDF Investment Group is proportionally consolidated in accordance with the level of economic interest, i.e. 7%.
Regulatory capital is structured as follows (all data after impact of the fi nancial guarantee granted by BPCE): (in billions of euros) 12.31.2011 12.31.2010 Change
Restatements, o/w: ● Reclassifi cation of hybrids and fair value fi ltering (4.3) (5.1) 0.8
Core Tier 1 capital totaled €12.1 billion at December 31, 2011, up by €0.4 billion over the year.
The decline in equity to €20.7 billion was mainly the result of the repayment of deeply subordinated notes (DSNs), of €0.8 billion, and the increase in unrealized and deferred losses (a €0.7 billion decrease due to the change in reserves to be recycled in respect of CCI s , available-for-sale assets and cash fl ow hedging derivatives, a change that was partly fi ltered through prudential capital). These items were largely offset by income for the year of €1.3 billion (net of interest on DSNs) and the impact of the rise of the dollar on foreign exchange translation and on the DSNs (+€0.1 billion).
The main reason for the reduction in Tier 1 capital, other than the above factors, was the redemption of DSNs, costing €0.8 billion.
Tier 2 capital decreased as a result of the early redemption of two redeemable subordinated securities not compatible with future Basel 3 rules (-€1.2 billion) and the regulatory depreciation and amortization of lines approaching maturity. These effects were partly offset by an increase in the positive gap between provisions and estimated losses (+€0.4 billion) and the reduction in deducted securitizations .
The decrease in credit risks (-€8.8 billion) over the year wa s primarily due to the follo wing factors: • the improved quality of the portfolio (decline in PD’s and LGD’s); • a decrease in outstandings, thanks in large part to a strategy to reduce exposures; • and the fine-tuning of methodologies (received guarantees are better taken into account).
Operational risks increased by €2.4 billion due to the replacement of 2008 net revenues with 2011 net revenues (standard practice is to calculate operational risk using average net revenues for the previous three years).
Including the impact of the P3CI transaction, which came into effect on January 6, 2012, the Core Tier 1 ratio was 10.2% at December 31, 2011.
Regulatory capital requirements for credit risk, counter party risk and dilution risk 9,838 10,583
Of which present value of residual exposure at default on fi nancial leases 9 15
This ratio is calculated on a parent company (non-consolidated) basis and according to regulations must be above 100%. Natixis’ ratio was 122% at December 31, 2011.
It uses three levels of coordinated controls: • internal controls are carried out by operational or functional departments under the supervision of their management: business lines are responsible for the risks they incur in their transactions, until their maturity. Depending on the precise situation and activities, first-level controls are conducted either by personnel themselves or by an ad hoc body, such as a
The Risk function was reorganized over summer 2010. It is highly integrated, has short decision-making channels, and crossbusiness ties via dedicated teams, notably the Consolidated Risk Department, which adopts a comprehensive, cross-business approach to risks. A Service and Investment Solutions Risk Department coordinates the function and is in charge of the Heads of Risk in the two divisions.
It plays an essential role in the structure of Committees, the highest-level Committee being Natixis’ Global Risk Committee.
In addition to quantitative work on models, Natixis has introduced standards and procedures and periodic controls undertaken at different levels within the Bank so as to ensure the quality of ratings and LGDs. As part of its oversight function, the Risk Department makes sure the rules and commitments underpinning the Bank’s IRBA approval are respected, and also ensures the proper operation of the tools and processes used and the quality and consistency of data. It also runs training and provides support to Bank employees.
The principles used for identifying, measuring and managing credit risk hedging instruments are determined by the recommendations of the Basel Committee accord. The decision on whether a guarantee’s risk-reducing effects make it eligible to be included in risk-exposure calculations is made on a caseby -case basis. Checkpoints are set up throughout the process. They cover the approval of the transaction, the monitoring of credit risk exposure and the calculation of the resulting capital requirements (predominantly calculated according to IRBA since September 30, 2010).
Collateral and netting agreements give rise to: • an analysis undertaken when loan applications are approved or reviewed, assessing the suitability of the instrument or guarantee provided and the associated improvement in risk quality; • verification, processing and documentation based on the use of standard contracts or contracts approved by the Legal Department; • registration and monitoring procedures covering risk administration and management systems.
Credit Portfolio Management may take steps to reduce commitments in order to lower concentration risk by counterparty, sector and geographic area. Concentration risk is measured via stress test-type methods (migration of ratings according to macroeconomic scenarios).
Periodic reviews of sector-based risk policies help to ensure that the risk budgets allocated by the Global Risk Committee chaired by the Chief Executive Offi cer are adhered to.
The monthly Limit Breach Committee analyzes breaches of predefi ned limits using specifi c indicators (number, total, duration, business lines concerned, etc), examines signifi cant breaches and monitors their correction.
This Committee is organized by the Risk Department and chaired by the Chief Executive Offi cer and assembles members of the Senior Management Committee in charge of the business lines, Finance and Risk, the Head of Risk and the heads of the support functions concerned.
It draws on a structure of preparatory Committees that are jointly steered by the Risk Department and each business line of the bank.
Natixis also sets aside provisions to cover country risk and sector risk (see Note 5.3 to the consolidated fi nancial statements presented in Section [5.2] Consolidated fi nancial statements). These provisions are created on the basis of: • ratings for loans to private individuals and professionals; • sector risk; • geographic risk for other counterparties (corporate entities, sovereigns, etc.).
“Securitization” exposure is linked to the termination of certain programs and the decline in “Sovereigns” exposure is primarily due to the reduction of short-term investments with the Fed in connection with liquidity management.
Sovereigns Central administrations and central banks 4.6% 0.5% 2.0% 0.7% 7.7% 8.3%
Breakdown of exposure at risk by residual maturity and category of exposure
(Breakdown of exposure at risk with the exception of other assets that do not represent a credit obligation, equities or securitization positions)
Exposure at risk by category of exposure and by approach as at December 31, 2011
Exposure at risk by rating (S&P equivalent) for IRB asset classes
The following table shows the breakdown of exposure at risk by internal rating (S&P equivalent) for asset classes measured using the IRB approach, after excluding: • exposure to equities (calculated using a simple weighting approach); • pool-based exposure (acquired portfolios); • accounting adjustments; • generic counterparties.
Breakdown of IRBA credit risk exposure by category of exposure and internal rating
They also present average loss given default (LGD ’s) and the average risk weighting.
Average observed weighting by internal rating (S&P equivalent) for IRB asset classes
(a) Under the advanced method, doubtful Corporate outstandings are calculated on a risk-weighted basis.
Gross fair value of contracts/exposure at risk /notional amount of credit derivative transactions.
❚ IMPACT OF RISK-REDUCTION TECHNIQUES ON CREDIT DERIVATIVES (DATA AS AT DECEMBER 31, 2011)
❚ EXPOSURES COVERED BY FINANCIAL AND TANGIBLE COLLATERAL BY CATEGORY OF EXPOSURE AS AT DECEMBER 31, 2011
SME s recorded in the corporate entities category 934 22 145 982
Other physical collateral is defi ned as collateral other than securities, fi nancial instruments, real estate or loans. Tangible collateral comprises real estate or real-estate mortgages, in accordance with Articles 166.2 and 183.1 of the French decree of February 20, 2007.
❚ SECURITIZATION (BANKING BOOK SECURITIZATION POSITIONS INCLUDING THOSE DEDUCTED FROM CAPITAL )
Breakdown of aggregate amounts representing kept or acquired securitization positions by risk-weighting category
Breakdown of securitization positions according to the role played by Natixis
(in millions of euros) at 12.31.2011 Exposure at risk Risk-weighted assets Regulatory capital requirements
PRESENTATION OF TRADING BOOK SECURITIZATION POSITIONS (INCLUDING SECURITIZATION POSITIONS DEDUCTED FROM CAPITAL )
❚ BREAKDOWN OF SECURITIZATION POSITIONS BY STANDARD & POOR’S EQUIVALENT RATING
Market risk is the risk of loss in value caused by any adverse fl uctuations in market parameters. These parameters include, notably, bond prices, interest rates, securities and commodities prices, derivatives prices and prices of all other assets, notably real estate and foreign exchange rates.
• the risk associated with other operations, notably real estate, which is indirectly affected by changes in the value of tradable assets held in the normal course of business.
The market risk control mechanism is based on a delegation structure which is under the responsibility of the Global Risk Committee and in which the Market Risk Committee, chaired by the Chief Executive Offi cer or his/her delegated representative, plays an essential role.
The Risk Department’s main responsibilities are: • the definition of all applicable risk measurement methods and risk indicators; • the analysis and daily control of market risks and the corresponding reporting for each business; • the validation of valuation models (pricers); • the definition of provisioning and fair value adjustment policies (for liquidity risk, risks related to non-hedgeable parameters, model risks, etc.); • the drawing up of all consolidated reports presented to management and control and supervisory bodies; • the introduction of standards and procedures common to all entities (subsidiaries and branches) carrying market risks; • the production of VaR, stressed VaR (SVaR), IRC (1) (Incremental Risk Charge) and backtesting models.
In accordance with the recommendations of France’s Lagarde Report, it also ensures adherence to the limit notifi cation procedure, under which each trader sends email confi rmation that they belong to the desk where they are authorized to trade and that they respect their allocated limits.
All decisions regarding risks factors are revised annually in Committee meetings attended by all parties concerned (Risk Department, front office and P&L division). Quantitative, objective tools are used to measure the relevance of risk factors. The aim is to ensure consistency between VaR calculations, results and sensitivities (use of the same risk factors).
VaR is calculated and monitored daily for all the group’s trading portfolios. A VaR limit is set at an overall level and for each business.
2. Loss alerts by portfolio and aggregated by business line which alert the management and Risk Department 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.
Overall stress tests are reviewed on a continuous basis. They are performed daily and can be grouped into two categories: • Historic stress tests consist of reproducing sets of changes in market parameters observed during past crises in order to create an ex-post simulation of the P&L changes recorded. While stress tests do not have any predictive value, they do make it possible to gauge the exposure of the portfolio to known scenarios.
BPCE guarantees most of the workout portfolio management assets in Paris and New York. Nevertheless, the Market Risk Department continues to manage risks on all transactions on a standardized and exhaustive basis, whether these transactions are guaranteed or not by BPCE. A VaR, overall stress tests as well as a S VaR and IRC that take into account the effects of this guarantee are produced on a daily basis.
As the chart below shows, VaR increased over the year on the back of growing market volatility, particularly in the wake of the European sovereign debt crisis.
Overall stress test levels remained relatively reasonable at December 31, 2011 with an average loss of €25.7 million.
In cr ea se in in te re st ra te s
Unforeseen events may cause an interruption of Natixis’ operations and cause substantial losses as well as additional costs
Unforeseen events such as a severe natural disaster, pandemic, terrorist attacks or any other states of emergency could lead to an abrupt interruption of Natixis’ operations and cause substantial losses insofar as they are not covered or are insuffi ciently covered by an insurance policy. These losses could relate to property, fi nancial assets, market positions and key employees. Such unforeseen events may, additionally, disrupt Natixis’ infrastructure, or that of third parties with which it conducts business, and could also lead to additional costs (such as relocation costs of employees affected) and increase Natixis’ costs (in particular insurance premiums). Subsequent to such events, Natixis may be unable to insure certain risks, resulting in an increase in Natixis’ overall risk.
Governance of the framework is the responsibility of Natixis’ Operational Risk Committee. This Committee is charged with defi ning the operational risk policy, ensuring its application within Natixis’ entities, reviewing serious operational risks, analyzing potential risks for the company and monitoring risk-reduction measures.
The department’s role is to maintain and actively improve the system that identifi es, monitors, controls and reduces the level of operational risk within all of Natixis’ entities. Its main tasks are defi ning methodologies, monitoring and reporting on operational risks, collecting and reporting incidents and building a risk culture within the company.
A single, overall information system has been deployed across all of the company’s entities and hosts the all the components required to manage operational risk.
Mapping is based on the company’s processes and is conducted in two phases: a qualitative phase for detecting and analyzing risks, and a quantitative phase for measuring these risks.
❚ DIVISIONAL BREAKDOWN OF EXPOSURE AT RISK ON THE EQUITY ASSET CLASS
Private Equity held in suffi ciently diversifi ed portfolios Other equity exposure Total as at 12.31.2011
Financial assets at fair value through profi t and loss (other than
❚ TOTAL AMOUNT OF DIVESTMENT GAINS OR LOSSES FOR THE PERIOD UNDER REVIEW
Financial assets at fair value through profi t and loss (other than trading) 478
❚ FRACTION OF AMOUNTS OF UNREALIZED GAINS OR LOSSES INCLUDED IN TIER 1 OR TIER 2 CAPITAL AS AT DECEMBER 31, 2011
The ALM Committee’s monitoring scope includes: • the banking portfolios of Natixis S.A. and its credit subsidiaries for overall interest rate risk; • Natixis’ entire consolidation scope for liquidity risk (excluding insurance subsidiaries without intrinsic liquidity risks and which are specifically monitored); • Natixis’ entire consolidation scope for structural foreign exchange risk.
As is the case for most Corporate and Investment banks, Natixis has very few assets and liabilities generating structural interest rate positions. Natixis’ overall interest rate risk is essentially linear, exposed to the euro and US dollar, and concerns mismatching positions between contractual transactions. The most signifi cant positions concern exposures to the short end of yield curves and are predominantly linked to the lag between IBOR reset dates. This therefore classes as a secondary risk at the bank level.
The Risk Department calculates indicators and monitors limits daily for Treasury and monthly for credit subsidiaries.
Natixis’ overall interest rate risk is minor in respect to the volumes of the positions managed, and does not warrant any special comments; the regulatory “shock” resulting from the application of Basel 2 standards (+200bp instantaneous variation in the yield curves) at December 31, 2011 would result in a change in the portfolio’s absolute value of €35 million.
4RISK MANAGEMENT Overall interest rate, liquidity and structural foreign exchange risks customer resources and partly funds itself on the markets (see Chapter 5 “Financial data”, section 5.1.5 Refinancing).
As a subsidiary of Groupe BPCE and present in CIB, asset management and specialized fi nance, Natixis’ liquidity risk management policy is an integral part of the group’s overall policy. It sets out to optimize Natixis’ activities within a clear, shared and harmonized framework in terms of governance and ALM regulations and in line within the group’s risk constraints. In particular, these constraints are part of the regulatory commitments made by the group when creating Natixis, which includes BPCE’s obligation to guarantee the liquidity of its subsidiary.
Thus, the purpose of the overall liquidity risk management policy is to: • guarantee that Natixis complies with its financing commitments while ensuring that its refinancing needs and mismatches traded are in line with the group’s short- and medium-term refinancing capacities; • optimize the cost of refinancing within the set risk constraints to help reach the profitability objectives set out in the New Deal plan; • respect the internal limits set in close cooperation with BPCE and adapted to the group’s ability to provide for Natixis’ ultimate mismatching needs; • comply with national and international regulations; • contribute to the diversification of amounts raised by Groupe BPCE by geography, product and counterparty.
Structural foreign exchange risk is defi ned as the risk of transferable equity loss generated by an adverse fl uctuation in exchange rates against the group currency used in the consolidated accounts due to mismatches between the currency of net investments refi nanced by purchases of currency and the currency of equity.
The overall structural foreign exchange risk management policy, set out by the ALM Committee, thus aims to: • only purchase currency for strategic net investments with sustainable holding periods; net investments in non-strategic currencies are therefore refinanced by loans; • maintain structural foreign exchange positions within the set limits in order to protect the Core Tier 1 ratio from exchange rate fluctuations due to weighted currency risks (in particular the US dollar).
The Core Tier 1 ratio’s sensitivity to exchange rate fl uctuations is regularly assessed by the ALM Committee. The Committee sets an acceptable variation range for this sensitivity and a monitoring report is presented during its meetings.
Operational foreign exchange risk defi nes the risk of loss generated by an adverse fl uctuation in exchange rates against the group currency due to mismatches between the currency of operational foreign exchange positions (due to products and costs in foreign currency) and the reporting currency.
Natixis’ operational foreign exchange positions are, due to its activities, mainly denominated in US dollars; positions in other currencies are secondary.
The overall operational foreign exchange risk management policy, set out by the ALM Committee, aims to limit as much as possible the volatility of IAS earnings to exchange rate fl uctuations; residual operational foreign exchange positions are not intended to be held and are therefore subject to strict controls. The ALM Committee however did not wish to hedge future recurrent net earnings in foreign currencies; any fl uctuations in the actual exchange value of net earnings in foreign currency compared to those calculated based on budgeted exchange rates are thus borne.
Such changes could include, but are not limited to, the following: • monetary, interest rate and other policies of central banks and regulatory authorities; • general changes in government or regulatory policy liable to significantly influence investor decisions, in particular in markets where Natixis operates; • general changes in regulatory requirements, notably prudential rules relating to the regulatory capital adequacy framework, such as the modifications being made to the regulations implementing Basel 3, Solvency 2 and Dodd-Franck Act requirements; • changes in rules and procedures relating to internal controls; • changes in the competitive environment and prices; • changes in financial reporting rules; • expropriation, nationalization, price controls, exchange controls, confiscation of assets and changes in legislation relating to foreign ownership rights; and
• any adverse change in the political, military or diplomatic environments creating social instability or an uncertain legal situation capable of affecting the demand for the products and services offered by Natixis.
Tax law and its application in France and in the countries where Natixis operates are likely to have a significant impact on Natixis’ results
Natixis’ reputation is essential in attracting and retaining its customers. The use of inappropriate means to promote and market its products and services and the inadequate management of potential confl icts of interest, legal and regulatory requirements, compliance issues, money laundering laws, information security policies and sales and trading practices may damage Natixis’ reputation. Its reputation could also be harmed by any inappropriate employee behavior, fraud or misappropriation of funds committed by participants in the fi nancial sector to which
Natixis is exposed, any decrease, restatement or correction of its fi nancial results and any legal or regulatory action that has a potentially unfavorable outcome. Any damage caused to Natixis’ reputation could be accompanied by a loss of business likely to threaten its results and its fi nancial position.
On February 27, 2007, the judge accepted all aspects of the Harris Associates L.P. motion and rejected the motion of the plaintiffs. On March 20, 2007 the plaintiffs appealed that decision.
Since March 13, 2008, Natixis and Natixis Funding have been named among the defendants in multiple class-action lawsuits fi led by and on behalf of certain state, county and municipal bond issuers in the US federal courts in New York, Washington D.C. and California. The plaintiffs allege that providers and brokers of municipal derivatives conspired to fi x prices, rig bids and allocate customers between 1992 and the present time. The various plaintiffs have also named more than 30 other US and European banks and brokers as defendants. Some plaintiffs seek to certify a class of all state, local and municipal government entities, independent government agencies and private entities that purchased municipal derivatives from the defendants or through brokers from 1992 to the present, and to recover damages to the class that result from the alleged anticompetitive activities. Most of the federal cases have been regrouped before the United States District Court for the Southern District of New York under the caption “Municipal Derivatives Antitrust Litigation.”
The individual municipalities’ cases against 40 defendants including Natixis Funding and Natixis will also go forward, as the requests for dismissing the plaintiffs’ suits were rejected on April 26, 2010.
The allegations against Natixis are that Natixis was Natixis Funding’s guarantor in derivatives transactions and that it was Natixis Funding’s agent. The defendants have responded to the grievances fi led by the plaintiffs. The parties have entered the discovery phase of litigation. The coming months are dedicated to requests concerning the communication of evidence and reviewing the documents requested by the plaintiffs. At the same time, the parties are preparing to take on the most important part of the litigation which is the attempt to certify the litigation as a class action suit by the plaintiffs. The plaintiffs are in the process of recruiting an expert economist and a statistician to analyze the data of all the transactions to prepare arguments against class action certifi cation. During this time, the 26 state prosecutors and the DOJ are continuing their investigations.
At December 31, 2011, Madoff assets net of insurance were estimated at €380 million and were fully provisioned. The actual impact of this exposure will depend on the amount of assets deposited on behalf of Natixis that are recovered and on the outcome of any action the bank may take, including legal action. Natixis has therefore retained the services of law fi rms to assist it in the collections process. Furthermore, a disagreement has arisen on the application of the terms of Natixis’ professional civil liability coverage in this matter.
Furthermore, the liquidators of Fairfield Sentry Limited and Fairfi eld Sigma Limited have initiated a large number of proceedings against investors having received payments from these funds for redemptions of shares (over 200 proceedings have been fi led in New York). Certain Natixis entities have been named as defendants in some of these proceedings. Natixis deems these proceedings to be entirely unfounded and intends to vigorously defend its position.
Basing their argument on a report by the French Financial Markets Authority (AMF - Autorité des Marchés Financiers), which has not been made public, the plaintiffs allege that Lagardère SCA failed to comply with market regulations when it issued bonds redeemable in EADS shares, subscribed by Natixis, in April 2006.
In a ruling handed down on January 27, 2010, the Commercial Court of Paris refused to hear the suit fi led by CIC and Crédit Mutuel, and ordered them to pay €120,000 to Natixis and €50,000 to Lagardère in accordance with Article 700 of the French Civil Proceedings Code (Code de procédure civile). The order of April 28, 2011 issued by the Paris Court of Appeals (Cour d’Appel de Paris) upheld the lower court’s ruling, which dismissed the claim by the plaintiffs. An appeal for annulment has been fi led by CIC and Crédit Mutuel.
In March 2009, the Paris public prosecutor’s offi ce (Parquet de Paris) launched a preliminary investigation into a complaint fi led by Natixis minority shareholders and coordinated by the Association to Defend Minority Shareholder Rights (Association de Défense des Actionnaires Minoritaires, ADAM). Because of the institution of civil action proceedings of plaintiffs, a judicial information was opened.
On January 6, 2010, Natixis received a notifi cation of grievances from the AMF Enforcement Committee regarding its failure to comply with procedures governing market surveys. On April 11, 2011, the Committee issued Natixis with a reprimand and fi nancial sanction of €500,000. Natixis has appealed against this decision before the French Council of State (Conseil d’État).
Risk of policy redemptions in the event of an increase in interest rates
Natixis Assurances has identifi ed the policyholders with a high risk of redemption, the differential criteria being age, tax seniority and amount of capital. For these policyholders, Natixis Assurances has hedged the risk of interest rate increases with Cap policies, and has limited the scope covered by such policies to approximately a quarter of its interest rate assets. It has also subscribed to variable-rate bonds with a minimum yield.
According to the sensitivity analysis carried out at endDecember 2011: • a 10% drop in the stock market would have a negative impact of €11.4 million on equity (after taking into account the variation attributable to policyholders and taxation), i.e. 1.1% of equity; • a 10% drop in the real estate market would have a negative impact of €4.1 million on equity (after taking into account the variation attributable to policyholders and taxation), i.e. 0.4% of equity; Also, Natixis Assurances fully reinsures the guaranteed minimum payment on unit-linked policies.
The monitoring and management of counterparty risk is carried out in compliance with Natixis’ standards and internal limits, as determined by the Credit Risk Committee, as well as the regulatory constraints imposed on insurance companies. Thus, 83% of the fi xed-income portfolio is invested in securities rated higher than A-.
In addition, a systematic scoring policy has been implemented, and 98% of commitments are now covered.
All major risks are subject to centralized monitoring both for inventory and monthly fl ows.
❚ POLICIES SIGNED EXCLUDING TRANSACTIONS ON BEHALF OF THE STATE/ALL GUARANTEED PRODUCTS
Second-level controls are set up to ensure that the group’s credit risk standards are observed.
Coface is exposed to fi nancial risk related to variations in net investment income and risks related to different asset classes. For each category of assets, there are stress scenarios to simulate the sharpest drop in prices, with a confi dence interval of 97.5%. Coface’s policy is to strictly limit fi nancial risk, as measured by the 3-month Value-at-Risk model, for all its fi nancial investments (excluding technical stakes) to less than 3.3% of its net assets, i.e. €48.4 million at December 31, 2011. At this date, the VaR of Coface and its subsidiaries were within the authorized limits at €44.8 million.
Coface achieved its goal through rigorous management of: • exchange rate risk: the vast majority of Coface’s investment instruments are in euros. Currency risk on assets representing liabilities in euros whose underlying is denominated in other currencies is hedged to avoid holding open positions; • counterparty risk: more than 92% of Coface’s bonds and interest rate products at December 31, 2011 were rated A- (or equivalent) or better, according to at least one internationallyrecognized rating agency; • interest rate risk: this risk is limited, as the maximum authorized sensitivity for the bond asset class is deliberately capped at 4; (1)
Second-level controls on compliance with Coface’s investment policy are also carried out.
Underwriting risk is the main risk incurred by CEGC. The volume of outstandings at risk amounted to €78,600 million at December 31, 2011 (up 21% compared to fi scal year 2010). Underwriting risk is essentially a type of counterparty risk, as the commitments given by CEGC to benefi ciaries of guarantees give direct exposure to subscribers (policyholders).