Groupe Banque Populaire Annual Report

Transcription

BANQUE POPULAIRE GROUP
2005 Annual Report
BANQUE POPULAIRE GROUP
2005 Annual Report
The original French language version of this annual report was registered with the Autorité
des marchés financiers on March 23, 2006 in compliance with Article 212-13 of the General Regulations
of the Autorité des marchés financiers. It may be used in connection with a financial transaction only if completed
by an Information Notice duly registered with the Autorité des marchés financiers.
The annual report was drawn up by the Banque Populaire Group and is the responsibility of its signatories.
The English language version of this report is a free translation from the original French. All possible
care has been taken to ensure that the translation is an accurate representation of the original.
Copies of this annual report are available on request, free of charge, from Banque Fédérale
des Banques Populaires, Le Ponant de Paris, 5 rue Leblanc, 75511 Paris Cedex 15.
This document is also available for download from www.banquepopulaire.fr
(financial reporting section).
THE BANQUE POPULAIRE GROUP IN 2005
01
Table of contents
P.07 >
Presentation of the Banque Populaire Group
Chairman's message
Profile
Key figures for 2005 and ratings
P.08 >
Corporate governance
P.04 >
P.05 >
P.06 >
01
02
03
04
P.25 >
P.08 >
BOARD OF DIRECTORS
P.09 >
P.09 >
P.12 >
Director’s responsibilities
Other positions held by Directors
Other disclosures about the Directors
P.13 >
CHAIRMAN'S REPORT ON THE CONDITIONS IN WHICH THE WORK OF THE
BOARD OF DIRECTORS IS PREPARED AND ORGANIZED
P.13 >
P.17 >
Role and organization of the Board of Directors
Consultative Committees
P.20 >
CORPORATE GOVERNANCE RULES FOR THE BANQUE POPULAIRE BANKS
P.20 >
P.21 >
P.22 >
Responsabilities of the Board of Directors
Responsabilities of the Chairman
Responsabilities of the Chief Executive Officer
P.23 >
STATUTORY AUDITORS
P.23 >
P.23 >
Names, addresses and dates of appointment
Fees paid to the Banque Populaire Group’s Statutory Auditors
P.24 >
INTERNAL FINANCING MECHANISMS
Group structure
P.25 >
P.26 >
P.27 >
P.28 >
P.29 >
P.29 >
P.32 >
P.38 >
P.41 >
P.44 >
P.46 >
Group business review
P.46 >
P.49 >
P.52 >
P.59 >
P.60 >
P.61 >
2005 ANNUAL REPORT
INTRODUCTION
PRINCIPAL SHAREHOLDERS
SIMPLIFIED FINANCIAL ORGANIZATION CHART
THE GROUP'S HISTORY
KEY EVENTS OF 2005
MEMBER-STAKEHOLDERS
BANQUE POPULAIRE BANKS
BANQUE FEDERALE DES BANQUES POPULAIRES
NATEXIS BANQUES POPULAIRES
THE GROUP'S INTERNATIONAL OFFICES
PERSONAL CUSTOMERS
SMALL BUSINESSES
CORPORATE CLIENTS
INSTITUTIONAL CLIENTS
BANKS AND FINANCIAL INSTITUTIONS
Sustainable development
P.61 >
P.65 >
P.70 >
P.74 >
THE BANQUE POPULAIRE GROUP'S COMMITMENT
HUMAN RESOURCES
ENVIRONMENT AND SOLIDARITY
PATRONAGE AND SPONSORING
05
06
P.77 >
Financial information
P.78 >
MANAGEMENT REPORT
P.78 >
P.86 >
P.98 >
P.101 >
Group overview in 2005
Risk management
Directors’ compensation
Subsequent events
P.102 >
P.104 >
P.112 >
P.215 >
RECENT DEVELOPMENTS
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
P.217 > Chairman’s report on internal control procedures
P.217 > GENERAL ORGANIZATION
P.217 >
P.218 >
Organization of internal control at the level of the consolidated entities
Organization of internal control at the level of Banque Fédérale des Banques Populaires
P.220 > RISK MONITORING AND CONTROL PROCEDURES
P.220 >
P.223 >
P.224 >
Risk management organization
Group compliance
Adaptation to the new regulatory environment
P.225 > INTERNAL AND CONTROL PROCEDURES COVERING FINANCIAL
AND ACCOUNTING INFORMATION
P.225 >
P.225 >
P.225 >
P.226 >
P.226 >
07
Preparation of the consolidated financial statements
Conversion of Group consolidated financial statements to IFRS
Control process
Role of the Audit Committee
Outlook
P.227 > STATUTORY AUDITORS’ REPORT ON THE CHAIRMAN’S REPORT
ON INTERNAL CONTROL PROCEDURES
P.228 > Additional information
P.228 > PERSON RESPONSIBLE FOR THE AMF ANNUAL REPORT
P.228 > STATEMENT BY THE PERSON RESPONSIBLE FOR THE AMF ANNUAL REPORT
P.228 > FINANCIAL COMMUNICATIONS
P.228 >
P.228 >
Financial calendar
Information officer
P.228 > DOCUMENTS ON DISPLAY
P.229 > Cross-reference table
P.231 > Contacts
03
Presentation of the
Banque Populaire Group
T
he Banque Populaire Group provides banking,
financial and insurance services to a broad client
base of individuals, tradespeople, farmers,
businesses, and banking and financial services groups.
n
Natexis Banques Populaires
Listed on Eurolist Paris, it is active in financing, investment banking
and services and contributes close to one-third of the Group's
earnings either directly or through its subsidiaries.
It defines itself as a major multi-banner universal bank. The local
retail banking business is conducted under the flagship “Banque
Populaire” banner, backed up by complementary banners.
CASDEN Banque Populaire serves employees of the French
education, research and culture systems, Crédit Coopératif
operates in the social and subsidized economy, ACEF caters to civil
servants, while SOCAMA mutual guarantee companies cater to
the needs of tradespeople and Crédit Maritime Mutuel serves the
fishing, marine and coastline industries.
Its range of corporate banking services and international
presence was enriched by the acquisition of Coface in 2002
(credit insurance and credit management services).
The financing, investment banking and services for corporate and
institutional clients are provided by Natexis Banques Populaires and
its subsidiaries, which include Coface.
True to the cooperative spirit that has guided it since its inception,
the Banque Populaire Group attaches great importance to local
relationships and regional roots. It provides long-term support to all
entrepreneurs, be they in or outside France.
The Banque Populaire Group stands out from other banking
groups on account of its unique structure, its origins in the
cooperative movement and corporate governance commensurate
with its values.
These three features have helped drive strong business
development based on brisk organic growth, selective acquisitions
and long-term partnerships.
A three-dimensional organization
The 19 Banque Populaire regional banks,
CASDEN Banque Populaire and Crédit Coopératif
n
The Banque Populaire banks are cooperative organizations, with
strong roots in their local areas and their sectors of activity.They are
the Group's parent companies and shareholders of Banque Fédérale
des Banques Populaires.They represent the Group's centre of gravity
in retail banking, which contributes over two-thirds of the Group's
earnings.They are autonomous banks, providing their clients with a
local service and the full range of banking and insurance products and
services.
Cooperative dimension
n
Banque Fédérale des Banques Populaires
It houses the central corporate functions of the Banque
Populaire Group and acts as the holding company for Natexis
Banques Populaires. Its role is to supervise, coordinate and
oversee strategic planning for the entire Group.
Federal dimension
2005 ANNUAL REPORT
Listed-company dimension
Cooperative and regional
foundations
As cooperative banks, the Banque Populaire banks forge a modern
and special type of relationship with their clients. Of these clients,
3 million are member-stakeholders, which guarantees their
independence and gives them the resources they need to expand.
The Directors of the Banque Populaire banks, who play an active
part in the economic and community life of their regions, represent
these member-stakeholders.They help to improve understanding
of the local economic fabric and the men and women who play a
key role in its development.
The Banque Populaire Group's presence throughout France is
provided both by the 19 Banque Populaire regional banks and by
branches of other Group entities.
The Group's international expansion is led primarily by Natexis
Banques Populaires and its Coface subsidiary, which has a presence
in 58 countries.
commensurate with
the Group's values
The Banque Populaire banks are the Group's parent companies.
Their Directors are responsible for control and supervision and for
setting their bank's overall goals in accordance with the national
strategy.
The Banque Populaire Group's corporate governance is
underpinned by the principles of cooperation. Banque Fédérale
des Banques Populaires' Board of Directors acts as the Group's
governing body, and its decisions are binding on the Group and
its member units.
The Chairman represents the Group nationally and internationally
and safeguards the Group's cohesion and identity. He is also the
Chairman of Natexis Banques Populaires.
This governance structure benefits from an ever more active
stakeholder base. It is a key contributor to the success of the
Banque Populaire Group and each of its member units.
A strategy of expansion and
partnerships
Leveraging its historic strengths, the Banque Populaire Group has
successfully bolstered its prominent positions year after year with
professionals and SMEs and built a solid business with over 6 million
retail clients. In this market, the Group has made the most effective
use of various expansion drivers,including new branches,recruitment
and affiliation models (CASDEN Banque Populaire,ACEF, etc.).
The growth in the income and margins of the retail banking
activities derived mainly from organic expansion, but was also
boosted by acquisitions, such as the addition of Crédit Coopératif
(in the social economy sector) and the affiliation of Crédit
Maritime Mutuel (in the fishing sector and coastline economy) in
2003 and the purchase of a shareholding in DZ Bank and
Volksbank International (VBI) to build up the Group's retail
banking base in Central and Eastern Europe.
Through its listed subsidiary Natexis Banques Populaires, the
Banque Populaire Group is also a major player in financing
(conventional and structured finance) and one of the principal
players in private equity for small and medium-sized enterprises.
A highly reputed asset manager, it also ranks among the leaders
in the French employee savings market and among the world
leaders in credit insurance, company information and debt
collection.
Chairman's message
Philippe Dupont, Chairman of the Banque Populaire Group
2005 was a very good year for the Banque Populaire Group. Its
performance reached new heights. Net banking income came to
B8.24 billion, representing an increase of 8% at comparable scope.
Gross operating income advanced by 12%, with the cost/income
ratio improving to 65.4%. Net income attributable to equity holders
of the parent rose by 27% to B1.5 billion. In an environment marked
by further lackluster growth in the Eurozone, the geographical focus
for our operations, these undeniably strong figures were attributable
in part to an exceptionally low cost of risk and, above all, the brisk
momentum of our business activities.
All the Group's business activities posted fresh
and significant improvement in their commercial
and financial performance
All the Group's business activities posted fresh and significant
improvement in their commercial and financial performance during
2005. In local retail banking, the Banque Populaire banks delivered a
harmonious combination of growth rates ranking among the
strongest in the market and further first-class cost/income ratios. And
Natexis Banques Populaires capitalized to the full on its new
organization in financing, investment banking and services. Hard work
by our teams, the quality of our business assets and the tight fit
between our offering and the needs of our various customer
segments formed the cornerstone of this success.
At the same time, our Group is undergoing radical change and
growing stronger. Some very large-scale projects have been
implemented successfully over the past few years. Our ability to
move with the times while consistently staying true to our values was
reflected by the merger of certain Banque Populaire banks, the
pooling of IT resources to form the i-BP platform, the integration of
Crédit Coopératif and Crédit Maritime Mutuel, the acquisition of
Coface, the overhaul of Natexis Banques Populaires' goals, the rampup in our high-quality partnerships and our international expansion.
The overall strategic planning carried out during 2005, our common
vision and the Plan that has evolved from it now provide us with a
framework for action and a powerful means of looking ahead to the
future and maintaining our consistency.The upgrade in Standard and
Poor's long-term and short-term ratings of the Group and of Natexis
Banques Populaires at the beginning of 2006 provided a ringing
endorsement of the quality of our results and strategy, as did the very
strong performance of our listed vehicle, which posted the largest
gains in the French banking sector during 2005.
In this fast-moving environment, the Banque Populaire Group
continues to look to the future and devise new projects. It is growing
by drawing on our more than 3 million member-stakeholders, over
300 directors and over 45,000 employees in France and abroad,
which together form an invaluable talent pool.
Because our cooperative values require us to reconcile continuously
our economic and social responsibilities, we are constantly stepping
up our efforts on the social and economic fronts,such as by providing
assistance for the creation of new businesses and regional
development,expanding microfinancing and the support provided to
the disabled, talented young musicians and the conservation of
maritime and aquatic heritage by the Banque Populaire Group
Foundation.
This coherence between our values, our organization and our ability
to act and move forward gives us the strengths we need to capitalize
on future changes in the banking industry.
05
Profile
21 Banque Populaire banks
76 Mutual Guarantee companies
3,000,000 Member-Stakeholders
6,800,000 Clients
45,530 Employees
2,807 Branches in France
Established in 68 countries
(1)
(2)
MOODY’S
STANDARD & POOR’S
Aa3
AA-
MOODY’S
STANDARD & POOR’S
Aa3
AA-
(1) 19 Banque Populaire regional banks, CASDEN Banque Populaire and Crédit Coopératif
(2) Active employees
2005 ANNUAL REPORT
Key figures for 2005
8,242
2,852
1,522
2,541
NET BANKING INCOME
IN MILLIONS OF EUROS
2005
2004
1,195
2004
2005
2004
7,646
+27%
+12%
GROSS OPERATING
INCOME
2005
+8%
NET INCOME
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
+22%
117.9
97.9
87.5
+15%
138.4
120.2
CUSTOMER DEPOSITS
CUSTOMER SAVINGS
IN BILLIONS OF EUROS
+17%
19.33
8.4 % 8.5 %
TOTAL REGULATORY CAPITAL
31/12/2005
01/01/2005
31/12/2005
01/01/2005
16.52
31/12/2004
31/12/2005
31/12/2004
31/12/2005
31/12/2004
96.9
31/12/2005
+11%
8,5
8,5
8,5
6,8
6,8
6,8
5,1
5,1
5,1
3,4
3,4
3,4
1,7
8,5
8,5
1,7
1,7
8,5
0,0
6,8
6,8
0,0
0,0
6,8
5,1
5,1
5,1
3,4
3,4
3,4
1,7
1,7
1,7
8,5
8,5
OUTSTANDING LOANS
0,0
0,0
6,8
6,8
5,1
5,1
3,4
3,4
1,7
1,7
0,0
0,0
0,0
TIER ONE RATIO
2005: IFRS
2004: under IFRS excl. IAS 32-39 and IFRS 4
07
T
he Banque Populaire Group, through Banque Fédérale des Banques Populaires (the Group's central
body) has elected to apply the recommendations resulting from the consolidation of the AFEP, MEDEF
and ANSA reports published in 2003 in areas where there is no corporate governance legislation in
France. It is worth noting that the concept of independent directors is not relevant to Banque Fédérale des
Banques Populaires (see the section on page 16 for further details).
THE BOARD OF DIRECTORS
In sections below (including page 13), the Board of Directors referred to is that of Banque Fédérale des Banques Populaires, the
Group's central body.
MEMBERS AT DECEMBER 31, 2005
PRINCIPAL DUTIES WITHIN THE COMPANY (1)
Philippe Dupont
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Chairman, Banque Populaire Group
FIRST APPOINTED / TERM OF OFFICE ENDS IN (2)
07-08-1999 / 05-2008
VICE CHAIRMEN
Claude Cordel
Francis Thibaud
Jean-Louis Tourret
Chairman of Banque Populaire du Sud
Chief Executive Officer of Banque Populaire du Sud-Ouest
Chairman of Banque Populaire Provençale et Corse
09-23-1999 / 05-2008
07-05-2000 / 05-2006
07-08-1999 / 05-2006
Richard Nalpas
BOARD SECRETARY
Chief Executive Officer of Banque Populaire Toulouse-Pyrénées
07-05-2000 / 05-2006
DIRECTORS
Deputy Vice Chairman of Banque Populaire d’Alsace
Deputy Vice Chairman of Banque Populaire Occitane
Chairman of Banque Populaire des Alpes
Chief Executive Officer of Banque Populaire Côte d'Azur
Chairman of Banque Populaire de l’Ouest
Chairman of CASDEN Banque Populaire
Chief Executive Officer of Banque Populaire Loire et Lyonnais
12-20-2000 / 05-2006
05-27-2004 / 05-2007
05-27-2004 / 05-2007
05-31-2001 / 05-2007
05-19-2005 / 05-2006
05-27-2004 / 05-2007
05-31-2001 / 05-2007
Christian Brevard
Michel Castagné
Jean Clochet
Jean-François Comas
Pierre Delourmel (3)
Pierre Desvergnes
Daniel Duquesne (4)
Stève Gentili
Bernard Jeannin (5)
Chairman of BRED Banque Populaire
Chief Executive Officer of Banque Populaire Bourgogne
Bourgogne Franche-Comté
10-20-1999 / 05-2008
01-19-2005 / 05-2008
Yvan de La Porte du Theil
Pierre Noblet
Chief Executive Officer of Banque Populaire Val de France
Deputy Vice-Chairman of Banque Populaire Rives de Paris
05-22-2002 / 05-2008
05-27-2004 / 05-2007
François Ladam
Jean-Claude Detilleux
NON-VOTING DIRECTORS
Chief Executive Officer of Natexis Banques Populaires
Chairman and Chief Executive Officer of Crédit Coopératif
Michel Goudard
Bruno Mettling
MEMBERS IN AN ADVISORY CAPACITY
Deputy Chief Executive Officer of Banque Fédérale des Banques Populaires
Deputy Chief Operating Officer of Banque Fédérale des Banques Populaires
Olivier Haertig
Patrick Delaval
Pierre Ribuot
ATTEND MEETINGS
Secretary-General of Banque Fédérale des Banques Populaires
Representative of Banque Fédérale des Banques Populaires' work council
Representative of Banque Fédérale des Banques Populaires' work council
(1) Company: Banque Fédérale des Banques Populaires, abbreviated to BFBP.
(2) Date of the AGM approving the financial statements.
(3) Pierre Delourmel was coopted as a director to replace René Clavaud at the Board Meeting of Banque Fédérale des Banques Populaires on May 19, 2005. This appointment will
be ratified by shareholders at the AGM on May 18, 2006.
(4) From February 22, 2006 onwards, Daniel Duquesne was replaced by Yves Gevin, Chief Executive Officer of Banque Populaire Atlantique. Yves Gevin was coopted as a director at
the Board Meeting of Banque Fédérale des Banques Populaires on February 22, 2006. This appointment will be ratified by shareholders at the AGM on May 18, 2006.
(5) Bernard Jeannin was coopted as a director to replace François Moutte at the Board Meeting of Banque Fédérale des Banques Populaires on January 19, 2005.
This appointment will be ratified by shareholders at the AGM on May 19, 2005.
2005 ANNUAL REPORT
CORPORATE GOVERNANCE
01
Directors' responsibilities
Banque Fédérale des Banques Populaires' Directors are the executive managers of the Banque Populaire Group, i.e. Chief
Executive Officers and Chairmen of the Banque Populaire banks.
The Chairmen of the Banque Populaire banks hold or have held
prominent responsibilities at regional or national companies,
which play an integral part in regional economic life.
The Chief Executive Officers have a wealth of knowledge of the
banking industry acquired throughout their professional careers
during which they have held increasingly senior duties at leading
regional and national banking companies.
They boast a wealth of experience in the management of a business and in the interactions this involves with the environment
and particularly with financial service providers.
They were selected based on a list of aptitudes, a key criterion
being the acquisition of in-depth experience in various responsibilities and at different units of the Banque Populaire Group.
Other positions held by Directors
MAIN DUTIES PERFORMED OUTSIDE BANQUE FÉDÉRALE DES BANQUES POPULAIRES
Other directorships in any company
Philippe Dupont
Chairman of the Supervisory Board
CHAIRMAN OF THE BANQUE POPULAIRE GROUP
Chairman of the Board of Directors
Assurances BP IARD
Castagné SAS
Chairman
Director
Christian Brevard
Maaf Assurances
DEPUTY VICE CHAIRMAN OF THE BOARD OF DIRECTORS
Permanent representative of Maaf SA,
on the Supervisory Board
Banque Populaire d’Alsace
Immeuble Le Concorde
4 quai Klébler
BP 10401
67000 Strasbourg
Maaf Vie
Permanent representative of Maaf SA,
on the Board of Directors
Covea
Natexis Bleichroeder SA
Jean Clochet
Director
CHAIRMAN OF THE BOARD OF DIRECTORS
Member of the Board of Directors
Natexis Bleichroeder Inc
Chairman of the Management Board
Bruker Biospin SA
Legal manager
Bruker Daltonique
Permanent representative of Banque Populaire
d’Alsace, on the Board of Directors
Natexis Pramex International
Banque Populaire des Alpes
2 avenue du Grésivaudan
BP 43 – Corenc
38701 La Tronche Cedex
Director
Banque Privée St Dominique
Chairman and Chief Executive Officer
Routin SA
Brasseries des Cimes
Chairman
Routin Nord Europe (Copenhagen)
Michel Castagné
Chairman of the board
DEPUTY VICE CHAIRMAN OF THE BOARD OF DIRECTORS
Routin America Inc
Banque Populaire Occitane
52-54 place Jean Jaurès
81012 Albi Cedex 9
Joint legal manager
Montania
SCI C3 et Houille Blanche
09
Jean-François Comas
CHIEF EXECUTIVE OFFICER
Banque Populaire Côte d’Azur
457 Promenade des Anglais
06292 Nice Cedex 3
Director
Natexis Assurances
Natexis Coficiné
Caisse Régionale du Crédit Maritime Mutuel
du Finistère
Pierre Desvergnes
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CASDEN Banque Populaire
91 cours des Roches
Noisiel
77424 Marne la Vallée Cedex 2
Côte d'Azur, Chairman
Foncière Victor Hugo
Sicav Fructi-Actions Rendement
Société Méditerranéenne d’investissement
Parnasse Finance
Côte d’Azur, on the Board
Invest Kappa
i-BP
Natexis Asset Management
Claude Cordel
Banque Populaire du Sud
10 place de la Salamandre
CS 98-001
30969 Nîmes Cedex 9
Maine Gestion SA
Director
Parnasse MAIF S.A.
Permanent representative of CASDEN Banque
Populaire, on the Board of Directors
Natexis Altaïr
Parnasse Services SA
Sicav Valorg
Sicav Fructidor
Natexis Factorem
on the Supervisory Board
Chairman
SCPI Parnasse Immo
SAS Holding Clobia
Permanent representative of Parnasse Finance,
on the Board of Directors
SAS CPSL
Director
SAS Dupleix
SNC Hydromons
Pierre Delourmel
Banque Populaire de l'Ouest
1 place de la Trinité
CS 86434 - 35000 Rennes
Delourmel Automobile SA
Delourmel Agriculture SA
Chairman
Parnassienne de Crédit
Legal manager
SARL Inter-promo
SARL Cour des roches
Daniel Duquesne
Banque Populaire Loire et Lyonnais
Immeuble PDG Part-Dieu
141 rue Garibaldi
69211 Lyon Cedex 03
Director
Natexis Asset Management
SAS Ouest Motoculture
Garibaldi Participations
SAS Delourmel Jardinage
Chairman
Chief Executive Officer
Garibaldi Capital Développement
Bretagri SA
Sepel
Director
Member of the Supervisory Board
Caisse Régionale du Crédit Maritime Mutuel
du Littoral de la Manche
Volksbank CZ
2005 ANNUAL REPORT
Volksbank International Austria
Permanent representative of Banque Populaire Loire
et Lyonnais, on the Board
Chairman of the Supervisory Board
i-BP
Director
01
M.A. Banque (formerly SBE)
Stève Gentili
Coface
Val de France, on the Board
BRED Banque Populaire
18 quai de la Rapée
75012 Paris
BRED Gestion
Natexis Pramex International
Vice Chairman of the Supervisory Board
Banque Internationale de Commerce - BRED
i-BP (Vice-Chairman)
Richard Nalpas
Banque Populaire Toulouse-Pyrénées
33-43 avenue Georges Pompidou
31135 Balma Cedex
Director
Director
Natexis Assurances
Natexis Algérie
Natexis Bleichroeder Inc.
Coface
Natexis Bleichroeder SA (Vice-Chairman)
BRED Cofilease
Toulouse-Pyrénées, on the Board
COFIBRED
LFI
Bercy Gestion Finances +
Pramex Italia S.R.L.
Permanent representative of BRED
Banque Populaire, on the Board
Natexis Asset Management Immobilier
Maison du Commerçant SA
Multi-croissance SAS
Socama 31
i-BP
BICEC
Irdi S.A.
Bernard Jeannin
Toulouse-Pyrénées, on the Supervisory Board
Banque Populaire Bourgogne Franche-Comté
14 boulevard de la Trémouille
BP 310
21008 Dijon Cedex
Latecoere
Pierre Noblet
DEPUTY VICE CHAIRMAN
Natexis Assurances
Banque Populaire Rives de Paris
55, avenue Aristide Briand
BP 549
92542 Montrouge Cedex
Natexis Lease
Chairman
Natexis Paiements
Natexis Intertitres
Legal manager
Sonodas SAS
SCI « IM BP »
Vice Chairman
Bourgogne Franche-Comté, on the Board
Natexis Lease
i-BP
Natexis Paiements
Yvan de La Porte du Theil
Francis Thibaud
Banque Populaire Val de France
9 avenue Newton
78183 St Quentin-en-Yvelines
Banque Populaire du Sud-Ouest
10 quai des Queyries
33072 Bordeaux Cedex
Director
Director
11
Director
Natexis Interépargne
Natexis Paiement (Vice Chairman)
Chairman
Socami Bordeaux et Région
Tourret SAS
Socama Sud-Ouest (Vice Chairman)
Proclair SAS
du Sud-Ouest, on the Board
Sopres SAS
i-BP
Socama Sud-Ouest
Lafarge Ciments
Soprolib Sud-Ouest
Legal manager
Director
Tourret Entreprises
Jean-Louis Tourret
Tourret Electronique
Proclair Provence
Banque Populaire Provençale et Corse
245 boulevard Michelet
BP 25 - 13274 Marseille Cedex 09
Proclair Rhône Alpes
Other disclosures about the Directors
Integrity of Directors
In accordance with the enforcement rules of EC directive 2003/71
(Article 14.1, paragraph 2), none of these Board members or
members of Executive Management has been convicted of fraud
over the past five years (minimum), has been subject to bankruptcy,
liquidation or receivership proceedings over the past five years
(minimum), has been officially incriminated or punished by corporate
or regulatory authorities,has been enjoined from acting as a Director
or Executive of a listed-company or from managing or participating
in the business of a listed-company over the last five years
(minimum).
Potential conflicts of interest
As far as Banque Fédérale des Banques Populaires is aware, no
potential conflicts of interest exist between the duties of the
Directors vis-à-vis Banque Fédérale des Banques Populaires and
their private interests in accordance with the aforementioned
European regulations.
2005 ANNUAL REPORT
In addition, the Directors have not agreed to any restriction
concerning the sale within a given timeframe of their shareholding
in the capital of Banque Fédérale des Banques Populaires. The
Directors do not hold any shareholding other than that required
for the performance of their duties.
Contracts between Banque Fédérale des
Banques Populaires and its Directors
In accordance with the aforementioned EC regulation, there are no
service agreements between the Directors and Banque Fédérale
des Banques Populaires potentially leading to the grant of benefits
at their term and liable to compromise their independence or to
interfere with their decisions.
None of the Directors of Banque Fédérale des Banques Populaires is
bound to the Company or one of its subsidiaries by an employment
contract.
01
CHAIRMAN'S REPORT ON THE CONDITIONS
IN WHICH THE WORK OF THE BOARD OF DIRECTORS
IS PREPARED AND ORGANIZED
T
his report forms an integral part of the
Chairman’s full report on the conditions in which
the work of the Board of Directors is prepared
and organized and on internal control procedures.
Role and organization of the Board
of Directors
The Board of Directors of Banque Fédérale des Banques
Populaires, which has been a joint stock company (société anonyme)
under French law since May 31, 2001 exercises a certain number
of legal functions. These include the responsibilities of Banque
Fédérale des Banques Populaires as the central body of the Banque
Populaire network. More generally, the Board is responsible for
supervising and defining various aspects of the strategy of the
Banque Populaire Group, such as expansion, profitability, security,
organization, information systems and other matters.
Each Director is considered as representing all shareholders and is
expected in all circumstances to act accordingly.
Members of the Board of Directors
Populaires has sixteen members, all elected by the shareholders in
General Meeting.All the Directors are individuals, and the majority
of Directors must be either Chairman, Director or Chief Executive
Officer of a Banque Populaire bank.
Directors exercising one of these roles are selected from two lists
of candidates put forward by the Chairmen and Chief Executive
Officers of the Banque Populaire banks according to a selection
process defined by the Board of Directors. Directors are elected
for a three-year term of office and may stand for re-election.
Their term of office expires at the close of the Annual General
Meeting of the shareholders held to approve financial statements
for the previous year. Each Director is required to hold one Banque
Fédérale des Banques Populaires share.
The term of office of the Directors comes to an end at the close
of the Annual General Meeting in the year of their sixty-eighth
birthday.
Notice of Board of Directors' meetings
The Board of Directors may be convened by the Chairman as
often as is required by the interests of BFBP. It addresses all matters
set forth in the agenda for the meeting by the Chairman.When it
has not met for more than two months, at least one-third of the
members of the Board may ask the Chairman to call a meeting to
consider a specific agenda.
It meets at the Company's head office or at any place indicated in
the notice convening the meeting.
Notice of the meeting must be provided by mail or by any other
means at least three days in advance. If all the Directors agree, a
Board meeting may also be called verbally and without any advance
notice. An attendance register is kept, which is signed by Board
members present at the meeting. It is obligatory for designated
representatives of the work council to be convened to all meetings
of the Board of Directors, which they attend in an advisory capacity,
in accordance with the law and regulations. Any other person(s)
invited to the meetings by the Chairman of the Board of Directors
may also attend in an advisory capacity.
Record of deliberations - Minutes Copies - Excerpts
The Board's deliberations are recorded in minutes kept in a special
minute book and are signed by the Chairman of the meeting and at
least one Director or, where the Chairman is unable to sign, by at
least two Directors. Copies or excerpts from the minutes of the
meetings may be duly certified by the Chairman of the Board of
Directors, the Deputy Chief Executive Officer or a specially
authorized representative.
Powers of the Board of Directors
The Board of Directors determines the strategic priorities for
BFBP's activities and ensures that they are implemented. Subject to
the powers expressly attributed to Annual General Meetings and
within the scope of the corporate purpose, it considers all matters
that affect the Company's operations and settles through its
decisions matters which concern it.
In its dealings with third parties, BFBP is bound even by the acts of
the Board of Directors that fall outside the scope of the
corporate purpose, unless it can prove that the third party knew
that the act was ultra vires or that it could not have been
unaware thereof given the circumstances.The sole publication of the
bylaws shall not suffice to establish such evidence.
The Board of Directors conducts the audits and verifications that it
deems necessary. Each Director receives all the information
required to carry out his duties and is sent any documents which he
considers to be useful.
The Board of Directors notably has the following powers:
1.it defines the policy and strategic goals for the network and the
Banque Populaire Group;
2. it negotiates and enters into national and international agreements
on behalf of the Banque Populaire Network;
13
3.more generally, it makes use of the prerogatives the Company
enjoys pursuant to law in its capacity as the Group's central body;
4. it approves the executive officers of the Banque Populaire banks and
defines the terms of their approval. It may also rescind this approval;
5.it approves the bylaws of the Banque Populaire banks and any
amendments made thereto;
6.it takes the requisite measures to protect the liquidity and capital
adequacy of the Banque Populaire network by defining and
implementing the requisite internal mutual guarantee systems;
7.on the recommendation of the Chairman, it appoints and
dismisses the Senior Executive Vice President,Internal Audit and Risk
Management, who monitors the consistency and efficacy of the
Group's internal control. The Senior Executive Vice President,
Internal Audit and Risk Management communicates the results of
audit assignments to the Board;
8.it establishes a Group Risk Management Committee and
defines its jurisdiction, members and operating procedures;
9.more generally,it lays down the general internal guidelines that are
obligatory for all Banque Populaire banks to uphold, with a view to
ensuring the goals defined in Article L. 511-31 of the Monetary and
Financial Code;
10. it draws up the Company's annual budget and sets the rules for
calculating the subscriptions payable by the affiliated Banque
Populaire banks;
They are appointed for a period of three years, which ends at the
close of the Ordinary General Meeting of the shareholders that has
voted on the financial statements for the previous financial year and
held in the year in which their appointment ends.
The Board of Directors may make provisional appointments
between two Annual General Meetings. These appointments are
subject to ratification at the subsequent Ordinary General
Meeting of the shareholders.
Non-voting directors may stand for re-election. They may be
dismissed at any time following a vote by shareholders at the Annual
General Meeting.
The role of non-voting directors is to ensure that the Company
discharges its responsibilities, especially those provided for in law,
without becoming involved or interfering in management of the
Company.
They are convened to meetings of the Board of Directors and
participate in the deliberations in an advisory capacity, without their
absence impairing the validity of the Board's decisions.
The Board of Directors may make payments to the non-voting
directors by deducting amounts from the directors' fees allotted by
the Annual General Meeting to its members.
12. it reviews the consolidated financial statements of the Banque
Populaire Group;
The Chairman of the Board of Directors represents the Board of
Directors. The Chairman organizes and directs the Board
and reports on these tasks to the General Meeting.The Chairman
is responsible for the proper running of the Company's
management bodies and in particular for ensuring that the Directors
are able to perform their duties.
13. it adopts the Board's internal rules.
The age limit for a Chairman has been set at 65.
11. it prepares the Company's balance sheet and annual financial
statements;
Even so, a two-thirds majority of Directors attending the
meeting is required for the following decisions:
n the entry of a third party into the Company's share capital
through a capital increase;
n the merger of two or more Banque Populaire banks,the complete
or partial disposal of their business assets or their winding-up;
n
the creation of a new Banque Populaire bank;
n
the removal of an affiliated bank;
n
the adoption and amendment of the Board's internal rules;
n
changes to the way in which Executive Management is exercised.
The Board of Directors may decide to set up committees
responsible for studying matters that it or its Chairman submits to
them for consideration. It sets the composition and responsibilities
of the committees exercising their activities under its supervision. A
plain majority of votes by members attending the meeting is
required to determine the creation, operating rules and any fees
paid to committee members.
Non-voting directors
The Ordinary General Meeting may appoint up to five non-voting
directors.The non-voting directors may be chosen from among the
shareholders or elsewhere.
2005 ANNUAL REPORT
The Chairman of the Board of Directors oversees the Company's
Executive Management. He carries the widest powers to act in all
circumstances in the Company's name. He exercises these powers
within the scope of the corporate purpose, subject to those which
the law expressly confers upon shareholders' meetings and on the
Board of Directors or those which under the Company's internal
rules are deemed to fall within the latter's jurisdiction in its capacity
as the Company's central body, and as listed more specifically in
Article 15-II of the bylaws.
In addition, in his capacity as Chief Executive Officer, the
Chairman represents the Company in his dealings with third
parties.The Company is bound even by the acts of the Chairman
that fall outside the scope of the corporate purpose, unless it can
prove that the third party knew that the act was ultra vires or
that it could not have been unaware thereof given the
circumstances.The sole publication of the bylaws shall not suffice
to establish such evidence.
Lastly, if recommended by the Chairman, the Board of Directors
may appoint up to five Deputy Chief Executive Officers to assist
the Chairman in his role as Chief Executive Officer. The scope
and duration of the powers vested in the Deputy Chief
Executive Officer(s) are determined by the Board of Directors
in conjunction with its Chairman. The Deputy Chief Executive
Officers enjoy the same powers as the Chairman in the exercise
of his duties as Chief Executive Officer. The Deputy Chief
Executive Officer(s) may not remain in office after their sixty-fifth
birthday.
The Board prepares the interim and annual financial statements
of Banque Fédérale des Banques Populaires, as well as the
consolidated financial statements of the Banque Populaire
Group. The business trends and results of Natexis Banques
Populaires are also presented systematically.
Election of the Chairman of the Board
of Directors
It participates directly in defining the policy and strategic goals of the
network and the Banque Populaire Group.
Article 2 of the internal rules states that according to Article 11 of
the bylaws of Banque Fédérale des Banques Populaires the
Chairman of the Board is elected by a simple majority for the
duration of his term as Director and he may be re-elected. The
bylaws also determine that a quorum of at least half the members
of the Board is required to be present for the election to take
place, with the Chairman then elected by a majority of the votes
cast by the Directors present (Article 12).
All investments of strategic importance carried out by Natexis
Banques Populaires and its subsidiaries or other Group subsidiaries
are submitted for its prior approval.
The Chairman of the Board of Directors of Banque Fédérale des
Banques Populaires has the title of Chairman of the Banque
Populaire Group.
Directors receive an information dossier around one week ahead of
each meeting.
Executive Management
The Chairman of the Board of Directors of Banque Fédérale des
Banques Populaires is also its Chief Executive Officer. He
exercises these powers within the scope of the corporate
purpose, subject to those which the law expressly confers upon
Annual General Meetings and on the Board of Directors or those
which under the Company's internal rules are deemed to fall
within the latter's jurisdiction as they relate to the central body of
Banque Fédérale des Banques Populaires.
The Chief Executive Officer represents Banque Fédérale des
Banques Populaires in its dealings with third parties.If recommended
by the Chairman, the Board of Directors may appoint up to five
Deputy Chief Executive Officers to assist him.
Organization of the Board of
Directors' work
The Board of Directors meets at least five times each year, in line
with a calendar set at the beginning of the year. The Chairman may
call additional meetings if circumstances so require.
The Board of Directors met eight times during 2005.The absence
of a member of the Board is an unusual event, since the attendance
rate stood at 95.52%.
The internal rules of Banque Fédérale des Banques Populaires
require Directors to make every reasonable effort to attend and
participate in all the meetings of the Board and at the specialized
committees on which they sit.
Meetings last for an average of four hours (aside from the meeting
held after the Annual General Meeting of the shareholders to elect
the office of the Board).
They systematically include a review of business trends at the Group
and Banque Fédérale des Banques Populaires since the previous
meeting, as well as the latest news and developments in the banking
industry.
01
Four times a year the Board hears a detailed report on the work of
the Banque Fédérale and Group Risk Management Committee,
which is followed by a debate. Acting on the recommendations of
the committee, the Board then takes any decisions it deems
appropriate.
Each agenda item considered by Board may give rise to a
debate.The members of the Board attach great importance to
asking questions of the persons making presentations, as well as
of members of the Group's executive management (Chairman,
Deputy Chief Executive Officer of Banque Fédérale des
Banques Populaires, Deputy Chief Operating Officer of Banque
Fédérale des Banques Populaires, Chief Executive Officer of
Natexis Banques Populaires), who always attend Board
meetings.
A record of the decisions taken is sent within three business days of
the Board meeting to all the Group's executive officers, with the
approved minutes of the previous meeting.
Accurate minutes are also taken of meetings of the Board of
Directors. They keep a record of the discussions initiated, the
positions presented and questions asked.
Eleven Directors sit on the Boards of Directors of both Banque
Fédérale des Banques Populaires and Natexis Banques Populaires.
Decisions of the Board of Directors
The internal rules of Banque Fédérale des Banques Populaires also
state the manner in which the Board shall reach decisions.They are
to be made by means of formal votes for the approval of the
financial statements, budget, resolutions to be submitted for
shareholders' approval at the Annual General Meeting and, more
generally, any issues of strategic importance referred to the Board
by the Chairman.
Office of the Board
The Office of the Board comprises the Chairman, three Vice
Chairmen including two Chairmen of Banque Populaire banks and
one Chief Executive Officer of a Banque Populaire bank and a
Secretary, who must also be a Chief Executive Officer of a Banque
Populaire bank. The Office of the Board does not have decisionmaking powers under the internal rules, but the Chairman may call
meetings of its members to inform or consult them on matters
falling within his authority.
15
Independent Directors
Independent Internal Audit Function
The concept of independent Director, as defined by the Bouton
report on corporate governance, is not relevant to Banque
Fédérale des Banques Populaires. As the central body of a
cooperative group, the Board of Banque Fédérale des Banques
Populaires should naturally comprise representatives of the
Banque Populaire banks. These banks hold over 99% of the
Company's capital (as at December 31, 2005) in their capacity as
credit establishments affiliated with Banque Fédérale des
Banques Populaires by law.
The Board of Directors monitors the independence of the
Internal Audit Function.The internal auditors have full authority to
require the audited entities to provide them with all necessary
documents and information to enable them to carry out their
audit. They also have unrestricted access to all the computer
applications used by the Banque Populaire Group.
Assessment of the Board's performance
Code of ethics
The performance of the Board of Directors of Banque
Fédérale des Banques Populaires is measured primarily by the
frequency of its meetings, the wealth of information made
available to Directors, who also sit on the Boards of Banque
Populaire banks, and the openness of discussions on the
various matters submitted to the Board. The representative
nature of the Board and the manner in which its meetings are
conducted ensure that the Board fulfils its stewardship role as
the central governing body of the Banque Populaire Group,
assuming full responsibility for determining strategy and
policies.
Article 11 of the Company's internal rules draws the Directors'
attention to insider trading legislation prohibiting the use of
confidential information about the Group's listed subsidiaries to
which the Directors may have access in their capacity as
Directors of Banque Fédérale des Banques Populaires.
In November 2005, a questionnaire was sent to all members of
the Board of Directors to solicit their opinion about the
organization of the Board's work (and in particular the contents,
availability of dossiers in advance of meetings, exhaustiveness and
clarity of the reports), the organization of meetings (choice of
However, under the bylaws, the seats on the Board are not held
by the Banque Populaire banks, but by individuals. Despite
being the Chairmen or Chief Executive Officers of Banque
Populaire banks, Directors do not sit on the board as
representatives of their respective banks, but as part of the
corporate governance structure of the Banque Populaire
Group, exercising the powers devolved to Banque Fédérale
des Banques Populaires by law.
Main issues addressed by the Board of Directors during 2005
A number of strategic issues were
submitted for review by the Board,
notably including:
n the structure of the Group's
international retail banking strategy;
the merger between Banque
Populaire des Pyrénées-Orientales, de
l'Aude et de l'Ariège and Banque
Populaire du Midi to create Banque
Populaire du Sud;
n
the link-up between Crédit Maritime
Mutuel's regional banks and local
Banque Populaire banks;
n
the entry of insurance partners
MAAF and MMA into the share capital
of SBE (now renamed MA Banque);
n
changes in the organization and
resources of Banque Fédérale des
Banques Populaires.
n
The Board reviewed the work
performed on the detailed strategic
program carried out by the Group
at the start of 2005.This collective
2005 ANNUAL REPORT
review, the findings of which are
summarized in the Group's Strategic
plan, provided a fresh endorsement
of the fundamentals of the Group's
business model. On this basis, the
Group produced a common vision
of the principal challenges and
the elements required for further
brisk expansion.
The Board also analyzed the updated
medium-term plan for Natexis
Banques Populaires, which represents
an integral part of the Group's
strategic program, and gave its approval
to several partnerships set up by
this subsidiary.
More technical dossiers were also
submitted for its approval, such
as the organization of the Group's
Business Continuity plans and the
2006 Business and Communications
Action plan.
In connection with the CRBF 97-02
reform, it also adopted charters
at its meeting on September 7, 2005
laying down guidelines for compliance
checks, risk management and auditing
at the Banque Populaire Group.
It was regularly given a detailed update
on Banque Populaire Group's latest
business trends.
It also heard two reports on the
activities of the Banque Fédérale
des Banques Populaires' Risk
Management Committee and four
reports on the activities of the
Group Risk Management Committee.
At its meeting on February 24, 2005,
the Chairman presented his report
on the conditions in which the
work of the Board of Directors is
prepared and organized and
on internal control procedures
(prepared in line with the French
Financial Security Act).
speakers, structure of presentations, time spent on debates), the
performance of their duties as Directors and, lastly, the level of
coordination between the work of the Board and that of the
committees.
Directors were also asked to suggest improvements to the way
the Board operates.
The results of this survey were submitted to the Board of
Directors on February 22, 2006.
They showed that Directors consider in a very favorable light the
dossiers submitted for review, the minutes of the Board, the
choice of speakers, the clarity of presentations, the time spent on
discussions, answers given to questions, and the reports on the
Risk Management Committee's work.
Directors also expressed a favorable opinion on reports on the
work of the Audit and Remuneration Committees and on the
information provided about the follow-up on its decisions.
Proposals will be made on other points in response to the
wishes expressed by cer tain Directors concerning the
sometimes excessive length of Board meetings, the arduous
agendas and the availability in advance of cer tain dossiers
concerning the Board.
Directors' fees
The fees paid to the Board of Directors(1) set by shareholders at
General Meetings are shared equally among the Directors.
Members of the Office of the Board and the Committees of the
Board receive an additional share for each additional post held.
Members of more than one Committee of the Board receive a
separate share for each Committee of which they are a
member.
Consultative committees
As part of the modernization of its organization inspired by the
Viénot repor t of 1999, the Board of Directors of Banque
Fédérale des Banques Populaires reviewed its corporate
governance and decided to create two specialist committees
alongside the Group Risk Management Committee, namely the
Audit Committee and the Remuneration Committee.
Each of these committees has four members (two Chairmen
and two Chief Executive Officers of a Banque Populaire bank)
nominated by the Chairman and elected by the Board of
Directors of Banque Fédérale des Banques Populaires. Minutes
of meetings of the committees are drawn up and the Chairman
of each committee reports to the Board on the work of his
committee.
As with the Group Risk Management Committee, these
committees serve to advise and assist the Board of Directors of
The Audit Committee
The Audit Committee reviews the company and consolidated
financial statements of Banque Fédérale des Banques Populaires
01
prior to their submission to the Board of Directors and the
consolidated financial statements of the Banque Populaire Group.
Executive Officers may not attend relevant meetings of this
committee. The committee is responsible for ensuring that
accounting policies are appropriate and are applied consistently
from one year to the next, and for assessing the reasonableness
of the main assumptions used to prepare the financial statements.
The scope of its responsibilities also extends to accounting and
financial documents published by Banque Fédérale des Banques
Populaires.
It also makes recommendations to the Board concerning the
choice of Statutory Auditors, their audit program and the fee
budget. It meets at least twice a year. Meetings are attended by
the Statutory Auditors.
Lastly, the committee may also request the presence of other
individuals who in one way or another are involved in the
production or supervision of financial statements, including
members of the Finance and Internal Audit Departments.
The Remuneration Committee
The Remuneration Committee makes recommendations to the
Board concerning the compensation, pension and other benefits
awarded to Executive Officers.The Directors concerned are not
present at meetings at which their compensation and benefits
are discussed.
The Chairman of the Board may also ask the committee to help
examine any issues relating to the overall compensation, benefits
and pension policy for Executive Officers of Banque Populaire
Group entities, prior to bringing these matters before the full
Board for consideration.
During 2005, the Remuneration Committee of the Banque
Populaire Group, chaired by Philippe Dupont, met to review the
compensation of Group Executives, in accordance with its remit.
All committee members were present.
After examining the actual compensation paid in 2004 to
Executive Officers of the Banque Populaire regional banks and
Banque Fédérale des Banques Populaires, the committee put
forward recommendations for 2005. These were passed on to
the Executives of the regional banks for approval by the regional
Remuneration Committees.
Two work sessions took place before these meetings, in which the
committee examined the criteria used to determine the fixed and
variable components of compensation.
The fixed component is determined according to three criteria:
n
the level of net banking income,
n
geographical mobility,
n
seniority in the position.
For 2005, the variable portion was determined based on
performance in three areas:
n
net banking income,
n
cost/income ratio,
n
return on equity.
(1) Details of the amounts received by individual Directors are given in the Directors’ compensation section.
17
The Group Risk Management Committee
Aside from the Audit Committee and the Remuneration
Committee, Banque Fédérale des Banques Populaires also
boasts a Risk Management Committee, whose remit is defined in
Article 10 of the internal rules of Banque Fédérale des Banques
Populaires.
Populaires established a Risk Management Committee pursuant
to the central body powers vested with Banque Fédérale des
Banques Populaires under Article L. 511-31 of the Monetary and
Financial Code.
When not attended by the executive officers of Banque
Fédérale des Banques Populaires, the Group Risk Management
Committee's sessions are dedicated solely to Banque Fédérale
des Banques Populaires.
n The Group Risk Management Committee meets four times
each year in plenary session to hear reports, in accordance with
the banking regulations, regarding risk assessment and
monitoring and an appraisal of internal control systems of the
Banque Populaire Group. It independently monitors overall risk
on an ex-ante and ex-post basis. Monitoring is based on regular
standardized counterparty risk reports providing analyses of
industry and country risks and a breakdown between interbank,
sovereign and client risks, as well as on interest-rate and liquidity
risk reports. The committee is also charged with examining
overall risk strategies, exposure limits and internal control
systems. Following this review, the committee makes
recommendations to the Board of Directors regarding any risk
management decision applicable to all Banque Populaire Group
entities.
The Group Risk Management Committee meets twice each year
in plenary session to hear reports regarding risk assessment and
monitoring and an appraisal of internal control systems of
Plenary sessions of this committee are chaired by the Group
Chairman.The committee is made up of six Directors including
the four members of the Office of the Board. They are also
attended by the Deputy Chief Executive Officers and the
Deputy Chief Operating Officer of Banque Fédérale des
Banques Populaires, the Chief Executive Officer of Natexis
Banques Populaires and the Senior Executive Vice President,
Internal Audit and Risk Management. No Executive Officers
attend meetings of the Group Risk Management Committee in
plenary session to review reports concerning Banque Fédérale
des Banques Populaires. Experts or line managers from any of
the Group's banks may be invited to attend to provide additional
insight into the matters under review.
Decisions are taken by a two-thirds majority. Minutes of the
plenary sessions are presented to the Board of Directors of
Banque Fédérale des Banques Populaires for consideration.
The Group Risk Management Committee holds a monthly
meeting, with restricted attendance, to review the main
counterparty risks at each Group bank on a consolidated basis
or at the Banque Populaire Group as a whole, as well as any loans
n
2005 ANNUAL REPORT
made to Executive Officers of the Banque Populaire banks, thus
helping to prevent any conflicts of interest.
The monthly meeting of Group Risk Management Committee is
attended by three standing members and three substitute
members appointed for one year by the Board of Directors
of Banque Fédérale des Banques Populaires on the
recommendation of the Chairman after the Annual General
Meeting of the shareholders.
The Chairman of the monthly Group Risk Management
Committee meeting is chosen from among the Chairmen of the
Banque Populaire banks who are members of the Office of the
Board. His substitute does not have to be a member of the
Office of the Board.The two Chief Executive Officers sitting on
the monthly committee are selected from those Directors who
are not members of the Office of the Board. Their substitutes
may be members of the Office. Decisions are adopted by a
majority of at least two votes.
To reflect changes in the regulatory environment, Banque
Fédérale des Banques Populaires decided to make adjustments
to its organization. Effective January 1, 2006, the Group Credit
Risk Committee will assume the monthly Group Risk
Management Committee's responsibilities for supervising the
Banque Populaire Group's counterparty risks on a consolidated
basis.
COMMITTEE
CHAIRMAN
MEMBERS
ATTENDANCE
RATE
01
NUMBER OF SESSIONS
IN 2005
Group Risk Management Committee
Group Risk Management Committee Plenary Session
First half 2005 (1)
Second half 2005 (1)
Philippe Dupont
: R. Clavaud, C. Cordel
Y. de La Porte du Theil, F. Moutte,
R. Nalpas, F. Thibaud
(2)
Philippe Dupont (1bis)
: J-F Comas, C. Cordel,
Y. de La Porte du Theil, R. Nalpas,
F. Thibaud, J-L Tourret
René Clavaud (2)
Members(2):
Y. de La Porte du Theil, F. Moutte
Substitutes(2):
J-F. Comas, R. Nalpas, J-L.Tourret
87.5%
4 concerning the Group
2 concerning Banque Fédérale
des Banques Populaires
96.3%
9
100%
2
100%
2
(3)
CARG Mensuel
First half 2005
Second half 2005
Jean-Louis Tourret (3)
Members(3):
J-F. Comas, Y. de La Porte du Theil
Substitutes(3):
C. Cordel, B. Jeannin, R. Nalpas
First half 2005
Richard Nalpas (4)
(4 )
Second half 2005
Richard Nalpas (4)
(4)
: P. Desvergnes, F.Thibaud, J-L.Tourret
Audit Commitee
: P. Desvergnes, F.Thibaud, J-L.Tourret
Remuneration Commitee
First half 2005
Philippe Dupont (5 bis)
(5)
: R. Clavaud, C. Hébrard, R. Nalpas, F.Thibaud
Second half 2005
Philippe Dupont (5 bis)
(5)
: R. Clavaud, C. Cordel, R. Nalpas, F.Thibaud
(1) First half 2005: appointed by the Board of Directors of Banque Fédérale des Banques Populaires meeting on May 27, 2004.
Second half 2005: appointed by the Board of Directors of Banque Fédérale des Banques Populaires meeting on May 2005.
(1 bis) When the Group Risk Management Committee considered issues relating to Banque Fédérale des Banques Populaires in plenary session, it was chaired by René Clavaud during the
first half of 2005 and by Jean-Louis Tourret during the second half of 2005.
(2) Appointed until the Annual General Meeting of the shareholders held to approve financial statements for 2004.
(3) Appointed until the Annual General Meeting of the shareholders held to approve the financial statements for 2005.
(4) Appointed for the term of their appointment as Director of Banque Fédérale des Banques Populaires.
(5) Appointed for the term of their appointment as members of the Office of the Board of Banque Fédérale des Banques Populaires.
(5 bis) When the Remuneration Committee considered issues relating to Banque Fédérale des Banques Populaires, it was chaired by René Clavaud
during the first half of 2005 and by Jean-Louis Tourret during the second half of 2005.
19
CORPORATE GOVERNANCE RULES
FOR THE BANQUE POPULAIRE BANKS
n November 20, 2002, the Board of Directors
of Banque Fédérale des Banques Populaires
approved a Corporate Governance Charter
for the Banque Populaire banks and Framework
Internal rules for their Boards of Directors.
O
efforts to attend meetings of the Board of Directors and the
General Meetings of the shareholders. Training events are
offered to Directors as required.
This charter establishes the rules of corporate governance and
codes of conduct to be followed by all the Banque Populaire
banks (Directors' code of conduct). It sets out the responsibilities
of the Board of Directors, Chairman, Chief Executive Officer and
Consultative Committees of the Banque Populaire banks.
Directors who sit on Consultative Committees are expected to
meet the same standards as apply to all Directors, namely loyalty,
diligence, competence, regular attendance, confidentiality and
professional secrecy.
The Banque Populaire banks are cooperative banks, and their
member-stakeholders play a central role in their organization.
Boards of Directors are made up of member-stakeholders, who
are clients like any others. The Group Risk Management
Committee oversees lending decisions regarding these Directors,
to avoid conflicts of interest.
Well before the May 15, 2001 Corporate Governance Act
entered the statute books, the Banque Populaire banks had
already decided to optimize the effectiveness of their executive
and management bodies by separating the roles of Chairman and
Chief Executive Officer, thus separating responsibility for strategic
decisions and control from the implementation of these decisions
and the management of the business.
Responsibilities of the Board
of Directors
The Directors derive their authority from the memberstakeholders, whether individuals or organizations, from among
whom they are elected. The Annual General Meetings of
member-stakeholders represent a high point in the life of a
cooperative bank, allowing broad-based par ticipation in its
affairs, the free flow of information, transparency and an
informed exchange of views.
The Board of Directors collectively represents all memberstakeholders and is bound to act in all circumstances in the best
interests of the member-stakeholders of the Banque Populaire
cooperative bank.
Directors have no individual powers of management, exercising
their powers only collectively through the Board of Directors.
Directors' code of conduct
Each Director must understand that he represents all memberstakeholders and act accordingly in the fulfillment of his duties.
Directors must allocate the time and attention necessary to the
performance of their duties. They must make all reasonable
2005 ANNUAL REPORT
Where Directors, in exercising their duties, gain access to
information not yet in the public domain, they are bound by a
duty of confidentiality and professional secrecy.
Directors are expected to make a more general contribution to
promoting the image of their Banque Populaire bank in the
regional community and economy. They play an active part in
encouraging and introducing new business.
Organization of the Board of Directors
The Directors elect from their number a Chairman for a
renewable term of three years, providing that this does not
exceed the term of his appointment as a Director or go beyond
the date of his sixty-fifth birthday. Beyond this date, the
Chairman's appointment is for a term of office of one year, and
may not exceed the statutory age limit set by the General
Meeting held to approve financial statements in the year of his
sixty-eighth birthday.
On the recommendation of the Chairman, the Board of
Directors appoints a Chief Executive Officer, who may not be a
member of the Board, for a renewable term of five years or until
his sixtieth birthday. Beyond the date of his sixtieth birthday, the
Chief Executive Officer's appointment is for one year and may
not exceed the age limit set in the bylaws at the date of his sixtyfifth birthday.
The Board of Directors adopts internal rules governing the
organization and work of the Board and of its Consultative
Committees.
On the recommendation of the Chairman, the Board of
Directors may set up and determine the membership of the
following Consultative Committees:
n
a Risk Management Committee,
n
an Audit Committee.
The Board of Directors may elect to combine the roles of these
two committees in a single body to be known as Audit and Risk
Management Committee.
The purpose of these committees is to:
1/ review, on a company and consolidated basis, the main
conclusions arising from risk monitoring systems, findings from
the internal control processes and the main conclusions arrived
at by the Internal Auditors, in accordance with banking
regulations;
2/ analyze financial statements and other financial documents
produced by the bank following approval of accounts and to
conduct further enquiries into particular areas before such
documents are brought before the Board of Directors.
In addition, the Board of Directors may elect to create two other
committees:
a Remuneration Committee responsible for drawing up, in the
absence of those concerned, any proposal concerning the
employment terms of Executive Officers. The committee's
proposals must be in accordance with Group policy regarding
Executive remuneration;
n
n a Member-Stakeholder Policy Committee. This committee is
responsible for tabling proposals to develop and promote the
cooperative aspects of the Company, through steady increases in
the number of member-stakeholders, a balanced distribution of
capital, communications policy and involvement in local
cooperative ventures, etc.
The powers of the Board of Directors
Strategy and operational structure
The Board of Directors is responsible for setting the bank's
overall strategy and policy, in accordance with the strategy and
policy of the Banque Populaire Group.
It determines key strategic policies based on joint recommendations of the Chairman and Chief Executive Officer and makes
periodic checks on their implementation in terms of the
fundamental issues of expansion, profitability, security and the
adequacy of the resources employed.
Risk control
The Board of Directors is responsible for controlling the major
risk exposures of the bank and ensuring the quality and reliability
of internal control systems in accordance with banking
regulations (CRBF 97-02).
n It sets the overall direction of lending policy and sets exposure
limits regarding the division and distribution of risk and its
relationship with the bank’s capital. It determines the exposure
thresholds above which it must be consulted, ensures
compliance with the procedures relative to the powers of the
Group Risk Management Committee of Banque Fédérale des
Banques Populaires, and monitors exposure using regular
information given on an aggregate basis on the cases considered
by the Group Risk Management Committee and on the
portfolio as a whole.
It sets overall limits for other major areas of financial risk, with
regard to the bank's ability to bear potential losses, and monitors
the compliance with these limits and the level of risk using the
regular information with which it is provided to this end.
n
The Board of Directors also reviews the procedures for
controlling operational risk, relating to information systems,
accounting, fraud and embezzlement, procedures, and legal risks.
n
01
n It sets targets regarding internal control and risk control having
reviewed the reports submitted to it, and in particular following
the analysis of those reports required by law or regulations.
The results of any on-site inspections carried out by Banque
Fédérale des Banques Populaires or by the Banking Commission
or other regulators are submitted to the Board of Directors for
discussion. The Board is responsible for monitoring the
implementation of any recommendations made as a result of
such checks. The Board is required to take without delay, any
measures or corrective steps necessary to protect the financial
and economic balance of the bank and thus preserve its
competitiveness.
In more general terms, the Board of Directors is responsible for
ensuring that the controls and checks in place are adequate for
their purpose and for making such further controls and checks
as it considers necessary.
Capital remuneration policy
The Board fixes the rate of capital remuneration.This rate must
be compatible with the creation of such provisions and reserves
as may be required to ensure adequate cover of risk exposure,
and with ensuring that the bank has sufficient resources to allow
its growth. The rate is set within the legal maximum level for
interest paid on shares in its capital.
The Board decides on the capitalization of reserves, ensuring
that any such transfers are exceptional in nature.
Responsibilities of the Chairman
The Chairman is one of the two Directors with responsibility
under the terms of the Monetary and Financial Code. As a result,
he is one of the two key contacts for the banking authorities and
must, therefore, have a clear overview of the bank's operations
in order to fulfill his duties.
Owing to the separation of functions, the Chairman does not
have responsibility for the Executive Management of the bank.
He is not the legal representative of the bank and may not make
undertakings on its behalf to third parties.
Management of the Board of Directors
The Chairman is responsible for managing the Board of
Directors and is also the natural point of contact for the bank's
executives, member-stakeholders and third par ties in their
dealings with the Board.
The Chairman is responsible for the smooth running of the
bank's management bodies (the Board of Directors, Executive
Management and General Meetings), and for ensuring
compliance with the legal requirements on the responsibilities of
the Board: setting the remuneration of Executives, setting and
distributing Directors' fees, the maximum level of which is
determined by the General Meeting, and informing the Board of
regulated and non-regulated agreements.
The Chairman organizes and directs the work of the Board and
reports on this work to the General Meeting. In this respect, the
21
management report to the Annual General Meeting provides
information regarding the work of the Board, such as the number
of meetings held during the year, the main topics discussed and
the work of the Consultative Committees, etc.
The Chairman determines the agenda for meetings of the Board
of Directors and thus has the power to raise subjects for
discussion.
The Chairman ensures that the minutes of meetings of the
Board of Directors give a full account of the work performed by
the Board. A copy of these minutes is supplied to Banque
Fédérale des Banques Populaires immediately after their
approval by the Board of Directors.
The Chairman will use the decisions of the Board of Directors
of Banque Fédérale des Banques Populaires to guide the Board
of Directors in the overall direction to follow and requirements
that must be met.
Relationships with the Chief Executive Officer
and the Group
The Chairman works with the Chief Executive Officer on
preparing the strategic decisions to be submitted to the Board
and for the implementation of which the Chief Executive Officer
is responsible.
As one of the two key points of contact for the Group, alongside
the Chief Executive Officer, the Chairman ensures that the
policies adopted by the Board of Directors are in keeping with
those determined by the Group. The Chairman plays an active
role in the federal life of the Group, such as participating in
federal conferences and commissions and meetings of Chairmen
of the Banque Populaire banks.
The Chairman represents his Banque Populaire bank at the
Annual General Meetings of Banque Fédérale des Banques
Populaires. Should the Chairman be unable to attend, the bank
will be represented either by a Director chosen by the Chairman
or by the Chief Executive Officer.
By staying in permanent contact with Executive Management,
the Chairman ensures that the strategies and policies approved
by the Board are implemented, and also keeps himself informed
about the overall conduct of the bank's operations.
The Chairman appends his signature to documents relating to
the Group Risk Management Committee alongside that of the
Chief Executive Officer and ensures that the decisions of this
body are upheld. Both the Chairman and Chief Executive Officer
are systematically informed by Banque Fédérale des Banques
Populaires of the Group Risk Management Committee's findings.
The Chairman receives Internal Audit reports from Banque
Fédérale des Banques Populaires and repor ts from French
Banking Commission inspections and ensures the Board is fully
informed of the findings of inspections carried out by the Banking
Commission or other regulatory bodies. The Chairman also
ensures that the minutes of the Board meeting at which the
Banking Commission's letter was discussed are provided to the
Banking Commission.
2005 ANNUAL REPORT
Responsibilities of the Chief
Executive Officer
Executive responsibility
The Chief Executive Officer, as a responsible Director under the
Monetary and Financial Code, works with the Chairman to
propose choices of strategy to the Board of Directors and
ensures that these are in keeping with the strategy and policies
defined by the Group.
Thus alongside the Chairman, the Chief Executive Officer is the
bank's representative and point of contact for Group bodies and
supervisory and regulatory organizations. The Chief Executive
Officer also participates in the federal life of the Group.
The Chief Executive Officer is responsible for implementing
strategies and policies approved by the Board of Directors.
The Chief Executive Officer is appointed by the Board of
Directors and answers to the Board on the proper performance
of his duties. Periodically, at the Chairman's request, the Chief
Executive Officer reports to the Board of Directors on the
implementation of policies adopted by the Board.
The head of the bank and manager of its staff
The Chief Executive Officer is the bank's legal representative visà-vis third par ties and in law. He is vested with the fullest
executive powers and is the head of the Banque Populaire bank,
responsible for smooth operational and day-to-day management
of the bank's affairs.
The Chief Executive Officer is also responsible for management
of the bank's staff. In agreement with the Chairman and in
accordance with banking regulations, he informs the Board of
Directors of the choice of the head of the Internal Audit
function, whose independence is then safeguarded by the Board.
Risk control
The Chief Executive Officer is jointly responsible with the
Chairman for implementing an internal control system safeguarding
the bank against the risks to which it is exposed, including credit and
margin risks, interest rate risks, market risks, foreign currency risks,
liquidity risks, operational risks and risks relating to subsidiaries.The
Chief Executive Officer makes regular checks on the correct
operation of these systems, ensures that adequate resources are
provided to internal control given the nature of these risks, and
supervises reporting to the Board of Directors.
The Chief Executive Officer is also responsible for the system of
delegating decisions on commitments. He ensures that the staff
authorized to make such commitments have the skills and
training required.
The Chief Executive Officer is responsible for ensuring constant
control over risk and for promoting a strong culture of risk
awareness within the bank's staff.
The Chief Executive Officer is responsible for ensuring there is a
policy for controlling legal risk with regard to operational risks and
particularly legal risks which could threaten the bank's image.
01
STATUTORY AUDITORS
Names, addresses and dates
of appointment
Directors of Banque Fédérale des Banques Populaires decided at its
meeting on February 22, 2006 to renew their appointment accordingly for a period of six years as follows:
The Statutory Auditors and Substitute Auditors are appointed in
accordance with Art. 27 to 33 of Decree no. 84-709 of July 24, 1984
concerning the activities and supervision of credit institutions.
n Statutory Auditors
The Statutory Auditors were appointed by the Conseil Syndical of
the former Chambre Syndicale des Banques Populaires on
September 20, 2000 for a six year term.
The meeting of the Board of Directors of Banque Fédérale des
Banques Populaires on June 23, 2004 noted the resignation of
PriceWaterhouseCoopers as Statutory Auditors for the consolidated financial statements of the Banque Populaire Group,and appointed Salustro Reydel (member of KPMG International) to replace it
for the remainder of their appointment.
Since the appointment of the Group's Statutory Auditors expires
following the audit of the 2005 financial statements, the Board of
BARBIER FRINAULT ET AUTRES
Ernst & Young
41, rue Ybry - 92576 Neuilly-sur-seine Cedex 4
Represented by Olivier DURAND
SALUSTRO REYDEL
Member of KPMG International
1, cours Valmy - 92923 Paris la Défense Cedex
Represented by Michel SAVIOZ
n Substitute Auditors
Pascal Macioce
41, rue Ybry - 92576 Neuilly-sur-seine Cedex 4
Louis-Pierre Schneider
32, rue Guersant - 75017 Paris
Fees paid to the Banque Populaire Group’s
Statutory Auditors
The following table shows fees paid in 2004 and 2005 by the Banque Populaire Group and its fully consolidated subsidiaries to the
Statutory Auditors and members of their respective groups:
in thousands of euros
DECEMBER 31, 2005
Ernst & Young
Network
Audit
- Independent audit
certification, review of parent
company and consolidated
financial statements (1)
- Ancillary assignments and
other audit assignments (2)
Sub-total
Other services
- Legal, fiscal, employment-related
- Information technology
- Internal audit
- Other
Sub-total
Total fees
DECEMBER 31, 2004
KPMG
Network
%
Ernst & Young RSM Salustro Reydel
Network
KPMG Network
%
1,240
3,075
62.0%
1,121
2,006
41.3%
1,820
659
35.6%
4,170
32
55.5%
3,060
3,734
97.7%
5,291
2,038
96.8%
0
0
55
39
41
0
0
27
0.6%
0.8%
0.9%
0
0
48
191
0
0
0
0
0.0%
0.6%
2.5%
94
68
2.3%
239
0
3.2%
3,154
3,803
100.0%
5,530
2,038
100.0%
(1) Including audit fees in respect of fully consolidated companies:
- Ernst & Young network: €1,038,000 in 2005 and €971,000 in 2004
- KPMG network: €2,095,000 in 2005 and €1,472,000 in 2004
(2) For the Ernst & Young group, this item includes fees for the Basel II reform project implemented at both Banque Fédérale des Banques Populaires and Natexis Banques Populaires.
23
INTERNAL FINANCING MECHANISMS
A
number of group entities benefits from the
Banque Populaire network's guarantee
system, including the Banque Populaire banks,
the exclusive Mutual Guarantee Companies, and
Banque Fédérale des Banques Populaires, as well as
Crédit Maritime Mutuel by virtue of its legal affiliation
to Banque Fédérale des Banques Populaires, under the
terms of the Monetary and Financial Code.
The system guaranteeing the liquidity and capital adequacy of
the Banque Populaire network has been organized under a
framework decision by Banque Fédérale des Banques Populaires,
in its capacity as central body in accordance with Art. L. 511-30,
L. 511-31, L. 511-32 and L. 512-12 of the Monetary and Financial
Code to which the bylaws of the Banque Populaire banks make
explicit reference (Article 1).
The system works by pooling the capital of all banks in the
network.
Banque Fédérale des Banques Populaires is able to put the
system into effect by calling upon the Banque Populaire banks to
contribute capital, within the limits of their own resources. As a
last resort, Banque Fédérale des Banques Populaires will make its
own capital available to meet the liquidity and capital adequacy
requirements of the Banque Populaire banks.
The mechanism works in two stages.The first stage consists of the
“Federal Solidarity Funds” held by Banque Fédérale des Banques
Populaires and the second takes the form of the “Regional
Solidarity Funds” set aside by the Banque Populaire banks.
Each year, the Banque Populaire banks transfer an amount to this
regional fund equal to 10% of their net income before transfers
to the fund for general banking risks and tax, after deduction of
tax on the amount of the transfer.Withdrawals from these funds
by the Banque Populaire banks must be authorized by Banque
Fédérale des Banques Populaires.
In the company financial statements, the federal and regional
solidarity funds are accounted for respectively by Banque
Fédérale des Banques Populaires and the Banque Populaire
banks in a specific sub-compartment of the fund for general
banking risks. As part of the consolidation process, since IAS 30
and IAS 37 no longer recognize the fund for general banking risks
as eligible for recognition as a liability, all the solidarity funds were
reclassified under the Group's equity in the opening 2004
balance sheet. In the same way, additions to and write-backs from
the fund during the 2004 financial year and during the first half of
2005 were eliminated from the income statement.
In addition, under a collective agreement, each Banque Populaire
bank guarantees the liquidity and capital adequacy of the mutual
guarantee companies whose corporate purpose is confined to
guaranteeing the lending activities of the banks.
2005 ANNUAL REPORT
The Banque Populaire network's guarantee system also
guarantees the liquidity and capital adequacy of Crédit Maritime
Mutuel, for which Banque Fédérale des Banques Populaires is the
central body, in accordance with Article L. 512-69 of the French
Monetary and Financial Code.This guarantee system comes into
effect only after Crédit Maritime Mutuel's own system.
Lastly, the members of the network contribute, along with all
French credit institutions, to the Fonds de Garantie des Dépôts
(deposit guarantee fund) set up in application of the Depositors'
Protection Act.
GROUP STRUCTURE
02
Group structure
n
The 21 Banque Populaire banks
n
Banque Fédérale
n
A successful business model combining strong financial performance and pursuit of the
common good while staying faithful to the Group's cooperative values.
INTRODUCTION
T
he Banque Populaire Group is one of France's
largest retail banking networks, with 6,800,000
clients and 2,807 branches. Rapid business
development, driven by a combination of steady
organic growth and selective acquisitions, has given
the Group leading positions across its personal, small
business, corporate and institutional client segments.
The Banque Populaire Group is a cooperative group in which
the 19 Banque Populaire regional banks, CASDEN Banque
Populaire and Crédit Coopératif are the parent companies.The
capital of these companies is wholly owned by their memberstakeholders. The Banque Populaire banks control Banque
Fédérale des Banques Populaires, the central body of the Banque
Populaire Group.
The other entities of the Banque Populaire Group are primarily
direct or indirect subsidiaries of Banque Fédérale des Banques
Populaires. Its largest subsidiary is Natexis Banques Populaires,
which is listed on the Eurolist Paris market.
The term “Banque Populaire
banks”
n Crédit Maritime Mutuel, which does not have Banque
Populaire status but which, as an affiliated institution (since
enactment of the French Financial Security Act of August 1,
2003, Ar ticle 93 (1)), benefits from the Banque Populaire
guarantee system.
The term “network”
Within the meaning of Art. L. 512-11 of the Monetary and
Financial Code, the Banque Populaire network encompasses:
The Banque Populaire banks, all of which are cooperative
banks.
n
The mutual guarantee companies whose sole corporate
purpose is guaranteeing loans issued by Banque Populaire banks.
n
n Banque Fédérale des Banques Populaires, a joint stock
company (société anonyme) governed by company law.
Both Banque Fédérale des Banques Populaires and
Natexis Banques Populaires registered an AMF annual
report with the Autorité des marchés financiers in
March 2006.
In this AMF annual report all references to the “Banque Populaire
banks” correspond to:
n the 19 Banque Populaire regional banks (at December 31,
2005),
n CASDEN Banque Populaire, a nationwide bank serving the
employees and employer institutions of the French national
education, research and culture systems;
Crédit Coopératif Banque Populaire or “Crédit Coopératif ”,
a major player in the social economy. It joined the other
Banque Populaire banks on January 30, 2003 when it took on
the status of “société coopérative anonyme de banque populaire
à capital variable”.
n
(1) Banque Fédérale des Banques Populaires thus became the central body for the establishments forming Crédit Maritime Mutuel. The French Financial Security Act of August 1, 2003
also enshrined the removal of Caisse centrale de Crédit Coopératif as central body of Crédit Coopératif. This body was merged into Crédit Coopératif on June 30, 2003 and was wound up on
October 17, 2003. In exchange for benefiting under the Banque Populaire guarantee system, Crédit Maritime Mutuel may contribute to any financial measures in favor of other banks in the
Banque Populaire network that may be decided by the Board of Directors of Banque Fédérale des Banques Populaires.
25
PRINCIPAL SHAREHOLDERS
n The Board of Directors of the Banque Fédérale des Banques
Populaires is composed of individuals holding senior executive
positions at Banque Populaire banks.
The Banque Populaire banks with shareholdings in Banque
Fédérale des Banques Populaires of over 5% at December 31,
2005 are as follows:
9.57%
9.52%
8.87%
8.56%
Banque Populaire Lorraine Champagne
6.68%
Banque Populaire Bourgogne Franche-Comté
6.31%
Voting rights
All the shareholders in Banque Fédérale des Banques Populaires
have equal voting rights. No shareholder may exercise more than
5% of voting rights (maximum limit under the bylaws).
Improper control
Given the duties incumbent upon Banque Fédérale des Banques
Populaires as central body under French banking legislation,
control of the capital is exercised jointly by the 21 affiliated
Banque Populaire banks. Furthermore, the control exercised by
the Banque Populaire banks over Banque Fédérale des Banques
Populaires cannot be deemed to be improper given the ceiling
on voting rights specified in the bylaws.
Change in control
To the best of Banque Fédérale des Banques Populaires' knowledge, there are no agreements in place that, if implemented,
could subsequently lead to a change in control of the Company.
This statement is made in accordance with European legislation.
The provisions of Article L.512-10 of the French Monetary and
Financial Code oblige the Banque Populaire banks to retain an
interest of at least 51% in Banque Fédérale des Banques
Populaires.
2005 ANNUAL REPORT
GROUP STRUCTURE
02
SIMPLIFIED FINANCIAL ORGANIZATION CHART (1)
at January 1, 2006
The Banque Populaire Group is organized in three dimensions: a COOPERATIVE
DIMENSION comprising the Banque Populaire banks, the Group's parent
companies, a FEDERAL DIMENSION provided by the Banque Fédérale, the central
body of the Group and also the holding company of Natexis Banques Populaires,
which, as the Group's listed vehicle, forms the LISTED-COMPANY DIMENSION.
3,000,000 member-shareholders
100%
t
informatiqueBanque Populaire (i-BP)
Group information
systems platform
19 Banque Populaire regional banks,
CASDEN Banque Populaire, Crédit Coopératif
Crédit
Maritime Mutuel
Affiliated with
Banque Fédérale
100%
t
99.3%
65.8%
t
52.5%
75%(2)
MA Banque
BICEC
Retail bank
in Cameroon
CORPORATE AND INSTITUTIONAL
BANKING AND MARKETS
100%
Natexis Lease
PRIVATE EQUITY AND WEALTH
MANAGEMENT
100%
Lease financing
100%
100%
100%
95.8%
Natexis Bleichroeder Inc.
Investment company
(New York)
Natexis
Private Banking
Luxembourg S.A.
100%
100%
Banque Privée
Saint Dominique
Wealth management in France
International
network (3)
100%
100%
Natexis Asset
Management
100%
Natexis Interépargne
100%
IT outsourcing
company
100%
100%
Natexis Paiements
94%
Valuation, middle office,
reporting
Coface Austria
Credit insurance
Credit management
Slib
Natexis Investor
Servicing
Coface Italia
Credit insurance
Guarantees
Credit management
Banking software
and IT facilities management
Natexis Altaïr
Coface Deutschland
Credit insurance
Credit management
Electronic banking
100%
Coface Services
Company information
Debt collection
Employee savings
Account keeping
and marketing
100%
Coface S.A.
Credit insurance
Credit management services
Fund management
Financial management
of employee
investment funds
International private banking
100%
Natexis Assurances
RECEIVABLES MANAGEMENT
Life, personal risk, and non-life
insurance
Private equity
Natexis Bleichroeder S.A.
Investment company (Paris)
Natexis
Private Equity
SERVICES
100%
Coface North America
Credit insurance
Credit management services
99.7%
Natexis Factorem
Factoring
Credit insurance
(1) This organization chart shows only subsidiaries with over 100 full-time equivalent employees (FTEs) at December 31, 2005.
(2) Incl. the Alizé Levier employee investment plan (2.1%).
(3) See map of international network (page 44-45).
The stated percentages show direct and indirect ownership levels.
27
THE GROUP'S HISTORY
T
he Banque Populaire Group can trace its origins
back to the late 19th century, with the creation
of the first Banque Populaire bank in various
regions of France (Angers, Menton, Montceau-LesMines,Toulouse, etc.) at the instigation of shopkeepers,
industrial companies and tradespeople, who grouped
together to form associations to facilitate their
member-stakeholders' access to lending.
March 13, 1917
Creation of the Banque Populaire banks
The Banque Populaire banks are established to help boost
lending to small and medium-sized businesses. They are
organized as cooperative companies entirely owned by their
member-stakeholders.
June 20, 1921
Creation of Caisse Centrale des Banques Populaires
The 74 Banque Populaire banks, united by a common identity, set
up a central structure to organize a system of mutual financial
support by centralizing, managing and investing their cash surpluses.
May 23, 1929
Creation of Chambre Syndicale des Banques
Populaires
A second central body is created to strengthen the system of
mutual support. Its three roles are the exercise of control, the
power to represent the banks and the establishment of a forum
for dialogue and consultation.
And more recently,
June 2, 1998
Friendly takeover bid by Banque Populaire Group
for Natexis S.A.
At the time, Natexis S.A. was the holding company of the
Natexis Group, which had been formed through the 1996
merger of Crédit National and Banque Française du Commerce
Extérieur. At the close of the offer period, Caisse Centrale des
Banques Populaires owned 53.2% of Natexis S.A. and the
Group's total interest was 71.4%. Its interest was raised to
74.36% at the end of 1998.
July 27, 1999
Creation of Natexis Banques Populaires
The businesses conducted by Caisse Centrale des Banques
Populaires are transferred to Natexis S.A., which is renamed
Natexis Banques Populaires.
2005 ANNUAL REPORT
December 23, 1999
Caisse Centrale des Banques Populaires becomes
The registered office transfers to the Ponant de Paris building. By
end-1999, the Group owns 88.06% of Natexis Banques
Populaires. By year-end 2000, the figure has been reduced to
79.23% following the first public issue of new capital by Natexis
Banques Populaires in its new configuration.
May 31, 2001
Banque Fédérale des Banques Populaires adopts joint
stock (société anonyme) status
Under Article 27 of the “NRE”Act (Act no. 2001-420 of May 15,
2001 concerning corporate governance), Chambre Syndicale
des Banques Populaires is wound up and all its assets, rights and
obligations are transferred to Banque Fédérale des Banques
Populaires, together with the collective guarantee fund.
August 2, 2002 and April 2004
Natexis Banques Populaires acquires Coface
Following a simplified public tender offer in July 2002 and a
squeeze-out bid followed by a mandatory delisting in April 2004,
Natexis Banques Populaires becomes the sole owner of Coface,
a credit insurance and credit management services specialist.
November 18, 2002
Memorandum of understanding between the Banque
Populaire Group and Crédit Coopératif
January 10, 2003
Memorandum of understanding between the Banque
Populaire Group and Crédit Maritime Mutuel
January 30, 2003
Crédit Coopératif adopts “société anonyme
coopérative de banque populaire” status
Following approval by shareholders at its Extraordinary General
Meeting, Crédit Coopératif becomes a Banque Populaire bank
and joins the Banque Populaire Group's internal guarantee
system.
August 1, 2003
Banque Fédérale des Banques Populaires becomes
the central body of the Crédit Maritime Mutuel banks
Following changes in the law in the summer of 2003 (Art. 93 of
the French Financial Security Act no. 2003-706) and in
accordance with the agreement signed in January 2003 between
the Banque Populaire Group and Crédit Maritime Mutuel,
Banque Fédérale des Banques Populaires replaced Caisse
Centrale du Crédit Coopératif as the central body of the Crédit
Maritime Mutuel banks.
GROUP STRUCTURE
KEY EVENTS OF 2005
Financing, investment banking
and services
Greater cohesion within the Group
n Natexis Banques Populaires' medium-term plan was analyzed
and endorsed by Banque Fédérale des Banques Populaires' Board
of Directors on January 19, 2005.The major achievements made by
the Services core business, with a particular focus on the customers
of the Banque Populaire banks, were as follows:
n Launch of the strategic program for the entire Banque
Populaire Group.
n Convention held for Directors and senior executives of the
Banque Populaire banks and Crédit Maritime Mutuel (called “At
the heart of Cooperation”, focusing on the following issues:
“How to be a Director today?” and “Cooperative values”).
- Electronic banking application systems were pooled with
BNP Paribas in the retail banking business by leveraging
Natexis Banques Populaires' platform (agreement signed in
late 2005);
- The partnership with The Bank of New York in custodial
services was ramped up;
Expansion in local retail banking
in France
n
- Financial services: completion on schedule of the CAP 2005
streamlining plan to refocus on the following businesses:
custodial services, depositary and issuer services, and
software publishing.
Further adjustments:
- November 29, 2005: creation of Banque Populaire du Sud,
which represents the culmination of efforts to bring together
the Banque Populaire du Midi, and Banque Populaire des
Pyrénées-Orientales de l’Aude et de l’Ariège, launched in late
2004.
- Crédit Maritime Mutuel: deployment of the strategic plan to
link the Caisses du Crédit Maritime Mutuel up with Banque
Populaire banks on the coastline.
n Active policy of new openings implemented by the Banque
Populaire banks: 131 new branches opened in 2005.
02
IT systems geared to the Group's
expansion
The ramp-up in i-BP together with the active pursuit of
planned migration projects (Banques Populaires Lorraine
Champagne; Rives de Paris; Midi et Pyrénées-Orientales,Aude et
Ariège; Crédit Coopératif), and the first deliveries by the federal
data warehouse.
n
MEMBER-STAKEHOLDERS: 3 MILLION IN 2005
W
ith strong roots in European companies,
cooperation represents a strategic asset
that is an integral part of its identity.
Through its longstanding and robust relationship with
its member-stakeholders, the Group demonstrates on
a daily basis its commitment to cooperation and
hones its local initiatives. The number of memberstakeholders broke above the 3 million mark in 2005.
Cooperative spirit is firmly rooted in the European companies.
The first Convention of the European Association of Cooperative
Banks, which was held in Brussels on December 1, 2005, was
attended by delegations from over 35 cooperative banking
groups of which Confédération Internationale des Banques
Populaires (CIBP) is a partner.The Banque Populaire Group was
naturally represented at the event since it believes that the
business model of cooperative banks fits perfectly with the
emphasis on social responsibility in European economies.
For the Banque Populaire Group, this undertaking by the 19
Banque Populaire regional banks, CASDEN Banque Populaire,
Crédit Coopératif and Crédit Maritime Mutuel has yielded
tangible results, with the number of member-stakeholders
breaking above the 3 million mark in 2005.
Over 300 stakeholder initiatives
In 2005, the White Paper on member-stakeholders, which was
drafted in 2004, adopted by the Board of Directors of Banque
Fédérale des Banques Populaires and laid out new cooperative
goals for the decade, served as a reference document for all the
Banque Populaire banks. Action plans were drawn up and adopted
by all their Boards of Directors.
An increasing number of varied and original initiatives were
implemented embodying the cooperative spirit and encouraging
enterprise in the regions. The Déclic Clubs, regional initiative
awards, summer schools, business start-up meetings, member-
29
stakeholder meetings and councils, voluntary work awards and the
Pop Reporter scheme are all examples of creative energies
channeled into the pursuit of the common good.
At the end of 2005, three Banque Populaire banks supported
more than 60 Déclic Clubs, representing a total of almost 300
jointly funded projects.Ten Banque Populaire banks hold regional
initiative awards. One Banque Populaire bank has organized
voluntary work awards and the Pop Reporter scheme for young
people for the past three years. Meanwhile, Crédit Coopératif
awards National Prizes and Trophies for Social Economy
Initiatives.
This ability to act, to become involved, and to share is founded on
a positive view of human nature and is a first-class illustration of
the spirit of the Banque Populaire Group. It helps to forge strong
and enduring local and regional relationships between memberstakeholders and the staff of the Banque Populaire banks.
Greater emphasis on communication
Banque Fédérale des Banques Populaires systematically enriches
the Societatis intranet, the principal communication system set up
to support efforts to share best practices that is accessible to the
Group's 45,500 Group employees and the 300 Directors of the
Banque Populaire banks.
Regional initiatives also include an annual management chart, regular
meetings of the working parties of member-stakeholder managers,
and an annual decentralized meeting of member-stakeholders.
A DVD containing the special edition of France 2's “Banque et
Populaire à la fois: On vous dit pourquoi” (Bank and Popular:We'll tell
you Why!) TV program, presented by Jérôme Bonaldi et Eglantine
Emeye, was used to help train recent recruits, as well as actively
educate new clients and member-stakeholders. On this DVD, over
200,000 copies of which have been distributed by the Banque
Populaire regional banks, member-stakeholders talk about the role
they play in the life of their local and regional communities.
A comic strip called “The Banque Populaire spirit, a human
adventure” tells the story of the Banque Populaire banks. The
Directors and then the Group's 45,500 employees were given
a special preview of this cartoon, of which 85,000 copies were
printed. The comic strip is given to all new memberstakeholders of the Banque Populaire banks. It was awarded the
silver trophy in the corporate book category of the Top Com
2006 awards.
In late 2005, a new area dedicated to member-stakeholders
was set up on the Banque Populaire Group's website at
www.banquepopulaire.fr. The Regions in Action section presents the
stakeholder initiatives led by member-stakeholders and jointly
funded by the Banque Populaire banks.
Consultation to discuss and build
for the future
At regional level, the business star t-up meetings, known as
welcome meetings at certain Banque Populaire banks, bring
together several hundred new clients and member-stakeholders
at branches to forge a closer relationship with the Bank's
employees. Meetings also provide an opportunity to inform
newcomers about the specific features, corporate governance,
results and projects of their particular Banque Populaire bank.
Larger meetings of 200 to 300 member-stakeholders are held
regularly by cer tain Banque Populaire banks to provide
oppor tunities to meet others and forge ties. For instance,
Banque Populaire Lorraine Champagne has organized summer
universities during September for its longstanding memberstakeholders for the past ten years to inform them about the
latest business and financial trends.
The September 2005 Annual decentralized Meeting of memberstakeholders was held in Pau in the region served by Banque
Populaire du Sud-Ouest. Focused on the theme “Osons
l'audace” (Dare to be entrepreneurial), it led to numerous
Entrepreneurship, Cooperation, Humanity: the Group’s values
For decades the Banque Populaire
Group has played an active role
in the French economy at both regional
and national level. Every day the
Group demonstrates that it has retained
its own distinctive style and forged a
strong personality. In the future, just
as in the past, the Group will continue
to be guided by three fundamental
principles: Entrepreneurship,
Cooperation and Humanity.
Entrepreneurship. Founded by
entrepreneurs for entrepreneurs, the
Banque Populaire Group encourages
entrepreneurship. It seeks to release the
2005 ANNUAL REPORT
creative energy of its clients and
staff. It respects bravery, tenacity and
enthusiasm among people developing
their professional or personal projects.
The vision of the entrepreneur requires
optimism. It is a source of constant
progress.
Cooperation. The Banque Populaire
Group's history, its way of doing
business and its day-to-day experience
shows its dedication to the
cooperative spirit. Cooperation means
working together for the common
good, accepting one's full responsibility
to one's partners and society. It implies
mutual trust. It is meaningless unless
it is for the long term. It withstands
the pressures of short-termism.
Humanity. The Banque Populaire
Group is built on respect for the
lifestyles, sensitivities, expectations
and individuality of its clients
and partners. Every person and
every project is unique.To succeed
they need to be listened to and
informed in a clear and transparent
way, to be understood. Putting
the individual at the heart of the
process gives shape and strength
to the banking relationship.
GROUP STRUCTURE
discussions between all political and operational participants of
the member-stakeholders of the Banque Populaire regional
banks, CASDEN Banque Populaire, Crédit Coopératif and
Crédit Maritime Mutuel.
n The National Prizes and Trophies for Social Economy Initiatives
awarded by Crédit Coopératif reward participants in the social
economy pursuing ground-breaking and innovative economic,
technological, social and/or cultural initiatives.
On June 22, 2005, the Banque Populaire banks reaffirmed the role
of their Directors as ambassadors for the Banque Populaire Group
and key players in the renewal of its cooperative mission, at the
National Directors' Convention, named “The heart of
cooperation”. A special boxed-set comprising a DVD, CD and
handbook was given out to each participant at the event so that
they can relive this national event time and again.
For example, “rethreading the needle”. The Second Initiative
prize wor th B6,000 was awarded to Association Création
Tissage 3 (ACT 3) in 2005. Founded in 1996, ACT 3 aims to
promote professional training for and the social reintegration of
former women prisoners or women experiencing serious social
or professional problems. What sets this organization apart is
that it brings together two apparently diametrically opposed
worlds, namely the world of haute couture (through a
partnership with the leading couturiers) and prison. During their
sentence, inmates receive training in haute couture weaving.The
program aims to restore their self-respect, to integrate them
gradually into a team and to help them rediscover the world of
employment. Upon their release, the women are employed
under a two-year reintegration contract to assist them financially
and socially.To date, 80% of the women enrolled in the program
have successfully rejoined the world of work, and none of them
has reoffended.
Three stakeholder initiatives
n Déclic Clubs are groups of member-stakeholders involved in
voluntary work from the same town or region who use their
initiative, skill and contacts to promote citizenship projects.
For example, the Citizen Power Club in Tourcoing is one of the
most active stakeholder initiative clubs in the area served by
Banque Populaire du Nord. This club, which has 21 members, has
already supported four projects since its inception in 2003. Most
recently, it has worked with La Parlotte, a theatre group of young
people performing Shakespeare in a Commedia dell'Arte fashion.
Several performances have been staged, all of them successfully,
attracting significant coverage in the local and regional press.
During 2005, the theatre group performed at the Avignon
festival.The Citizen Power club contributed B2,000 to help find
a venue and rehearsal facility for the group, which is set to
become La Parlotte's home.
Regional initiative awards provide recognition each year for
voluntary projects that improve the facilities of a region.Whether
on the initiative of an individual or an organization these projects
cover the natural, architectural, cultural, but also customs and
traditions, professional and economic heritage of the regions of
France.
n
For example, l’Ecole de l’ADN (DNA school). The judges'
special prize in the 2005 regional initiative awards by Banque
Populaire du Midi (now Banque Populaire du Sud) went to
l’Ecole de l’ADN, a training and information center about
progress in molecular biology and genetics. It is developing a
new concept by opening up biology workshops for members of
the general public with an interest in biotechnologies. Run by
high-level scientists, these workshops provide a beginners'
introduction to genetics. L’Ecole de l’ADN invites trainees to
discuss with scientists the issues raised by the manipulation of
living organisms, including both the potential benefits and
hazards. Since 2001, l’Ecole de l’ADN has delivered professional
training courses to employees working in biotechnology-related
sectors, such as food, health, chemicals and legal services. Since
it is jointly funded by the French research ministry for the
Languedoc Roussillon region, l’Ecole de l’ADN is free for
students in secondary and further education. A network of
l’Ecole de l’ADN units is being set up in Paris, Grenoble,
Marseille and Angers.
02
Cooperative banks in Europe
Faced with a series of challenges as a result of
economic, financial and regulatory changes,
cooperative banks in Europe held their first
convention in Brussels on December 1, 2005
under the auspices of the European association
of cooperative banks and the Confédération
Internationale des Banques Populaires (CIBP).
Cooperative banks, which operate through
decentralized networks, comply with both the
banking legislation in force and cooperative
legislation.The business model is underpinned
by three pillars: democracy, transparency and
proximity. Based on these firm foundations,
cooperative banks put individuals at the heart of
their activities and their organizations, thereby
assuming full responsibility towards society.To this
end, cooperative banks naturally contribute
to local economic development and to the objectives
set in the Lisbon Agenda, particularly towards
enhancing competitiveness and social cohesion.
Backed by its network of 4,500 credit institutions
and a presence provided by 720,000 employees
working at 60,000 branches, they account for over
half the number of banks in Europe.They serve
140 million clients, including 60 million memberstakeholders. All in all, cooperative banks have
market share of around 20% across the 25 member
states of the European Union.
31
BANQUE POPULAIRE BANKS
T
rue to their cooperative values, the Banque
Populaire banks foster close, lasting relationships with their member-stakeholders and
clients. They are key players in their regional
economy.
Banks with the cooperative
spirit at their core
The Banque Populaire banks draw their strength from the spirit
that inspired their creation by a group of men and women aiming
to take control of their own destiny. This is reflected in their
cooperative status and the way in which they conduct their dayto-day business.
They are firmly rooted in the cooperative movement, which
places the individual – whether a client, member-stakeholder or
employee – firmly at the center of their concerns.
The Banque Populaire banks are incorporated as “sociétés
anonymes coopératives de banque populaire à capital variable” (1).
The banks represent the cooperative dimension of the Banque
Populaire Group.
At the end of 2005, there were 21 Banque Populaire banks: the
19 regional banks, CASDEN Banque Populaire and Crédit
Coopératif.
Under their cooperative status, clients of all of these banks can
become member-stakeholders, providing that they meet the
criteria set out in the bank's membership policy. Returns on
invested capital may not exceed the average yield on bonds
issued by private sector companies.
At year-end 2005, the Banque Populaire banks were owned by
3 million member-stakeholders, embodying the cooperative
spirit on a daily basis.
The cooperative spirit ensures an emphasis on long-term
growth at the Banque Populaire banks. Part of the very essence
of a cooperative company is that it represents the freely elected
association of individuals seeking to provide a long-term solution
to their shared economic requirements.
The importance of these shared cooperative values has allowed
the Group to expand in recent years. In 2003, Crédit Coopératif
decided to become a new Banque Populaire bank, while Crédit
Maritime Mutuel has become a bank affiliated with Banque
Member-stakeholder clients
at the heart of the organization
The status of member-stakeholder clients is unlike any other.Their
capital investment may not be speculative in nature and is not
made with a view to generating a profit through large dividends.
But although member-stakeholders are not traditional investors,
nor are they traditional clients. They subscribe to the key
cooperative value of loyalty. They are committed to a long-term
relationship and have a natural tendency to introduce new clients,
thereby enlarging the mutual base.
Cooperative status gives priority to collective investment over
individual investment.The optimization of profits, a way of assessing
the efficiency of any company, becomes an essential step towards
fulfilling the cooperative company's service to the common
interest. This is a long-term endeavor, and there cannot be any
conflicts of interest between member-stakeholders and clients.
Reserves do not contribute to the value of the shares in the
company but are simply a collective asset owned by current and
future member-stakeholders.
Member-stakeholder clients contribute to the life of the bank: they
understand its constraints, they support its ambitions and help
drive them forward on a daily basis.
Strong regional roots
During 2005, the Banque Populaire banks proudly restated the
features that set them apart. As cooperative regional banks, they
demonstrate every day their closeness to clients in all the
different senses of the term.This cooperative, human dimension
has been adopted as a major pillar of future expansion.
The Banque Populaire banks have retained and developed the
regional focus, that has guided them since their creation. For them,
being a regional bank goes much deeper than simply providing
services in a particular geographical area. It means being fully
involved in and committed to developing the regional economy
and dedicated to serving the local community.
Their 331 Directors, including 18 non-voting Directors (but not
including Crédit Coopératif whose Directors are legal entities)
include 176 business owners or senior executives, 28 tradespeople
and independent retailers, nine farmers and 27 self-employed
professionals. All of them maintain close ties with local community
and business organizations as well as local chambers of commerce,
in many cases serving on their boards.
This involvement of Directors in all areas of regional life gives the
Banque Populaire banks an in-depth understanding and knowledge
of their local economy.They thus cement particularly strong links
with their regions and are key players in regional development.They
serve to reconcile the interests of their member-stakeholders,
clients, staff, and local socio-economic environment.
Prominent regional players
With the European Union increasingly becoming a community of
regions, several Banque Populaire banks have merged to form major
€5,194
million
Net banking income
(1) Except for BRED Banque Populaire, which is a “société anonyme coopérative de banque populaire à capital fixe”.
2005 ANNUAL REPORT
€971
million
Net income attributable
to equity holders
of the parent
65.2%
Cost/income ratio
GROUP STRUCTURE
Distribution clout deriving
from:
brisk expansion of the branch network:
- 131 new branches opened in 2005 (net increase of 115)
successful integration of multi-channel access:
- 87 million internet connections
- overhaul of the internet client offering
regional players. By joining forces to become prominent regional
forces,they are better able to support clients,strengthen their capital
base, sharpen their regional image, win market share and give their
employees increased opportunities to move to new jobs. Today's
new communications technologies provide an opportunity to
redraw the maps and allocate resources more effectively, without
ever losing sight of the overriding need to maintain close relations
between the bank and its member-stakeholders, its clients and the
many other players in the regional economy.
The creation in 2005 of Banque Populaire du Sud, the product
of the merger between Banque Populaire du Midi and Banque
Populaire des Pyrénées-Orientales, de l’Aude et de l’Ariège,
dovetailed perfectly with the major drive to consolidate and
make adjustments implemented over the past few years.
With its 390,000 clients, including 147,000 member-stakeholders
and 142 branches, the new bank is a force to be reckoned with
in the region.With net banking income of B289 million in 2005,
it ranks as the fifth-largest of the Banque Populaire banks.
The formation of Banque Populaire du Sud is an exciting project
for clients, member-stakeholders and the entire staff, which
should help to promote economic development in the region.
Close relationships with clients
Local personalized service forms the cornerstone of the Banque
Populaire Group's client relationships.This unwavering emphasis
on closeness is made possible by highly skilled and motivated
teams and backed up by identification of the best solutions for
each client based on a global approach to their needs.
Every member of staff at the Banque Populaire banks is aware that
the aim is not to get clients to sign up immediately for this savings
product or that loan, but to gain an in-depth understanding of each
client's needs and expectations.This focus on client requirements,
and on the way they change from one moment to the next, has
helped build up momentum right across the Banque Populaire
network. It is this same approach that allows client relationships to
be built and developed over the long term.
The Banque Populaire branch network is steadily expanding.
During 2005, the number of branches increased by a net figure of
115, lifting the total number of branches operated by the Group to
2,807 at year-end December (including both Crédit Coopératif
and Crédit Maritime Mutuel), with two or three new branches
opening on average each week.
02
This dynamic and sustained expansion in the Group's coverage
of France has led to the opening of 755 branches over six years.
For the Banque Populaire banks, local banking remains the main
avenue of expansion thanks to the size, quality and stability of the
client base and the long-term deposits they bring. In practice, this
presence is backed up by local relations in all their various other
forms.
In addition,technological advances in remote banking channels have
enabled subscribers to enjoy online access to all banking services.
The same is true of the 80% of business clients for whom the
Banque Populaire Group provides teletransmission services.
In order to meet all client expectations, the Banque Populaire banks
have strengthened their capabilities in all areas, and particularly in
wealth management, project financing and insurance.
The Banque Populaire Group has also developed the requisite
strategic alliances, drawing on networks such as the SOCAMA
mutual guarantee companies, ACEF and CASDEN Banque
Populaire (cooperative mutual bank serving the employees of the
French national education, research and cultural systems).
Bylaws
The Banque Populaire banks are “sociétés anonymes coopératives de
banque populaire” governed by Art. L. 512-2 et seq. of the Monetary
and Financial Code and the various legislative texts concerning the
Banque Populaire banks, the Cooperative Movement Act of
September 10, 1947,Art. I to IV of book II of the Commercial Code
(Code de commerce), the first chapter of section I of book V and
section III of the Monetary and Financial Code, the related enabling
legislation and by their individual bylaws.
Their bylaws were extensively amended to comply with the
provisions of the Corporate Governance Act of May 15, 2001.
To enable the production of consolidated financial statements
for the Banque Populaire Group under the new IFRS accounting
standards, including IAS 32 regarding debt and equity
Local and close relationships represent
a major factor determining clients'
selection and loyalty to their bank
In local retail banking, the priority and original avenue
of expansion chosen by Banque Populaire Group, various
aspects of proximity come into play:
n geographic proximity through local coverage and
the existence of spheres of influence (the “movers and
shakers” need to be supported),
n situational proximity to stay in close contact when
the client has a project,
n proximity of decision-making,
n and lastly technical proximity through growing use
of tools, such as the internet.
33
instruments, the Board of Directors of Banque Fédérale des
Banques Populaires, meeting on December 15, 2004, requested
the Banque Populaire banks with variable capital to make the
changes to their bylaws needed in order to allow the shares in
these banks to be recognized as capital instruments for
accounting purposes.
These changes to the bylaws were submitted to memberstakeholders at the Combined General Meeting held to approve
financial statements for 2004.
The Banque Populaire banks are licensed to operate as credit
institutions and are thus authorized to conduct the following
transactions:
n all banking transactions with trading and manufacturing
companies, small businesses, agricultural ventures, self-employed
professionals, whether incorporated or unincorporated, as well as
with any other grouping or legal entity, which may or may not be
member-stakeholders.They may also provide services to personal
customers, participate in any and all transactions guaranteed by the
mutual guarantee companies, make loans to holders of CEL
(Compte Epargne Logement) or PEL (Plan Epargne Logement)
home-savings accounts for the acquisition of a residential property,
and collect deposits from private individuals and companies;
n all related transactions as defined in Ar t L. 311-2 of the
Monetary and Financial Code, all investment services governed
by Art. L. 321-1 and L. 321-2 of the Monetary and Financial Code
and all brokerage and insurance transactions;
all real estate and securities investment transactions. They may
purchase any and all marketable securities, for their own account,
and acquire equity interests in any and all companies, associations
and other unincorporated entities and more generally, carry out
any transaction of any type related directly or indirectly to their
corporate purpose and likely to facilitate the development or
achievement of this purpose.
n
Any individual or company is eligible to become a memberstakeholder of a Banque Populaire bank, regardless of whether
they are clients of the bank. To become a member-stakeholder
they must be approved by the bank's Board of Directors and be
recognized as creditworthy.
The bylaws of the Banque Populaire banks state that their Boards
of Directors are not required to explain the reasons for rejecting
any application to become a member-stakeholder.
Member-stakeholders' liability for any losses of a Banque
Populaire bank is limited to the value of their shares in the bank.
All member-stakeholders are entitled to attend General
Meetings and vote on resolutions personally or by proxy, in
accordance with the applicable law and regulations, irrespective
of the number of shares they own.
All member-stakeholders may vote by correspondence using a
postal voting form addressed to the Banque Populaire bank in
accordance with applicable law and regulations.
As stipulated in Art. L. 512-5 of the Monetary and Financial Code,
at General Meetings of the shareholders, no member-stakeholder
may exercise a number of voting rights – including proxy votes and
2005 ANNUAL REPORT
votes in respect of shares held indirectly – representing more than
0.25% of the total voting rights attached to shares of the relevant
Banque Populaire bank.
All shares of the Banque Populaire banks are issued in
registered form. They may not be sold or transferred without
the prior authorization of the Board of Directors.The capital of
all of the Banque Populaire banks (except for BRED Banque
Populaire) is variable. The capital is increased on issuance of
shares to new member-stakeholders or to existing memberstakeholders, in both cases with the prior approval of the Board
of Directors.
The Board of Directors may set a ceiling on the number of
shares that may be held by a single member-stakeholder.
Different ceilings may be set for different categories of
The capital may be reduced by buying back memberstakeholders' shares. If the buybacks were to have the effect of
reducing the capital to less than three-quarters of the highest
amount reached since the Banque Populaire bank was set up, the
prior authorization of Banque Fédérale des Banques Populaires
must be obtained before the capital may be reduced. In addition,
under no circumstances may the capital be reduced to below the
minimum capital required under banking regulations.
The bylaws also stipulate that the dividends paid on shares, as
decided each year by the Annual General Meeting, may not
exceed the average corporate bond yield as published by the
French Ministry of the Economy (Art. 14 of the Cooperative
Movement Act of 1947 and Art. L. 512-3 of the Monetary and
Financial Code).
Dividends on shares acquired or surrendered during the year
are paid pro rata to the number of full months for which the
shares were held.The price at which shares are bought back by
a Banque Populaire bank may not exceed their par value.
Buybacks may be carried out no later than the thirtieth day
following the Annual General Meeting held to approve the
accounts for the year in which the withdrawal of the memberstakeholder and the surrender of his or her shares was
approved by the Board of Directors. In accordance with Art. 39
of the bylaws, dividends are paid no later than nine months after
the end of the financial year. The details of dividend payments
are determined by the General Meeting or, failing that, by the
Board of Directors.
Banque Fédérale des Banques Populaires may authorize the
Banque Populaire banks to capitalize a por tion of their
reserves. In this case, the related capital increase must be for
double the amount concerned, with half being paid up by
capitalizing reserves and half in cash.
In addition, no more than half of the bank’s reserves may be so
capitalized.
In cases where reserves are capitalized on several occasions, the
por tion that may be capitalized on each occasion may not
exceed one half of the amount by which reserves have increased
since the previous capitalization (Art. R.512-1 of the Monetary
and Financial Code).
GROUP STRUCTURE
02
Banque Populaire banks at January 1, 2006
11
15
5
15
5
9
2
13
3
19
4
8
6
10
1
12
17
14
18
7
16
14
End-2005 figures, directors in office as a March 1, 2006
Active employees
1
BANQUE POPULAIRE
DES ALPES
2
BANQUE POPULAIRE
D’ALSACE
3
BANQUE POPULAIRE
ATLANTIQUE
Chairman
JEAN CLOCHET
ALAIN ROGÈS
Chairman
THIERRY CAHN
DOMINIQUE DIDON
Chairman
JEAN-PIERRE CAHINGT
YVES GEVIN
Number of member-stakeholders 96,354
Number of employees
1,352
Number of branches
148
Number of employees
1,293
Number of branches
100
Number of employees
1,470
Number of branches
151
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
www.alpes.banquepopulaire.fr
€506 m
€228 m
€38 m
www.alsace.banquepopulaire.fr
€372 m
€184 m
€23 m
€609 m
€256 m
€36 m
www.atlantique.banquepopulaire.fr
35
4
BANQUE POPULAIRE
BOURGOGNE
FRANCHE-COMTÉ
5
BRED
BANQUE POPULAIRE *
6
BANQUE POPULAIRE
CENTRE ATLANTIQUE
Chairman
JEAN-PHILIPPE GIRARD
BERNARD JEANNIN
Chairman
STÈVE GENTILI
JEAN-MICHEL LATY
Chairman
JACQUES RAYNAUD
GONZAGUE DE VILLÈLE
Number of employees
1,710
Number of branches
176
Number of employees
3,119
Number of branches
301
Number of employees
966
Number of branches
102
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
€645 m
€311 m
€54 m
www.bpbfc.banquepopulaire.fr
7
€1,092 m
€651 m
€132 m
www.bred.banquepopulaire.fr
BANQUE POPULAIRE
CÔTE D’AZUR
8
€268 m
€139 m
€16 m
www.centreatlantique.banquepopulaire.fr
BANQUE POPULAIRE
LOIRE ET LYONNAIS
9
BANQUE POPULAIRE
LORRAINE CHAMPAGNE
Chairman
BERNARD FLEURY
JEAN-FRANÇOIS COMAS
Chairman
HERVÉ GENTY
OLIVIER DE MARIGNAN
Chairman
MICHEL HELLENBRAND
JACQUES HAUSLER
Number of employees
989
Number of branches
93
Number of employees
1,194
Number of branches
91
Number of employees
1,496
Number of branches
137
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
€211 m
€154 m
€18 m
www.cotedazur.banquepopulaire.fr
10
BANQUE POPULAIRE
DU MASSIF CENTRAL
€385 m
€190 m
€31 m
www.loirelyonnais.banquepopulaire.fr
11
BANQUE POPULAIRE
DU NORD
€653 m
€278 m
€32 m
www.lorrainechampagne.banquepopulaire.fr
12
BANQUE POPULAIRE
OCCITANE
Chairman
DOMINIQUE MARTINIE
CHRISTIAN DU PAYRAT
Chairman
JACQUES BEAUGUERLANGE
GILS BERROUS
Chairman
JEAN-PAUL MALRIEU
ALAIN CONDAMINAS
Number of employees
854
Number of branches
85
Number of employees
1,061
Number of branches
88
Number of employees
1,052
Number of branches
103
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
€249 m
€123 m
€17 m
www.massifcentral.banquepopulaire.fr
2005 ANNUAL REPORT
www.nord.banquepopulaire.fr
€266 m
€144 m
€17 m
€331 m
€167 m
€30 m
www.occitane.banquepopulaire.fr
GROUP STRUCTURE
13
BANQUE POPULAIRE
DE L’OUEST
14
BANQUE POPULAIRE
PROVENÇALE ET CORSE
15
02
BANQUE POPULAIRE
RIVES DE PARIS
Chairman
PIERRE DELOURMEL
YVES BREU
Chairman
JEAN-LOUIS TOURRET
FRANÇOIS-XAVIER DE FORNEL
Chairman
MARC JARDIN
JEAN CRITON
Number of employees
1,394
Number of branches
126
Number of employees
734
Number of branches
79
Number of employees
2,598
Number of branches
201
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
€533 m
€245 m
€32 m
www.ouest.banquepopulaire.fr
16
€222 m
€112 m
€19 m
www.provencecorse.banquepopulaire.fr
BANQUE POPULAIRE
DU SUD
17
BANQUE POPULAIRE
DU SUD-OUEST
€781 m
€454 m
€62 m
www.rivesparis.banquepopulaire.fr
18
BANQUE POPULAIRE
TOULOUSE-PYRÉNÉES
Chairman
CLAUDE CORDEL
FRANÇOIS MOUTTE
Chairman
JEAN-LOUIS D’ANGLADE
FRANCIS THIBAUD
Chairman
MICHEL DOLIGÉ
RICHARD NALPAS
Number of employees
1,664
Number of branches
142
Number of employees
865
Number of branches
97
Number of employees
1,074
Number of branches
107
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
€556 m
€289 m
€51 m
www.sud.banquepopulaire.fr
19
€293 m
€162 m
€26 m
www.sudouest.banquepopulaire.fr
BANQUE POPULAIRE
VAL DE FRANCE
20
CASDEN
BANQUE POPULAIRE **
€387 m
€188 m
€36 m
www.toulousepyrenees.banquepopulaire.fr
21
CRÉDIT
COOPÉRATIF **
Chairman
JEAN-PIERRE TREMBLAY
YVAN DE LA PORTE DU THEIL
Chairman
PIERRE DESVERGNES
Chairman-Chief Executive Officer
JEAN-CLAUDE DETILLEUX
Number of employees
2,126
Number of branches
201
Number of member-stakeholders 1,051,800
Number of employees
431
Number of branches
1
Number of employees
1,547
Number of branches
98
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
Regulatory capital
Net banking income
Net income
€851 m
€335 m
€61 m
www.bpvf.banquepopulaire.fr
www.casden.banquepopulaire.fr
€982 m
€186 m
€55 m
€649 m
€288 m
€34 m
www.credit-cooperatif.coop
* BRED Banque Populaire is also present in the overseas departments and territories of Martinique, Guadeloupe, Guyanne, Mayotte and Réunion.
** Banque Populaire banks with national coverage.
37
BANQUE FÉDÉRALE DES BANQUES POPULAIRES
n
Central body and guarantor of the
Group's liquidity and capital adequacy
n
Natexis Banques Populaires' holding company
A
bank with major responsibilities: promoting
the Group's development, developing strategy,
and supervising, coordinating and managing
the Group.
In 2005, Banque Fédérale des Banques Populaires strengthened
its role as the driving force of the Group's dynamism, its central
body and holding company. It introduced a new organization to
contend with the changes in the banking industry and to go
even fur ther towards meeting the Group's leadership and
coordination needs.
The Executive Committee
Banque Fédérale des Banques Populaires' Executive Committee
has the following members:
Philippe DUPONT, Chairman and Chief Executive Officer
Michel GOUDARD, Deputy Chief Executive Officer
Bruno METTLING, Deputy Chief Operating Officer
Françoise BOURGEOIS, Senior Executive Vice President, Finance (1)
Francis CRÉDOT, Senior Executive Vice President, Legal Affairs
and Compliance
Tanguy du CHÉNÉ, Senior Executive Vice President, Human
Resources (2)
Chantal FOURNEL, Senior Executive Vice President, Logistics
and Organization
Bernard GOURAUD, Senior Executive Vice President,
Technologies
Olivier HAERTIG, General Secretary
Pierre JACOB, Senior Executive Vice President, Group Financial
Communication
Josianne LANCELLE, Senior Executive Vice President, Strategy
Martine LEFEBVRE, Senior Executive Vice President, Internal
Audit and Risk Management
Patrick MAHEUT, Senior Executive Vice President, Business
Development
The Group Risks department was set up as part of Banque
Fédérale des Banques Populaires' new organization structure.
Banque Fédérale des Banques
Populaires' new organization
structure
The major changes in the Group (mergers, creation of i-BP,
integration of Coface, Crédit Coopératif and Crédit Maritime
Mutuel, etc.) and in the landscape of the banking industry since
2000 (Basel II, IFRS, new requirements introduced by supervisory
authorities, ratings agencies, etc.) prompted Banque Fédérale
des Banques Populaires to review its organization structure to
better meet its regulatory obligations, especially its risk and
compliance-related imperatives, and the additional expectations
of the Group.
This organization reflects Banque Fédérale des Banques
Populaires' drive to step up its role and enhance its capabilities
in its three key roles as the central body, holding company and
head of the network. Presented on November 16, 2005 to
Banque Fédérale des Banques Populaires' Board of Directors,
the new organization structure features the addition or
strengthening of six departments:
n a Strategy department organized into three units, responsible
for Strategic Intelligence, Strategic Planning and Analysis of
acquisition and international expansion opportunities through
the Partnerships and Shareholdings unit;
n a Finance depar tment including Financial Management
(optimization of the Group's ALM and refinancing), Financial
Control (monitoring and analyzing the performance of the
Group's various entities, especially its holding company
responsibilities) and Accounting-consolidation (production and
analysis of the Group's regulatory submissions, drafting of the
relevant annual report);
n a Group Internal Audit and Risk Management department
responsible for monitoring the coherence and efficacy of the
Group's internal control system, risk management and the
financial condition of the Banque Populaire Group's banks. Its
role includes regular audits of all the Group's units, coordination
of the internal audit function and reporting to authorities and
internal governance bodies;
n a Risks department, which is separate from Internal Audit and
Compliance, with powers to monitor and manage the Group's
risks. It is organized into two units: Risk control and BFBP
Permanent Control;
a Legal Affairs and Compliance department, with a Compliance
unit reporting to the Legal Affairs department to monitor and
control compliance failure risks of all types (legislative, regulatory,
professional standards, code of conduct) within the Group;
n
(1) As of April 2006, Françoise Bourgeois is replaced by Alain David.
(2) As of July 2006, Tanguy du Chéné is replaced by Bérangère Grandjean.
2005 ANNUAL REPORT
GROUP STRUCTURE
n a restructured Business Development department, with the
creation of a new Research, Marketing, Distribution unit,
alongside a Markets unit covering the various client markets, and
a Communications unit handling corporate communications
centered around the brand, commercial communications and
sponsoring.
The scope of the other departments' responsibilities and
organization (Group Investor relations, General Secretariat,
Human Resources, Technologies, Logistics and Organization)
remains unchanged and they continue to perform the same duties
as previously.
By expanding Banque Fédérale des Banques Populaires' role and
resources, the Group has significantly boosted its leadership,
coordination and analytical capabilities.
Representing the Group
Banque Fédérale des Banques Populaires is the central body of
the Banque Populaire Group. It combines the functions of the
former Chambre Syndicale des Banques Populaires, namely
internal guardianship and control functions and the role of the
central body within the meaning of French banking law, and of
the former Caisse Centrale des Banques Populaires, which in
1999 refocused on the management of cash surpluses at the
Banque Populaire banks and its role as holding company of
A bank in its own right, subject to French banking law, Banque
Fédérale des Banques Populaires plays a role that sets the
Banque Populaire Group apart from other banking institutions.
Banque Fédérale des Banques Populaires does not head the
Banque Populaire Group, but rather operates at the heart of the
organization. It is responsible for determining Group strategy,
coordinating the network, managing the mutual guarantee
mechanism and supervising subsidiaries, notably Natexis
Banques Populaires, for which it is the holding company.
Banque Fédérale des Banques Populaires’ decision-making body,
the Board of Directors, consists of nine Chairmen and six Chief
Executive Officers of Banque Populaire banks. The Board of
Directors is the Group's main governing body, and its decisions
apply to the Group as a whole, as well as to all of its component
parts. In keeping with the Group's cooperative values and its
federal structure, the members of the Board are elected by
their peers for a three-year term. One-third of Directors retire
by rotation each year.The Board of Directors plays an essential
role in the Group's development, and Directors devote one
third of their time to Board matters, meetings of the Banque
Fédérale des Banques Populaires Board, the Boards of
subsidiaries and the Group Risk Management Committee.
A cooperative organization
The active involvement of all Group banks also results in Banque
Fédérale des Banques Populaires organizing regular working
parties and discussions: the Federal Committee, which brings
together members of the Boards of Directors, Commission
02
Chairmen and senior managers; the Federal Conference, open
to all Chairmen, Chief Executive Officers and other senior
managers; and Federal Commissions, which consider various
topics at the request of the Board of Directors and on the
recommendation of the Chairman of the Group.
The cross-Group commissions contribute their views and their
expert opinions in areas such as development, communication,
technology and information systems, risk management and
finance, human resources and development in Europe and
internationally.
Federating strategic projects
Positioned at the heart of the Banque Populaire Group, Banque
Fédérale des Banques Populaires continued in 2005 to initiate
strategic decisions affecting the Group and support their
implementation. Banque Fédérale des Banques Populaires drives
the Group’s planning processes, and is thus fully involved in
identifying and preparing key decisions for the future of the Group.
As par t of this role, it acquires (majority and other)
shareholdings in foreign banks. Through Banque Fédérale des
Banques Populaires, the Group is, for instance, the majority
shareholder in BICEC, the leading bank in Cameroon. Banque
Fédérale des Banques Populaires also owns an interest of 1.98%
DZ Bank (the central body of a network of close to 1,400
German cooperative banks).
More recently, Banque Fédérale des Banques Populaires
acquired a shareholding of 24.5% in the capital of VBI, a holding
company set up in partnership with ÖVAG (the central body of
the Austrian popular banks) and DZ bank and WGZ Bank
(German cooperative central banks).
VBI's subsidiaries are present in eight Central European
countries. Their sales and marketing activities are focused on
local SMEs, local authorities and project financing.VBI already has
150 offices and plans to open another hundred by 2008.
Banque Fédérale des Banques Populaires had previously initiated
the strategic decision to acquire Coface, a global specialist in
credit insurance and credit management services (via Natexis
Banques Populaires, which now owns 100% of Coface's capital).
Banque Fédérale des Banques Populaires also prepared the
entry of Crédit Coopératif as one of the Banque Populaire
banks, as well as the affiliation of Crédit Maritime Mutuel.
Banque Fédérale des Banques Populaires owns 65.8% of the
capital of MA Banque, a bank set up in conjunction with
insurance companies MAAF and MMA, which also have a stake
of 34.1% in MA Banque's capital.
Guaranteeing the Banque
Populaire Group's liquidity and
capital adequacy
Banque Fédérale des Banques Populaires meets the requirement
of French banking law that mutual banks should have a central
body responsible for guaranteeing their liquidity and capital
39
adequacy and for supervising and controlling the activities of the
Group. Banque Fédérale des Banques Populaires is thus also in a
position to offer other banks and financial institutions seeking
such a central body the oppor tunity to join the Banque
Populaire Group.
The guarantee system is backed by the capital of all the banks
covered, through a mutual support mechanism (see Internal
Financing Mechanisms, page 24). All Banque Populaire banks,
together with the mutual guarantee companies guaranteeing the
loans of these banks, are covered by this mechanism.
Through this system, Banque Fédérale des Banques Populaires
can trigger the mutual support mechanism by calling on the
other Banque Populaire banks to contribute capital within the
limit of their own resources. As a last resort, Banque Fédérale
des Banques Populaires will provide capital from its own
resources to ensure the continued liquidity and capital adequacy
of the Banque Populaire banks. Thus the liquidity and capital
adequacy of the Banque Populaire banks is guaranteed by two
complementary systems of protection.
The federal solidarity fund is a component of Banque Fédérale
des Banques Populaires' fund for general banking risks. It may call
upon the Banque Populaire banks to top up the level of this fund
should the need arise.
Likewise, the regional solidarity funds perform the same role for
the Banque Populaire banks. These funds are par t of their
guarantee fund for general banking risks. In addition, all members
of the network contribute to the “Fonds de Garantie des
Dépôts” (deposit guarantee fund) set up in application of the
Depositors' Protection Act.
Holding company of Natexis
Banques Populaires
Listed in compar tment A of Paris Eurolist, Natexis Banques
Populaires is the Banque Populaire Group's financing, investment
banking and services bank. It is directly controlled by Banque
At December 31, 2005, Banque Fédérale des Banques Populaires
owned 75% of Natexis Banques Populaires, including the 2.1%
held by the Alizé Levier mutual fund.
Strategic decisions concerning the Group's investment in
Natexis Banques Populaires are taken by the Board of Directors
of Banque Fédérale des Banques Populaires.
A credit institution in its own right
As a credit institution licensed to conduct banking transactions,
Banque Fédérale des Banques Populaires manages a cash pool
for the Banque Populaire banks and also meets their refinancing
needs. Banque Fédérale des Banques Populaires entrusts the
bulk of responsibility for these tasks to Natexis Banques
Populaires under a specific agreement.
More generally, as the Banque Populaire Group's central
treasurer, Banque Fédérale des Banques Populaires is authorized
2005 ANNUAL REPORT
to conduct all types of banking transactions and to provide any
investment services designed to facilitate performance of these
duties.
Coordinating major Group projects
The Directors of Banque Fédérale des Banques Populaires are
also tasked with planning projects and checking their overall
feasibility before handing responsibility for them over to other
Group units for implementation.
This approach is applied both to products and projects shaping
the Group's activities.
During 2005, work continued on a number of major projects,
such as preparations for the new capital adequacy Ratio (the
Mac Donough ratio) and IFRS accounting standards (the first
Group-wide consolidation under IFRS was completed for the
period ended June 30, 2005) and further migration to i-BP, the
Group's shared IT platform.
The i-BP project made considerable progress in 2005, with five
regional banks migrating to the shared platform.These successful
migrations were completed with no interruption to normal
business, ensuring that the same high level of service quality was
maintained throughout.
In addition, Banque Fédérale des Banques Populaires participated
in efforts to bring the internal control system of the Group's
banks into line with the requirements of Regulation 97-02, by
formalizing operating rules for the Risk, Compliance and Audit
functions.
GROUP STRUCTURE
02
N
atexis Banques Populaires builds long-term
partnerships, on both the national and international level, with a client base of large and
medium-sized companies, institutional clients and the
Banque Populaire network.
A major player in financing, investment banking and services,
Natexis Banques Populaires, the Banque Populaire Group's listed
vehicle, works with nearly all major French companies and
institutions. Active in bancassurance and a recognized asset
manager, it is also a leading force in employee savings in France.
Through its subsidiary Coface, it is one of the world's leading
providers of credit insurance and credit management services.
Brisk pace of expansion
Avenues of expansion
Natexis Banques Populaires has started to deploy its mediumterm plan, which rests on four major pillars:
- diversification of and capitalization on the revenues generated
by its large and medium-sized corporate and institutional clients;
- leveraging the expansion potential of the Banque Populaire
banks and their client bases;
- optimization of the strong positions acquired in specialized
business lines;
- expansion of Natexis Banques Populaires' international
positions.
Efforts to implement these avenues of expansion led to a rampup during 2005 in cross-selling between corporate and
institutional client segments and an increase in the synergies
harnessed between business lines; the new sales and marketing
organization introduced for these client segments also facilitated
closer performance monitoring.
A new Strategy department is now tasked with updating and
monitoring this plan.At the same time, the bank strengthened its
strategic management and internal control systems, as well as its
tools for managing and controlling risks, including operational
risks.
Furthermore, this plan is closely coordinated with the aims of the
Group's strategic plan, in which it is involved.
Strategic management and internal control
systems strengthened
Natexis Banques Populaires defined an enterprise systems
development plan in 2005, with the aim of overhauling the
architecture of the bank's financial and cost accounting, financial
control and risk management systems. Apart from its regulatory
aspects, this program aims to develop cross-functional strategic
management tools and to foster the development of synergies
between business lines, leading to a comprehensive client
approach.
Natexis Banques Populaires has continued to build up its market
risk management and supervision teams. The internal control
system was also strengthened in areas defined in the plan as
having special ambitions, i.e. Natural Resources and Related
Industries, Global Debt & Derivatives Markets.
In 2005, deployment of the operational risk management project
continued. Launched by the Banque Fédérale des Banques
Populaires, it aims to map operational risks and implement
systems to manage and consolidate them.
International expansion
In line with its priorities, Natexis Banques Populaires continued
to strengthen its activities in Italy, Spain and Germany. Growth in
these countries was driven primarily by the capital markets,
structured finance and leasing businesses.
In the US, during 2005, Natexis Banques Populaires adopted a
new organization structure better suited to the business lines
and client segments that it wants to expand in the region.
Lastly, Coface actively continued to develop its receivables
management businesses abroad.
The Group's drive to enhance the coordination and
effectiveness of its various foreign units prompted country
managers to be given a stronger leadership role, while various
functions were pooled to a greater extent in the United States
and in the United Kingdom.
New partnerships
Natexis Banques Populaires continued in 2005 its policy of
forging long-term par tnerships in business lines employing
advanced technology.The IT platform used by MA Banks, a new
banking joint venture between the Banque Populaire Group
(65.8% interest) and MMA/MAAF (34.1% stake), is being
developed by Natexis Banques Populaires.
BNP Paribas and the Banque Populaire Group, for which Natexis
Banques Populaires handles electronic banking, signed an
agreement in December 2005 to create a common electronic
banking development platform in their retail banking units.
Named Par tecis (PARTnership European Card Information
System), the unit is a 50-50 joint venture between the two
banking groups.
13,000 income
33%deriving
of net banking 117 international
from
offices
Close to
employees
outside France
41
Strong rise in 2005 results
+14%
+23%
695
1,034
2004
488
2005
2004
2005
843
GROSS OPERATING
INCOME
NET BANKING INCOME
2005
3,091
2,707
2004
+43%
NET INCOME
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
+12%
79.4
106.4
TIER ONE RATIO
AVERAGE OUTSTANDING
LOANS
2004: under IFRS excl. IAS 32-39 and IFRS 4
(1) Including wealth management
Finally, Natexis Altaïr now houses all of i-BP's mainframe
machines (informatique-Banque Populaire) and delivers a
growing number of value-added services to i-BP and the Banque
Populaire regional banks. In particular, internet access common
to the entire Banque Populaire Group was implemented in 2005,
ensuring a very high level of security.
Four core businesses for greater
sales efficiency
Corporate and Institutional Banking and
Markets
Serving both corporate and institutional clients, the Corporate
and Institutional Banking and Markets core business proposes
solutions for customer needs – be they in loans and cash
management, capital markets, employee savings or asset
management – by drawing on all the business lines of Natexis
Banques Populaires.Two business development departments –
2005 ANNUAL REPORT
31/12/2004
87.3
2005
2004
12/31/2005
01/01/2005
70.6
12/31/2005
8.3% 8.3%
+22%
ASSETS UNDER
MANAGEMENT (1)
106,400002
106,400002
106,400002
85,120001
85,120001
85,120001
63,840001
106,400002
63,840001
106,400002
63,840001
106,400002
42,560001
85,120001
42,560001
85,120001
42,560001
85,120001
21,280000
63,840001
21,280000
63,840001
21,280000
63,840001
0,000000
42,560001
0,000000
42,560001
0,000000
42,560001
21,280000
21,280000
21,280000
0,000000
0,000000
0,000000
one dedicated to corporate clients, the other to institutions –
provide strategic and marketing intelligence for these client
segments and coordinate the salesforces of the specialized
business lines.
The Corporate and Institutional Banking and Markets core
business has been organized into six business lines since late
2004: Corporate France, International depar tment, Natural
Resources and Related Industries, Global Debt & Derivative
Markets, Equity Group and Mergers & Acquisitions.
Private Equity and Wealth Management
The Private Equity and Wealth Management core business
includes Natexis Private Equity, Banque Privée Saint Dominique
and Natexis Private Banking Luxembourg S.A.
Natexis Private Equity and its subsidiaries, which specialize in
private equity business lines, play a role in every stage of a
company's development, from incorporation to pre-flotation
financing via mezzanine financing. Natexis Private Equity builds
relationships with investors and entrepreneurs based on its
GROUP STRUCTURE
02
values of commitment and entrepreneurship. Banque Privée
Saint Dominique, dedicated to private asset management,
personalizes its approach to managing wealth by combining
management of a diversified investment portfolio with legal and
tax advisory services. Natexis Private Banking Luxembourg S.A.
is specialized in international estate planning.
Services
With over 2,500 employees, the Services core business now
comprises six business lines, ranging from asset management,
insurance and employee benefits planning to financial services
(custodial), banking services (electronic banking) and investor
servicing.
It has two objectives.The first is to support the Banque Populaire
regional banks and help them achieve their growth and new
business development goals through the design of products and
systems.The second is to enhance the range of services for nonGroup client segments (corporate and institutional clients, retail
banks, specialized banks with or without networks and financial
institutions).
Synergies between these business lines are leveraged to develop
high value-added industrial and technological processes, as well
as increasingly seamless information systems to provide an
effective range of products and services, designed for maximum
business coherence and profitability.
Receivables Management
Receivables Management houses the combined resources and
expertise of Coface and Natexis Factorem. It enables companies
to optimize, in whole or in part, the financial management of
their customer and supplier relationships. This core business
comprises four business lines: company information, receivables
management, credit insurance and factoring, enabling all
businesses to manage, protect and finance their accounts
receivable. Natexis Banques Populaires is at the forefront of
these four businesses in France and across the globe.
Coface offers corporate clients a broad spectrum of receivables
management solutions through its own network spanning 58
countries and through those of its partners in the CreditAlliance
network (insurance and service companies).
Natexis Factorem operates its business predominantly through
the Banque Populaire Group's network.
This multi-network strategy is one of the strengths of the
Receivables Management core business, enabling it to maximize
the volume of customer sales it handles.
43
THE GROUP’S INTERNATIONAL OFFICES
Present in 68 countries
ALICANTE
AMSTERDAM
BARCELONA
BERLIN
BIELEFELD
BIELLA
BIRMINGHAM
BONN
BRATISLAVA
BREDA
BRUSSELS
BUCHAREST
BUDAPEST
COLOGNE
DUBLIN
DÜSSELDORF
ESCHBORN
FRANCFURT
FREDERIKSBURG
HAMBURG
HANOVER
ISTANBUL
KARLSRUHE
KIEV
LA CORUÑA
LAUSANNE
LINZ
LISBON
LJUBLJANA
LONDON
LOUVAIN-LA-NEUVE
LUXEMBOURG
MADRID
MAYENCE
MILAN
MONACO
MOSCOW
MUNICH
NUREMBERG
OSLO
PRAGUE
RIGA
ROME
2005 ANNUAL REPORT
ST-PETERSBURG
SAN SEBASTIAN
SEVILLE
SOFIA
STOCKHOLM
STUTTGART
TALLINN
VALENCIA
VIENNA
VILNIUS
WARSAW (1)
WATFORD
ZAGREB
ZURICH
Coface
Joint network
(1) BISE: subsidiary of Crédit Coopératif
(2) BICEC: subsidiary of Banque Fédérale
To find out more, visit:
www.banquepopulaire.fr
GROUP STRUCTURE
ALMATY
BANGALORE
BANGKOK
BEIJING
HANOI
HÔ CHI MINH CITY
HONG KONG
JAKARTA
KUALA LUMPUR
LABUAN
MUMBAI
BALTIMORE
BOGOTA
BUENOS-AIRES
CARACAS
CHICAGO
EAST WINDSOR
FAIRFIELD
GLENDALE
GREENWICH
GUAYAQUIL
HOUSTON
LIMA
LOS ANGELES
MEXICO
MIAMI
MONTREAL
NEW HAVEN
NEW YORK
PANAMA
PIERREFONDS
QUITO
SAN JOSE
SANTIAGO
SÃO PAULO
02
NEW DELHI
OSAKA
SECUNDERABAD
SEOUL
SHANGHAI
SINGAPOUR
SYDNEY
TAIPEI
TEHRAN
TOKYO
YANGON
ABIDJAN
ALGIERS
BAMAKO
BNEI-BRAK
CAIRO
COTONOU
DAKAR
DOUALA (2)
DUBAÏ
JOHANNESBURG
LOME
ORAN
OUAGADOUGOU
SANDTON
SETIF
45
Group Business Review
€8,242
million
in net banking income
8.5%
€1,522
million in net income
attributable to equity holders of the parent
Tier one ratio
The Banque Populaire Group maintains a close relationship with its clients through its
dense network and its emphasis on listening to participants in the markets it serves and
holds a leadership position in numerous areas.
PERSONAL CUSTOMERS
T
he personal banking market was bolstered
during 2005 by further major efforts made by
Banque Populaire employees. This hard work,
backed up by the network's successful positioning, as
well as appropriate organization and resources,
boosted the drive to win new and secure the loyalty of
existing clients, which was launched several years ago.
Client – and growth – oriented
organization
The Banque Populaire banks, which have always been firmly
rooted in their region, have always maintained a close
relationship with their clients – both geographically and through
a major emphasis on the human dimension.This proximity was
further heightened last year through an active policy of opening
new branches. During 2005, the Group opened around two or
three new branches each week, with a total of 131 new
branches over the year. Taking closures and transfers into
account, the Group's total branch por tfolio grew to 2,807
branches.
In addition, the Banque Populaire banks continued to recruit
regularly and actively.The year was marked by a further increase
in the number of personal banking advisors, with a rise of 422 in
the total number compared with year-end 2004.
new needs of its personal customers. This policy should enable
employees of the Group's branches to spend more time on
higher value-added advisory activities through the development
of automatic and remote services handling the most mundane
tasks. Aside from the extension of the ATM and banking terminal
network, with 182 new units added, the Group expanded its
internet banking channel.The number of clients using the online
service rose by 37%. Consultations continued to increase, with an
average of 1.6 million logins per week, bringing the annual total to
87 million.
The 25 contact centers, which are designed to enhance advice
and increase the availability of personal banking managers,
worked hard to make progress. They provide clients with a
service complementing their relationship with their branch, with
780 staff on hand to take their call. They answered 9.5 million
incoming calls, made 660,000 outgoing sales-oriented calls and
handled 400,000 e-mails.
During 2005, a new online stock market platform was launched
under the OIC banner. It encompasses LineBourse, the existing
service for clients managing their investment portfolio very
actively, and LineDefi, which is geared primarily for clients keen on
checking up on the current value of their stock portfolio. At yearend 2005, the Group had 65,000 securities accounts and
processed 257,000 orders.
The Group also continued to expand communication via SMS
text messages.The SMS+ service, marketed under the “6 11 10”
banner and highly popular with young clients, informs clients of
their bank balance, most recent transactions and credit card
spending via their mobile phone.
Constant efforts to bolster the sales and marketing organization
across all client segments paved the way for the successful
implementation of continuous high-impact campaigns, most notably
“Dual Auto”,“Dual Immo”,“Cap 100,000” and “Je m'installe.”
Resources devoted to
strengthening relationships
To reinforce its banking relationship with its clients, the Group
pursued a policy of investing the requisite resources to meet the
2005 ANNUAL REPORT
6,130,000 personal customers
+12%
é
billion
€52.0
in outstanding loans
+6%
é
€52.3
billion
in customer deposits
+13%
é
€27.2
billion
of life insurance in force
GROUP BUSINESS REVIEW
Assurbanque:
Creation of MA Banque
The Banque Populaire Group strengthened its
partnership with MAAF and MMA by creating
the MA Banque joint venture in late 2005.
This balanced partnership, which reconciles the interests
of the producer with those of the distributor, helps
both insurers to add banking services to their existing
range of insurance products.The new services are
geared to meeting the everyday banking needs of their
This bancassurance partnership has already yielded
promising commercial results.The network of
MMA's general agents sold 3,200 motor finance
loans during the last five months of the year and
opened 25,000 passbook accounts, generating
€130 million in net new money over just two months.
High-performance products
Despite a highly competitive environment, the network posted a
very firm performance on the savings and deposits front, with
strong net new money inflows and new lending thanks to a brisk
pace of new business.
Growth in customer deposits ran at 6% in 2005 on the back of
strong performances in both passbook savings accounts (growth
of 11%) and in home savings accounts (5%).
Customer savings posted significant increases across all the
various components. Success in life insurance led to an increase
of 11% in life insurance in force to B27.2 billion, with a 14% rise
in net new money to B3.6 billion.The growth in net new money
was notably underpinned by the successful launch of the special
“Odeis 2005” fund.
03
The Group strengthened its positions in property and casualty
insurance. Its teams swung into action, enabling the Group to
meet its initial sales targets of a 29% increase in gross production
from a total of over 500,000 policies.
The Banque Populaire Group is one of the only bancassurers to
offer a dedicated range of homeowners insurance for homesharing, an increasingly common practice owing to the high level
of rents and the scarcity of properties for rent.
The “Dual Auto” and “Dual Immo” campaigns made a significant
contribution to these performances.These novel products comprising insurance and a loan attracted extensive media interest.
These new launches, which were attuned to client needs, were
instrumental in the results achieved in both proper ty and
casualty insurance and in consumer and mortgage loans.
Business trends in personal loans were particularly healthy and
helped to build the loyalty of existing clients and to win new
clients.
Expansion in revolving credit continued, with the roll-out of the
full range of Novacrédit solutions. The drive to win new clients
by increasing penetration was spearheaded by the “Réserve
Banques Populaires Aurore” and “Réserve Plus” cards, which are
dedicated to this type of revolving credit. In 2005, the number of
cards rose by 13% to 203,000, with outstanding loans moving up
9% to B105 million.
During 2005, installment consumer loans also enjoyed expansion, with volumes outstanding moving up 5% to B8 billion and
new lending reaching B3.4 billion.
Spurred on by supportive economic conditions (strong demand
and advantageous interest rates), new mor tgage lending
reached exceptionally high levels, with lending volumes rising
15% to B13 billion. As a result, mortgage loans outstanding
stood at B44 billion.
In pension funds, new clients were acquired regularly through the
sale of 43,000 PERP plans, representing growth in excess of the
market average.
The volume of mutual funds managed on behalf of personal
customers amounted to over B19 billion. The major share
placements and the firm performance of the capital markets
provided favorable conditions for PEA equity savings plans, which
posted a 32% increase in managed assets.
The development of services for the Banque Populaire banks'
mass affluent clients (specialized departments and mass affluent
branches), plus the products and services marketed by Banque
Privée Saint Dominique provide our wealthiest clients with a
range of high value-added investment products, backed up by a
broad and detailed analysis of their asset por tfolio. At
December 31, 2005, the total volume of managed assets came
to over B5.3 billion.
A leading force in
solidarity-based savings
The 2005 survey of solidarity-based finance published in
November by Finansol confirmed the Group's position
at the forefront of the solidarity-based savings segment.
With its extensive range of Finansol-approved products,
Crédit Coopératif is a major player in solidarity-based
savings. Likewise, Natexis Asset Management and Natexis
Interépargne hold prominent positions in solidaritybased employee savings, with €150 million in managed
assets at December 31, 2005 (growth of 52%).
47
Expansion momentum
The combination of a finely tuned organization plus resources
and products geared to market expectations made 2005
another year of expansion for Banque Populaire Group. By
signing up 250,000 new clients, the Group increased the
number of personal clients to 6.1 million. Gains were
particularly strong among young people, with over 137,000
new clients less than 25 years old joining the Group compared
with at year-end 2004.
While striving to win new clients, the Group consistently
maintained its efforts to serve existing clients and to support
their various projects.
Given the fierce competition prevailing, performance in the
personal banking market during 2005 was first-class. This
growth momentum helped to boost the Group's spontaneous
recall rate, which reached 39.6%, and to promote a positive
image among consumers.
Younger clients served by an extensive range
of products geared to their needs
Winning young clients is one of Banque Populaire Group's
priorities, and it has implemented specific measures to attract
them.
Its marketing campaigns in this market revolve around the
“special moments” in life and use cinema and internet-related
themes.
The Group offers children less than 12 years old their first
savings account, the “Premier pas” passbook.
For young people less than 18 years old, “Passpop” offers a
combination of available savings through the “Banque Populaire
Livret Jeune” passbook account and a debit card. A monthly
account statement enables accountholders to monitor their
spending.
Adults aged less than 25 can benefit from an exclusive product
range, with the “Equipage Horizon” package covering the daily
running of their account, as well as helping them to deal with the
major milestones in their life, such as moving into a new home.
For instance, the “Je m'installe” (I'm moving in) package provides
a rental guarantee to help them find accommodation, pays for
moving-in costs and insures their home.
The Group also joined in efforts to promote the products set up
by the authorities, including loans to buy laptop PCs (Prêt PC)
for B1 and loans towards driving lessons (Prêt Permis) for B1.
Fresh impetus in the civil servant market
The Group strengthened its position in banking services for civil
servants through CASDEN Banque Populaire and Associations
pour le Crédit et l’Epargne des Fonctionnaires (ACEF).
Together with the Banque Populaire regional banks, CASDEN
Banque Populaire decided to inject fresh impetus into its efforts
to win new clients working for the French national education,
research and culture systems. For the first time, they embarked
2005 ANNUAL REPORT
together on a nationwide campaign called “Cap 100,000”. This
campaign put them in contact with numerous prospects and
boosted the pace of customer acquisitions at CASDEN Banque
Populaire.The key objective of the program is to consolidate and
expand the company's position as the leading player in this
market. CASDEN Banque Populaire, a nationwide cooperative
bank, is backed up by a network of 104 departmental offices,
3,500 correspondents in schools and the 2,807 Banque
Populaire branches.
ACEF, which was set up to provide civil servants a range of
savings and lending products on preferential terms, forged closer
links with the Banque Populaire banks. Since it shares the same
values of solidarity and cooperation, ACEF has aligned its
organization with that deployed by the Banque Populaire banks
to help win new members.
Successful IPOs
The Sanef, Gaz de France and EDF IPOs were all
successes for the Group.The Group's ability to mobilize
all the relevant teams for these IPOs at the Banque
Populaire banks, Banque Fédérale des Banques Populaires
and Natexis Banques Populaires enabled it to land
670,000 orders worth close to €900 million in total
for the three flotations.
SMALL BUSINESSES
For instance, the Group has over 5,000 employees specializing in
the small business sector. In the farming segment, it boasts over
100 experts and 400 advisors distributed across the branch
network, who are dedicated to serving this client segment.
T
In addition, the integration of Crédit Maritime Mutuel within the
Group, the leading bank for small fishing industry businesses, and
the affiliation of each branch with one of the Banque Populaire
regional banks on the French coastline have increased the
efficiency of the commercial network.
he Banque Populaire Group is the leader in the
main segments of the small businesses market.
Thanks to the breadth of its expertise and the
special ties it has forged with small business
organizations,it is able to support clients at every stage
of their life, from the incorporation of a new business
to the transfer of businesses, by offering suitable
products and services.
In 2005, the Banque Populaire Group consolidated its prominent
position by further enhancing its range of products and services.
It built on its position as number two in the French small business
market, by securing a penetration rate of 20% in this market.(1)
A major force
Founded by tradespeople over one century ago, the Banque
Populaire Group is the leading bank for small trades-oriented
businesses. It also caters to the needs of its other small business
clients, predominantly farmers, self-employed professionals and
business entrepreneurs. Number one in loans for starting or
acquiring a business, and number one in franchise financing, the
Group is also the leading player in the cards market (for small
businesses) and the top bank in factoring for small businesses.
In addition, its longstanding partnership with the SOCAMA mutual
guarantee companies has enabled the Group to develop some
highly innovative products, including “Prêt Express Socama” loans
without personal guarantees for clients' equipment purchases and
“Prêt Socama Transmission-Reprise” buy-in/buy-out financing.Their
goals of facilitating access to credit and ensuring the successful
repayment of loans, while protecting the business owner's personal
assets make the Banque Populaire Group and SOCAMA unique
partners capable of innovating consistently to offer solutions
geared to meeting the most diverse needs of their clients.
A dedicated organization
The Banque Populaire Group's marketing initiatives for small
businesses emphasize its close geographical relationships and
sector-specific expertise, its long-term relationships with clients
and the strong ties forged with small business organizations and
the affiliated networks of the SOCAMA mutual guarantee
companies and SOPROLIB (mutual guarantee companies for
self-employed professionals).
The Banque Populaire Group is backed by one of the densest
and most efficient networks in France, with over 2,800 branches
at year-end 2005.
At each branch, small business advisors, specializing in each
business line, use their expertise to help each of their clients to
expand their business activities.
03
The Group has managed to build long-term relationships founded
on trust with its clients. A large number of tradespeople are
member-stakeholders and Directors of the Banque Populaire
banks and thus provide them with the benefit of their experience
and professionalism.
The effectiveness of the Group's sales organization derives from
the very close relationships it has built with affiliated networks,
such as SOCAMA. To meet the needs of small businesses more
effectively, the Banque Populaire Group is also backed by a
network of 35 SOCAMA mutual guarantee companies (at yearend 2005). Led by their directors, who are business owners
representing various different sectors, they facilitate access to
credit for small business through their business expertise and each
year guarantee numerous projects. They also represent the
interests of trades-related businesses with their banking partner
and are the number one issuer of mutual guarantees in France.
The Group has also forged close relationships with all the small
business organizations in France. These include Assemblée des
Chambres Françaises de Commerce et d’Industrie (ACFCI,
federation of chambers of commerce and industry); l’Assemblée
Permanente des Chambres de Métiers (APCM, permanent
assembly of chambers of trade); l’Union Professionnelle Artisanale
(UPA, professional union of craftsmen), l’Assemblée Permanente
des Chambres d’Agriculture (APCA, permanent assembly of
chambers of agriculture) and Confédération Générale des Petites
et Moyennes Entreprises (CGPME, general confederation of
SMEs).
Firm roots
Leadership position in the principal client
segments
Leading bank for small trades-related businesses
With one in three craftsmen and one in four shopkeepers
currently Banque Populaire clients, the Group remains the
leading bank for small businesses.
Effor ts continued in 2005 to penetrate all areas of the
commerce market. The Group has developed a number of
initiatives over many years to improve its performance in the
par ticularly fast-growing franchise segment, with a view to
adapting to changes in local trading patterns.
The Group's offering for franchisees encompasses a broad range
of dedicated products from support and guidance through the
(1) CSA Pépites 2006 survey
49
partnerships forged with the principal franchise operators to
SOCAMA-guaranteed loans and benefits for their employees
(incentives, holiday vouchers, luncheon vouchers), as well as their
apprentices (special apprentice loans), not to mention
comprehensive insurance solutions and retirement planning.
The second annual franchising survey in 2005 confirmed the
Group's leadership in this major sector of retail commerce.The
Banque Populaire banks have consolidated their positions as the
number one bank for franchisees. In addition, the Banque
Populaire Group is the first bank recommended by franchisors
to their franchisees.
satisfactory levels. Using public procedures for business start-up
loans or guarantee systems for business loans also helps to
manage Group exposure actively.
Build on success
(2)
In the small business sector, the Banque Populaire Group has
traditionally worked in par tnership with small business
organizations and has created joint product ranges with them.
This strategy was pursued in 2005, to accelerate distribution of
asset management and investment products to this client base.
For instance, it led to the development of the CNPA offering
(Conseil National des Professionnels de l’Automobile) and the
apprentice offering for young people in apprenticeship, designed
in conjunction with the APCM and AFCFI.
Likewise, since July 1, 2003, the Banque Populaire banks have
distributed a loan to cover recurring capital expenditures
without personal guarantees from the business owner or his or
her family. Meeting longstanding demand from small businesses,
the new “Prêt Express Socama” formula was developed with
support from the European Investment Fund (EIF).
Number one in loans for starting or acquiring
a business
Each year,the Banque Populaire Group lends to around one in three
start-up owners, i.e. 60,000 ventures, in partnership with the most
effective support networks, notably the Chambers of Trade and
Chambers of Commerce and Industry.
With market share of 32% in 2005, the Banque Populaire Group
remains the number one distributor of business start-up loans in
France.
This performance was achieved by the Banque Populaire regional
banks by forging a tight network of relationships with all local
business organizations that support employment in mainland
France and overseas departments.
In particular, the regional banks have actively cooperated with a
number of well-known networks including local enterprise groups,
ADIE (economic enterprise association), France Active, the
Entreprendre network, Boutiques de Gestion and all enterprise
bodies created by local authorities.
This marriage of skills, with the best professionals in supporting
and working with business creators, has helped the Banque
Populaire Group to select the most robust opportunities.Working
together in this way is a key guarantee that the companies will
survive and therefore ensures tight risk control.
The Banque Populaire banks have also developed real expertise in
analyzing risks related to this kind of business.This specific skill is a
key factor for long-term success in this market niche, which
explains why the risk profile on these loans has been kept at
(2) Annual franchise survey – Banque Populaire, French franchising association, CSA.
2005 ANNUAL REPORT
Key partners in the farm sector
The Banque Populaire Group has been established in the farming
market for 15 years and distributed over B530 million in loans to
farmers during 2005, representing an increase in a sluggish market.
The steady increase in its market share each year illustrates the
Group's commitment to and success in this sector. Its penetration
rate now exceeds 10% of all farm businesses.
Drawing on its team of experts and client advisors, the Banque
Populaire Group is developing a three-pronged strategy
commensurate with its cooperative values emphasizing long-term
commitment, close relationships with farmers and fishermen, and
solidarity in times of crisis.
The Group's presence in small business organizations and ability
to influence the authorities also facilitates the task of the Banque
Populaire banks in the field.The “Prix National de la Dynamique
Agricole et de la Pêche” (PNDA, national awards for dynamism
in farming and fishing) introduced by the Group 13 years ago
illustrates this strategy. Each year, this event brings together not
just farmers but also leading representatives of the agricultural
trade unions, the FNSEA (French national federation of
agricultural workers’ unions) and the chambers of agriculture.
Awards are presented to the eight farming projects and one
fishing project judged to be the most effective and innovative.
In 2005, the Banque Populaire banks also continued to expand
and diversify the range of products and services dedicated to this
market, including the launch of “Optiplus Agri” (a precautionary
savings plan) and “Fructi Facilité Agri” (a plan covering treasury
loans in the event of death or disability).
Positions beefed up in the self-employed
professionals segment
During 2005, the Banque Populaire Group developed new
offerings for its self-employed professional clients catering to
their receivables collection, cash management and retirement
planning needs.
For instance, the Group promoted the deployment of its
electronic banking solutions for health industry professionals,
which help clients secure guaranteed payment of their
professional fees, send in patient medical cost reimbursement
forms and automate payments in several installments for
retirement planning purposes. In 2005, the Group continued to
roll out its “ES/PL PERCO” employee pension plans, which were
a product of its par tnership with UNAPL (national selfemployed professions union).
An extensive and innovative
product range
Facilitating payments
The Group built further during 2005 on its number one position
in the issuance of payment cards to small businesses, primarily
Visa Business Electron,Visa Business and Gold Business but also
BusinessCard, which is part of the MasterCard network.
At December 31, 2005, the Group had 257,131 cards in
circulation, representing an increase of 16% compared with 2004.
At the same time, the Group confirmed its position as a leading
force in electronic banking, with more than 170,000 merchant
contracts (increase of 2.64% compared with 2004).
Managing receivables more effectively
A highlight of 2005 was the continued deployment of the
comprehensive receivables management range for small
businesses, including company information, credit insurance and
factoring.
In the factoring for small business segment, the Banque Populaire
Group retained its leadership in 2005 and consolidated its
expansion, with a rise of 32% in new business.
The factoring range for business start-ups “Créance Primo”
enjoyed considerable success during 2005.
Motivating employees and improving
retirement planning
The Banque Populaire Group enables its entrepreneur clients to
pursue a genuine policy of welfare benefits not only for
themselves but also for their employees. To a great extent, the
successful expansion of these products probably stems from the
fact that they make powerful tools available to motivate and
enhance the loyalty of employees and guarantee the same tax
and welfare benefits offered by large companies.
Having sold 17,700 “Fructi Épargne” company savings plans since
these employee savings tools were opened up to individual
entrepreneurs in 2001, including 3,355 in 2005 alone, the
Banque Populaire Group is now the leading distributor of
employee savings plans to small businesses.
This success was confirmed by the results achieved by the new
PERCO (employee pension plan), with close to 4,300 plans sold
since its launch in mid-2004, including 2,900 in 2005 alone.
In 2005, the Banque Populaire Group capitalized on this position
and reaped the benefit of the growing interest among the French
population in funded pension products.
03
With a portfolio of 19,055 policies,Assurances Banque Populaire
IARD, the joint venture between Banque Populaire and MAAF
Assurances has exceeded its initial targets. The two partners
now wish to build on this success and accelerate the pace of
sales to the Banque Populaire Group's small business client base
(see box).
Major campaigns of 2005
The “Prêt Socama Transmission-Reprise”
formula with a personal guarantee
of just 25%.
In September 2005, the Banque Populaire Group launched the
“Prêt Socama Transmission-Reprise” loan giving access to
business owners – either individual entrepreneurs or legal
entities – to a loan of up to B100,000 and a personal guarantee
of just 25% of the size of the loan, regardless of their size and
their sales.
Craftsmen, tradespeople, self-employed professionals and service
providers can thus secure funding enabling them to finance the
purchase of business assets, leasehold, equipment or securities in
a company.
For such transactions, the “Prêt Socama Transmission-Reprise”
loan carries a counterguarantee from the European Investment
Fund (EFI), which manages the program on behalf of the
European Commission as part of its multi-year plan for small
businesses.This loan product is an extension of the “Prêt Express
Socama” without any personal guarantee formula marketed by
the Banque Populaire Group, also under a partnership with the
EFI.
Impressive performance
in non-life insurance
Building on the upbeat results recorded in late 2004,
the Banque Populaire Group significantly increased
uptake of non-life insurance products by its small
businesses in 2005 (7,310 policies sold in 2005,
representing an increase of 21.3% compared with 2004).
As a result, the Group made progress towards its goal
of a significant increase in the number of policies over
the next five years. Its clients and member-stakeholders
can thus secure protection for both their business
and personal lives.
Protecting businesses
In insurance, the policies sold by the Banque Populaire network
cover both risks linked to small businesses, such as property and
utility vehicle insurance, financial protection and civil liability, as
well as the business owner him- or herself.
51
CORPORATE CLIENTS
T
he Banque Populaire Group is a leading player
in the corporate lending market.The breadth of
its complementary expertise enables it to
support corporates throughout their life cycle, from
incorporation through expansion to their sale or even
flotation. This approach, which is based on
comprehensively meeting its clients' needs, is
underpinned by long-term partnerships at both
national and international level.
In 2005, the Banque Populaire Group further stepped up the
pace of its progress with a range of products and services
constantly fine-tuned to the new needs of its clients. This
momentum enabled it to establish prominent positions in the
corporate market. The Banque Populaire Group thus ranks as
the leading corporate bank (source: Sofres survey of September
2005). With its overall penetration rate of 42% among
businesses with between 10 and 1,000 employees, it has
established itself as a force to be reckoned with in this market. It
works together with almost all the largest French groups.
Client-focused organization
The Banque Populaire Group is building up its marketing
initiatives for corporate clients by leveraging the expertise of
Natexis Banques Populaires and the Banque Populaire banks, as
well as Coface's complementary expertise. Banque Fédérale des
Banques Populaires, which lies at the heart of the Group, which
has included Crédit Coopératif and Crédit Maritime Mutuel
since 2003, is responsible for making the Group's major strategic
decisions and running the network.
A leading player
The Banque Populaire Group boasts flagship positions
in each of its business lines.The Group is the
second-largest lender to corporations with sales
of less than €15 million and has nearly 11%
market share. It is the fourth-largest lender to all
French corporations, with aggregate market
share of 8% of outstanding loans (leasing and factoring
excluded) during the third quarter of 2005
(source: Centrale des risques - Banque de France,
Central Risk Database).The Group is also a
prominent player in employee savings, with market
share of 20.6%. It is the leading player in expansion
capital and private equity for SMEs.Through its
subsidiary Coface, the Group is one of the world
leaders in credit insurance and is French market
leader in company information.
2005 ANNUAL REPORT
The Banque Populaire Group's sales and marketing organization
perfectly reflects this synergy, which guarantees a rapid response
to and a clear understanding of the specific needs of its corporate
clients.The Group can thus draw on the 147 corporate branches
operated by the Banque Populaire regional banks (up from 75 in
2000, representing an increase of close to 100% over five years),
as well as on Natexis Banques Populaires' regional offices across
the length and breadth of France.
The relationship manager, who is the real pivotal point in the
commercial relationship, can mobilize a network of expertise on
behalf of his clients at these centers and at the Banque Populaire
banks in areas as diverse as structured and specialized financing,
payments and capital management, employee benefit planning,
international assistance and financial engineering. Alongside the
relationship manager stands the asset management advisor, who
can offer business owners solutions geared to their property
management, tax planning and corporate buy-ins/buy-out
requirements.
Crédit Coopératif is establishing a presence with cooperative
associations and businesses. Mutual guarantee companies lie at
the hear t of this program, forming a par tnership with the
associations and federations, which represent these companies
and are member-stakeholders in the bank. The bank is
represented among SMEs which have formed financial
cooperatives, SCOPs (production cooperatives) with two
mutual guarantee companies, and transport, trades and retailer
cooperatives, etc.
Within Crédit Coopératif, Banque du Bâtiment et des Travaux
Publics is developing acknowledged exper tise in the
construction industry in partnership with such federations.
Payments processing and services
Continuous improvements in payments
processing
Payments processing represents a top priority for corporate
clients given the stricter regulatory standards, the frenetic pace of
advances in technology and the inroads made by electronic
transactions.The Banque Populaire Group constantly endeavors
to adapt its range of products and services to the changing
expectations of its clients in terms of speed, reliability and security.
It offers businesses of all sizes national and international solutions
covering their payments and receipts, as well as their treasury
management requirements. Its innovative offering, combined with
its emphasis on providing sales coverage, has enabled it to rank
among the leading players in this expanding market.
No.
1
French operator
No.
2
placing agent in
No.
3
worldwide in
in private equity in
the SME market
asset management
credit insurance
No.
4
largest lender to
corporate clients
No.
4
bookrunner in
acquisition finance
and syndicated loans
03
Network dedicated to corporate clients
147 corporate branches
800 corporate account executives
16 regional offices
555 relationship managers
117 international offices
4,500 correspondent banks outside France
The Banque Populaire Group continued its brisk expansion in
payment media during 2005. The number of “Mission Plus”
business cards recorded an annual increase of 22%. In addition,
the Group renewed and enriched its “Cyberplus Paiements”
secure online payment system to support the ramp-up in ecommerce and distance selling.
New payment processing systems were launched, such as the
“Suite Entreprise 2005” teletransmission platform. Another
highlight of 2005 was the significant increase in business in
electronic cer tification arising from the obligation effective
January 1, 2006 for businesses with sales of over B1.5 million
(compared with B15.2 million previously) to declare and pay VAT
electronically.
To better meet the cash management expectations of its
corporate clients, the Group embarked on a complete overhaul
of its range of its products and services to include the pooling of
receipts (Fructiflux), cash pooling (Fructi 900) and business
transfers at due date (Vircom). A simplified offering with richer
features will be launched during 2006 for businesses keen to
optimize management of their finances, enhance the visibility on
risks and reduce their administrative overhead.
Stronger leadership in receivables
management
Receivables are, by far, the largest item on the balance sheet of
French companies, accounting on average for 40% of their assets.
Hence businesses need to manage, finance and protect their
commercial relationships with their clients and suppliers. Backed
by the combined expertise of Natexis Factorem and Coface,
the Banque Populaire Group offers a comprehensive and
personalized approach to receivables management, which aims to
provide a suitable solution to the needs of each business. This
unequalled expertise is underpinned by powerful sales coverage.
Since January 2005, Natexis Factorem has made all the
receivables management offerings available to clients of the
Banque Populaire regional banks and Natexis Banques Populaires.
In addition, they are delivered through Coface's distribution
networks, which cover 58 countries, and through those
operated by its insurance and banking par tners in the
international CreditAlliance network. Thanks to these extensive
networks, the Banque Populaire Group has established prime
positions in the corporate market. It is the number one player
in receivables management in France, number two in trade
receivables management in France and ranks in the top three
worldwide in trade receivables management and credit
insurance and in the top five worldwide in company
information. It also ranks third in the French factoring market.
In 2005, the Banque Populaire Group pursued its active policy
of winning new clients and securing the loyalty of existing
clients across all its business lines. To emphasize the synergies
between products in the receivables management range, they
have all been given names beginning with the word CREANCE
(French for trade receivable): “CREANCEinfo” for business
information, “CREANCEassur” for credit insurance, etc. The
Group has also bolstered its network with the creation of
Coface Services on January 1, 2006. This new company, which
houses the combined expertise of Coface SCRL and Coface
Ort, two of France's largest company information providers,
was France's leading player in receivables collection and
management from its inception.
An integrated approach to
receivables management
Thanks to the combined efforts of Natexis Factorem
and Coface, the Banque Populaire Group is the only
banking network capable of handling internally all the
business lines related to receivables management:
- credit insurance protects financial and non-financial
companies alike against the risk of non-payment of
their customer receivables;
- company information enables them to evaluate
the financial condition of their business partners and
their ability to meet their commitments (solvency
information) and to detect business opportunities with
solvent clients (marketing information);
- factoring enables companies to monetize their
accounts receivable by transferring them to a third party,
the factor, who takes responsibility for collecting
them and may suffer potential losses owing to debtor
insolvency;
- recovery (management of unpaid receivables).
53
In the very dynamic factoring market in 2005 (growth of 12%),
the Banque Populaire Group focused its development on
its innovative offering and high-quality ser vices. Natexis
Factorem, France's number three factoring company (source:
French association of financial companies), was the first in the
French market to secure service certification. Issued by Bureau
Veritas Quality International (BVQI), this certification bears
testimony to compliance with precise and quantified
commitments for all of Natexis Factorem's ser vices. This
quality-oriented program is backed up by new product
introductions, including the launch in 2005 of an offering
geared specifically to the needs of large corporate clients:
“CREANCEplus Délégué”(delegated factoring),“CREANCEexpert”
(confidential factoring), and structured finance for receivables
(balance acquisition).The SME client base also benefited from
the overhaul of the “CREANCEplus” product, which notably
includes contractual financing commitment within 24 hours.
Lastly, the Group has tapped into fresh growth opportunities
in Germany thanks to the success of VR Factorem, a 51%-owned
subsidiary of Natexis Factorem and a joint venture with VR
Leasing (subsidiar y of DZ Bank). VR Factorem's business
model, which is focused on winning Volksbanken's microcompany and SME clients, is proving itself to be highly
effective.
Financing and investment
Close client relationships
The Group provides solutions meeting all the needs of its
corporate clients in areas including lease financing, medium- and
long-term loans, structured finance and capital markets
products by leveraging the teams and branches of the Banque
Populaire banks, as well as Natexis Banques Populaires' regional
offices.
Lease financing
In equipment financing, its Natexis Lease subsidiary posted a gain
of over 10%, with B1.1 billion in new business. New leases from
the Banque Populaire regional banks, at Crédit Maritime Mutuel
and with Natexis Banques Populaires' corporate clientele
contributed to this performance.
Vendor programs were put in place. In particular, a partnership
was signed with the Manitowoc Group (Potain) covering the
French and Spanish markets. In energy management and
environmental lease financing, Energéco is a leading player in
wind farm financing.
In property leasing, Natexis Lease, which ranks second in France
(source: French association of financial companies) posted B530 million
in new lease production. Internationally, Natexis Lease recorded a
significant rise in its business in Spain, two years after opening an
office in Madrid. A new branch is to be opened in Barcelona in
2006. In the fourth quarter of 2005, a branch was opened in Milan.
Lastly, Natexis Lease created a leasing department at Natexis
Algérie.
2005 ANNUAL REPORT
Long-term lending
The Banque Populaire Group is the number two lender to
corporate clients with sales of less than B15 million with market
share of 10.93% in the third quarter of 2005 (source: Centrale des
risques - Banque de France, Central Risk Database).
In the large and medium-sized corporate segment, Natexis
Banques Populaires' Corporate France department fine-tuned
its organization to build even closer relationships with its clients.
It strengthened its sales teams at both the regional offices, in the
sectors and at the level of its Global Relationship Managers,
which are responsible for a small number of clients generating a
large volume of business across a number of different business
lines. It continued to build up its sectoral expertise, especially in
the health, media, food, and the construction and environment
industries. Each company is monitored by a “key banker” whose
primary role is to initiate and coordinate relationships with all
product lines.
With total market share of 11.5% of outstanding loans (leasing
and factoring included) at June 30, 2005, the Banque Populaire
Group is the fourth-largest lender to all categories of French
businesses (source: Banque de France).
Global Debt & Derivatives Markets
All Natexis Banques Populaires' global debt and derivative
markets activities recorded significant gains on the back of the
extension of its range of higher value-added services.
The bank's borrowing platform, which brings together the
financing, engineering and issuing businesses, offers global
borrowing, investment and risk hedging solutions, both for
issuers and investors.
By bringing together a variety of products, the bank has been
able to strengthen its position as a prominent arranger of
structured debt facilities. Clients receive turnkey financing, both
in France and abroad.
The new Financial Engineering unit also contributed to overall
performance owing to innovative, structured deals, such as the
financing of the Colony fund's investment in Accor. Customized
solutions backed by a variety of underlying assets, from equities
to real estate, are also offered to corporate clients.
The Primary Markets and Securitization unit continued to grow,
as customer targeting was enhanced. In France, despite an overall
decline in new issues, this unit focused on significant corporate
mandates, such as SFR, Bouygues, Schneider and Alstom, and on
inflation-indexed instruments (Cades and Réseau Ferré de
France).The bank continued to gain stature in syndicated credits
in France, as a top-tier arranger and bookrunner (Gaz de France,
Air France, Vinci, LVMH, Partouche and CMA CGM). It also
played a significant role in the Europe, Middle East and Africa
(EMEA) region.
The Capital Markets unit benefited from the combination of
capital market and financing dimensions and a new organization
fostering more sophisticated products on each desk. Sales
volumes were boosted by the growing impact of cross-selling.
In 2005, Natexis Bleichroeder S.A. lead-managed two IPOs in the
mid-cap segment and took part in seven rights issues, leadmanaging three of them. In conjunction with the Banque
Populaire regional banks, the subsidiary participated in three
privatizations during the year (SANEF, GDF, EDF). It also
consolidated its leading position in securities borrowing and
lending and in public offers with market share of 7% (source:
Offers filed with the Autorité des Marchés Financiers).
Natexis Banques Populaires,
the number one LBO lender
in 2005
In the LBO and acquisition financing market, Natexis
Banques Populaires won the “LBO lender of the year”
award in 2005 (1) (debt and mezzanine).The prize was
awarded by a panel of 18 professionals for the number
and quality of arranger mandates.
Corporate financing
Through Natexis Private Equity, the Banque Populaire Group
was again very active in expansion capital and buy-out/buy-in
financing. It also contributed to the surge in the venture capital
market, while making some very impressive exists from its
portfolio investments.
At the same time, it gave its investment teams what they needed
to be competitive and for them to adhere strictly to corporate
governance principles. This commitment helps to guarantee a
high level of performance for its partners. By working closely
with private equity regulatory and supervisory bodies (AFIC,
EVCA, AMF) and by implementing a bona fide system of
corporate governance, with internal controls, a compliance
officer, risk management, a supervisory board and other
safeguards, Natexis Private Equity is a conscientious sponsor,
committed to responding to the demands of its investor and
entrepreneur partners.
issues managed, B371 million in capital invested and B161
million in capital gains on sales.
In expansion capital, Natexis Private Equity strengthened its
status during 2005 as leading investment partner for unlisted
French SMEs. Managed assets totaled B666 million and the
amount invested B131 million.
In venture capital, five investments held by Spef Venture (since
renamed Seventure) and Ventech were floated on the stock
market, and 11 others were sold to industry players. These
results bore testimony to the exper tise of the bank's
professionals and the reasoning behind their investment and
management decisions.
French teams dedicated to buy-in/buy-out financing were
very active in 2005. Natexis Industrie, Initiative & Finance and
Spef LBO assisted companies such as Maisons du Monde
(household furnishings), Elexience (distribution of electronic
components and scientific instrumentation), Européenne de la
Mer and Datavance (IT ser vices, systems and network
engineering). These three subsidiaries also realized significant
gains on asset sales, such as on Eau Ecarlate (household
cleaning products), Cibleclick (affiliate marketing), Holophane
(vehicle lighting systems) and Médiascience (publisher of
teaching materials).
Through its role as an active sponsor of teams based in
Europe, Asia and Latin America, Natexis Private Equity's
international commitment made a significant contribution to
the impressive 2005 results. International business posted
fresh growth, with B752 million in funds under management
and sizable investments. For example, Finatem in Germany
invested in JNS and Derby, Natexis Mercosul Fund invested in
Lupatech in Brazil, Natexis Cape invested in Phoenix in Italy,
and Natexis Private Equity Asia invested in Suntech Power,
which has since been floated on the New York Stock
Exchange.
In 2005, Natexis Private Equity launched a new B500 million
fund of funds, Dahlia, in par tnership with the European
Investment Fund (EIF). Designed for institutional investors and
insurance companies, the fund draws on all the skills of its two
sponsors to invest in all branches of private equity, at both
primary and secondary levels.
Private equity
Fund for personal customers
Natexis Private Equity and its subsidiaries (2), which specialize in
private equity business lines, play a role in every stage of a
company's development, from incorporation to pre-flotation
financing. Natexis Private Equity builds relationships with
investors and entrepreneurs based on its values of
commitment and entrepreneurship.
Drawing on the strength of its expertise in its business lines,
Natexis Private Equity also expanded its range of products for
individual clients of the Banque Populaire regional banks. For
instance, Naxicap Partners launched three new “proximity”
investment funds (Banque Populaire Proximité Sud-Est 2005,
Sud-Ouest 2005 and Ile-de-France Nord Centre 2005). In the
meantime, Spef Venture participated in the launch of its tenth
innovation mutual fund (Banque Populaire Innovation 10).
With 630 investments and B2.3 billion in assets under
management in its subsidiaries, Natexis Private Equity
bolstered its position as a French specialist in private equity
dedicated to small and medium-sized enterprises (SMEs).
Business continued apace in 2005, with B252 million in equity
03
In addition, Banque Privée Saint Dominique clients enjoy
special access to unlisted investments offered by Natexis
Private Equity.
(1) Prize created by Private Equity Magazine.
(2) Seventure (formerly Spef Venture), Ventech (venture capital), EPF Partners, Natexis Investissement, Natexis Equity Management,
Naxicap Partners, Providente created after December 31, 2005 (expansion capital), Natexis Private Equity International
Management (International), Initiative & Finance, Natexis Industrie, Spef LBO (LBO financing).
55
Asset Management
Number two placing agent in France
Natexis Asset Management, the Banque Populaire Group's asset
management subsidiary, posted very strong expansion in the
French market during 2005.Total assets under management rose
from B82.8 billion at December 31, 2004 to B101.1 billion at
December 31, 2005.
Natexis Asset Management ranked as the number two placing
agent in France during 2005 (source: Europerformance at
December 31, 2005). Total net new money soared to a record
level of B8.4 billion, breaking down into B6.2 billion channeled
into mutual funds and mandates, B1.3 billion into insurance
products and B800 million into employee savings.The managed
and advised assets of Natexis Asset Square, a subsidiary of
Natexis Asset Management specialized in multi-manager
investment, advanced by 71.4% during the year.
Of particular note during 2005 were the numerous successes
scored in competitive bidding held by pension and personal risk
insurance funds, mutuals and businesses. Greater marketing
synergies with Natexis Banques Populaires' teams, the formation
of a dedicated research and development team and efforts to
streamline the range of mutual funds were instrumental in this
success. In addition, Natexis Asset Management embedded
sustainable development into its strategic planning, its
organization structure and all its products. The management
company embarked on the process of earning a non-financial
rating, which culminated in the award of an “A++” by European
agency BMJ-Ratings.
Natexis Asset Management Immobilier, the fourth-largest REIT
management company in France (source: Institut de l’Epargne
Immobilière et Foncière, real estate savings institute) recorded
B82 million in net new money and a 15% increase in its managed
assets, giving it a 6.7% share of managed assets (source: AEIF at
December 31, 2005).
Employee benefits planning
Expansion of revenue synergies
Two years on from the creation of the PERCO (group employee
pension plan) by the Fillon law in August 2003, there were
various developments in the legislation concerning employee
benefits planning during 2005. Aside from the reform of the
work-time management plan (Compte Epargne Temps) and the
creation of the “Universal prefinanced Chèques Emploi Service”
(CESU), the Breton law of July 26, 2005 injected fresh impetus
into employee incentives and share ownership plans for SMEs.
To build on this momentum, the Banque Populaire Group pooled
all of its expertise in corporate compensation and benefits. It can
thus provide an integrated approach to employee benefits
planning, which emphasizes the synergies between the solutions
available to corporate clients: employee savings (profit-sharing, PEE
company savings plans, PERCO group employee pension plans,
2005 ANNUAL REPORT
employee share ownership, etc.), corporate pensions (Article 83,
Article 39, the Madelin law), collective personal risk insurance
plans (end-of-career benefits) and service vouchers (restaurant
vouchers, prefinanced “Chèques Emploi Service” vouchers, holiday
vouchers, etc.).This strategy has paved the way for greater revenue
and organizational synergies to be harnessed between Natexis
Interépargne, Natexis Assurances and Natexis Intertitres and
raised the quality of the services provided to corporate clients.
In 2005, the Banque Populaire Group retained its leadership in
a booming employee savings market, which has more than
doubled in the space of seven years. Natexis Interépargne
remains the number one administrator of employee savings
with close to 26,000 corporate clients and over 2.6 million
employee accounts to its name at December 31, 2005.
Following the absorption of Natexis Epargne Entreprise on
January 1, 2005, Natexis Asset Management has established
itself as the leading financial manager of employee savings in
France, with B13.8 billion in managed assets at December 31,
2005, which raised its market share to 20.61% (source: French
investment management association at June 30, 2005).
Thanks to the combined efforts of Natexis Interépargne and
the Banque Populaire regional banks, major industry-wide
agreements were signed during 2005, notably including the
Professions du Bois (timber sector) in Alsace region, the Artisanat
d’Alsace (craftsmen sector) and the Boulangers Val-de-France
(bakers sector).These commercial success stories were facilitated by
the quality of the products designed by Natexis Interépargne, as
reflected by the excellent reception afforded to “Fructi Epargne
Plus” (a combined PEE and PERCO plan) for micro-companies.
SMEs benefited during 2005 from the launch of “Fructi Optimum
Perco”, an innovative product based on a socially responsible
investment formula. Last but not least, a new personal credit offering
marketed under the “Fructi Libre” banner was designed for
employees of the corporate clients served by Natexis Interépargne.
The employee savings products include investment options
suitable for pension savings and extend the range of products
marketed by Natexis Assurances including “Madelin” taxdeductible plans and defined contribution pension savings.
Spurred on by changing lifestyles and consumer trends, the
service vouchers business has undergone a radical and rapid
transformation. Following on from the launch of the “Chèques
Cadeau” (gift check) in 2004, new products were introduced
Recognized management
quality
The quality of Natexis Asset Management's management
is regularly acclaimed in the specialized press.
For instance, in 2005,“Le Revenu” awarded it its Silver
trophy for the best range of sectoral equity funds
over three years, as well as the Bronze trophies for
best overall performance over three and ten years.
during 2005, such as the “Chèques Culture” vouchers and the
“Universal prefinanced Chèques Emploi Service” (CESU).
The Banque Populaire Group holds a unique position in this market
through Natexis Intertitres, the first player authorized by the French
National Agency for Personal Services to issue and distribute
prefinanced chèques emploi service. The appeal of the products
marketed by Natexis Intertitres, together with the Group's
distribution clout,powered a brisk pace of growth during 2005.With
an issuance volume of 47.7 million vouchers (up 20% compared
with 2004),Natexis Intertitres boasts market share of 8.26% (source:
Centre de Règlement des Titres, voucher settlement center).
International expansion
International markets, a source of future growth
The Banque Populaire Group expanded its international initiatives
during 2005. It benefits from the expertise developed by the
Banque Populaire banks and by Natexis Banques Populaires, as well
as Coface's complementary expertise.
In addition, it can draw on its partnership with DZ Bank in
Germany and on the coverage provided by partner banks of the
VBI network in Central and Eastern Europe.
The Group bolstered its positions in the United States and Europe
where new lending was again very brisk. In emerging countries,
Natexis Banques Populaires focused most of its efforts on ten or
so countries (while covering a total of 130 countries).
The aircraft financing business expanded its market share through
the creation of Natexis Transport Finance, a new dedicated entity,
and landed four “deal of the year” awards.
With acquisition financing for the Rinascente stores, Natexis
Banques Populaires has now established itself as a prominent player
in the Italian real estate financing market. LBO, project and shipping
financing also secured a regular stream of arranger and underwriter
mandates in international deals.
Launch of the “Chèque
Emploi TPE”
As the leading bank for small businesses, the Banque
Populaire Group naturally supported the launch of
the “Chèque Emploi TPE”, a simplified salary voucher
for very small businesses.This new system, which
was enshrined in law by the order of August 2, 2005,
significantly streamlines the recruitment formalities for
micro-companies, France's leading source of new jobs.
The system, which is intended for companies in all
sectors with up to five employees, takes the place of
recruitment formalities, contract of employment and
payslips. Natexis Intertitres, a subsidiary of the Banque
Populaire Group, actively participated in the launch of
the system, which entered force on September 1, 2005.
03
In the United States, 2005 was a key year for equities
brokerage. Natexis Bleichroeder Inc. distinguished itself as
underwriter and co-manager of primary market transactions
by leveraging Natexis Banques Populaires' corporate client
base in the United States.
Lastly, the Group launched some ambitious plans to consolidate its
local sales and marketing approach and to foster cross-selling,
particularly in Europe and North America, with branches hiring
staff across various business lines.
Advisory services for International
corporate expansion
Through Natexis Pramex International, a subsidiary specialized in
advisory services for international corporate expansion, the
Banque Populaire Group continued to support its clients in
export markets.
During 2005, over 500 businesses decided to trust Natexis
Pramex International's expertise and it recorded an increase
of 16% in its net banking income, thereby bolstering its
positioning in and outside France. Having opened subsidiaries
in Montreal and Bombay in 2005, Natexis Pramex
International plans to beef up its presence in Russia, Brazil and
the Persian Gulf in 2006. Through this expanded, 14-country
coverage, it will be able to develop its corporate management
and delegated management services for its clients' foreign
subsidiaries.
It notably offers “Volontariat International en Entreprise” services
(international voluntary action agency) under the char ter it
entered into with French ministry for foreign trade and its
partnership with Ubifrance.
Export credit insurance
Through its Coface subsidiary (see Receivables Management
page 53), the Banque Populaire Group ranks among the world
leaders in credit insurance and tops the national rankings in
terms of export credit insurance.
Coface's @rating represents a unique corporate rating system
with worldwide coverage, which offers a link between its
business lines. Coface also makes the public export guarantees
that it manages on behalf of the government available to its
clients.
Coface is backed by the Banque Populaire Group's network (the
Banque Populaire banks and Natexis Banques Populaires) and
has its own networks in 58 countries and those operated by its
partners in CreditAlliance.This multi-network strategy is one of
the Group's strong points.
In 2005, Coface posted an 8% increase in sales to B1.2 billion.
It has notably extended its range of products and services to
20 additional countries. It has also strengthened its
international network through the acquisition of South Africa's
second-largest credit insurer CUAL and Lithuanian credit
insurer LEID, creation of credit insurance offices in Brazil and
Mexico, purchase of a majority shareholding in BDI, a major
57
Israeli provider of company information and an agreement
with Dubai insurer NGI.
International trade financing
Thanks to its highly organized and constantly enriched product
and services range, the Group is a major force in trade finance.
Natexis Banques Populaires forged closer ties with its banking
clients in emerging countries, particularly in Latin America.
Commodities
Natexis Banques Populaires strengthened its presence vis-à-vis
all par ticipants – producers, traders, distributors and other
service providers – in the energy, metals and soft commodities
markets.
During 2005, the bank confirmed its position among the top
10 worldwide arrangers of structured finance in emerging
countries (source: Dealogic). Its teams acted as mandated
arranger in 25 transactions, including an increasing number of
reserve-based lending deals, seven of which received “deal of
the year” awards.
Management emphasizes local client relationships, with
commodities specialists present in its offices in Singapore,
Hong Kong, São Paulo, Buenos Aires, Santiago de Chile,
Moscow and Abidjan, as well as New York and Houston. In
2005, a Kazakhstan office was added to the network.
A team dedicated to the mining sector was created in the
Metals unit. In addition, the Natural Resources and Related
Industries department expanded its liaison role to offer its
specialized clients financing and hedging solutions developed by
other specialized departments, such as Equities, Capital Markets
and Project Finance. Natexis Commodity Markets Limited, one
of the principal accredited brokers on the London Metal
Exchange, enhanced its range of metals, energy, soft
commodities products on organized exchanges and of OTC
derivative products to its own client base and to support the
Group's clients.
2005 ANNUAL REPORT
INSTITUTIONAL CLIENTS
T
he Group generally holds robust positions
across all markets serving institutional clients
and the local public sector that were
established by various units, including Crédit
Coopératif, the Banque Populaire regional banks and
Natexis Banques Populaires. The current changes in
the regulatory environment represent an expansion
opportunity, with the faster pace of concentration in
the mutual sector and particularly mutual health
funds, reform of decentralization and the opening of
local public services to the banking sector.
Expansion stepped up in
institutional segment
The institutional market comprises insurance companies, mutuals,
providers of personal risk insurance, pension funds, associations and
other similar organizations, social agencies, trusts, training and
collecting bodies, and lawyers' pecuniary payment funds (CARPA),
etc.
During 2005, the Banque Populaire Group stepped up its
expansion drive in the institutional market by leveraging its very
extensive range of products and services. This offering
encompasses a full range of banking products and services, asset
management (Natexis Asset Management) and insurance products
(Natexis Assurances), as well as employee benefits planning
products (Natexis Interépargne and Natexis Intertitres).The newly
created role of senior banker at Natexis Banques Populaires also
facilitates global management of relationships with the leading
institutional clients.
For instance, an unprecedented wave of consolidation has
unfurled across the mutual health fund sector owing to the
combined effect of the new mutual code that introduced
draconian prudential rules and changes in the French social
security system. The number of mutuals slumped from 6,000 in
2003 to 700 in 2005. Efforts to harness productivity gains,
especially on the payments side, have led to the systematic use of
competitive bidding. The Banque Populaire Group holds strong
positions in this segment (penetration rate of 25%), especially in
payments processing (mass-scale transfers, etc.). The Group
boasts the lion's share of banking services for the personal risk
insurance market (i.e. over 50%) and market share of around 15%
in the CARPA (lawyers' pecuniary payment funds) market.
Crédit Coopératif is also a benchmark provider of banking services
for players in the social economy, including cooperatives, business
consortia and their members, associations and other major publicinterest organizations. The bank is very active in the health and
social care sector with public-interest associations running hospitals,
homes, retirement homes, centers for the handicapped and home
help services. It operates in a wide variety of sectors, from retailing
to sport and from culture to helping the long-term unemployed
back into the world of work.
03
For more than 15 years, Crédit Coopératif has also been offering a
full range of electronic data transmission and teletransmission
services to help professional guardians fulfill their obligation to control
and monitor the accounts of the people under their protection.
Opportunities for commercial
expansion in the local public sector
The local public sector serves regional and local authorities
(municipal, departmental, regional and intermunicipal authorities),
their public or private law satellite organizations (low-cost housing
agencies, private-public partnerships, etc.) and independent public
bodies such as chambers of commerce and hospital complexes.
The local public sector is currently in the throes of tremendous
regulatory change, with further decentralization to local authorities,
modernization and dematerialization of payment media, the
loosening of the French Treasury's monopoly and authorization
under certain conditions of deposits with banks.
The introduction of these various reforms represents a commercial
expansion opportunity for the Group, particularly vis-à-vis local
authorities with fewer than 10,000 inhabitants. Its strong reputation
among local officials via the CASDEN Banque Populaire and ACEF,
the strong roots of the Banque Populaire banks in the regions and
the recognized experience of Natexis Banques Populaires have
helped it to establish itself in this market, where there is still further
scope for it to bolster its presence.The Group aims to become a
dynamic partner for local agencies, with a comprehensive approach
encompassing financing, employee benefits planning, electronic
banking and investments.
For instance, the Group has achieved progress in the development
of banking services geared to the needs of the sector, including
short-term loans, bridging loans, conventional finance, specialized
finance (computer equipment, vehicle fleet, environment, etc.) and
infrastructure financing (subway lines, air conditioning networks,
incineration plants).
Crédit Coopératif strengthened its involvement in the low-cost
housing sector, notably in partnership with the Fédération
Nationale des Coopératives HLM, (the French national federation
of low-cost housing cooperatives).
Natexis Banques Populaires is also involved in various public-private
partnerships with the French leaders in the construction industry
in the justice, health and security sectors.
The electronic banking offering, including “Moneo” to simplify
administrative formalities for citizens and the “Mission Plus” business
cards for the professional expenses of local officials and agents, will
be rounded out in 2006 by the “Carte d'Achat” for local
authorities' day-to-day purchases.
Lastly, the Group uses the expertise of its Natexis Intertitres
subsidiary to distribute a full range of service vouchers to public
agents and citizens, including, restaurant vouchers, gift checks,
Interservice vouchers and from 2006 onwards the prefinanced
“Chèques Emploi Service” vouchers (CESU).
59
BANKS AND FINANCIAL INSTITUTIONS
T
hrough its Natexis Banques Populaires listed
vehicle, the Banque Populaire Group offers a
wide variety of services dedicated to the banking
sector.These products and services for all the Group's
companies also meet the back-office needs of
numerous non-Group banks and financial institutions.
The services for banks and financial institutions are housed in
Natexis Banques Populaires' Services core business and are
structured around two business lines: banking services for
electronic banking and payment transactions, and financial
services for all services related to account keeping and securities
custody.
Banking services
Banking services provide access to national and international
clearing systems, with complete transaction processing.
This business line performs three functions: electronic banking
through Natexis Paiements, checks and clearing systems, and
personal banking services.
During 2005, the payment media management units were
integrated within Natexis Paiements. As a result, it is now a wellorganized and coherent entity capable of rising to the challenges
posed by increasingly fierce competition.This asset transfer was
carried out with several goals, notably including the pooling
within the Group of technological investments, as well as an
organizational target for the development of synergies between
all the payment media activities.
The par tnership between BNP Paribas and the Banque
Populaire Group represents a novel direction for the electronic
banking business. Under this agreement, a joint electronic
banking software development platform will be set up for the
retail banking businesses of both groups. Initially, it will use the
platform developed by Natexis Banques Populaires.
The three key service lines in these markets are account-keeping
and securities custody, depositary controls and issuer services.
The major “Cap 2005” redeployment and restructuring plan
initiated in 2003 was completed successfully.
It put financial services back on a trajectory of profitable growth
through efforts to refocus on the core business, business process
reengineering, a reorganization and improvements to managerial
capabilities.
The return to profitability marked the culmination of several
initiatives:
n asset disposals, including the closure of the subsidiaries in
Monaco, the shutdown of the account keeping business for
online brokers and multiple clearing,
n streamlining of online portfolio management with the OIC
internet client offering marketed under the “LineBourse” and
“LineDefi” banners,
n selection of a global custodian (The Bank of New York) for all
assets deposited with foreign depositaries. This transfer to a
single intermediary lowers operational risks and custody costs
outside France, while expanding coverage by providing seamless
access to over 100 markets,
n transfer of offshore funds deposited abroad to a single platform
(Fundsettle/Euroclear).This program lowers operational risks and
makes for more fluid processing.
n
implementation of new control and monitoring tools,
n
steep reduction in IT production costs,
n
design of a new information system development plan.
Concomitantly with the final phase of the “Cap 2005” plan, an
agreement was sealed with Ofivalmo, a recognized player in thirdparty asset management. This deal involved the transfer of the
depositary and account-keeping activities to the financial services
unit.
To see this project through to completion, the PARTECIS 50-50
joint venture was set up by the banks.
As part of the project, all the “production” electronic banking
applications will be pooled to enable both groups to enhance
their electronic banking performance across all client segments
(personal, small business and corporate clients).
Personal banking services, the other area of banking services,
played a role in the creation of MA Banque.
€429
billion
in assets in custody
Financial services
The Banque Populaire Group's financial services offering is geared
to the needs of two complementary market segments: retail and
single-branch banks, and asset management companies and
mutual funds.
2005 ANNUAL REPORT
5.6
million
cards managed
10%
of the electronic
banking market in France
(source: GIE - Bank cards)
SUSTAINABLE DEVELOPMENT
04
Sustainable development
No. 1
in micro-loan
refinancing (source:Adie)
No. 1
in solidarity-based savings
(source: baromètre Finansol - November 2005)
The Banque Populaire Group’s commitment to sustainable development stems from the
values on which it was founded and determines the way the Group conducts its internal
affairs and its external actions.
THE BANQUE POPULAIRE GROUP’S COMMITMENT
Given the challenges posed by sustainable development, the
cooperative values of entrepreneurship, audacity, humanity and
long-term vision represent the cornerstone of Banque Populaire
Group’s commitment.
Set up to bring to life entrepreneurial projects shunned by established banking channels, the Banque Populaire banks now play
a major role in the economy and in society at large.The principles of active cooperation that drive them forward are every bit
as relevant in today’s world.
The Banque Populaire Group acknowledges that it has particular responsibility for mobilizing the capabilities of its memberstakeholders so that they are able to pursue their personal, business and citizenship projects. Since its inception, it has enjoyed
the benefits of its geographical, personal and cultural proximity
to its clients and its employees. It has thus been able to build up
an extraordinary level of trust. It undertakes to enrich this even
further by adhering to the human values that have sustained it:
an optimistic view of mankind, respect for individuals and differences and mutual commitment.
For the Banque Populaire Group, social responsibility is founded
on close relationships between the Banque Populaire regional
banks and member-stakeholders, clients, employees, suppliers
and key figures in their local communities. For clients and memberstakeholders, it means transparent and easily accessible information about the performance of the bank. It also means support
for member-stakeholders’ community and voluntary projects.
For employees, the Group’s social responsibility necessitates a
social policy built on paying attention to individuals, training and
employability.
An organization dedicated
to sustainable development
In 2004, the Board of Directors of Banque Fédérale des Banques
Populaires made the decision to set up an organization charged with coordinating and overseeing the Group’s sustainable
development policy.
This organization was introduced during 2005 through the
appointment of a person in charge of sustainable development.
He repor ts to Banque Fédérale’s Secretary-General and is
responsible for organizing and managing sustainable development right across the Banque Populaire Group. One of his duties
is also to make sure that the Banque Populaire Group puts into
practice the principles of sustainable development in its dealings
with its clients and member-stakeholders. This approach is
notably giving rise to the distribution of environmentally friendly
banking solutions, such as “PREVair” and “CODEVair”.
At the same time, a network of sustainable development officers,
all reporting to a member of the Executive Committee, was set
up at all the Banque Populaire regional banks and principal
Group entities.This network will facilitate the sharing of information and best practices between banks.
This commitment underpins the day-to-day actions of the
Banque Populaire Group’s network. It guarantees a very close
relationship with local communities and direct involvement in
developing the regional economy. Numerous regional initiatives
provide evidence of this proximity in its day-to-day activities and
the diverse range of measures taken to promote sustainable
development by the Banque Populaire Group’s units.
Commitment founded
upon the Group’s values
of Entrepreneurship,
Cooperation and Humanity
The Banque Populaire Group’s commitment to sustainable development is in keeping with its practices and its history. It embodies its cooperative values, which make it fully committed to its
stakeholders and the regions in which the Group operates.This
long-term commitment has always been encapsulated its
emphasis on human relationships, the intensity of its recruitment
and the breadth of training available to its employees.
The Banque Populaire Group’s patronage is overseen by its own
corporate foundation, which plays a talent-spotting role in its
61
three areas of activity. It provides critical support to young artists
taking the first steps in their career. It brings to life personal or
business start-up projects launched by the disabled, volunteer
workers and creative people. Over the last ten years, 70% of the
projects financed were completed successfully – a success rate
well above the average for business start-ups thanks to the commitment and exper tise of the prizewinners. Lastly, the
Foundation has since 2004 supported the projects sponsored by
associations protecting or enriching sea and freshwater heritage.
During 2005, the Banque Populaire Group Foundation gave
awards to ten young musicians (composers, pianists, clarinetist,
cellist, flutist, violinist and a string quartet). It financed 19 projects
led by disabled people and ten projects to enrich the national
aquatic and maritime environment.The Foundation supports its
prizewinners over the long term, generally for three consecutive
years.
Natexis Banques Populaires’
strong involvement
The Banque Populaire Group’s commitment to sustainable development is also shared by listed subsidiary Natexis Banques
Populaires.The implementation in late 2004 of a dedicated team
of specialists in social and environmental matters and in asset
management helped to raise employees’ awareness considerably
and to factor sustainable development gradually into business
lines.This project was implemented by numerous subsidiaries in
conjunction with the Banque Populaire Group.
Recognized commitment
Rated by Vigeo for the third year in a row, Natexis Banques
Populaires saw a major improvement in its rating between 2004
and 2005.The bank made significant progress in all areas and is
among the top-ranking banks for human resources, relations with
customers and suppliers and its investment in society.The bank
is also a member of the “ASPI Eurozone” index comprising the
120 Eurozone companies with the best social and environmental responsibility performance as defined by Vigeo.
Since 2002, the “Comité Intersyndical de l’Epargne Salariale”, an
organization created by French labor unions to represent
employees in employee savings plan negotiations, has given
“Fructi ISR” its stamp of approval every year.
Enhanced credit analysis
In July 2005, credit committees began requiring an environmental score on all proposed financing to ensure that environmental
impact is taken into consideration. Regardless of the amounts at
stake, these scores take into account the project’s impact (A, B
or C depending on the sector or country), the extent to which
regulations are adhered to, the conclusions of the environmental
report and the risk of opposition to the project. Thanks to this
information, now systematically provided by relationship managers who have received training in this area, environmental
impact studies have become part and parcel of project analysis.
(1) Ademe is the French environment and energy management agency.
2005 ANNUAL REPORT
Greater emphasis on eco-management
The scope of consumption monitoring (water, energy, raw materials,
etc.), previously restricted to central offices, was extended with the
inclusion during 2005 of regional subsidiaries and offices.
During 2005, 2,400 Natexis Banques Populaires employees
moved into the new 50,000 m2 “Liber té 2” building at
Charenton-le-Pont.
A dedicated intranet site was set up for the move, with answers
to employees’ questions, a description of the new building,
practical tips for the move, concrete measures concerning transportation, rehousing, etc. An information leaflet was also distributed to all the employees, and 120 visits to the new building
were organized, enabling 1,200 employees to familiarize themselves with the site prior to the move.
The “Liberté 2” building was designed to offer the highest comfort
standards to its occupants, while minimizing the impact of its
operations on the environment. It also meets certain criteria laid
down in the French HQE (high environmental quality) standards.
By joining Ademe’s “Planète Gagnante” club, Natexis Banques
Populaires supported the energy-saving message of Ademe’s (1)
publicity campaign. The campaign aims to make the general
public aware of the environmental problems caused by
greenhouse gas emissions and encourage people to control
their energy consumption. Natexis Banques Populaires also
informed its employees of the implications of the everyday
behavior of individuals, who generate half of all greenhouse gas
emissions. By making changes to their personal travel, heating
and lighting habits, both at home and at work, they have
significant scope for improvement. Using the Climact test, available on the bank’s intranet site, employees can measure and
learn how to reduce their own greenhouse gas emissions in a
few minutes.
Natexis Banques Populaires also launched the “Gestes verts”
(green tips) campaign. A questionnaire sent to employees
helped to collect their suggestions concerning ways of reducing
the environmental impact of their activities. The “Gestes verts”
adopted for 2006 include the widespread introduction of selective waste sorting, a study of a car-sharing system and development of green product purchasing.
In fulfillment of its end-2004 commitments, the bank embedded sustainable development criteria into its various calls for
tender. The Purchasing department now follows this procedure systematically. To accomplish this, the bank called upon
the exper tise of Ademe’s eco-design and sustainable
consumption department, which made it possible to choose
products with less impact on the environment over their
entire life cycle. Official eco-labels have been widely used to
this end. For marketing publications, for example, the bank
turned to printers carrying the “Imprim’vert” label, used natural, vegetable inks and replaced all previously used varnishes
and coatings with acrylic varnish.The bank also adopted recyclable envelopes carrying the NF Environnement seal of quality for sending out various client statements, as well as using
recycled cartridges for its printers.
04
Banque Populaire Atlantique,
a new HQE* head office for the Banque Populaire Group
The Banque Populaire Atlantique’s
head office is the second building in
the Banque Populaire Group, after
the Sausheim office in the Haut-Rhin
department, to embark on a HQE*
program.
Several innovations helped to achieve
these goals.The external elliptic
double facade guarantees excellent
sound-proofing, high standards of
thermal comfort within the offices
and maximum natural lighting.
The external laminated glazing and
the insulating interior double glazing
help the building to adapt to different
weather conditions.This “double skin”
creates a buffer zone that is heated
in winter and naturally ventilated
in summer, which thus saves energy.
In both situations, hot air is channeled
by convection towards the colder
areas, further enhancing the system.
Blinds increase the insulation and
protect people working there in
the evening or at the weekend.
They enhance the efficiency of the
double skin and thus yield energy
savings. Centralized management of
the technical installations helps
to minimize energy consumption.
Plants are grown on the head office’s
roof terraces and the entrance
square to slow down the run-off
of rainwater, which is directed into
a vast buffer basin.This system meets
the requirements of the new legislation
on rainwater management.
Servicing and maintenance were
built into the design process
to ensure effective management
of the installations.
*High Environmental Quality
An Ethics, Compliance and Sustainable Development department was created in 2005 with dominion over all Coface activities. Its mission is to make sure that Coface’s practices are in
keeping with the principles of sustainable development, to
propose improvements where necessary, and to involve each
employee directly in the company’s commitments by creating a
code of conduct for all Coface employees in the 58 countries
where it has a direct presence.
French education system, CASDEN Banque Populaire, the
educational authorities and Banque Populaire d’Alsace.
Commitment in all aspects
of sustainable development
In pursuit of the same educational target, Banque Populaire des
Alpes and Banque Populaire Loire et Lyonnais recently signed an
agreement with Rhônalpénergie-Environnement to support two
projects working in parallel. The first is an educational program
concerning the use of energy for primary school pupils. The
second proposes dedicated services for municipal authorities to
enhance the economic efficiency of the buildings they manage.
Buildings (homes and offices) account for 40% of demand for
energy in Europe.
Raising awareness and informing stakeholders about sustainable
development is a top priority. The 1992 Conference of the
United Nations on Environment and Development placed great
emphasis in its Agenda 21 on the role of education for achieving
development that respects and protects the natural environment. It stressed the need for education to play an orientation
and reorientation role to promote environmentally friendly
attitudes. Several Banque Populaire banks, which are actively
involved in their environment, took the initiative by launching
active and eye-catching educational campaigns.
Banque Populaire d’Alsace held the fifth edition of its “Trophées
de l’Environnement” (environmental awards) for the 2005-2006
school year, in conjunction with CASDEN Banque Populaire, the
Strasbourg regional school authorities and the Alsace regional
educational documentation center. The theme of this competition, which is open to pupils in the first three years of secondary
school, is the protection of links with the environment in the
context of local issues. Participants are asked to illustrate this
subject however they wish by producing a mini-exhibition on
three or four boards. This helps teachers broach the subject of
sustainable development as part of a multi-disciplinary framework. The panel of judges comprises representatives from the
CASDEN Banque Populaire, a key partner of civil servants
working for the French education system, works together with
educational teams to produce a number of exhibitions to mobilize teachers on the theme of sustainable development-related
education. During 2005, several exhibitions were set up, including one about EU expansion as a crossroads for education and
training and another about the four seasons of time.
In October 2005, Banque Populaire Provençale et Corse and
Banque Populaire Côte d’Azur organized the presentation of the
“Pavillon Bleu” environmental education awards at the Institut
Euroméditerranéen des Métiers in Marseille (French Office of the
Foundation for Environmental Education).The top award went to
Marc Camus, Director of the La Ciotat harbor, who designed an
anti-pollution kit for amateur sailors.
In 2002, the Banque Populaire Group launched a partnership
with Médecins Sans Frontières (MSF). Two campaigns to raise
awareness about humanitarian emergencies and to support new
customer introductions and solidarity-based commitment were
held during 2005. The emergency assistance mobile exhibition
and the humanitarian assistance hotspots mini-exhibition were
presented in Banque Populaire branches in 19 towns and cities.
Five Banque Populaire banks (Alpes, Atlantique, Bourgogne
Franche-Comté, Alsace and Lorraine Champagne) participated
63
in this program, which was a major success.The emergency assistance exhibition attracted close to 26,000 visitors, 2,400 of
whom became members of “Médecins Sans Frontières”.
During Sustainable Development Week, between May 30 and
June 5, 2005, Natexis Banques Populaires set up a mobile
exhibition to inform its employees about the key priorities of
sustainable development, including a definition of the concept,
the urgent need for action, the players involved and the implications for banks (solidarity-based savings, investments linked to
the Kyoto Protocol, financing for renewable energies). This
exhibition was staged at the Banque Populaire Group’s principal
offices until September 2005.
Involvement in the international
battle against corruption
The Banque Populaire Group ensures that all its units conform
to all legal requirements regarding the detection and prevention
of money laundering and corruption, in accordance with the
tenth principles of the “Global Compact” signed and adhered to
by the Group.
The “Global Compact” is predicated on a partnership between
the United Nations, NGOs and the world of business. It aims to
couple the power of the markets with the moral authority of
universally held beliefs and to promote awareness of the social
and environmental effects of globalization.
Natexis Banques Populaires stepped up its efforts to prevent
corruption.The teams working in pursuit of this objective were
strengthened and reorganized, and the anti-money-laundering
training was well-attended. In addition, specific training modules
were put in place for certain business lines (correspondent banking, Corporate France and Natural Resources and Related
Industries).
Breakfast meetings on “how to prevent corruption” are held
each quarter. Sixty employees of Natexis Banques Populaires
and its subsidiaries listen to a talk given by a guest speaker
concerning a specific aspect of money laundering.
Monitoring systems were implemented, with filtering softwarescreening entities on French and European anti-terrorism watch
lists now installed on transaction clearing platforms. Furthermore,
the bank acquired behavioral analysis software that can detect
suspicious transaction flows with regard to the anti-money laundering regulations in the accounts of businesses, correspondent
banks and personal customers.
Lastly, an “unusual” transaction report, i.e. a transaction likely to
fall within the scope of the anti-money laundering legislation, is,
where appropriate, sent to the corruption prevention team,
which conducts the necessary investigations and may report any
suspicions to the relevant authorities (Tracfin). A corruption
supervisory committee meets every month together with the
supervisory units and representatives from the business lines to
review any difficult cases and to bring its internal system into line
with the latest regulatory changes.
2005 ANNUAL REPORT
04
HUMAN RESOURCES
Safeguarding jobs
The Group decided to make jobs a priority, firmly positioning its
human resources policy as part of a forward-looking approach
to skills management. In return, each employee can develop his
or her own expertise to the full within a supportive environment.
n In 2005, the size of the Group’s workforce increased again, at a
modestly slower pace than last year of 2.3% (vs. 3% in 2004).The
number of active employees came to 45,530, representing an
increase of 1,021, compared with 2004 driven primarily by the
Group’s organic expansion.
Banque Populaire Group’s active employees (1)
Banque Populaire regional banks
+ CASDEN Banque Populaire
Crédit Coopératif
Total Banque Populaire banks
Crédit Maritime Mutuel
Natexis Banques Populaires and subsidiaries
(excluding Coface)
Coface
Total Natexis Banques Populaires
and subsidiaries
IT platform(2)
Other structures (3)
Group Total
12/31/2001
12/31/2002
12/31/2003
12/31/2004
12/31/2005
25,218
25,218
25,725
1,425
27,150
430
443
26,528
1,486
28,014
959
453
27,054
1,509
28,563
918
463
27,441
1,548
28,989
959
484
7,589
7,681
3,765
8,151
4,076
8,311
4,619
8,590
4,842
7,589
807
767
11,446
759
780
12,227
761
810
12,930
770
865
13,432
814
852
34,811
40,578
43,224
44,509
45,530
(1) Active employee numbers show on full-time equivalent basis employees on the register of employees at the end of each month on permanent or fixed-term contracts (including permanent retraining contracts and return-to-work contracts). Employees working part-time and those under fixed-term contracts are included prorata to their hours worked during the month.
(2) 12/31/2002: the active employees of CTR Metz-Troyes were included with those of Banque Populaire Lorraine Champagne.
(3) MA Banque (formerly SBE), BICEC, CAR-IPBP, Click & Trust, seconded banking staff in following subsidiaries: BRED Banque Populaire, Cofilease, M+X, a subsidiary of Banque Fédérale
n The Banque Populaire banks, which comprise the Banque Populaire
regional banks, CASDEN Banque Populaire, Crédit Coopératif and
Crédit Maritime Mutuel (affiliated institution), account for 29,948
employees, up 1.6% over the previous year (1.7% last year).
Another merger between Banque Populaire regional banks took
place during 2005 (between Banque Populaire du Midi and Banque
Populaire des Pyrénées-Orientales, de l’Aude et de l’Ariège), lifting
the number of such combinations to 11 over the past six years and
increasing the average number of employees to 1,500 per new bank.
In local retail banking, another key development during 2005 was
the transfer of 41 employees from Société Centrale du Crédit
Maritime, following the link-up between its regional banks and the
Banque Populaire banks.The mobility program implemented by the
Group ensured that almost all these employees were offered a
concrete position internally commensurate with their professional
development.
n In the Group’s financing, investment and services business, the size
of the workforce of Natexis Banques Populaires and its subsidiaries,
i.e.13,432,increased by 3.9%,a stronger rise than that seen across the
Group as a whole (2.3%). Various employee transfers took place
within this segment, especially between the French subsidiaries.
Natexis Paiements recorded an increase of 154 employees over one
year, while Natexis Investor Services recruited around 60 new
employees. In addition, the number of Coface’s employees outside
France continued to grow (increase of 269 employees over the year).
Natexis Banques Populaires’ active employees
12/31/2001
12/31/2002
12/31/2003
12/31/2004
12/31/2005
Parent company
French subsidiaries (excluding Coface)
Employees outside France (excluding Coface) (1)
Coface France
Coface outside France
4,349
2,612
628
4,375
2,616
690
1,921
1,844
4,391
2,698
1,062
1,872
2,205
4,434
2,739
1,138
2,217
2,402
4,395
2,979
1,216
2,171
2,671
Total Natexis Banques Populaires
7,589
11,446
12,227
12,930
13,432
(1) Including Natexis Bleichroeder New York.
65
As a result of Natexis Banques Populaires’ organic growth and
acquisitions outside France (at Coface), the number of the
Group’s employees outside France continued to grow, with an
additional increase of 335 (rise of 8.2%). The Group’s workforce, which is present in 68 countries, breaks down as follows
by region:
Group’s employees outside France
12/31/2003
12/31/2004
12/31/2005
Africa
Europe
Asia
North America
South America
668
2,105
371
552
110
17.5%
55.3%
9.7%
14.5%
3.0%
716
2,301
406
480
178
17.5%
56.4%
9.9%
11.8%
4.4%
780
2,470
444
499
226
17.6%
56.0%
10.0%
11.3%
5.1%
Total
3,807
100%
4,081
100%
4,419
100%
Of the 4,419 employees outside France, 60% work for the
Coface network, 27% for Natexis Banques Populaires and 13%
for the Group’s subsidiary in Cameroon (BICEC). International
employees now account for 9.7% of the total, compared with
1.7% in 1998.
during 2005. It demonstrated its support for combined workstudy programs (433 apprentices and 291 job-training programs
at December 31, 2005), with Chairman Philippe Dupont signing,
on October 7, 2005, the Apprenticeship Charter for CAC 40
companies and large public and private companies.
n
Attracting, integrating
and retaining employees
Recruitment continues to get a boost from the transfer of
responsibilities from one generation to the next. In line with its
human resources management policy, the Banque Populaire
Group applies several key principles: attracting, integrating and
retaining employees. These represent top priorities for the
Human Resource departments of its various units.
n In 2005, the Banque Populaire Group hired over 4,000 new
employees in France on permanent contracts, 27% of whom
have management-level status. Of these new recruits, one in two
were women. Considering the Banque Populaire regional banks
in isolation, 82% of the 2,500 new hires in 2005 joined the
branch network. This active recruitment policy helps to keep a
constant flow of talent around the Group and to replenish the
Group’s skills base.
The trend towards a reduction in the average age of Group
employees seen since 1998 remained intact, with under 25s
accounting for 41% of new hires. Planning ahead for future
departures, the Group has been working to rebalance its age
distribution for several years. As a result, under 35s now account
for 34% of its total employees, compared with 30% in 2001. At
the same time, the Group’s recruitment policy is to increase the
level of qualification among its new hires. In 2005, 39% of new
hires had spent at least four years in higher education, whereas
the overall figure for its workforce stands at just 23%.
In its search for young talent, the Banque Populaire Group and
its units have adopted a high profile at recruitment fairs for
students and graduates, participating in over 250 events at target
schools and universities during the year. During 2005, its online
recruitment site had an average of 160 job offers. The Group
continued to support the integration of young people into
business life, by providing internships to over 4,600 students
n
2005 ANNUAL REPORT
“Change life, without changing Group”
Support for internal transfers and communication about the
Group’s business lines were stepped up during 2005. Every
effort is made to retain employees, who receive extensive information about the diversity of the Group’s business lines and the
gateways between them, especially since the expansion of the
Group’s scope is leading to the emergence of new business lines.
The campaign to inform employees about the Group’s business
lines continued during 2005, with the organization of two days of
meetings between employees working for units in Paris and the
surrounding region (September 27 in Paris) and between those
working for units in Eastern France (November 24 in Nancy), i.e.
a total of over 360 employees. With this greater emphasis on
geographical mobility, the Group’s promise of “Changing life,
without changing Group” is now a reality, as indicated in the
guide bearing the same name distributed to human resources
departments of the Group’s units during 2005.
Developing employees’ skills
and optimizing their professional
capabilities
The Banque Populaire Group has a proud tradition of investing
in employee training. It endeavors to implement a policy enabling
its employees to develop their skills in line with their expectations and with the Group’s operational needs.
In 2004, the Banque Populaire Group provided 1,509,691 hours
of training to over 33,300 employees, i.e. 87.5% of employees. It
devoted 6.2% of its payroll costs to training, a proportion well in
excess of its legal obligations.
Under its Annual Marketing and Communication Plan, the
Group continued to hone the business skills of its salesforce
across its various markets through Group-wide initiatives. For instance, 1,320 salespeople received training in selling to businesses
n
as part of the CiblEntreprise program, another 700 received
training in wealth management over the past four years, while a
basic training program called “coeur de l’épargne financière” (the
heart of financial savings) provided training for 330. In addition, a
special training plan for certain categories of self-employed professionals was set up in March 2005 and is currently being rolled
out across the banks.The Group also has an international qualification program (150 specialists trained to date). Further initiatives are planned in 2006, in particular for farming and small
business client advisors.
At the same time, the Group continues to encourage its
employees to gain professional banking qualifications as a means
of developing their potential. A total of 143 employees were
awarded qualifications during 2005, representing 23% of the
industry total.
The year saw the gradual deployment of training reforms and
the launch of a strategic review to formulate a revitalized Group
training policy, with the creation of a dedicated federal commission. Chaired by Bernard Jeannin, Chief Executive Officer of
Banque Populaire Bourgogne Franche-Comté, the federal commission has emphasized the need to rise to the challenge of lifelong training geared to the development of skills and the strategy
of the business. It has defined five priority employee categories:
senior managers, high-potential managers, local management,
seniors and young recruits.
n
Against the backdrop of rapidly changing regulations, the Group
stepped up its efforts to combat money laundering. The new
training program to combat money laundering and the financing
of terrorism designed by the French Banking Federation was distributed to all branch and department staff.
Further training tools were developed to foster skills. The
Group set up the “e-tinéraires” distance-learning platform for
its 45,500 employees. It will help to promote the development
of its employees’ skills thanks notably to dedicated career development plans. The distance learning modules, which will
shortly be available on the internet, represent a major component of the training program because they cover a wide range
of areas and are readily available. To the same end, the Group
set up its first business line portal in June 2005 specializing in
wealth management.
n
Securing the transition from
the current generation of senior
managers
The Group encourages the recruitment of men and women from
a wide range of backgrounds and seeks to value and nurture the
talents of all its employees. With an eye toward training the
Group’s senior managers of the future, it endeavors to develop
and refine on a continuous basis a set of managerial initiatives.
During 2005, new training modules were offered to senior
managers as part of the Executive cycle.The Mastership program
for management supervisors was continued, with the total
number of employees having received this training since its
04
inception increasing to over 3,000. A new intake for the Group’s
management training institute (Centre de Perfectionnement au
Management) aimed at future senior managers was arranged in
October 2005, taking the total number of managers to have
completed the training to 410.
The Group also encourages the continued development of its
senior managers and the sharing of best practices. Over
110 Chairmen, Chief Executive Officers and Vice Chairmen
received training in topical issues. The third Group Directors
summer school was attended by 350 participants and focused
on the theme of Society and Performance.These seminars, which
provide ideal conditions for discussions, represent one of the
keys to mutual enrichment.
Improving HR management
methods
Human resources management is the area in which greatest
efforts are being made to contribute to sustainable development.The size of the Group’s businesses and the challenges they
face (demographics, higher professional standards, etc.) have
prompted it to take a fresh look at the roles and resources
allocated to the human resources function.
A specific program, HR organization and performance, was
launched during 2005 with a view to improving the quality of
services provided in this area.The initial conclusions aim to raise
the awareness of the “HR community” to boost the function’s
performance and its level of involvement in the strategy of the
businesses.
At the same time, implementation of forward-looking skills
management based on a dynamic approach to human resources continues at the Group’s units. Following on from the “joint
skills base” developed in 2004, the Group’s businesses benefited in 2005 from a new joint initiative – the annual review –
which incorporates the requirements of the training reform
and forward-looking skills management.The year also saw the
creation of the “Observatoire des métiers” (observatory for
banking professions).
At the same time, modernization of the Group’s human
resources information system reached a new milestone with
deployment of the architecture planned five years ago being
completed and initial steps towards the new target architecture for 2010 being implemented.
Motivating employees
As far as possible, the Group is committed to keeping its employees
motivated by offering attractive compensation packages, devised
jointly by human resources executives and local managers.
Compensation and benefits
For the Group as a whole, average salary levels are comparable
with market rates in the banking industry. As a general rule, 92%
of an employee’s compensation is fixed, the remainder is variable.
67
Salary increases depend largely on the policy of the individual banks,
which have full responsibility for determining how they reward
individual and collective performance. Across-the-board pay settlements are negotiated at industry or Group level taking into account
the economic situation, overall pay levels and the competitive environment. In 2005, a new Group-level salary agreement was signed
with three trade unions (CFDT, CFTC, SNB). It granted all
employees covered by the banking industry collective employment
agreement a permanent 1.8% pay rise, with a minimum of B450.
As in the previous year, variable remuneration (profit sharing,
profit-related bonuses, incentives and company top-up payments) represented a significant share of total employee compensation. A link is gradually being introduced between part of
the compensation and benefits paid to employees and their
individual and collective performance. In 2004, the variable
portion of compensation accounted for an estimated average of
29.4% of total pay.
Additional pay elements in 2004
Amount (in thousands of euros)
% of total pay
Profit-related bonuses
Employee profit sharing
Bonuses
Company top-up payments
115,542
78,653
126,672
20,335
10.0%
6.8%
10.9%
1.7%
Total
320,867
29.4%
Additional benefits
Nearly all of the Banque Populaire banks, Natexis Banques
Populaires and most of its subsidiaries, and Banque Fédérale des
Banques Populaires have profit-related bonus, profit sharing and
company savings scheme agreements.
Profit-related bonuses
All the Group’s profit-related bonus schemes allow for bonus
payments based on the results of the relevant entities. In the vast
majority of cases, the calculation formula also takes into account
gains in market share and increases in return on equity.
Productivity, as measured by the improvement in the cost/income
ratio, and quality of business, as reflected by the decrease in loan
loss provisions and the number of client defaults, are also used in
some cases. More than half of the schemes’ bonuses are paid only
if a certain profitability target is reached. This trigger may be
stated in terms of growth in gross operating income, growth in
reserves, improvements in the return on equity and so on.
The distribution of bonuses is generally in proportion to basic
pay. Some Group companies offer flat-rate bonuses and many
banks combine the two approaches in varying proportions.
Profit-related bonus payments over the last five years
In thousands of euros
2000
2001
2002
2003
2004
87,740
96,128
85,960
98,595
115,542
Profit sharing
Some Group companies apply profit sharing calculation formulae that are more generous than those prescribed by law. Some
waive the 1/2 coefficient, while others reduce the amount
deducted from the calculation base in respect of return on
equity. Some Group companies use an altogether different
formula, basing profit sharing directly on a percentage of taxable
or book income.
Company savings schemes
The majority of these schemes have been set up by Group
companies under agreements with employee representatives.
Where companies make additional voluntary top-up payments
2005 ANNUAL REPORT
and grant profit-related bonuses, the percentage they pay
generally varies according to the size of the payment, with
amounts of less than B150 or B300 being matched up to 100%
in certain cases. Half of the Group’s employees are members of
their company’s company savings scheme.
Maintaining a healthy and active
dialog with employees
The Group has pursued a high-quality dialog with its employees
over a long period of time. Employee relations are structured at
divisional, Group and bank level.
n As an associate member of the French Banking Association
(AFB), the Group is an active participant in industry negotiations.
Its input has grown following the appointment of its Director of
Human Resources as Chairman of the Joint Banking Commission
effective September 1, 2005.
The key events of 2005 included the signature of several
industry-wide agreements concerning training, pay and pensions.
The agreement of February 25, 2005 on pensions for banking
industry professionals notably cleared up certain outstanding
issues concerning the status of the banking industry pension fund
(management of residual pension rights when the banking sector elected to join the AGIRC and ARCO funds).This agreement
is due to be adopted at Group level.
04
At the same time, the Group equipped itself to deal with the
plethora of new regulations and their implementation deadlines
(January 1, 2006). Against this backdrop, it holds information and
induction training sessions concerning the new reforms,
especially concerning health insurance (law of August 13, 2004)
and the disability act of February 11, 2005. In addition, it is
developing new services to raise the standards achieved by local
managers in their management of human resources.
n Dialog with employees is constantly being enriched at local
level. Employee representatives and management regularly reach
agreements entitling employees to benefit from special financial
or labor-related arrangements (profit-related bonuses, profitsharing, working hours, health, etc.). What’s more, they have to
contend with new negotiation obligations, particularly in terms
of equal opportunities and occupational health.
The agreement of March 29, 2005 now allows employers to
put an employee into retirement prior to the age of 65 when
he or she has the number of annual credits required for a
full-rate pension. This agreement provides for compensatory
mechanisms in terms of jobs and training, as well as procedural
guarantees.
The pay agreement of February 4, 2005 on minimum industry
wages also led to a change in pension benefits, with the introduction of an increase after 30 years of service. Lastly, the industry
signed a continuous training agreement on July 8, 2005 entitling
employees to receive training throughout their banking career.
A key aspect of professional training policy, this agreement
represents progress in terms of employee training in the banking
sector, including the right to training and credit for life and work
experience.
n At Group level, dialog with employees led to numerous
meetings with national employee representatives of the
various negotiating and discussion bodies, with an average of
two meetings per month.
The signature on May 2, 2005 of the pay deal (permanent
increase of 1.8% in industry wages) helped to ease the tension,
which had built up during the spring.
Early in the autumn, employee representatives and management
agreed to review all the Group’s representative bodies as part of
the current renegotiations of the industry-wide agreement.The
goal is to structure more effectively the respective responsibilities of the representative bodies and resources devoted by the
Group to dialog with its employees. Talks were also initiated
regarding reform of the Banque Populaire Caisse Autonome de
Retraite (CAR) pension plan to bring it into line with the Fillon
pension reform law.
Furthermore, in keeping with the industry agreement, the Group
set about adapting the employment and professional training
agreement of December 1, 2003 to the legislative and regulatory
changes that took place during 2004 and 2005.
69
ENVIRONMENT AND SOLIDARITY
The Banque Populaire Group puts its values and its expertise
into practice in financing and assistance for environmental
protection projects, as well as in the solidarity-based economy.
Across France as a whole, the Banque Populaire Group is the
number one bank when it comes to financing the solidaritybased and environmental components of sustainable development projects for individuals and businesses(1). Its network is
heavily involved in the distribution of solidarity-based savings
products and financing for solidarity-based projects, either
directly or by reallocating gifts from participation products with
associations or solidarity-based financial organizations.
Number one in the
solidarity-based savings
market in France
In 2005, the “Baromètre Finansol”(2) survey of solidaritybased financing again found the Banque Populaire Group
to be the leading player in this segment in France.
This leadership was achieved thanks to the combined
efforts of several banks, including Natexis Banques
Populaires, the Banque Populaire regional banks and
Crédit Coopératif.
The Banque Populaire Group is the leading bank
in France for collecting solidarity-based savings thanks
notably to the efforts of various business units, such
as Natexis Asset Management, Natexis Interépargne,
Crédit Coopératif and Banque Populaire d’Alsace.
NEF, a bank affiliated with Crédit Coopératif, is the
leading solidarity-based player in collecting solidarity-based
savings products (€63 million in 2004) thanks to its range
of eight products carrying the Finansol seal of quality.
This leadership is backed up by Caisse Solidaire du
Nord-Pas-de-Calais, a Crédit Coopératif affiliate that
is France’s leading regional collector of solidarity-based
savings, with three solidarity-based savings products
carrying the Finansol seal of quality.
Furthermore, the Banque Populaire Group was also a partner of
the Solidarity Savings Week campaign in the Ile-de-France (Paris)
region. Lastly, Crédit Coopératif, Natexis Asset Management and
Natexis Interépargne took part in the fourth edition of the
Solidarity Savings Week organized by Finansol, which was held
during 2005 in the Ile-de-France region. This campaign is intended to raise public awareness about the advantages of solidaritybased savings and to present ambitious concrete projects based
on this type of investment: back-to-work and job creation activities, solidarity-based housing projects, and renewable energies
ventures, to cite just a few examples. The Banque Populaire
Group units taking part in this event passed information on to
their employee savings clients and employees, inviting them to
seminars about solidarity-based employee savings.
Crédit Coopératif, with its 11 solidarity-based savings products
carrying the Finansol seal of quality, and Banque Populaire
d’Alsace, with its “CODEVair” passbook account, make the
Banque Populaire Group the bank offering the widest choice of
solidarity-based savings products in France. To better meet
savers’ needs, Crédit Coopératif constantly breaks new ground
by offering a range of solidarity-based savings products (passbook accounts, mutual funds, current accounts, etc.) benefiting a
growing number of solidarity-based organizations.
In 2004, its savings volumes posted the strongest growth in the
sector (30% vs. an average of 14% across the solidarity-based
savings sector).
Natexis Interépargne is the French market leader in employee
savings. It is also the bank that has shown the highest level of
commitment to promoting solidarity-based savings to businesses.
In this market segment, which was worth a total of B613 million
at the end of 2004, including B130 million in solidarity-based
employee savings, Natexis Asset Management and Natexis
Interépargne are market leaders, with solidarity-based employee
savings of B93 million under management at December 31,
2004, or a 71% market share. Managed assets advanced significantly again in 2005 to reach B150 million.
The bank owes its first-tier position to the complementary
expertise of two Natexis Banques Populaires subsidiaries.
Natexis Interépargne has introduced specific training in solidarity-based savings for its corporate clients and their employees.
It currently channels savings inflows into three solidarity-based
financial organizations: Adie, Habitat et Humanisme, and France
Active.
In terms of the Banque Populaire regional banks, Banque
Populaire d’Alsace has offered the “CODEVair” passbook savings
account since 1999.This product, which carries the Finansol seal
of quality, helps to collect solidarity-based savings for environmental protection projects. At year-end 2005, Banque Populaire
des Alpes and Banque Populaire Loire et Lyonnais also signed up
to this program.
Number one in micro-loans
in France
People in a precarious situation find it very hard to secure bank
loans, which tends to exacerbate their situation. Micro-loans provide a practical solution to their problems.
Guarantees represent a key factor helping to improve access to
credit. The French Ministry of Employment, Labor and Social
Cohesion set up a guarantee fund as par t of legislation to
promote social cohesion. This fund facilitates micro-loans, while
taking all the requisite measures to prevent borrowers becoming
over-indebted.
(1) Source: Adie and Finansol.
(2) The Finansol seal of quality helps to identify solidarity-based savings products. It guarantees transparency, high ethical standards and solidarity-based aims of the savings products on which it appears.
2005 ANNUAL REPORT
The social cohesion fund, which is to be set aside by the French
Government over five years and is managed by the Caisse des
Dépôts et Consignations, covers two types of loans: professional
micro-loans fostering the creation of new businesses and companies by or for people in difficulty, and social loans facilitating the
social and professional integration of low-income individuals.
Since November 22, 2005, the Banque Populaire Group has
been one of the first banks to receive approval from COSEF, the
advisory committee monitoring use of the fund, to use the guarantee fund for social micro-loans.
The Banque Populaire Group has received an initial commitment
of B150,000 (enabling it to grant B1,200,000 in social microloans) from the Social Cohesion Fund guaranteeing 50% of loan
volumes, the purpose of which must solely be to finance personal micro-projects linked to:
n
access to housing, education or training;
n
employment and mobility;
n
household equipment;
n
family-oriented and other social cohesion projects;
spending necessitated by a major change in personal circumstances (illness, handicap, unemployment, divorce).
n
The plan presented by Banque Populaire Group is underpinned
by the system put in place by Crédit Coopératif and tested on a
preliminary basis by Banque Populaire des Alpes.This recognition
of the Group’s commitment strengthens initiatives already implemented in support of organizations combating social inequality.
“Crédit Coopératif and Unicef France” also launched in 2005 a
new ethical and solidarity-based investment product.To support
international campaigns in favor of a school education for girls,
Unicef receives 50% of the income distributed on an annual basis
by the mutual fund in the form of a gift.
Crédit Coopératif Agir Unicef has received the Finansol seal of
quality, which guarantees the transparency, reliability and use of
the savings for solidarity purposes.
A pioneer in environmental
funding in France
In 2005, the Banque Populaire Group continued supporting banking initiatives devoted to financing environmental and renewable energy projects.
Two Banque Populaire regional banks announced the launch
during 2006 of the “CODEVair” passbook account. Savings collected are assigned to “PREVair”, which funds environmentallyfriendly property projects. Banque Populaire Loire et Lyonnais
and Banque Populaire des Alpes are thus the first banks in the
region to offer both a solidarity-based savings system geared to
sustainable development and a specific type of loan for financing
investments intended to improve the quality of the environment.
Their client approach is backed up by partnership initiatives to
support regional sustainable development programs. For instance,
Banque Populaire Loire et Lyonnais and Banque Populaire des
04
Number one lender to ADIE
The Banque Populaire Group is the number one
lender to ADIE (French association for the right
to economic initiatives), having committed a global
credit line of over €5 million to the organization.
ADIE (Association pour le droit à l’initiative
économique) is a voluntary network providing
support and assistance to project leaders
excluded from traditional borrowing channels.
The goal is to help people create their own
small businesses. Such is the professional approach
demonstrated by ADIE, both in its relationship
with project leaders and in its credit risk management,
that the legislative authorities and the banking
supervision body have authorized it to make direct
business start-up loans to the unemployed and
recipients of social security payments.ADIE has
turned to its banking partners, including the
Banque Populaire Group, for refinancing to help
it cope with this decisive stage in its development.
In 2005, Banque Fédérale des Banques Populaires made
it easier for the Banque Populaire regional banks to
contribute to ADIE’s local units, which should also
help to increase the use of funding at national level.
Alpes signed a partnership agreement with “RhônalpénergieEnvironnement” to promote and use renewable energies (timber,
solar power, geothermal energy, etc.) in the Rhône-Alpes region.
They gave their backing to two Europe-wide projects led by the
regional energy and environment agency in the Rhône-Alpes
region.The first is an educational program concerning the use of
energy for primary school pupils. The second aims to develop
energy efficiency services for municipal authorities to reduce the
energy consumption of the buildings they manage or own.
Banque Populaire d’Alsace is pursuing its partnership with the
Alsace regional authorities and ADEME’s (French environment
and energy management agency) Alsace office, which is geared
to distributing subsidized housing eco-loans for individuals and
for individual solar-powered water heaters.
These efforts broke new ground in France in terms of financing
for environmental projects.They paved the way for a reconsideration of the role of banks as the financial instruments of public
sustainable development policies. They brought into clear focus
the benefits of subsidized eco-loans for achieving equipment installation objectives helping to combat the greenhouse gas effect.
To reconcile regional and environmental development, Crédit
Maritime d’outre mer and BRED Banque Populaire set up
a “Sofipêche” unit on Réunion Island, in conjunction with
Coopération Maritime. This product, which was called
“SOFIRUN 2005” and has B4.9 million in capital, aims to widen
ownership of new fishing vessels by young fishermen setting up
a business for the first time.
71
The efficacy of this initiative in the relevant geographical environment was underlined in the statement outlining commitment to
the Réunion fishing industry signed jointly by the French
Agriculture and Fishing Ministry and the Chairman of the Island’s
regional authorities in December 2005. This plan is particularly
significant for Réunion’s small fishing industry, which accounts for
87% of the island’s fishing fleet and close to 50% of its sailors.
Natexis Banques Populaires is aware that its significant contribution to sustainable development is predicated on its business
lines (financing, investment, asset management, etc.). During
2005, it continued to establish itself as a major force in the
renewable energies sector (hydro, biomass, wind energy), socially
responsible investment (SRI) and solidarity-based lending.
Sharp increase
in wind farm financing
In 2005, Energéco, a subsidiary of Natexis Lease,
contributed €99 million in loans to the financing
of 25 wind farms.This represented a significant increase
over the €57 million in financing and 18 wind farms
assisted between 2001 and 2004.With market share
of around 30%, Energéco strengthened its position
as one of the leaders in arranging and financing projects
of this kind in France. Natexis Banques Populaires
doubled the size of its project portfolio through
its involvement in financing 10 new wind farms in
France, Spain, Portugal, Morocco, the UK and the US.
Financing amounted to €115 million for a total capacity
of 1,100 MW.
Natexis Banques Populaires is also fostering the emergence of
the emissions permit trading and derivative products (carbon
credits, Kyoto projects, etc.). Since the Kyoto Protocol became
effective in 2005, the bank has started to position itself as an
intermediary in the CO2 quotas market. A dedicated team can
now execute orders to buy or sell negotiable emissions permits
on the Amsterdam stock exchange on behalf of clients.
Natexis Banques Populaires is continuing its reflection so that it
is able to offer its customers a wide range of products and services linked to carbon-related constraints, ranging from support
for clients affected by the CO2 quotas in France, to financing
Kyoto-projects in developing countries.
To raise businesses’ awareness about the dangers of global warming, Natexis Banques Populaires also signed up to the Carbon
Disclosure Project during 2005.This questionnaire was sent by
155 investors to the world’s top 500 businesses based on their
market capitalization, asking them for details about their greenhouse gas emissions. During 2005, 70% of businesses consulted
responded to the questionnaire, up from 58% in the previous
year.
2005 ANNUAL REPORT
Quest to identify novel sustainable
development solutions
To reduce the impact of our business activities on climate
change and the environment, we need to deploy a whole range
of innovative technologies. Providing financial support for the
development of these eco-technologies necessitates the creation or strengthening of dedicated financial instruments.
The Banque Populaire Group kicked off the process by introducing the first subsidized eco-loans. It also supports investment
funds dedicated to eco-innovation. Natexis Banques Populaires
contributes to the FCPR 3E (Emertec Energie Environnement)
venture capital mutual fund, which provides seed capital to
finance innovative businesses at the cutting edge of technology
in the energy and environment sectors. Five Banque Populaire
regional banks contributed to the FIDEME fund developed by
Ademe to support businesses operating in renewable energies
and the environment sector.
Aside from implementing a growing number of fragmented
initiatives, the need for investment and financing for environmental equipment is such that integrated planning of how to
finance the demands of sustainable development is now required. The ETAP program (Eco-Technology Action Plan), which
has drawn up plans for “green” financial funds to be developed
to support environmentally friendly technical solutions, represents one of the responses to this imperative at European
level.
Eco-innovation funds are due to be set up during 2007 as part
of Entrepreneurship and Innovation Program project.
Preallocation of the funds has focused on eco-innovation, in
support of implementation of the Eco-Technology Action Plan
(ETAP). Some of the funds will be channeled into financial
instruments managed by the European Investment Fund, in
conjunction with banks and investment funds.
The proposed Entrepreneurship and Innovation Program also
provides for support measures for innovation in businesses,
including the initiatives contained in the INNOVA program launched by the European Commission (Enterprise Executive
Management) in 2005.The goal is to introduce sectoral innovation
monitoring units (ten or so sectors, including eco-industries, have
been identified), financing networks and sector-specific innovation
management systems. All in all, some 800 innovation experts are
involved. Over the 2007-2013 period, this initiatives are expected
to receive additional funds, to prompt eco-innovation, among
other goals.
Leveraging its pioneering experience in France with the
“CODEVair” passbook account, which helps to provide “PREVair”
financing, the Banque Populaire Group decided to support this
approach by strengthening the EPE’s (European Partnership for
the Environment) working par ty. Led by the RABOBANK
cooperative bank, it works together with the Banque Populaire
Group, the French and Dutch Ministries of the Environment,
ADEME and various European regions, such as the Rhône-Alpes
regional authorities, to offer incentives for the development of
green financial funds.
The organization in Lyon on April 20, 2006 of a seminar to
launch these public-private discussion forums is intended to help
assist the regions, departments, cities, Banque Populaire banks,
Chambers of Commerce and competitiveness unit managers to
gear up as a network for the 2007-2013 EU programs supporting SMEs pursuing eco-innovation and natural resource management projects.
Support for innovation
in the Rhône-Alpes region
The Banque Populaire des Alpes joined forces
with the “Energies Environnement 74” association
and will contribute to the financing of a House for
the planet at Meythet in Haute Savoie.This project
will be a replicable prototype for corporate real
estate that should make for substantial energy savings.
Through this partnership, Banque Populaire des Alpes
intends to promote the use of renewable energies
to conserve resources and protect the environment.
04
Glossary
Ethical savings: The saver takes into account not just the
return of a product, but also non-financial factors, such as
the intended use of the savings collected (e.g. for social or
environmental projects).
Solidarity-based savings: Created at the instigation of
cooperative banks, this type of savings is used to finance
projects considered as solidarity-based owing to the nature
of the activities funded, such as ecological (e.g. the “CODEVair”
passbook account) or social projects, which do not meet
conventional borrowing criteria.When some of the income
from solidarity-based savings is distributed to a not-for-profit
organization, such as Crédit Coopératif’s “CODESOL”
passbook account, this is known as a solidarity-sharing
product.To help potential savers get their bearings,
FINANSOL, an association encompassing organizations
and qualified personalities in solidarity-based financing,
has awarded a seal of quality since 1997 identifying
solidarity-based investment products according to transparency
and solidarity criteria.
Socially responsible investment (SRI): Investment in
a Mutual Fund on the strength of the responsible behavior
by the businesses in which the fund invests the savings it
collects. For instance, Natexis Asset Management, which has
been involved in socially responsible investment since 2002,
currently offers a range of three funds spanning the entire
range of asset classes:“Fructi Développement Durable
Actions”, an equity fund,“Fructi Développement Durable
Obligations”, a fixed-income fund, and “Fructi Développement
Durable Monétaire”, a money-market fund.
Solidarity-based SRI: A Mutual Fund, part of whose
collective funds (5-10%) is invested in solidarity-based
social or environmental financing ventures.The “Fructi
ISR Solidaire” is an example of this type of fund.
73
PATRONAGE AND SPONSORING
Patronage
The budget for the Foundation, the key component of the
Group’s patronage, is split between all the Banque Populaire
regional banks, Natexis Banques Populaires and Banque Fédérale
des Banques Populaires. The Banque Populaire Group
Foundation’s activities are focused in three areas:
n culture, by supporting young musicians (classical instrumentalists and composers) in the early stages of their career;
n solidarity, by helping young disabled people to pursue a lifechanging project or to rejoin the business world;
n preservation and renovation of the national maritime and
aquatic environment.
The Foundation takes a long-term approach since prizewinners
may be assisted for three years in succession, depending on how
their project progresses. Almost 300 prizes and bursaries have
been awarded since the Foundation was set up in 1992.
In 2005, the Water Heritage panel of judges selected 10 projects,
most of which were submitted by associations:
n
the restoration of a water mill at Réthoville (Manche department);
n restoration of the water supply channels to the La Borie cultural centre (Limousin region);
n
Restoration of Isle-surla-Sorgue’s waterwheels
The Banque Populaire Group Foundation selected
Isle-sur-la-Sorgue’s project, which is intended
to conserve and exploit the historical and ecological
heritage of the canal that surrounds it by rebuilding
three waterwheels, with a view to:
- using clean energy from the Sorgue river by hooking
up one of the wheels to a generator, which will generate
sufficient power to illuminate the surrounding banks;
- retaining the town’s character by reinstalling
the wheels at their former locations;
- revitalizing water-related craftsmanship by entrusting
a local master craftsman with the manufacture of the
new wheels.
This project was submitted by the Sorgue area “Club
Déclic” of Banque Populaire Provençale et Corse,
which took part in the effort to highlight local heritage
and has fully embraced the Foundation’s efforts
to protect aquatic heritage. Its subsidy will cover
the wheel and access footbridge manufacturing costs.
renovation of outbuildings at the Stiff lighthouse in Ouessant;
n refurbishment of a “Barque de Patron” boat that was used on
the Canal du Midi;
n organization of an exhibition about the coastlines of France at
the Palais de la Découverte in Paris;
n restoration of the waterwheel, which maintained the supply of
seawater to the “Salins Les Pesquiers” (salt marsh) in Hyères;
n restoration of a Paris river police patrol boat dating back to the
beginning of the 20th century;
n reconstruction of a scute (a very old type of boat) on the Loire
river;
n refurbishment of karstic sites in the Quercy, Causses and
Pyrenees regions;
n restoration of waterwheels at Isle-sur-la-Sorgue (Vaucluse
department).
Likewise, the panel of music judges selected 10 young musicians
(composers, pianists, clarinetist, cellist, flutist, violinist and string
quartet). Assistance from the Foundation will enable them to
continue their artistic education by taking classes and master
classes, participating in international competitions and making
their first CD recordings.
The partnerships forged over several years with music festivals
were renewed in conjunction with the Group’s banks. Over 40
prizewinners performed at concerts at highly reputed events.
Likewise, the Villefavard master class in the Limousin region,
which was held for the sixth year in a row, was attended by 12
musicians and directed by famous pianist Jean-Claude Pennetier.
Thanks to this initiative, the Foundation afforded its prizewinners
an exceptional opportunity to work together and to play chamber music.
The results of a 2005 survey of all the musicians that had won
bursaries since 1993 showed that 93% had actually achieved the
objectives for which they had asked suppor t from the
Foundation and are now making a living from their art and their
talent.
A total of 19 prizes were awarded by the Disability panel of judges based on the quality of the individual personal or professional integration projects.The Foundation’s bursaries have enabled
them to pay for the requisite technical and IT equipment, pursue
higher education or specialized training, meet the costs of sports
training for international disabled sport competitions or install
special equipment enabling them to drive business vehicles.
2005 ANNUAL REPORT
Based on a survey carried out in 2004, almost two-thirds of
prizewinners since 1993 successfully achieved the goals of their
projects, with health problems being the primary cause of failure.
The Banque Populaire Group thus demonstrated its commitment to those with an entrepreneurial spirit and a driving
enthusiasm for community or personal projects. Several of them
were presented by the Group’s banks and by Banque Populaire
member-stakeholders’ clubs, which work hard to ensure that
local initiatives come to fruition.
Relationships with the Group’s banks are facilitated by the
network of correspondents built with a view to involving the
banks closely in the Foundation’s activities by making them a
source of new projects and applications.
Other patronage initiatives
within the Group
Various patronage initiatives are undertaken by the Banque
Populaire banks.
For instance, Banque Populaire Côte d’Azur and Banque
Populaire Provençale et Corse teamed up with the “Pavillon
Bleu” (Blue Flag) initiative to recognize coastline communities
and pleasure ports that have factored the environment into their
efforts for holidaymakers.
Banque Populaire Toulouse-Pyrénées continued the “Hôpital
Sourire” (Hospital Smile) campaign alongside ACB (French bank
customers’ association). The goal is to support children throughout their illness by creating a fun and cultural environment.
Since 1995, this association has helped the 30,000 children from
Awards for the Quatuor
Modigliani
Founded in 2002 by four musicians with an average
age of 22, the Quatuor Modigliani string quartet
unanimously landed the top prize at the Conservatoire
National Supérieur de Musique’s 2003 awards in Paris.
In 2004, it proved to be a revelation at the international
string quartet competition in Eindhoven, where it landed
the top prize, the audience’s award, the young people’s
prize and the contemporary work interpretation award.
The Quatuor Modigliani was unanimously selected
by the Foundation’s panel of judges, which has helped
it to cover the costs of its participation at international
competitions, classes and master classes, as well as
of bows and music scores.
In the meantime, it landed the Top prize at the Rimbotti
competition in Florence during September 2005
and was the first French string quartet to win top prize
at the “European Young Concert Artists awards”
in Paris during October 2005.
04
the Midi-Pyrénées region spending time in Toulouse’s children’s
hospital each year.
Banque Populaire des Alpes was heavily involved in downhill
skiing competitions through its role on ski committees and clubs,
reflecting its attachment to and support for winter sports. In
2005, it was the official partner of the 50th “Critérium de la
Premiège neige” ski event in the Isère department. The “Ta
première Coupe du Monde” (Your first World Cup) campaign,
which was launched at the same time, gives young people an
exceptional experience since they join a team helping to organize the Critérium event and can rub shoulders with the world’s
best skiers.
In 2005, the Crédit Coopératif Foundation again co-produced
the “Festival Orphée”, Europe’s leading theatrical and disability
festival, along with associations. The goal of the festival is to
enable disabled artists to demonstrate their talents and their
professional abilities.
Natexis Banques Populaires joined efforts during 2005 to combat malaria – something of a forgotten disease, which kills over
two million people every year. To this end, it began by pledging
its support to the Franco-African day of action against malaria on
April 25, 2005, which was organized by the “Plan France” NGO.
With the support of its subsidiaries, it also funded an initial
program to raise awareness and distribute mosquito nets to
affected populations in Cameroon.
What’s more, two projects to combat malaria led by other
NGOs received the support of Natexis Banques Populaires in
year-end 2005, including one brought to light by an employee of
Banque Populaire Toulouse-Pyrénées, who chairs the “Les
enfants de l’Aïr” association.This project aims to distribute mosquito nets and to raise awareness among inhabitants living close
to Agadez in Niger.
Lastly, Natexis Banques Populaires continued its cultural patronage
policy.As part of its “Patrimoines d’hier,Trésors d’avenir” patronage
program, launched two years ago, it helped promote knowledge
about the Coronelli terrestrial and celestial Globes and financed
their exhibition at the Grand Palais (Paris) in September 2005.The
globes are due to join the permanent collection of the
“Bibliothèque Nationale de France” (BNF), the French national
library, in autumn 2006.
Sponsoring: an exceptional 2005
season for the “Sailing Bank”
In 2005, the Banque Populaire Group extended its partnership
with the French Sailing Federation (FFV), which was first signed
in 2000. Confirming its credentials as the “Sailing Bank”, it stepped up its involvement in developing a sport whose values it shares by supporting the Federation’s activities through to the
Beijing Olympic Games of 2008.
Alongside this commitment, the Banque Populaire Group
decided to support Faustine Merret, the Olympic windsurfing
champion at the Athens games, in her bid to win another gold
medal at the next games in China. Faustine will be supported by
75
the Banque Populaire Group as she prepares for the Beijing
event as effectively as possible. During 2005, the champion, who
hails from Brest, familiarized herself with her new board, the
RS:X at the world championships in Cadiz, during which she
recorded the best performance in the world.
In 2005, the par tnership with the Association Eric Tabarly
reached cruising speed. The Pen Duick yachts were used by
various Group entities for sailing trips with clients. They also
participated in two events, which helped to raise the profile of
the Banque Populaire banner : the Tall Ships Race (500,000
visitors in Cherbourg) and the “Voiliers Mythiques” (Mythical
Sailboats), an event organized by Banque Populaire du Nord
(60,000 visitors).
A sports season dominated
by a series of firsts
Jeanne Grégoire, during her first full season on board
the Figaro Banque Populaire, established herself among
the leaders in this category. After finishing sixth in
the Trophée BPE, the single-handed transatlantic race
from Saint-Nazaire to Cienfuegos de Cuba, Jeanne
competed in the “Solo Generali” race during June and
the “La Solitaire du Figaro” race during August. She
finished in eleventh and twelfth position respectively in
these events.Thanks to these encouraging results, the
Concarneau-based skipper ranked among the top ten
on the Figaro circuit and was the best-placed woman.
Meanwhile, Pascal Bidégorry had a tremendous season
on board the Trimaran Banque Populaire, his first as
skipper. He scored two major victories for the Group,
winning the “IB Group Challenge” (Lorient to Nice)
at the start of the season, followed at the end of the
season by the “Transat Jacques Vabre” race from
Le Havre to Salvador de Bahia, when he set a new
course record. Between these two impressive victories,
the Basque skipper took part in five Grands Prix,
frequently contesting the top positions, together with
the Team Banque Populaire.
It was thus perfectly logical for him to become World
Champion in the Open 60 foot class.These very
encouraging performances, which received extensive
press coverage, helped to raise the media profile of
the Banque Populaire (close to 600 radio reports and
400 television reports, including 21 on news bulletins).
2005 ANNUAL REPORT
FINANCIAL INFORMATION
05
Financial information
2005 Financial information
MANAGEMENT REPORT
78
Group overview in 2005
Risk management
Directors’ compensation
Subsequent events
78
86
98
101
RECENT DEVELOPMENTS
CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2005
102
104
Consolidated balance sheet
Consolidated income statement
Consolidated statement of changes in equity
Consolidated cash flow statement
104
107
108
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
112
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
112
128
128
135
149
178
185
IX.
X.
XI.
XII.
Impact of first-time adoption of IFRS
Basis of presentation
Consolidation methods and principles
Scope of consolidation
Notes to the balance sheet
Notes to the income statement
Risk management
Payroll costs, number of employees, employee
compensation and benefits
Segment reporting
Commitments
Related parties
Financial statements based on French GAAP
191
195
201
203
205
STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED
FINANCIAL STATEMENTS
215
77
2005 Financial information
MANAGEMENT REPORT
1 - Group overview in 2005
1.1.2 – Accounting standards
1.1 - Comparability of results
1.1.1 – Changes in Group structure
Although the Banque Populaire Group, which is unlisted, is not
required to adopt IFRS, the Board of Directors of Banque
Fédérale des Banques Populaires has decided that the consolidated financial statements of the Banque Populaire Group should
be prepared in accordance with IFRS as of January 1, 2005.
The consolidated financial statements presented below cover
the full Banque Populaire Group. Changes in the Group structure
compared with 2004 were insignificant and do not require the
preparation of proforma financial statements.
This decision was made with the intention of improving transparency and comparability with other major French banks, and
represents a major step for the Group and all parties directly
concerned by its financial information.
Local retail banking
Consequently, the Group’s results are presented in accordance with
IFRS including IAS 32-39 and IFRS 4 (EU IFRS) for the 2005 financial
year and under IFRS excluding IAS 32-39 and IFRS 4 (2004 IFRS) for
the 2004 financial year.The impact of the application of IAS 39 on
results for the period is insignificant, increasing consolidated net banking income by B9 million and net income by B1 million.
n Consolidation under the equity method of VBI (VolksBank
International AG), which comprises the Group’s retail banking
interests in Central and Eastern Europe. Banque Fédérale des
Banques Populaires holds a stake of 24.5% in partnership with
Övag (51%) and DZ Bank (24.5%).
consolidation of Natexis LLD;
sale of OFIVM on December 31, 2005;
n acquisition of CUAL, Coface’s insurance subsidiary in South
Africa, in February 2005;
n acquisition of LEID, Coface’s insurance subsidiary in Lithuania,
in April 2005.
n
n
Furthermore, in accordance with IFRS, non-trading real estate
companies (SCIs) and mutual funds dedicated to insurance company investments are now full consolidated.
The new standards for the presentation of statements of intermediate
balances comply with CNC recommendations,the main effects being:
n the reclassification of exceptional items as net banking income
or operating expenses, depending on whether they are positive
or negative;
the reclassification of gains and losses on the disposal of fixed
assets as net banking income, apart from capital gains or losses on
the disposal of investment properties and consolidated interests;
n
n the reclassification of interest on preference shares from minority
interests to net banking income.
1.2 – Business and results overview
in millions of euros
Net banking income
Operating expenses, depreciation and amortization
Gross operating income
Impairment charges and other credit provisions
Operating income
Share of income of associates
Net gain or loss on disposals of fixed assets
Change in value of goodwill
Income tax
Net income
Minority interests
Net income attributable to equity holders of the parent
2005 ANNUAL REPORT
12/31/2005
EU IFRS
8,242
(5,390)
2,852
(436)
2,416
15
117
3
(855)
1,696
(174)
1,522
12/31/2004
2004 IFRS
7,646
(5,105)
2,541
(477)
2,064
7
6
(43)
(736)
1,298
(103)
1,195
% change
+7.8%
+5.6%
+12.2%
-8.7%
+17.1%
+30.6%
+27.3%
Consolidated net banking income totaled B8,242 million in
2005, an increase of 8%. All Group businesses contributed to this
growth. Outstanding customer loans (excluding pensions) rose
by 15% during the year to B138.4 billion and inflows into savings
accounts (excluding pensions) increased by 11.9% to B98.0
billion.Total managed savings, including customer savings, stood at
B216 billion at December 31, 2005, an increase of 17%.
Operating expenses increased by 6% to B5,390 million. This
moderate increase was due to the level of investment, particularly in human resources. The cost/income ratio improved by a
further 1.4 points to 65.4%.
Gross operating income rose by 12% to B2,852 million.
Impairment charges and other credit provisions totaled B436
million, a decrease of 9% compared with 2004. The charge for
the year represented 0.27% of risk-weighted loans compared
with 0.34% in 2004.
Operating income rose by 17% to B2,416 million.
05
Net gains on the disposal of other assets relate primarily to a capital gain on a property sale by Natexis Banques Populaires.The tax
charge rose to B855 million, mainly due to the increase in earnings.
Net income (before minority interests) came to B1,696 million, an
increase of 31%. After deducting minority interests of B174
million, net income came to B1,522 million, an increase of 27%.
(The results of Crédit Maritime Mutuel are now fully consolidated).
Return on equity (ROE) after tax stood at 13.5%, an improvement of 1.6 points (including Crédit Maritime Mutuel in the
scope of consolidation).
The Group’s financial structure remained extremely solid. Total
regulatory capital rose by 17% to B19,334 million, with Tier One
capital rising by 18% to B14,634 million.This growth was mainly
thanks to earnings for the period, as well as the issue of shares
by the Banque Populaire banks and of super-subordinated notes
by Natexis Banques Populaires.
The Cooke Tier One ratio stood at 8.5%, one of the highest
levels in the sector.
1.3 – Analysis of income statements
1.3.1 – Contribution of business lines to net banking income (NBI)
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
5,194
4,973
+4.5%
(3,039)
2,678
+13.5%
Federal activities
Total
Local retail banking is principally conducted by the 19 Banque
Populaire regional banks, Crédit Coopératif, CASDEN Banque
Populaire, Crédit Maritime Mutuel, SBE and Bicec in Cameroon.
Natexis Banques Populaires is structured around four core
businesses:
n Corporate and Institutional Banking and Markets, which comprises Corporate France, International, Global Debt &
Derivatives Markets, Equity Group, Natural Resources & Related
Industries and Mergers & Acquisitions;
n Private Equity and Wealth Management, which comprises
private equity, private banking and international estate planning;
9
(5)
8,242
7,646
+7.8%
n Receivables Management, which comprises Coface and
Natexis Factorem.
The breakdown of net banking income within the Group
remained relatively stable in 2005, with almost two-thirds
coming from local retail banking (63%) and one-third from
Natexis Banques Populaires (37%).
The contribution from federal activities, chiefly conducted by
Banque Fédérale des Banques Populaires in its role as central
body for the network and holding company of Natexis Banques
Populaires, is not material.
Ser vices, which comprises Insurance, Employee Benefits
Planning, Fund Management, Financial Ser vices, Banking
Services and Investor Servicing, formed from the creation in
2005 of the Natexis Investor Servicing subsidiary, which groups
together around 160 employees from the different Services
activities and is responsible for a number of services intended
for asset management companies;
n
79
1.3.1.1 – Local retail banking – net banking
income
In the local retail banking business, 95% of net banking income is
derived from retail banking activities on behalf of clients. The
remaining 5% comes from interbank and money market operations, chiefly conducted by BRED Banque Populaire.
In a climate of falling interest rates and tough competition, the
average margin on customer loans fell by 27 basis points to 5.0%,
while the average margin on customer deposits fell by 6 basis
points to 1.7%.
Overall and excluding resale agreements, outstanding customer
loans rose by 10% and deposits by 6.7%.
Net interest income
Outstanding customer loans
On the basis of the same accounting standards, net interest
income grew by 4.1%, driven by a strong increase in volumes,
despite a drop in the gross interest rate spread to 3.3%, down
23 basis points compared with 2004.
Outstanding customer loans rose by 10%, all segments combined, to B97.5 billion. The biggest increases were in equipment
financing (up 8.8% to B33.6 billion) and home loans (up 13.7%
to B44.0 billion).
Outstanding customer loans
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
51.9
46.3
+12.3%
8.0
7.6
+4.7%
Home loans
44.0
38.7
+13.7%
Business loans
42.8
40.1
+6.7%
Short-term loans
9.2
9.2
+0.0%
33.6
30.9
+8.8%
in billions of euros
Personal loans
Short-term loans
Equipment financing (1)
Other loans
Total customer loans (2)
2.8
2.2
97.5
88.6
+10.0%
(1) Including lease financing.
(2) Excluding resale agreements.
Loans to corporate and small business clients increased by 6.7%. In line with Group strategy, activity in the personal banking market
was strong, with loans to personal clients rising by 12.3%. Personal loans accounted for 53.3% of total loans distributed by the Group
compared with 52.2% in 2004.
Customer deposits
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
Personal deposits
52.3
49.3
+6.1%
Demand deposits
11.3
10.3
+9.4%
Special savings accounts
38.8
37.0
+4.9%
Time deposits
2.2
2.0
+11.2%
Business deposits
26.8
23.8
+12.4%
Demand deposits
22.2
19.7
+12.3%
Time deposits
4.6
4.1
+13.0%
Retail certificates of deposit and savings bonds
6.4
7.1
-8.8%
85.5
80.2
+6.7 %
Total customer deposits (1)
(1) Excluding repurchase agreements
Customer deposits for local retail banking rose by 6.7% to B85.5 billion.
Among this total, demand deposits amounted to B33.5 billion, up 11.3% at nearly 40% of the total.
2005 ANNUAL REPORT
05
Fees and commissions
On the basis of the same accounting standards, net fees and commissions from client transactions (excluding interbank and money
market operations) rose by 6.0% and accounted for 36.3% of net banking income from client transactions, up 90 basis points.
12/31/2005
EU IFRS*
12/31/2004
2004 IFRS
% change
Accounts and services
756
741
+2%
Loan management
278
269
+3%
Electronic banking
276
250
+10%
Financial activities
482
430
+12%
1,792
1,690
+6,0%
Total
* Fees and commissions before application of the provisions of IAS 39 relating to the amortized cost method.
Fees and commissions on accounts, banking services (account operation, payment incidents etc.) and loan management saw limited
growth.The increase in net fees and commissions from client transactions was mainly due to the increase in fees and commissions on
electronic payments (up 10%) and financial activities (up 12%, including a 9% increase in securities trading).
Other net banking income
Other net banking income comprises interbank operations,
money market operations, insurance activities (via BRED
Banque Populaire subsidiaries Prepar-Vie and Prepar-IARD)
and capital gains realized on the securities portfolios of the
Banque Populaire banks. It also includes revaluations of financial instruments following the adoption of IAS 39, as well as
provisions for risks relating to regulated homebuyers’ savings
schemes.
These items, which in total account for just 5% of net banking
income from local retail banking, increased by 29% to B261
million, mainly due to significant capital gains realized on the
investment portfolio of the Banque Populaire banks (B101 million
compared with B54 million in 2004).
The effect of revaluations of financial instruments in accordance
with IAS 39 was immaterial in local retail banking (increase of
B10 million, including B8 million relating to the ineffective
portion of hedging instruments). Provisions for risks relating
to homebuyers’ savings schemes resulted in a net charge of
B6 million, increasing the total level of provisions to B306 million.
Provisioning of PEL and CEL mortgage savings schemes amounted to 1.66% at December 31, 2005, compared with 1.56% at
the end of 2004.
1.3.1.2 – Natexis Banques Populaires – net banking income
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
1,259.3
1,159.0
+9%
264.0
187.7
+41%
Services
724.4
610.9
+19%
781.3
683.0
+14%
Corporate and Institutional Banking and Markets
Other
(1)
Total
10.0
37.4
3,039.0
2,678.0
+13.5%
(1) Net banking income from non-core businesses and elimination of intragroup transactions between Natexis Banques Populaires and Banque Populaire banks.
The Corporate and Institutional Banking and Markets core business
was created in late 2004 to meet the bank’s goals of taking an
increasingly client-centric approach, providing its corporate and
institutional clientele with a comprehensive product offering tailored to their needs, and fully exploiting synergies between its various
business lines. Its growth strategy is to capitalize on its existing
corporate and institutional business franchise, particularly through
cross-selling and developing high value-added business lines.
Corporate and Institutional Banking and Markets generated net
banking income of B1,259 million in 2005, an increase of B100
million or 9% compared with 2004.The adoption of IAS 32-39
as of 2005 had a negative impact of B29.9 million. On the basis
of the same accounting standards, net banking income would
have increased by 11%.
Thanks to high new business volumes, Corporate France
sustained just a limited decline in net banking income, despite
the decline in margins, while International benefited from the
81
growth in momentum of foreign branches. Global Debt &
Derivatives Markets, Natural Resources & Related Industries
and Equity Group delivered an excellent performance, with
growth of 12%, 18% and 24% respectively, despite unfavorable
market conditions in terms of interest rates and lending in the
first half of the year.
Corporate and Institutional Banking and Markets accounted for 41% of total net banking income generated by the core businesses.
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
Corporate France
385.0
401.1
-4%
International
127.6
123.1
+4%
Global Debt & Derivatives Markets
458.8
410.4
+12%
Natural Resources & Related Industries
108.7
92.1
+18%
Equity Group
156.0
125.6
+24%
6.5
5.8
+12%
Mergers & Acquisitions
Other
16.7
0.8
ns
Total
1,259.3
1,159.0
+9 %
Private Equity and Wealth Management delivered an excellent performance in 2005, with a 41% increase in net banking income. Private
Equity was the main contributor, with an increase of B76.6 million compared with 2004.
Private Equity and Wealth Management contributed 9% of total net banking income generated by the core businesses.
Private Equity
Wealth Management
Total
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
221.1
144.5
+53%
42.9
43.2
-1%
264.0
187.7
+41%
Private Equity produced net banking income of B221 million, a rise of B76.6 million compared with 2004.This was mainly thanks to
the B74.5 million increase in unrealized capital gains on the invested portfolio in accordance with IAS 39 in 2005.
Services
Total net banking income from Services rose by 19% to B724.4 million.The impact of the transition to EU IFRS was limited to B7.2 million.
Services contributed 24% of total net banking income generated by the core businesses. The six departments making up the core
business contributed to this performance:
Insurance
Employee Benefits Planning
Fund Management
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
202.1
160.6
+26%
74.7
68.1
+10%
166.8
144.4
+15%
Investor Servicing
3.4
2.7
+26%
Financial Services
148.3
128.9
+15%
Banking Services
129.1
106.1
+22%
Total
724.4
610.9
+19%
In mid-December, BNP Paribas and Banque Populaire Group signed an agreement to create a shared e-banking software platform for retail
banking.The two groups plan to form a joint venture called Partesis in early 2006.This project entails the sharing of all IT developments
and will be based principally on the Natexis Banques Populaires platform at the outset.
2005 ANNUAL REPORT
05
Net banking income increased by 14% to B781.3 million, accounting for 26% of total net banking income generated by the core
businesses.
Coface
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
674.2
580.8
+16%
Factoring
107.1
102.2
+5%
Total
781.3
683.0
+14%
Coface continued the worldwide roll-out of its product range. In the 58 countries in which it is present, business information services
are now provided in 51 countries compared with 43 the previous year, with receivables management services available in 32 countries
compared with 25 the previous year.
2005 was characterized by acceleration in revenue growth, maintaining a good loss ratio of 50%, and favorable conditions in the
financial markets, allowing for a sharp increase in income on the investment portfolio.
1.3.2 – Operating expenses
and cost/income ratio
Local retail banking posted a cost/income ratio of 65.2%, an
improvement of 0.7 points and one of the best in the French
retail banking sector.
Operating expenses totaled B5,389 million, an increase of 5.6%.
The total breaks down into B3,195 million in payroll costs (59%),
up 7%, and B2,194 million in other operating expenses (41%),
up 3.6% overall.
Employees
The total number of full-time equivalent employees (FTEs) rose
by 2.3% in 2005 to 45,530, an increase of 1,020 compared with
December 31, 2004, including 365 within the scope of Natexis
Banques Populaires.
Trends in operating expenses
The local retail banking business saw controlled growth in operating expenses, in line with the Group’s policy of sustained development in this business. Operating expenses totaled B3,385 million,
an increase of 3.3%, including a 5.3% increase in payroll costs
(comprising an 18% rise in costs related to incentive and profit-sharing plans).This also includes investments by the Banque Populaire
regional banks, in particular in IT and sales and marketing.
The Banque Populaire banks continued their strategy of
strengthening the network’s commercial capability, with the
opening of 131 branches in 2005, corresponding to a rate of
two to three new branches a week. This brought the total to
2,807 at the year-end.
At Natexis Banques Populaires, operating expenses came to
B1,994 million, up 9.5% compared with 2004, as a result of
investment in human resources and systems operated by the
bank as part of its strategic development plan, as well as higher
costs relating to incentive and profit-sharing plans and variable
performance-related compensation.
1.3.3 – Impairment charges and other credit
provisions and operating income
Impairment charges and other credit provisions amounted to
B436 million in 2005, a decrease of 8.7%.As a percentage of riskweighted loans, impairment charges and other credit provisions
fell sharply to 27 basis points compared with 34 basis points at
end-2004 and 43 basis points at end-2003.
In local retail banking, impairment charges and other credit
provisions decreased by 5.7% to B355 million, representing
0.35bp of risk-weighted loans compared with 0.41bp in 2004.
Provision coverage of non-performing loans stood at 70.3%, in
line with 2004, before IFRS. Collective provisions for performing
loans remained stable at B377 million.
For Natexis Banques Populaires, impairment charges and other
credit provisions were down 20% to B81 million. This figure
comprises a net charge to collective provisions of B37 million.
The value of non-performing loans decreased slightly in absolute
terms, despite a sharp rise in customer loans. In relative terms,
the proportion of non-performing loans decreased by 2.1%.
Coverage of non-performing loans by specific and collective
provisions remained at a high level of 90.4%.
Operating income totaled B2,416 million, an increase of 17.1%
compared with 2004.
1.3.4 – Income before exceptional
items and tax
Cost/income ratio
Income before exceptional items and tax totaled B2,551 million
versus B2,034 million in 2004, an increase of 25.4%. This
includes:
The Group’s cost/income ratio stood at 65.4%, an improvement
of 1.4 points over the previous year.
B15 million contributed from companies accounted for by the
equity method;
n
83
B117 million in net gains on disposals of fixed assets versus
B5 million in 2004, mainly due to the B95 million capital gain
(B67 million after tax) realized by Natexis Banques Populaires
on the sale of the “Liberté 2” building in Charenton.
n
Furthermore, individual analysis of consolidated goodwill did not
show any need for impairment in 2005, as projected cash flow
from the core businesses exceeded goodwill for each of the
business lines significantly.
Breakdown of income before exceptional items and tax
All Group businesses achieved strong growth in income before exceptional items and tax in 2005:
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
1,483
1,325
+12%
1,075
720
+49%
472
404
+17%
Corporate & Institutional Banking and Markets
Private Equity & Wealth Management
159
84
+89%
Services
282
187
+50%
223
164
+36%
Other
(60)
(120)
-
(7)
(11)
-
2,551
2,034
+25%
(1)
Federal activities
Total
(1) Net banking income from Natexis Banques Populaires’ non-core businesses and elimination of intragroup transactions between Natexis Banques Populaires and Banque Populaire banks.
1.3.5 – Net income
The Banque Populaire Group achieved its highest ever consolidated net income of B1,522 million, an increase of 27.3%, after:
n
a tax charge of B855 million, up 16%, proportional to the Group’s earnings growth;
n minority interests of B174 million, corresponding mainly to minority interests in Natexis Banques Populaires, of which 19.1% is not
owned by the Group.
2005 ANNUAL REPORT
1.4 – Shareholders’ equity
and capital adequacy
Capital stock
In 2005, the consolidating entity increased its capital stock by
B226 million by issuing new members’ shares in the Banque
Populaire banks and the mutual guarantee companies to
Furthermore, as a result of the consolidation of Crédit Maritime
Mutuel following the linking of the Regional Banks of Crédit
Maritime Mutuel to the Banque Populaire banks in coastal
regions mid-year, their members’ shares were also included in the
Group’s capital stock, representing B180 million.
Regulatory capital and international capital
adequacy ratio
At December 31, 2005, the Group’s total regulatory capital
rose to B19.3 billion from B16.5 billion one year earlier on a
like-for-like basis, i.e. after the adoption of IFRS and prudential
filters as defined by the French Banking Commission.
In total, restatements relating to the first-time adoption of IFRS
as at January 1, 2005, had a negative impact of B1.1 billion
compared with regulatory capital under French GAAP as at
December 31, 2004.
Tier 1 capital totaled B14.6 billion, up from B12.4 billion the
previous year on the basis of the same accounting standards.The
increase was mainly due to earnings capacity generated during
the period, after taking account of dividends and interest payable
on members’ shares, as well as issues of members’ shares in
the Banque Populaire banks (increase of B226 million) and a
B300 million super-subordinated notes issue by Natexis
Banques Populaires in January 2005.
Tier 2,Tier 3 and other regulatory capital rose by 13% to B4.7 billion,
mainly due to the positive net balance between new redeemable
subordinated notes issued and redeemed during the period.
Risk-weighted assets amounted to B164.8 billion, an increase of
17.6%, just above the level of growth in customer loans (15.1%),
due to a 23% rise in guarantee commitments recognized as offbalance sheet items. Market risks were up 6% to B7.2 billion,
representing 4% of total risk, which came to B172 billion.
The international capital adequacy ratio stood at 11.2%, including
a Tier 1 ratio of 8.5%, versus 11.2% and 8.4% respectively at
December 31, 2004, on the basis of the same accounting standards and regulations.
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
% change
Tier 1 capital
14,634
12,366
+18%
Total regulatory capital
19,334
16,518
+17%
164,799
140,149
+18%
7,185
6,760
+6%
171,984
146,909
+17%
Tier 1 ratio
8.5%
8.4%
+0.1
Total ratio
11.2%
11.2%
+0.0
05
Regulatory capital
Risk-weighted assets
Credit risks
Market risks
Total consolidated risks
International capital adequacy ratio
European capital adequacy ratio
Since 1996, French financial institutions have been required to
measure and comply with an overall capital adequacy ratio
covering not only counterparty risks but also market risks such
as interest rate and currency risks.
It is defined as the ratio of available capital to the capital requirement for counterparty and market risks. It must be higher than
100%.
As of December 31, 2005, the ratio is based on banking activities alone, i.e. excluding capital relating to insurance activities and
associated risks.
At December 31, 2005, the Group’s ratio stood at 143%, including a Tier 1 ratio of 106%, compared with 143% and 105% respectively in 2004, on the basis of the same calculation method.
85
2 - Risk management
2.1 – Risk management
organization
The Group is exposed to four main categories of risk:
n
credit risks arising from customer transactions;
n
market risks arising from capital markets transactions;
n interest rate, currency and liquidity risks arising from retail
banking transactions;
n
operational risks, including non-compliance risks.
In accordance with standard CRBF 97-02, implemented in 2005,
each bank has set up risk management and monitoring structures that are independent from operating units.
All Group banks have also set up their own systems of exposure
limits and decision-making procedures, complying with the rules
established at Group level, as set out in the credit risk manual
updated in June 2004, the interest rate and liquidity risk manual
updated in April 2004 and the operational risk manual updated
in November 2005.
Each bank’s risk policy is determined by the bank’s executive
management and approved by its Board of Directors.The banks
are also responsible for exercising continuous control over risks,
in accordance with the rules laid down by the Board of
Directors of Banque Fédérale des Banques Populaires – dealing
in par ticular with the role of the Group Risk Management
Committee – and by the Banking Regulator.
At the end of 2003, the Banque Populaire Group established
comprehensive rating systems that comply with future prudential requirements.These systems are based on the use of homogenous methods throughout the Group and centralized rating
applications dedicated to the principal client segments.
The Group’s central body is responsible for assessing risk policies
and management procedures according to standard principles
and criteria.
Risks are monitored at Group level, as follows:
n
Banque Populaire banks on a consolidated basis;
n Banque Fédérale des Banques Populaires subsidiaries on a
consolidated basis;
n
Crédit Maritime Mutuel on a consolidated basis.
In addition to this consolidated risk monitoring system, the
Group Risk Management Committee performs monthly assessments of material individual exposures at Group level or at the
level of individual banks. Responsibility for performing credit
reviews and the credit rating process may be delegated to the
Banque Fédérale des Banques Populaires Risk Management
Department. All Group entities are informed of the decisions
made by the Group Risk Management Committee.
Risk diversification presents a fundamental risk management rule
and is governed by external and internal guidelines. As required
2005 ANNUAL REPORT
by the Group’s risk management manuals, each bank sets internal risk concentration limits based on its own specific characteristics, which are lower than the limits authorized under banking
regulations. In 2005, a single maximum level below the regulatory
threshold was implemented, which will apply to all Group banks
on a consolidated basis as of June 30, 2006.
The organization of risk monitoring procedures is described in
the “Chairman’s Report on Internal Control Procedures” included in this annual report.
2.2 – Credit portfolio analysis
In 2005, global economic growth – driven by the United States
– held up against rising oil prices, natural catastrophes and
competition from China, although frequently at the cost of high
national deficits.
Thanks to a more favorable second half of the year, GDP
growth in the Eurozone came to 2% compared with 1.4% the
previous year, with unemployment remaining high. New EU
member states in Eastern Europe do not yet have a significant
enough presence to drive European growth.
Following a bleak first half of the year, France achieved growth of
close to 1.6% in the second half, as a result of low consumer
spending and a 3.3% increase in business investment.
Inflation remained controlled at 1.8%, despite the rise in oil prices, while the savings rate decreased by 1.4% and household
debt increased by 17.9% in two years.
The slight fall in the euro at the end of the year should favor
exports, while the European Central Bank’s decision of a moderate rate increase in December 2005 is unlikely to curb growth.
However, public expenditure represents 54.4% of GDP in
France, compared with the eurozone average of 48.6%, while
public debt stands at 66% of GDP.
Thanks to its strong risk management culture and commitments
to particular industries and regions, the Banque Populaire Group
is in a favorable position to avoid any severe consequences
relating to these uncertainties.
05
2.2.1 - Total risks
12/31/2005
EU IFRS
01/01/2005
EU IFRS
% change
Total customer loans
146.6
129.5
13.2%
Sound loans
144.7
127.8
13.3%
8.7
8.2
5.9%
115.3
99.6
15.8%
Trade receivables
3.6
3.5
3.2%
Export loans
1.2
1.1
5.3%
24.3
20.1
21.0%
Equipment loans
33.8
30.1
12.3%
Home loans
44.1
38.8
13.7%
8.2
6.0
38.4%
Customer overdrafts
8.5
7.5
12.3%
Factoring
3.5
2.7
29.3%
Unlisted fixed income securities
2.9
3.0
-0.9%
Collective provisions
(0.7)
(0.7)
8.5%
Other
6.7
7.5
-11.2%
Non-performing loans
1.9
1.7
9.9%
Total interbank loans
55.7
39.6
40.9%
Lease financing
Other loans and receivables
Short-term and consumer loans
Other customer loans
Customer loans increased by around 13%, notably in the Group’s main strategic growth axes such as retail banking.
2.2.2 - Interbank risks
Change in outstanding loans and utilized commitments to credit institutions (in billions of euros) *
30
29.3
25.2
25
22.2
22.9
20.6
20
DEC. 01
DEC. 02
DEC. 03
DEC. 04
DEC. 05
* Management data
Growth in outstanding loans and utilized commitments to credit institutions accelerated in 2005 to 16.3%.
87
Interbank counterparties by country *
%
50
n Dec. 2003
40
n Dec. 2004
n Dec. 2005
30
20
10
0
France
North
America
Western
Europe
Asia (excl
Japan) &
Oceania
North Africa
& Middle East
Latin
America &
Caribbean
Japan
SubSaharan
Africa
Supranational
borrowers
Central &
Eastern
Europe
* Management data
Counterparties include a large number of banking institutions in
50
OECD countries.The weighting of Western European counterparties rose from 35% to 41%, ahead of France representing
40
37%. Loans and commitments to foreign banks involve the leading banks in each country, 82% of which are investment grade.
The concentration of risks remains stable.
30
Change in interbank commitments by credit rating*
20
10
%
45
0
n Dec. 2003
35
n Dec. 2004
25
n Dec. 2005
15
5
0
-5
1
2-4
5-7
8 - 10
11 - 16
> 16
Not rated
* Management data
45
35
The global banking industry continued to improve in 2005. Banking counterparties rated AA (see note 2-4) or equivalent continued to
represent the largest category.
25
15
5
-5
2005 ANNUAL REPORT
05
2.2.3 - Sovereign risks
Sovereign risk is the risk of a Government (and/or Central Bank) being unable to honor its debts. Sovereign borrowers almost never
default on their loans; instead, they initiate negotiations with lenders, frequently leading to the waiver of interest and/or part of the
outstanding principal.
Sovereign risks by geographic area
%
100
n Dec. 2003
80
n Dec. 2004
n Dec. 2005
60
40
20
0
Western Europe
Africa
Latin America &
Caribbean
Asia
Central
& Eastern Europe
North
America
Nearly 83% of the Group’s sovereign loans concern Western Europe. Exposure to other regions has decreased significantly. Africa now
represents only 2.7% of the total, while Latin America – the highest risk area – accounts for 1.3%.
100
80
Change in sovereign loans by Coface credit rating
%
60
80
40
n Dec. 2004
70
60
20
n Dec. 2005
50
0
40
30
20
10
0
A1
A2
A3
A4
B
C
D
NR
The quality of the Group’s sovereign exposures is measured by the Coface short-term @rating, which allows virtually all risks to be
rated (less than 1% are not rated - NR): 97% of sovereign exposures are investment grade ranging from A1 to A4, including 73% of
80
which
70 are A1 rated. Only 3% of sovereign borrowers are non-investment grade with a rating from B to D, including 1% of which are
D rated, reflecting the Group’s marginal exposure to foreign sovereign risks.Total sovereign exposures decreased by 10%.
60
50
40
30
20
10
0
89
2.2.4 - Customer risks
Breakdown by industry
2005
Industry
2004
€M
%
%
Real estate
22,735
17.4%
14.7%
Holding companies & diversified
19,014
14.5%
17.3%
Finance & insurance
10,161
7.8%
4.3%
Services
9,261
7.1%
6.0%
Construction & public works
8,589
6.6%
7.2%
Consumer goods
7,020
5.4%
5.9%
Food
6,251
4.8%
5.0%
Basic industries
5,793
4.4%
5.0%
Retailing
5,483
4.2%
4.6%
Mechanical & electrical engineering
5,191
4.0%
4.1%
Transport
4,913
3.8%
4.1%
Tourism, hotels & restaurants
4,088
3.1%
2.6%
Pharmaceuticals & healthcare
3,748
2.9%
2.3%
Government
3,354
2.6%
3.1%
Media
2,660
2.0%
2.8%
Technology
2,439
1.9%
2.4%
Utilities
2,220
1.7%
1.6%
Not applicable
6,104
4.7%
4.6%
Energy
1,091
0.8%
1.1%
632
0.5%
0.3%
100%
100%
Investment companies
Total
Source: Management data
In real estate, which comes top of the list, half the loans concerned are to non-trading real estate companies (SCIs).The main change
concerns the increase in exposure to the Finance & Insurance and Services sectors, while the relative weighting of the Construction &
Public Works and Manufacturing sectors decreased.
Concentration by borrower
2005 breakdown
%
Risk-weighted
loans as a %
of capital
2004 breakdown
%
Largest borrower
0.7%
7.6%
1.1%
Top 10 borrowers
5.1%
57.9%
6.7%
Top 50 borrowers
11.4%
129.6%
14.4%
Top 100 borrowers
13.7%
155.8%
17.1%
Significant concentrations of risks decreased in 2005.Their weighting relative to the Group’s capital has fallen compared with 2004.The
banks’ internal limits are expressed relative to capital and the Group’s 100 largest exposures (on- and off-balance sheet) represented
155.8% of capital, while balance sheet exposures alone represented 144.9% of capital at December 31, 2004.
2005 ANNUAL REPORT
05
High-risk industries
Gross on and off-balance sheet exp. (in millions of euros)
12/31/2005
12/31/2004
Aerospace
1,218
1,102
Insurance
2,572
1,517
Poultry sector
139
109
Telecommunications services
957
986
Tourism, hotels & restaurants
4,179
2,187
Total exposure to these sectors increased in 2005. Although exposure to telecommunications was reduced further, exposure to the
tourism and insurance sectors increased significantly.The Group still has limited exposure to the poultry sector.
2.2.5 - Non-performing loans
Impairment charges and other credit provisions totaled B436 million, a decrease of 8%.The total breaks down into B355 million for
local retail banking and B81 million for Natexis Banques Populaires.The decrease reflects an improvement in the economic climate and
progress in the active management of positions.The highly conservative provisioning policy continued.
Specific provision coverage of non-performing loans amounted to 68% at December 31, 2005, bearing witness to this conservative
policy.
12/31/2005
EU IFRS
Gross
Provisions
01/01/2005
EU IFRS
Net
Provision
coverage
%
Gross
Provisions
Net
Provision
coverage
%
Interbank loans
108
(61)
46
57%
109
(60)
49
55%
Customer loans
5,782
(3,919)
1,863
68%
5,626
(3,930)
1,696
70%
5,552
(3,839)
1,713
69%
5,376
(3,845)
1,530
72%
Customer loans excl. lease financing
Lease financing
229
(80)
150
35%
250
(84)
166
34%
Total
5,889
0
(3,980)
(796)
1,909
(796)
68%
-
5,735
0
(3,990)
(748)
1,745
(748)
70%
-
0
(47)
(47)
-
0
(58)
(58)
-
Interbank loans
Customer loans
Total (incl. collective provisions)
0
(749)
(749)
-
0
(691)
(691)
-
5,889
(4,776)
1,113
81%
5,735
(4,739)
996
83%
Breakdown by client category
at December 31, 2005
in % of loans
Customer loans and lease financing
Sound loans
Provisions for non-performing loans
Non-financial
corporates
Small
businesses
Personal
customers
Other
58%
65%
68%
7%
16%
16%
32%
17%
15%
3%
2%
2%
The breakdown by client category and the breakdown of non-performing loans remain stable compared with 2004.
The breakdown by country shows that in the local retail banking business, over 99% of defaults concerned clients in France.
For Natexis Banques Populaires, the breakdown by country shows a slight reduction compared with 2004 in terms of both exposure
and provisions. However, the breakdown shows a moderate increase in exposure in North America and in provisions in Africa and the
Middle East.
91
Breakdown of Natexis Banques Populaires exposures and provisions at December 31, 2005
Geographic area
Specific
credit risks
Country
risks
Industry
risks
Total
credit
risks
Specific
provisions
Provisions
for country
risks
Provisions
for industry
risks
Total
Provisions
France
874
-
5,074
5,948
527
-
69
596
Rest of Western
Europe
176
-
3,578
3,754
135
-
91
226
Eastern Europe
25
44
1,081
1,150
17
1
5
23
North America
152
-
1,795
1,947
81
-
94
175
Central &
Latin America
90
973
180
1,243
46
37
3
86
Africa &
Middle East
25
1,510
192
1,727
13
91
11
115
Asia & Oceania
54
653
518
1,225
18
12
5
35
1,396
3,180
12,417
16,993
837
140
278
1,256
Credit risks and provisions
2.3 – Market risks
Market risks primarily concern Natexis Banques Populaires,
whose market risk management system is described below.
2.3.1 - Natexis Banques Populaires’ market
risk organization and management
Natexis Banques Populaires’ market risk management system
covers the capital markets activities conducted by Natexis
Banques Populaires and its subsidiaries. The improvement program launched by Natexis Banques Populaires in 2002 continued
during 2005. Improvements concerned organization, procedures
and risk measurement.
Control over market risks is the responsibility of the middle
office, Risk Management Department and the Internal Control
Department. Internal Control and Risk Management report to
the General Secretariat, while the middle office reports to the
Corporate and Institutional Banking and Markets core business.
Natexis Banques Populaires’ Executive Management distributed
the directive SGA no. 1748, formalizing the structure of the different teams involved in managing market risks.This directive sets
out the works carried out in 2004 to determine each department’s duties in terms of controlling market risks.
2005 ANNUAL REPORT
2.3.1.1 - Roles of the different
parties involved
The major responsibilities of each control entity are as follows:
n First tier controls are carried out by the middle office, which
plays an operational role through the applications it manages and
uses daily. Its key duties are:
– producing and analyzing results and risks on a daily basis;
– producing and analyzing provisions on a monthly basis;
– ensuring the reliability of market parameters used to calculate
results and risks;
– proposing methods to calculate reserves while ensuring that
they are exhaustive and correspond to the nature of risks;
– developing the system of delegated limits and method of
calculating risk, in conjunction with Risk Management;
– monitoring and reporting any limit violations.
n Risk Management is responsible for the financial component of
second tier controls, in particular overseeing market risks and
models. Its key duties are:
– validating the proposals made by the middle office, ensuring
their consistency throughout the Group and making recommendations where necessary;
– monitoring market risks at the various consolidation levels and
particularly at Group level;
– ensuring internal and external reporting on market risks;
– validating internally-developed models and software models
used to value products. To do this, the pricer and model validation char ter was distributed by the Risk Management
department in July 2005,This charter sets out the duties of the
Risk Management department in validating models and pricers, as well as the documents that must be provided by other
divisions (Research and MO);
– validating the various delegated authorities and limits requested by Corporate and Institutional Banking and Markets and
proposed by the middle office;
– making recommendations on the risk management system;
– leading Market Risk activities at Natexis Banques Populaires
subsidiaries and branches.
n Internal Control is responsible for the operational component
of controls:
– ensuring that adequate procedures are in place and periodically assessing their appropriateness, particularly with regard to
business activities and regulations;
– ensuring that procedures are properly and correctly followed;
– making recommendations on the risk management system;
– more generally, ensuring that procedures governing the
management and monitoring or market risks are respected.
This structure is completed by:
n a New Products Committee, enabling capital markets activities to
launch new products safely, after identifying and analyzing the different risk factors that may impact the value of the product.The New
Products Committee meets every six weeks and is completed by
working parties that meet every week.The committee examines
the different risks inherent to a new product, in particular market,
counterparty, legal, accounting, tax and non-compliance risks;
a Market Risks Committee, which meets monthly and comprises the heads of the various control levels together with front
office managers. It is chaired by the head of capital markets
activities.The committee validates new limits, proposes changes
to limits and reviews any identified limit violations;
n
n a Risk Monitoring and Supervision Committee, which meets
quarterly, comprising front office and middle office managers, the
Risk Management department and the Internal Control department to present new methods for measuring risks and divide up
developments for their implementation.
The Board of Directors validates overall risk limits for all entities.
In addition, the Internal Audit departments of Natexis Banques
Populaires and Banque Fédérale des Banques Populaires periodically conduct specific audit assignments.
2.3.1.2 - Market risk measurement
The market risk management system is based on a risk metrics
model that measures the risk run by each Natexis Banques
Populaires entity. The current model consists of a number of
standard metrics and VaR calculations.
Standard metrics
n
05
– sensitivity to a change in delta of an underlying (equities, fixed
income and currency);
– sensitivity to dividend levels;
– sensitivity to change in government security/swap spreads;
– sensitivity to change in issuer spreads;
– sensitivity to change in correlations;
– monthly and annual loss alerts.
n
New metrics and limits were implemented in 2005:
– deployment of the methodology for interest-rate risk measurement: yield curve risk indicator;
– specific indicators relating to product developments giving rise
to new types of risk (correlations). All of these new products have
been subject to the “new products” procedure and model validation;
– further improvements to limits for interest-rate products and
hybrid derivatives;
– significant increase in assets authorized for money market
securities, with deployment of the spread risk measurement
metric (Xsi) for this portfolio;
– launch of high-yield activities;
– increased sensitivity to yields on short-term treasury instruments;
– increase in limits for long/short equity, capital structure arbitrage
and convertible bonds from Natexis Arbitrage;
– tightening of loss alert levels.
Limits
Maximum sensitivity of interest rate maturity schedules to a
+/-1% shift in the yield curve is B100 million.
The currency risk limit is B3 million expressed in terms of a
one-day potential loss with a 99% confidence level.
Maximum sensitivity to a change in issuer spreads in the secondary bond market trading book is B10 million, expressed in
terms of a one-day potential loss and a 99% confidence level.
Volatility limits for interest rate, currency and equity options are:
n
B2.5 million for a 1% change in interest rate volatility;
n
B1.35 million for a 1% change in equity volatility;
B0.683 million to B0.975 million per currency for a 1 point
change in foreign exchange volatility.
n
These overall metrics are supported by more precise measurements by underlying, maturity and strike price.
The key standard metrics used are:
– sensitivity to a +/- 1% change in interest rates (overall and by
maturity);
– yield curve exposure expressed as the potential loss;
– currency exposure;
– equity exposure;
– sensitivity to a +/- 1% change in implied volatilities in the equity,
foreign exchange and fixed income markets (overall, by maturity
and by strike);
93
VaR
In addition to these standard metrics, Natexis Banques
Populaires also uses the Value at Risk (VaR) method. It uses
Riskmanager software developed by Riskmetrics to perform
historical VaR calculations designed to quantify the risk of losses
from capital markets activities, using conservative assumptions.
VaR calculations are based on:
n
one year’s historical data;
n
a one-day potential loss horizon;
n
a 99% confidence level.
n
trading portfolios of Natexis Commodity Markets;
n
the investment portfolio of the Finance department.
For the Corporate and Institutional Banking and Markets core
business, VaR calculations are conducted daily by the middle
office and monthly by the Risk Management department of
Natexis Commodity Markets’ VaR calculations are conducted
daily using local Riskmanager software and monthly by the Risk
Management department.
Data is inputted into Riskmanager primarily using automatic interfaces developed between the front office/middle office systems and
the software.These interfaces supply the characteristics of an operation, enabling the software to understand the various operations.
The scope of VaR calculations is as follows:
n trading and investment por tfolios of the Corporate and
Institutional Banking and Markets core business, excluding the
“structured equities” portfolio;
n
trading portfolios of Natexis Bleichroeder S.A.;
n
trading portfolios of Natexis Arbitrage;
Market data are provided by Riskmetrics on the basis of information from Reuters and are subject to a data management
process by Riskmetrics.
Historical Natexis Banques Populaires' VaR consumption
Total VaR scope 2005
Date
Total VaR
Interest rate VaR
Forex VaR
Equities VaR
Commodities VaR
Total VaR
Jan-05
7.28
4.47
1.80
6.44
0.17
Global Debt and Derivatives Markets
Feb-05
8.24
5.14
2.39
7.23
0.27
Equity Group
Mar-05
6.97
5.31
1.98
5.10
0.37
Natural Resources & Related Industries
Apr-05
5.82
4.47
0.91
4.38
0.44
Finance department
May-05
4.95
3.98
0.50
3.34
0.17
Jun-05
4.52
4.06
0.96
3.18
0.28
Jul-05
5.05
5.45
1.14
2.07
0.31
Aug-05
4.33
4.69
0.35
2.15
0.30
Sep-05
4.91
4.72
0.39
2.00
0.19
Oct-05
5.31
5.16
0.54
3.11
0.26
Nov-05
6.44
5.33
0.65
2.90
0.32
Dec-05
5.67
4.78
0.48
3.34
0.34
Confidence level: 99%
Horizon: 1 day
History: 1 year non-weighted
2005 ANNUAL REPORT
05
Total VaR in 2005
9.00
8.00
Total VaR
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05
For the US subsidiary Natexis ABM Corp., which trades in the
mortgage-backed securities market, stress tests are performed
based on a uniform 100 bp distortion of the yield curve and its
impact on the market (in the shape of early repayments, increased volatility etc.).
At December 30, 2005, the impact of the worst-case scenario
would be an $18.31 million fall in the value of the portfolio.
2.4 – Interest rate and liquidity risks
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
adopted at Group level in terms of balance sheet management.
In particular, it includes interest rate and liquidity risk limits.
2.4.1 - Interest rate risk
In the first three quarters of 2005, interest rates fell to their
lowest ever level in the Eurozone. The year ended with the
flattening of the yield curve, which can be detrimental for retail
banking.The spread between 3-month Euribor and 10-year CMS
narrowed from an average of 208 bp in 2004 to an average of
129 bp in 2005 and 91 bp at the start of 2006.
The Banque Populaire Group’s financial risk management system
aims to:
Interest rate risk limits
define the best strategy to develop net interest income while
also controlling risk;
Limits are set as a percentage of projected net interest income on a
“dynamic” balance sheet basis (i.e. including business projections) and
earnings capacity on a “static” balance sheet basis (i.e. previous
balance sheet) on a four-year horizon,based on predefined scenarios.
n
check that the bank’s business development reflects its financial structure in terms of both interest rate risks and liquidity
risks;
n
n
limit exposure to interest rate risk through adequate hedging;
n validate the organization and control rules of balance sheet
management;
n
define and periodically monitor internal risk limits.
The risk management policy of each Banque Populaire bank falls
within the framework of the Banque Populaire Group’s risk
guidelines, which sets out the management and reporting rules
Each Banque Populaire bank is free to set its own limits, provided
that they are expressed in terms of Group metrics.
Sensitivity of earnings capacity on a constant balance
sheet basis (“regulatory” vision)
The calculation is based on four matrix-based scenarios (temporary
shocks):
n
fall and rise in market interest rates: (+/-200 bp);
n changes in the yield curve: short-term rates +/-100 bp, longterm rates -/+100 bp.
95
Earnings capacity sensitivity has to comply with two limits
expressed as a percentage of earnings capacity and in absolute
terms as “minimum required capacity”.
Sensitivity of net interest income on a dynamic
balance sheet basis
The calculation is based on projected (progressive) scenarios “of
Natexis Banques Populaires economists”, “deduced from the
yield curve”,“of falls in interest rates”,“of a rise in interest rates”
and of “a turnaround in interest rates”.
In each of the four years analyzed, net interest income must be
higher than in the previous year to which a multiplying coefficient
is applied.
Hedging instruments
n
Cash flow hedges (CFH)
Cash flow hedges are used by the Group’s entities to hedge
future variable-rate borrowings (mostly interbank borrowings)
and private or public issues, as well as future variable-rate loans
(commercial loans, interbank loans).
The use of this type of hedging is justified by the maturities of the
variable-rate instruments hedged, which can take account of
renewal assumptions of the assets or liabilities concerned.
or the date the hedge was implemented are compared with
changes in the value of hedged items over the same period.The
ratio of these changes must be between 80% and 125%. Outside
these limits, the hedging relationship would no longer be justified
under IFRS.
To carry out retrospective testing, hedged items are represented
by:
a hypothetical asset or liability that can be used to isolate the
risk component(s) hedged in the case of fair value hedging;
n
a hypothetical derivative financial instrument representing full
hedging of the hedged items in the case of cash flow hedging.
n
Recognition of ineffective portion
The ineffective portion of the hedge is recognized in the income
statement under “net gains or losses on financial instruments at
fair value through profit or loss”. At December 31, 2005, the
ineffective portion of cash flow hedges amounted to B7 million
and the ineffective portion of fair value hedges amounted to
-B30 million.
Results
n
n
Fair value hedges (FVH)
Fair value hedges are used by the Group’s entities to hedge
fixed-rate assets (securities held for sale and loans) or fixed-rate
liabilities (interbank loans, forward customer savings, private or
public issues).
n
Effectiveness testing
Prospective testing
For the hedging of a single asset or liability, prospective testing
consists of verifying that the financial characteristics of the
hedged item and the hedging instrument are the same.
In the case of hedging of a group of assets or liabilities, prospective testing is done on a constructive basis, depending on the
type of documentation used:
a schedule of cumulative amounts of variable-rate liabilities and
fixed-rate borrower swaps (CFH);
n
n a schedule of cumulative amounts of variable-rate assets and
fixed-rate lender swaps (CFH);
a schedule of cumulative amounts of fixed-rate liabilities and
fixed-rate lender swaps (FVH).
n
Hedging is demonstrated if for each maturity category of the target repayment schedule, the nominal amount of items to be hedged is higher than the notional amount of hedging derivatives.
Retrospective testing
Retrospective testing is used to ensure, at least at each accounting date, the effectiveness of hedges.
During each test, changes in the fair value excluding accrued interest of hedging instruments since the previous accounting date
2005 ANNUAL REPORT
Interest rate risk
An increase in the sensitivity of net interest income to a decline
in interest rates and a downturn in the yield curve over the four
years of analysis.
On a dynamic balance sheet basis, the sensitivity of net interest
income to a 200 bp fall in interest rates increased from -9% in
2004 to -24% and sensitivity to the flattening of the yield curve
increased from -4% to -7%. The projected (progressive) scenarios of falls in interest rates and a downturn in the yield curve are
less likely to impact net interest income on a four-year horizon
over the first two years of downturn (-5% in 2006 and -4% in
2007 compared with 2005).
On a static balance sheet basis, average earnings capacity sensitivity over four years to a 200 bp fall in interest rates increased
from -29% to -58%. In the event of a turnaround in short-term
and long-term rates, the increase would be just -15% rather than
-19%.
n
Sensitivity
In terms of sensitivity, Natexis Banques Populaires’ main exposure is to a rise in short-term interest rates.
Credit derivatives
Apart from securitization transactions, credit derivatives held by
the Banque Populaire Group were insignificant at December 31,
2005, representing a nominal amount of around B2.5 billion,
principally in Credit Default Swaps (CDS) held for trading.
Most of these credit derivatives are held by Natexis Banques
Populaires, which wanted to develop a credit derivatives business
within its capital markets activities. As par t of a cautious
approach, the Group has implemented trading limits in several
stages:
January 2004: creation of a credit derivatives trading portfolio.
In January 2004, the Risk Committee delegated authorization to
traders to trade CDS within the framework of the base position
(cash/CDS);
n
April 2004: delegation of the trading desk was extended to
direction positions in CDS.This authorization is granted subject
to a volume restriction, allowing for tight control of the operating process;
n
September 2004: the non-government bonds por tfolio is
authorized to trade in CDS.The delegated limits are fairly restrictive and the volume restriction also applies to transactions initiated by traders on this desk;
n
n October 2004: as the operating process is considered satisfactory,
the volume restriction is lifted;
Since December 2004: transfer of CDS trading positions
within the scope of non-government bonds, which will now be
in charge of trading in CDS. The idiosyncratic risk is measured
using the Xsi indicator (Natexis Banques Populaires indicator),
which is set monthly based on the historic levels of JP Morgan
bond indices. An Xsi base measurement is also made in order to
limit the base cash risk versus CDS.
n
The authorized credit derivatives are “vanilla” credit default swaps.
One restriction applies to trading positions: piling up of positions
is not allowed – in order to close a position, the trader either has
to cancel or assign the transaction.
2.4.2 - Liquidity management
Liquidity limits are expressed as gaps in relation to residual
assets. They are measured on a dynamic balance sheet basis
(including commercial projections) and calculated for normal
and crisis scenarios.
A second metric is calculated on the basis of earnings capacity
sensitivity to a 50 bp increase in the short-term rate spread and
measured over a six-month period for a normal scenario on a
dynamic balance sheet basis.
Risk is not affected by an increase in the customer assets-liabilities
ratio.
The liquidity gap on a dynamic balance sheet basis for all Banque
Populaire banks over six months excluding CDN decreased
significantly from B5 billion to B0.8 billion thanks to the increased level of refinancing in liabilities. Over four years, the dynamic
liquidity gap excluding CDN rises from B21 billion to B22 billion,
still representing 16% of residual assets.
Liquidity indicators show that business development is under
control, even more so than in the past.The slight increase in the
assets-liabilities ratio shows that this has been accompanied
more by borrowing rather than by increasing customer liabilities.
All Banque Populaire banks comply with regulatory ratios.
05
2.5 – Operational risk
The Group’s methodology is based on the risk guidelines
adopted by the Board of Directors of Banque Fédérale des
Banques Populaires in 2005, a list of business activities covered
and a reporting system.
The definition of operational risk corresponds to that used by
regulators: the risk of loss due to inadequacies or deficiencies in
processes, people and systems, or to external events.The Banque
Populaire Group has created mapping of these risks in accordance with this definition, dividing risks into four main categories:
Systems and Processes, Fraud and External risks, Legal and
Compliance Risks, and Strategic Risks.
In 2004, the Group launched a project, overseen by Banque
Fédérale des Banques Populaires, to create a coherent operational risk management system by providing all Group entities with
standardized manuals for identifying key activities and information systems, as well as guidelines for establishing business continuity plans.Work on the project continued throughout 2005 and
has resulted in the implementation of business recovery plans
based on best practices.
In 2005, the efforts of the operational risk division resulted in the
adoption of the operations charter, which governs relationships
with the Group as of January 1, 2006.
2.6 – Insurance and risk coverage
Like other banking groups, the Banque Populaire Group insures
its major risks through specific insurance coverage with insurers
and reinsurers.
The 2005 insurance program completes the system covering
the Group’s material risks. It includes insurance for professional
liability, directors’ and officers’ liability, liability for losses resulting
from fraud and embezzlement, as well as the vast majority of
Group information systems infrastructures and premises or
major sites such as head offices and information systems centers. These policies also include business interruption and
consequential loss cover for each Group entity.
As in 2004, the entire program was renewed for 2005 on
generally better terms than the previous year. All cover has
been taken out with leading insurers that are recognized for
their claims-paying ability.
2.7 – Legal risks
2.7.1 - Legal and arbitration proceedings
The Group is currently involved in a limited number of liability
claims.
After review and based on the current status of claims pending,
the Group does not believe these claims will have a material
adverse impact on its results or financial position. Provisions
have been booked in the financial statements at December 31,
2005, for all legal and tax risks that can be reasonably estimated.
97
2.7.2 - Dependency
3.1 - Compensation and benefits
The Banque Populaire Group is not dependent on any
patents, licenses or industrial, commercial or financial sourcing
agreements.
paid to Executive Directors in 2005 by Banque
Fédérale des Banques Populaires and companies
controlled by it
n Total gross compensation paid to Executive Directors of
Banque Fédérale des Banques Populaires includes both a fixed
and a variable component.
3 - Directors’ compensation
The information below concerns the compensation paid to
Executive Directors of Banque Fédérale des Banques Populaire,
the central body of the Banque Populaire Group.
The fixed and variable compensation of Philippe Dupont and
Michel Goudard have remained unchanged since 2003:
in euros
2005
B.F.B.P.
Companies controlled by
B.F.B.P.
Total
compensation
Fixed
Variable
Service
awards
Fixed
Variable
Philippe Dupont
224,427
75,000
-
263,000
75,000
637,427
Michel Goudard
290,000
90,000
22,308
-
-
402,308
in euros
2004
B.F.B.P
B.F.B.P.
Total
compensation
Fixed
Variable
Fixed
Variable
Philippe Dupont
224,427
75,000
263,000
75,000
637,427
Michel Goudard
290,345
90,000
-
-
380,345
Jean-Paul Dubus*
250,598
60,000
-
-
310,598
2003
in euros
B.F.B.P
B.F.B.P.
Total
compensation
Fixed
Variable
Fixed
Variable
Philippe Dupont
224,427
75,000
263,000
75,000
637,427
Michel Goudard
290,345
90,000
-
-
380,345
Jean-Paul Dubus*
247,200
60,000
-
-
307,200
* Jean-Paul Dubus has asserted his pension rights as of December 31, 2004.
2005 ANNUAL REPORT
Philippe Dupont and Michel Goudard each have a car and an
apartment paid for by the bank. In addition, Philippe Dupont
receives a standard allowance in his capacity as Chairman and
Chief Executive Officer.
n
Neither Philippe Dupont nor Michel Goudard receives any allowances or benefits from companies controlled by Banque
3.2 - Directors’ fees
Directors’ fees paid to members of the Board of Directors of
Banque Fédérale des Banques Populaires are determined on
the basis of each member’s attendance rate at Board meetings
and Board Committee meetings and are therefore entirely
variable:
n
In respect of Banque Fédérale des Banques Populaires, allowances and benefits in kind (tax base) awarded to Executive
Directors are as follows:
in euros
the fee per Director and per Board meeting was B995;
the fee per Director and per Board Committee meeting was
as follows:
n
- Group Risk Management Committee: B1,524;
2005
2004
2003
Philippe Dupont
63,868
61,853
56,658
- Audit Committee: B1,524;
Michel Goudard
11,437
15,921
13,182
- Remuneration Committee: B762.
-
14,656
16,393
Total Directors’ fees paid in 2005 in respect of 2004 amounted
to B209,504. Amounts received per Director are shown in the
table below.
Jean-Paul Dubus*
05
The Directors of Banque Fédérale des Banques Populaires are
also paid fees in their capacity as Directors of companies controlled by Banque Fédérale des Banques Populaires.Total fees paid in
respect of 2005 amounted to B180,740. Amounts received per
Director are shown in the table below.
in euros
Directors
P. Dupont, chairman
C. Hébrard
C. Brevard
M. Castagné
R. Clavaud
J. Clochet
J-F. Comas
C. Cordel
P. Desvergnes
J-C. Detilleux
M. Devianne
D. Duquesne
S. Gentili
A. Jacquier
M. Jardin
Y. de la Porte du Theil
F. Moutte
R. Nalpas
P. Noblet
F. Thibaud
J-L. Tourret
Total
Directors’ fees paid in 2005*
by B.F.B.P.
(in euros)
Directors’ fees paid in 2005*
by companies controlled by
B.F.B.P. (in euros)
10,945
5,737
8,955
5,970
15,181
5,970
9,950
13,231
7,494
10,945
6,499
10,945
10,945
4,975
4,975
13,996
13,318
13,993
5,970
15,517
13,993
209,504
10,065
17,265
2,948
15,510
20,925
5,897
13,725
22,595
19,895
15,495
13,695
22,725
180,740
* In accordance with the French corporate governance act of May 15, 2001 (“NRE” Act), this table only shows directors’ fees paid during 2005. For Banque Fédérale des Banques
Populaires, they correspond to fees for attending meetings of the Board of Directors and the Board Committee held during 2004. For the companies controlled by Banque Fédérale des
Banques Populaires, they correspond to fees for attending Board meetings held during 2005.
99
During 2005, Michel Goudard also received B10,065 in his capacity as non-voting Director of Natexis Banques Populaires.
3.3 - Post-employment benefits
Philippe Dupont and Michel Goudard belong to the general
Social Security pension scheme and the ARRCO and AGIRC
complementary pension schemes. In their capacity as Executive
Directors, they also belong to the following two schemes:
Retirement allowances
Philippe Dupont and Michel Goudard belong to the supplementary
group pension scheme open to all executive managers of the
Banque Populaire Group within the framework of the provisions of
the by-law relating to this category.
The total amount paid to a director by way of a pension cannot
exceed 60% of revenues for the period, up to a maximum of
B335,000.This is reduced to 50% for Directors appointed after
July 1, 2004.
This scheme was launched before May 1,2005,i.e.before the Breton
Act (Law 2005-842) of July 26, 2005 came into effect.
Early retirement allowances
In the event of the early retirement of an Executive Director,
apart from in the case of gross misconduct, an amount is paid
equal to one year’s salary, plus 1/12th of annual compensation
per year of service with the Group, and if applicable, 1/12th of
the same annual compensation per year as Executive Director.
The maximum amount that can be paid is 42/12ths of annual
compensation.
Retirement or early retirement allowances given rise to a
payment equal to 1/40th of annual compensation per year of
service with the Group, capped at 40/40ths of this compensation.
3.4 - Stock options granted to and
exercised by Executive Directors
No options have been granted on Banque Fédérale des Banques
Populaires shares.
However, executive directors of Banque Fédérale des Banques
Populaires have been awarded options on Natexis Banques
Populaires shares.
Philippe Dupont benefits from this scheme in his capacity both at
Banque Fédérale des Banques Populaires and at Natexis Banques
Populaires.
Plan characteristics
Natexis Banques
Populaires options
granted to
executive
directors of
B.F.B.P.
Number of options granted
Plan number
Exercise
date
Expiration
date
Exercise
price
(in euros)
As director
of B.F.B.P.
As director
of companies
controlled by
B.F.B.P.
Number
of options
exercised
Number
of options
at end-2005
N°9–CA 09/19/01
N°10–CA 11/20/02
N°11–CA 09/10/03
N°12–CA 11/17/04
N°13–CA 11/15/05
09/19/05
09/10/06
09/10/07
11/17/08
11/15/09
09/19/08
09/09/09
09/09/10
11/16/11
11/14/12
94.30
72.47
83.25
89.10
119.24
10,000
5,500
6,000
6,000
7,000
10,000
5,500
6,000
6,500
7,000
20,000
-
0
11,000
12,000
12,500
14,000
N°9–CA 09/19/01
N°10–CA 11/20/02
N°11–CA 09/10/03
N°12–CA 11/17/04
N°13–CA 11/15/05
09/19/05
09/11/06
09/10/07
11/17/08
11/15/09
09/19/08
09/11/09
09/10/10
11/17/11
11/14/12
94.30
72.47
83.25
89.10
119.24
6,000
4,200
4,200
5,000
6,000
-
6,000
-
0
4,200
4,200
5,000
6,000
N°9–CA 09/19/01
N°10–CA 11/20/02
N°11–CA 09/10/03
N°12–CA 11/17/04
09/19/05
09/11/06
09/10/07
11/17/08
09/19/08
09/11/09
09/10/10
11/17/11
94.30
72.47
83.25
89.10
4,000
2,800
2,800
3,000
-
4,000
-
0
2,800
2,800
3,000
Philippe Dupont
Michel Goudard
Jean-Paul Dubus*
2005 ANNUAL REPORT
3.5 - Loans and guarantees given
to Directors or Officers
4.3 - Material changes in the
financial or commercial situation
None
In accordance with the European Commission’s regulation
no. 809/2004 implementing the Prospectus Directive, no material changes in Natexis Banques Populaires’ financial or commercial situation have been seen since the end of the last financial
year for which audited financial statements have been published.
4 - Subsequent events
05
4.1 - Group strategic plan
At its meeting of January 18, 2006, the Board of Directors of
Banque Fédérale des Banques Populaires reviewed efforts relating to the strategic plan implemented by the Group at the start
of 2005.
This collective review, synthesized into the Group Strategic Plan,
allowed for the revalidation of the fundamentals of the Group’s
business model. On the basis of this, the Group obtained an
overview of the main challenges and requirements of continued
robust growth.
The Group Strategic Plan is a development plan based on five
main axes:
n
continued efforts to gain market share in France;
optimizing measures to promote customer loyalty and service,
with the aim of meeting customers’ needs and continuing to
generate sufficient profit margins to finance efforts to win new
customers and grow the Company;
n
n enhancement and optimization of the business portfolio, as
well improving the effectiveness of the Group’s payout capacity
in order to help win new customers;
n targeted acquisitions in order to strengthen the Group’s
presence in certain priority business lines and step up its international expansion;
mobilization of all resources and adaptation of the organizational structure to meet strategic targets.
n
The Board of Directors also examined Natexis Banques
Populaires’ updated medium-term plan, which forms an integral
part of the Group’s strategy, and approved several partnerships
initiated by the subsidiary.
4.2 - Long-term and short-term
ratings upgraded
In January 2006, credit rating agency Standard & Poor’s published
new long and short-term credit ratings for Natexis Banques
Populaires and Banque Fédérale des Banques Populaires, with a
long-term rating of AA- (with a stable outlook) and a short-term
rating of A-1+.
This constitutes an upgrade in Natexis Banques Populaires’ long
and short-term ratings, an upgrade in Banque Fédérale des
Banques Populaires’ short-term rating and the first long-term
rating for Banque Fédérale des Banques Populaires.
101
RECENT DEVELOPMENTS
O
n March 12, 2006, the Banque Populaire
Group issued a press release stating that the
Board of Directors of Banque Fédérale des
Banques Populaires had unanimously approved the
start of exclusive negotiations between the Banque
Populaire Group and Groupe Caisse d’Epargne
concerning the creation of NATIXIS through the
combination of some businesses.
On March 12, 2006, the Banque Populaire Group issued a
joint press release with Groupe Caisse d’Epargne stating the
following:
“Banque Populaire Group and Groupe Caisse d’Epargne have
entered into exclusive negotiations for the creation of NATIXIS.
The Banque Populaire Group and Groupe Caisse d’Epargne,
each one representing over 3,000,000 member stakeholders,
have just signed a letter opening exclusive negotiations, which
shall end at the latest on June 1, 2006, for the combination of
some of their respective businesses.
This ambitious project is designed to constitute a significant
player in the finance and investment banking and banking services sector, whilst safeguarding each of the partners’ own retail
banking models.
The project dovetails naturally into both groups’ current development strategies. For Groupe Caisse d’Epargne, this is a natural extension of its current reorganization. For the Banque
Populaire Group, it provides its finance and investment banking
business with the necessary growth to take it to new dimensions.
There are three guiding principles to the negotiations underway
between the two groups:
n respect for the identity and independence of each of the two
networks’ regional banks and their head office organizations;
the implementation of cross stockholdings between Banque
Fédérale des Banques Populaires and Caisse Nationale des
Caisses d’Epargne so as to reinforce the overall cohesion of the
new entity;
n
n the combination of all their investment and finance banking and
banking services in one single vehicle. The name of the legal
entity will be NATIXIS. It is listed and will be jointly and equally
controlled by the Banque Populaire Group and Groupe Caisse
d’Epargne.
NATIXIS, a major player in finance and investment
banking and in banking services
The new entity NATIXIS will be a leader in a number of sectors
in France (especially employee savings, asset management, automated payment systems and bancassurance). It will be a subsidiary of Caisse Nationale des Caisses d’Epargne and Banque
Fédérale des Banques Populaires and will have its own client base
2005 ANNUAL REPORT
and strong distribution networks based on a high quality service
platform designed to deliver best practices aimed at achieving
the best performance on the market.
NATIXIS will be created by the combination of Natexis Banques
Populaires and various Caisse Nationale des Caisses d’Epargne
contributed subsidiaries in the finance and investment banking
sector (IXIS Corporate & Investment Bank, IXIS Asset
Management Group and CIFG), and in the specialist banking services sector (Crédit Foncier and Cefi) and private asset management (Compagnie 1818). Existing strategic partnerships at the
Banque Populaire Group and Caisse d’Epargne, in particular
CNP, will not be brought into the new entity.
Caisse Nationale des Caisses d’Epargne and Banque Fédérale des
Banques Populaires will have equal stakes (34% each) in NATIXIS.
This parity will be achieved by the combination of assets, the issue
of Cooperative Investment Certificates and cash contributions,
where necessary. NATIXIS will have a free float of at least 25%
and market capitalization of more than B20 billion. It will have the
resources necessary to take part in consolidation moves currently underway in the industry. Both parties aim to propose a
rate of dividend payout of 50% of NATIXIS’ consolidated net profits subject to profits, sufficient free reserves are to hand, then,
taking into account all regulatory capital requirements.
NATIXIS’ corporate governance will be conducted through a
Supervisory Board and a Management Board. Both groups will
have equal representation on the Supervisory Board and the
chairmanship will alternate between representatives of each
group. Mr Charles Milhaud will be the first Chairman of the
Supervisory Board. The Chairman of the Management Board,
appointed by the Supervisory Board, will be selected by mutual
agreement between the two groups. Mr Philippe Dupont will be
the first Chairman of the Management Board.
Close ties between the two Groups
The intention is to strengthen ties between the two groups by
putting in place cross equity holdings, within the constraints of
current legislation and regulations, between Caisse Nationale des
Caisses d’Epargne and Banque Fédérale des Banques Populaires.
The Chief Executive of each group will have a seat on the board
of the other party with the title of Vice-Chairman. The first
Banque Populaire Group representative on Caisse Nationale des
Caisses d’Epargne’s Supervisory Board will be Philippe Dupont
and the first Caisse Nationale des Caisses d’Epargne representative on the Banque Fédérale des Banques Populaires Board of
Directors will be Charles Milhaud.
Project to be launched end-2006
The timetable provides for the project to be implemented in the
course of December 2006, after the period of exclusive negotiation, which will end at the latest on June 1, 2006, with the signature of the final agreements following the required consultations
05
and agreement from the appropriate bodies in each group and in
accordance with the commitments to and rights of shareholders.
In this respect, it shall be noted that Caisse des Dépôts et
Consignations, which holds a 35% stake in Caisse Nationale des
Caisses d’Epargne, has specific shareholders’ rights pursuant to
the shareholders agreement dated June 30, 2004. Consequently,
when required, Caisse des Dépôts et Consignations will have to
take a position on the proposed transaction to allow the execution of the final agreements. To date, Caisse des Dépôts et
Consignations has stated it is opposed to this project.
The Banque Populaire Group will be assisted in this project by
Citigroup, Rothschild & Cie and Philippe Villin Conseil. Groupe Caisse
d’Epargne is assisted by Bucéphale Finance, Lazard Frères & Cie and
Merrill Lynch.
Building on the strengths and mutual society culture of each
group, the implementation of this project should result in the
creation of NATIXIS, a strong player in the finance and investment banking sector and banking services sector in its French
domestic market and with the capability to develop in Europe
and beyond.”
103
CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2005
Consolidated balance sheet - Assets
Notes
Cash and balances with central banks and post offices
12/31/2005
EU IFRS
01/01/2005
EU IFRS
3,129
3,359
Financial assets at fair value through profit or loss
V.1
33,325
31,874
Hedging instruments
V.2
279
571
Available-for-sale financial assets
V.3
29,920
28,837
Loans and advances to banks
V.4
55,744
39,543
Loans and advances to customers
V.4
146,603
129,472
1
0
6,899
5,748
0
0
Interest rate hedging reserve
Held-to-maturity financial assets
V.5
Current income tax assets
Deferred income tax assets
V.6
682
767
Other assets
V.7
8,152
6,621
Non-current assets held for sale
V.16
0
0
Investments in associates
VI.8
248
93
Investment property
V.8
1,154
1,055
Property, plant & equipment
V.9
1,702
1,772
Intangible assets
V.9
286
234
V.10
586
556
288,711
250,501
Goodwill
Total assets
2005 ANNUAL REPORT
05
Consolidated balance sheet - Liabilities
Notes
Due to central banks and post offices
12/31/2005
EU IFRS
01/01/2005
EU IFRS
416
29
Financial liabilities at fair value through profit or loss
V.1
6,758
7,237
Hedging derivatives
V.2
474
767
Deposits from banks
V.11
61,277
44,984
Customer deposits
V.11
104,483
97,878
Debt securities in issue
V.12
49,090
41,538
0
6
Current income tax liabilities
156
130
Deferred income tax liabilities
V.6
536
548
Other liabilities
V.7
12,517
10,769
0
0
Liabilities associated with non-current assets held for sale
Insurance companies’ technical reserves
V.13
29,677
26,422
Provisions
V.14
1,922
1,876
Subordinated debt
V.15
6,404
5,385
13,699
8,383
3,180
614
1,522
11,684
7,709
2,334
446
1,195
1,301
1,249
288,711
250,501
Equity attributable to equity holders of the parent
- Share capital and reserves
- Retained earnings
- Unrealized or deferred capital gains or losses
- Net income for the year
Minority interests
Total liabilities
105
05
Consolidated statement of income
Notes
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
Interest and similar income
VI.1
11,539
10,440
Interest and similar expense
VI.1
(7,126)
(6,176)
Fees and commission (income)
VI.2
3,157
3,024
Fees and commission (expense)
VI.2
(784)
(701)
Net gains or losses on financial instruments
at fair value through profit and loss
VI.3
841
409
Net gains or losses on available-for-sale financial assets
VI.4
461
187
Income from other activities
VI.5
5,794
4,872
Expenses from other activities
VI.5
(5,640)
(4,410)
8,242
7,646
(5,084)
(4,805)
(306)
(300)
2,852
2,541
(436)
(477)
2,416
2,064
Net banking income
General operating expenses
VI.6
Amortization, depreciation and impairment of property,
plant & equipment and intangible assets
VI.7
Operating income
Share of results of associates
VI.8
15
7
Gains or losses on other assets
VI.9
116
6
VI.10
3
(43)
2,551
2,034
(855)
(736)
1,696
1,298
(174)
(103)
1,522
1,195
Income before income tax
Income tax
Net income
Minority interests
Net income attributable to equity holders of the parent
VI.11
107
Consolidated statement of changes in equity from December 31, 2003 to December 31, 2005 - Banque Populaire Group
Share capital and reserves
in milllions of euros
Elimination
of
treasury
shares
Retained
earnings
4,712
-
658
-
510
-
343
2,886
4,682
0
1,002
-
(4)
-
1,929
2,886
4,678
0
2,931
147
-
(9)
-
4
(78)
-
-
-
-
-
-
-
(10)
-
2004 net income
-
-
-
-
Other changes
-
-
-
-
3,033
4,669
0
2,847
-
7
-
(512)
-
259
-
936
3,033
4,935
0
3,271
226
-
(15)
-
-
4
(98)
-
-
-
-
180
-
18
-
-
24
-
-
-
-
-
-
6
-
(21)
3,439
4,944
0
3,180
Consolidated equity at December 31, 2003 before allocation - French GAAP
Allocation of 2003 net income
Consolidated equity at January 1, 2004 after allocation - French GAAP
Impact of adopting 2004 IFRS applicable as of January 1, 2004
(1)
Consolidated equity at January 1, 2004 - 2004 IFRS
Movements related to relations with shareholders
Capital increase
Share-based payment plans
Dividend
(2)
Unrealized gains or losses in 2004
Impact of exchange rate differences
Impact of acquisitions and divestments on minority interests
Reclassification of securities
Other changes in scope of consolidation
(3)
(4)
Consolidated equity at December 31, 2004 - 2004 IFRS
Impact of adopting EU IFRS applicable as of January 1, 2005
(5)
Allocation of 2004 net income
Consolidated equity at January 1, 2005 after allocation - EU IFRS
Movements related to relations with shareholders
Capital increase
Share-based payment plans
Dividend
(2)
Unrealized gains or losses in 2005
Impact of change in value of financial instruments
Impact of exchange rate differences
Impact of acquisitions and disposals on minority interests
Crédit Maritime tie-up
Other changes in scope of consolidation
(6)
(7)
2005 net income
Other changes
(8)
Consolidated equity at December 31, 2005 - EU IFRS
Share
capital
Reserves
2,886
[1] Impact of adopting IFRS applicable in 2004 (2004 IFRS)
On adoption of IFRS, the translation reserve existing as of January 1, 2004 was transferred to retained earnings.
[2] Share-based payment plans in 2004 and 2005:
Under IFRS 2, employee stock option plans are treated as a cost to the company. The corresponding expense is equal to the value of the options granted in return for services
rendered by employees. The cost and corresponding impact on retained earnings was B4 million in 2004 (including B3.6 million attributable to the Group) and B3.5 million in
2005 (including B2 million attributable to the Group).
Impact of acquisitions and divestments on minority interests during 2004:
[3] Reclassification of securities: On December 23, 2004, Natexis Assurances acquired the 435,000 Crédit Maritime Vie shares previously held by the Crédit Maritime Group. As this is an
internal restructuring operation, the capital gains have been eliminated. The change in minority interests resulting from the reclassification of these shares is mirrored in a change in
retained earnings, with no impact on the income statement.
[4) Other changes in equity:
- B80 million arising on first-time consolidation of credit institutions (not subsidiaries) that have signed an association agreement with Crédit Coopératif. In view of their “associated”
status, their retained earnings are recorded under minority interests;
- B(15) million arising on the squeeze-out made by Natexis Banques Populaires for the remaining Coface shares;
- B(13) million arising on Coface’s buyout of the minority interests in Unistrat;
- B7 million in dilution arising on Natexis Banques Populaires’ acquisition of BP Développement shares from the Banque Populaire banks,
- B3 million arising on other changes in scope of consolidation.
2005 ANNUAL REPORT
05
Unrealized gains or losses
Exchange
differences
Revaluation
Change in value of financial
instruments net of deferred tax
Available
for sale
assets
Hedging
instruments
Net income
attributable
to equity
holders
of the parent
Equity
attributable
to equity
holders
of the
parent
Equity
attributable
to minority
interests
Total
equity
(66)
-
-
-
853
8,504
1,962
10,466
-
-
-
-
(853)
0
-
-
(66)
0
0
0
0
8,504
1,962
10,466
66
-
-
-
-
1,991
(277)
1,714
0
0
0
0
0
10,495
1,685
12,180
-
-
-
-
-
147
4
(87)
0
(86)
147
4
(173)
(41)
-
-
-
-
(41)
(42)
(83)
-
-
-
-
-
(10)
0
10
63
63
-
-
-
-
1,195
1,195
149
1,344
-
-
-
-
-
0
-
0
(41)
0
0
0
1,195
11,703
1,779
13,482
2
-
344
140
-
(19)
(530)
(549)
-
-
-
-
(1,195)
0
-
-
(39)
0
344
140
0
11,684
1,249
12,933
-
-
-
-
-
211
4
(98)
0
(43)
211
4
(141)
80
-
156
-
(77)
-
-
79
81
28
22
107
102
-
-
(3)
-
-
-
219
0
(219)
98
0
98
-
-
-
-
1,522
1,522
166
1,688
0
-
10
3
-
(2)
-
(2)
41
-
507
66
1,522
13,699
1,301
15,000
[5] Impact of adopting IFRS applicable in 2005 (EU IFRS)
Impact of acquisitions and divestments on minority interests during 2005:
[6] Crédit Maritime Mutuel tie-up: as part of the tie-up between the Crédit Maritime regional banks and the Banque Populaire regional banks, each Crédit Maritime regional bank made
a capital increase reserved for the appropriate Banque Populaire regional bank, giving each one between 20% and 22% of the share capital. After approval from the French Banking
Commission at end 2005, the Crédit Maritime Mutuel banks were consolidated by the consolidating entity. As this was an internal restructuring, the change in minority interests resulting from the tie-up is mirrored in a changed in retained earnings (B219 million), with no impact on the income statement.
[7] Other changes in scope of consolidation:
The increase in minority interests is principally due to dilution of the percentage holding in Natexis Banques Populaires:
* B57 million representing a net 1.33% reduction in the Group’s percentage holding in Natexis Banques Populaires, following the sale of Natexis Banques Populaires shares on the market;
* B41 million representing a net 0.83% reduction following the exercise of stock options during the period, which was partially offset by a 0.10% increase in the number of treasury shares held
during the year.
[8] Other changes:
Other changes principally comprise:
- adjustments between retained earnings (attributable to the Group) and unrealized gains/losses (attributable to the Group): B14 million ;
- as part of Banque Populaire Val de France’s absorption of its subsidiary Sociep, Sociep’s retained earnings were transferred to the share premium: B6 million.
109
05
Consolidated cash flow statement - Banque Populaire Group
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Income before income taxes
2,551
2,034
+/- Net charge to depreciation and amortization of property, plant & equipment and intangible assets
+/- Impairment of goodwill and other non-current assets
+/- Net charge to other provisions (including insurance reserves)
+/- Share of results of associates
+/- Net loss/(gain) on investing activities
+/- Net loss/(gain) on financing activities
+/- Other movements
306
(9)
2,953
(15)
(414)
0
(79)
310
35
1,720
(7)
(194)
0
434
= Total non-cash items included in income before income taxes
and other adjustments
2,743
2,298
1,168
(10,426)
1,340
3,486
(868)
8,734
(10,874)
1,472
4,203
(633)
(5,299)
2,901
(6)
7,232
+/- Decrease/(increase) in financial assets and investments in associates
+/- Decrease/(increase) in investment property
+/- Decrease/(increase) in property, plant & equipment and intangible assets
(1,841)
(159)
(209)
(2,445)
19
(488)
Total cash used by investing activities (B)
(2,209)
(2,913)
+/- Cash received from/(paid) to shareholders
+/- Other cash provided/(used) by financing activities
69
1,148
(22)
(1,624)
Total net cash provided/(used) by financing activities (C)
1,217
(1,646)
Effect of exchange rate changes on cash and cash equivalents (D)
117
(38)
Net increase/(decrease) in cash & cash equivalents (A + B + C + D)
(880)
2,635
Net cash provided/(used) by operating activities (A)
Net cash provided/(used) by investing activities (B)
Net cash provided/(used) by financing activities ( C)
Effect of exchange rate changes (D)
(6)
(2,209)
1,217
117
7,232
(2,913)
(1,646)
(38)
Opening cash & cash equivalents
(1,390)
(1,245)
Cash, central banks, post offices (assets & liabilities)
Interbank balances
3,329
(1,939)
1,735
(2,980)
509
1,390
2,713
(2,203)
3,329
(1,939)
(880)
2,634
+/- Decrease/(increase) in interbank and money market items
+/- Decrease/(increase) in customer items
+/- Decrease/(increase) in other financial assets or liabilities
+/- Decrease/(increase) in non-financial assets or liabilities
- Income taxes paid
= Net decrease/(increase) in operating assets and liabilities
Total net cash provided/(used) by operating activities (A)
Closing cash & cash equivalents
Cash, central banks, post offices (assets & liabilities)
Interbank balances
Change in cash & cash equivalents
111
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Note I - Impact of first-time
adoption of IFRS
The 2004 financial statements provided by way of comparison
have been prepared in accordance with IFRS excluding IAS 32,
39 and IFRS 4.
The effects of transition to IFRS on the 2004 financial statements
were described in a press release issued by the Banque Populaire
Group on April 21, 2005.The main resulting reclassifications and
restatements affecting equity,Tier 1 capital, the balance sheet and
income statement are described in this note.
This note also describes the main reclassifications and restatements at January 1, 2005 resulting from the adoption of IAS 32,
IAS 39 and IFRS 4.
The following terminology has been used for all of the financial
documents provided:
2004 IFRS: IFRS excluding IAS 32, IAS 39 and IFRS 4;
EU IFRS: IFRS as adopted by a series of EU regulations, comprising
IAS 1 to 41, IFRS 1 to 5 and their interpretations as endorsed by the
European Union as at December 31, 2005.
n
n
IFRS 1 provides for certain exemptions to the principle of retrospective adoption of IFRS as of the transition date:
n Business combinations: the Group has elected not to restate
business combinations before January 1, 2004.
n Fair value as deemed cost: the Group has elected to measure
its property, plant and equipment at cost.
n Employee benefits: the Group has elected for prospective
adoption of the corridor method.
n Cumulative translation reserve: the translation reserve existing
at January 1, 2004 has been transferred to retained earnings.
n Share-based payment: the Group has elected to adopt IFRS 2
for plans granted after November 7, 2002 which had not vested
at January 1, 2005.
n Designation of previously recognized financial instruments:
designation was made on the date of transition to IFRS.
n Measurement of financial assets and liabilities at fair value:
prospective adoption for transactions entered into after
January 1, 2004.
Some information previously provided about the transition to
IFRS has been amended following prospective adoption of the
fair value option amendment to IAS 39 (endorsed by the EC
regulation of November 15, 2005) and some method adjustments.
The main adjustment concerns the method of calculating collective impairment provisions for loans and receivables.The amount
previously disclosed was based on expected losses resulting
from the application of Basel II using the probability of default on
a one-year horizon. Expected losses have been recalculated to
2005 ANNUAL REPORT
factor in the probability of default based on the actual maturity
of each exposure in the pools of assets concerned (industries
and countries). This resulted in a B45 million increase in the
amount of impairment provisions recognized in the opening
balance sheet, together with B30 million decrease in equity net
of deferred tax (B24 million attributable to equity holders of the
parent).
05
I.1 - Impact on equity and Tier one capital
I.1.1 - Impact of 2004 IFRS on equity and Tier one capital at December 31, 2004
N.B.
n the impacts on equity and net income are shown net of the deferred tax effect,
n the impact on the Tier one ratio is expressed in basis points.
Equity *
Net income
Tier one
ratio
(millions of euros)
(millions of euros)
(basis points)
8,517
1,059
9.1%
Excluding
net income
Consolidated financial statements
at December 31, 2004 - French GAAP
Comment
2004 IFRS restatements:
Additional provisions for employee benefits
(1)
(221)
8
-0.14
Deferral of fees and commissions
(2)
(46)
3
-0.03
Restatement of fund for general banking risks
(3)
2,082
115
Restatement of finance leases
(4)
(6)
(2)
0.00
Restatement of goodwill and Coface network assets
Restatement of Coface network assets
Restatement of goodwill
(5)
140
(11)
140
(11)
-0.13
-0.13
0.00
Property, plant & equipment and intangible assets
(6)
(15)
2
-0.01
(31)
16
(1)
3
-0.02
0.01
Restatement of property, plant & equipment
Capitalization of development expenses
Restatement of equalization reserves
(7)
88
33
0.08
Deferred tax on capitalization reserve
(8)
(30)
(3)
-0.02
Scope and basis of consolidation
(9)
Increase in percentage holding of NBP
First-time consolidation
Other impacts
Total restatements
Consolidated financial statements at December 31, 2004 - 2004 IFRS
(1)
(9)
-0.20
40
13
(54)
11
(1)
(19)
-0.21
0.01
0.00
1,991
136
-0.45
10,508
1,195
8.7%
(*) attributable to equity holders of the parent
Comments:
insurance. It had no impact on net income for the period, on
a comparable new lending basis.
(1) Employee benefits
IAS 19 stipulates more precise rules for the measurement and
recognition of employee benefits. This led to an increase in the
provision for employee benefits, primarily due to actuarial gains
and losses, deducted from opening equity. Actuarial gains and losses comprise differences arising on changes in assumptions used
(mainly the discount rate used) following the adoption of IFRS.
(3) Elimination of Fund for General Banking Risks
(2) Deferral of fees and commissions
(4) Restatement of leases
IFRS require certain fees and commissions to be deferred
over the period during which the service is rendered. Under
French GAAP, they were recognized in full upon receipt. This
restatement principally concerns the retail banking business
with respect to fees charged for payment services and loan
IAS 17 imposes stricter rules for the recognition of finance
leases and operating leases. Certain contracts have therefore
been reclassified as operating leases and the corresponding
unrealized reserve recognized under French GAAP has been
derecognized.
Under international accounting standards (IAS 30 and IAS 37),
provisions of a general nature do not qualify for recognition as
a liability. The Fund for General Banking Risks was therefore
reclassified in full as equity at January 1, 2004. Charges or
reversals have been eliminated from the income statement.
113
(5) Restatement of goodwill and Coface network
assets
n
Goodwill
Under IFRS, goodwill is no longer amortized but tested for
impairment at least once a year and whenever there is objective
evidence that the value of the goodwill might be impaired, giving
rise to the recognition of an impairment loss where necessary.
Negative goodwill has been reclassified as equity in the opening
balance sheet and in subsequent years will be recognized immediately in the income statement. Goodwill arising on acquisitions
made prior to January 1, 2004 has not been restated.
n
Restatement of Coface network assets
Network assets previously recognized as intangible assets in the
French GAAP financial statements do not satisfy the criteria laid
down in IAS 38 for recognition as an intangible asset. In accordance with IFRS 1 on first-time adoption, these items have been
reclassified as goodwill.This had no impact on opening equity as
the adjustment is simply a reclassification.
(6) Restatement of property, plant & equipment and
intangible assets (excluding network assets)
n
Capitalization of software development expenses
IFRS require software development expenses to be capitalized,
which was not the case under French GAAP. These expenses
have therefore been recognized in the balance sheet as an intangible asset with a corresponding increase in opening equity.
n
Component accounting for property, plant & equipment
The impact of this approach relates primarily to property. Under
French GAAP, property assets (investment or owner-occupied)
were depreciated over a period unique to the entire asset. Under
IFRS, a specific depreciation schedule is drawn up for each significant component of an asset which has a different useful life or rate
of consumption of future economic benefits than the item as a
whole.The resulting difference in depreciation was deducted from
opening equity.
(7) Equalization reserve
The equalization reserve recognized by Coface (credit insurance
business) and ABP IARD is a technical reserve permitted under
French GAAP to protect insurance companies against the risk of
catastrophe. IFRS does not permit the recognition of reserves
covering risk of a general nature. Accordingly, the equalization
reserve was fully reclassified in equity on January 1, 2004.
Charges to the equalization reserve recognized in 2004 under
French GAAP have therefore been reversed.
(8) Deferred tax on the capitalization reserve
The capitalization reserve recognized in the separate financial
statements of insurance companies is intended to defer capital
gains arising on the sale of certain bonds to offset subsequent
capital losses.The portion presumed unlikely ever to be used is
reclassified in equity. Under French GAAP, this does not give rise
to the recognition of deferred income tax. Under IAS 12, it is
treated as a temporary difference that gives rise to a deferred
tax liability.
2005 ANNUAL REPORT
(9) Scope and basis of consolidation
Calculation of the Group’s percentage holdings in Natexis
Banques Populaires and its subsidiaries
n
The consolidation of shares in Natexis Banques Populaires held
by the Banque Populaire banks and their subsidiaries, and the
deduction of treasury shares from Natexis Banques Populaires’
share capital, had the effect of increasing the Banque Populaire
Group’s percentage holding in Natexis Banques Populaires from
75.59% to 82.76%.The impact of this restatement on equity was
a reclassification between minority interests and equity attributable to equity holders of the parent, and deduction of the value
of the securities concerned from retained earnings.
n
Changes in scope of consolidation
An analysis of the control criteria defined by IFRS did not have
any material impact on the scope of consolidation. The only
change involved special purpose entities that were not consolidated under French GAAP.These are the Cristalys securitization fund, which is wholly-owned by BRED Banque Populaire,
and four non-trading real estate companies (Sociétés Civiles
Immobilières) that hold the property investments of Natexis
Assurances and SCI Cofimmo (Coface sub-group).
Private equity investments between 20% and 50% are not
accounted for using the equity method as they have been
designated as financial assets at fair value through profit or
loss as of January 1, 2005. IAS 28 and 31 on investments in
associates accept that for this type of investment, fair value
provides a better level of information than full consolidation
or equity accounting. The adoption of IAS 27 for the private
equity business did not lead to the consolidation of any majority investments, as none is material.
n
Other impacts
The impact on equity attributable to equity holders of the
parent mainly comprises the allocation of IFRS restatements
(sections 1 to 8 above) between equity attributable to equity
holders of the parent and minority interests, with no impact on
the Tier 1 ratio.
05
I.1.2 - Impact on equity and Tier one capital at January 1, 2005 - EU IFRS
N.B.
n the impacts on equity are shown net of the deferred tax effect
n the impact on the Tier one ratio is expressed in basis points
Consolidated financial statements at December 31, 2004 - 2004 IFRS
Comment
Equity* attributable
to equity holders
of the parent
(millions of euros)
Tier one
ratio
(basis points)
11,703
8.7%
EU IFRS restatements
Amortized cost
(1)
(161)
-0.11
Valuation of certain financial instruments at fair value
Fair value through profit or loss**
Fair value of available for sale financial assets**
Cash flow hedges**
Fair value hedges**
Fair value of insurance investments
(2)
643
32
432
100
5
74
0.09
0.04
0.00
0.05
Impairment charges and provisions
(3)
(404)
-0.26
(75)
(133)
(196)
-0.05
-0.08
-0.13
Discounting effect
Home loans savings plan provisions
Other impacts
Preferred shares
Treasury shares
Other
Total EU IFRS restatements
Consolidated financial statements at January 1, 2005 - EU IFRS
(4)
(97)
0.00
(9)
(19)
(69)
0.00
-0.01
0.00
(19)
-0.28
11,684
8.4%
(*) Including net income attributable to equity holders of the parent.
(**) Excluding insurance.
Comments:
(1) Amortized cost
Under French GAAP, loans are measured at cost with accrued
interest for the period recognized in profit or loss. Most fee and
commission income is recognized on a cash basis.
Under IFRS, loans and receivables are measured at amortized
cost using the effective interest method. Under this method,
cer tain fees and commissions received or paid which are
directly connected with the loan transaction are deferred over
the term of the loan on an actuarial basis.
(2) Valuation of certain financial instruments at fair
value
Under French GAAP, the only financial instruments measured at
fair value through profit or loss are securities and derivatives held
for trading purposes.
n through profit or loss: derivative financial instruments, instruments subject to a fair value hedge (to the extent of the
components hedged), instruments with embedded derivatives that cannot be separated from the host contract, instruments held for trading;
n through equity: financial instruments classified as available for
sale and derivative financial instruments designated as cash flow
hedges for macro-hedging purposes.
Under IFRS, insurance company investments are recognized
and measured in accordance with IAS 39. However, unrealized
gains or losses on investments representing contracts with a
discretionary par ticipation feature are largely offset (about
92%) by the recognition of a deferred participation liability
under the shadow accounting principle permitted by IFRS 4,
which equates to considering that a proportion of those gains
or losses will be passed on to policyholders through the return
on their contracts.
IAS 39 requires the following financial instruments to be measured at fair value:
115
(3) Impairment charges and provisions
n
Impact of discounting
The conditions for identifying impairment of specific loans are
similar to those used under French GAAP. However, under IFRS,
the amount of the impairment is the difference between the
carrying amount of the loan and the estimated recoverable
amount discounted at the effective interest rate applicable at
the inception of the loan.
n
The rules for recognizing collective provisions are stricter
under IAS 39 than under French GAAP. If there is no objective
evidence of impairment for an individually assessed financial
asset, the asset is included in a pool of financial assets with
similar credit risk characteristics and collectively assessed for
impairment. The country and industry provisions recognized
under French GAAP were reclassified as collective provisions as
of January 1, 2005. The method of calculating the provisions is
based on an internal ratings system cross-applied to three portfolios (personal/small business/corporate) and three risk types
(pre-default/performing in default/industry). The breakdown by
portfolio is based on the segmentation recommended under
Basel II and performing loans are grouped into portfolios with
similar risk characteristics. When a group of financial assets is
found to be impaired, the impairment provision is calculated on
the basis of expected losses.
n
Provisions for home loan savings schemes
Home loan savings schemes are peculiar to the French market
and are therefore not specifically treated by IFRS.The treatment
adopted by Banque Populaire Group is based principally on the
work carried out on this issue under the aegis of the CNC.The
purpose of the provisions is to cover the two risks inherent in
these schemes:
- the risk of having to grant loans at a pre-agreed rate which is
lower than the market rate;
- the risk of paying interest on the savings accounts at an abovemarket rate.
Both risks have been measured prospectively until extinction
of the savings carried on the balance sheet. This required
modeling current outstandings (savings and conversion into
loans) based on assumptions regarding future market rates
and client behaviour. Following this evaluation, a provision was
taken against these risks by deduction from opening equity at
January 1, 2005.
(4) Other impacts
n
Preferred shares
Under French GAAP, preferred shares issued by the Group are
recognized as equity and classified under minority interests.
Under IFRS, preferred shares are classified, after analysis of the
contracts, as liabilities or equity, depending on whether the issuer
is contractually obliged to pay cash to holders of the shares.
On the basis of its analysis, the Group has reclassified these shares
as liabilities, the main effect of which is a reduction in minority interests corresponding to the amount of the issues. Dividends paid on
the preferred shares are treated as interest expense under IFRS.
2005 ANNUAL REPORT
n
Treasury shares
IFRS does not permit treasury shares to be recognized in the
balance sheet regardless of their purpose and classification under
French GAAP. In accordance with 2004 IFRS, the treasury shares
held by Natexis Banques Populaires have been eliminated
through equity at their historical value, taking account of the
Group’s new percentage holding in Natexis Banques Populaires
(see Note I 1.1 - para. 9). The unrealized capital gain on these
shares was also eliminated as of January 1, 2005, in accordance
with IAS 39.
n
Other impacts
The impact on equity mainly comprises the allocation of the EU
IFRS restatements identified above between equity attributable
to equity holders of the parent and minority interests, with no
impact on the Tier 1 ratio.
05
I.2 - Transition of the balance sheet at December 31, 2004 (2004 IFRS)
and January 1, 2005 (EU IFRS)
Assets
IFRS restatements
Cash and balances with central banks and post offices
Financial assets at fair value through profit or loss
Hedging instruments
Restatements
2004 IFRS impacts
EU IFRS impacts
01/01/2005 EU IFRS
Note I.2.1
Note I.2.2
Note I.2.3
3,354
0
5
3,359
30,505
(136)
1,505
31,874
230
0
341
571
28,944
(849)
742
28,837
39,727
0
(184)
39,543
130,442
149
(1,119)
129,472
84
5,748
5,664
335
141
291
767
7,122
(409)
(90)
6,622
90
2
2
93
276
739
40
1,055
Other assets
Investment property
1,722
50
0
1,772
Intangible assets
573
(342)
2
234
Goodwill
190
366
0
556
249,173
(289)
1,619
250,502
Total assets
Liabilities and Equity
Due to central banks and post office
Financial liabilities at fair value through profit and loss
29
29
3,222
0
84
7,237
Hedging instruments
221
0
546
767
Deposits from banks
44,908
(2)
78
44,984
Customer deposits
97,874
(8)
12
97,878
Debt securities
41,717
(186)
6
41,538
6
6
183
116
249
548
(72)
(32)
10,770
Other liabilities
130
14,809
130
Liabilities associated with non-current assets held for sale
25,725
(96)
793
26,422
Provisions
4,037
(1,876)
(285)
1,876
Subordinated debt
4,675
0
710
5,385
Minority interests
2,068
(288)
(531)
1,249
Retained earnings
Unrealized or deferred gains or losses
Net income for the period
9,576
7,706
953
(143)
1,059
2,122
(4)
1,924
66
136
(14)
7
(543)
522
1
11,684
7,709
2,334
446
1,195
249,174
(289)
1,619
250,502
Total liabilities & equity
117
I.2.1 - Main reclassifications made at December 31, 2004 (2004 IFRS)
and at January 1, 2005 (EU IFRS)
Assets
IFRS
Cash and
Financial
Hedging
balances
assets at instruments
with central
fair value
banks &
through
post offices profit or loss
French GAAP
(1) (2) (3)
Interbank and money
market assets
55,463
Customer transactions
120,584
Lease financing
(3,354)
(3)
Available
for-sale
financial
assets
(7,764)
(5,015)
(772)
1
(7,827)
Insurance company
investment portfolios
26,044
(3,687)
989
(1,018)
Accrued income, prepaid
expenses and other assets
Total assets
Held-tomaturity
financial
assets
Deferred
income
tax assets
(39,727)
(29)
0
(118,719)
0
(8,726)
(12,859)
Goodwill
Interest
rate
hedging
reserve
(1) (2)
8,890
26,256
Property & equipment
and intangible assets
Loans and
advances
to
customers
(1) (2)
Bonds, equities and other
fixed and variable
income securities
Investments in affiliates and
associated undertakings
and other securities
held for investment
Loans and
advances
to banks
0
(2,663)
0
(15,928)
(180)
(5,664)
(175)
(125)
0
2,389
228
9,561
250,404
(3,354)
(4,406)
(230)
(30,505)
(230)
(335)
(28,944)
(39,727)
(130,442)
-
(5,664)
(335)
3,354
30,505
230
28,944
39,727
130,442
5,664
335
2005 ANNUAL REPORT
05
IFRS
Current
income
tax assets
Other
assets
Noncurrent
assets held
for sale
Invest- Investment
ments
property
in
associates
(1) (2)
Property,
plant &
equipment
Intangible
assets
Goodwill
Other
reclassifications
(assets/
liabilities)
(1) (2)
425
(1,094)
(27)
(13)
(123)
(2,907)
0
(585)
(90)
445
(108)
(25)
(1,708)
(573)
(190)
(7,122)
(7,122)
(38)
2,532
(90)
(276)
(1,722)
(573)
(190)
(1,230) IFRS
Cash and balances with central
banks and post offices
Financial assets at fair value
through profit or loss
Hedging instruments
39,727
Other assets
276
Investment property
1,722
573
190
230
28,944
90
30,505
7,122
3,354
130,442
0
5,664
335
0
7,122
0
90
276
1,722
Intangible assets
573
Goodwill
190
Total assets
249,173
119
Liabilities
IFRS
Due from Financial
central liabilities at
banks FV through
and post
profit
offices
and loss
Hedging
instruments
(1) (2) (3)
(3)
French GAAP
Interbank and money
market liabilities
46,971
Customer deposits
98,253
(66)
Debt securities in issue
42,001
(266)
Insurance company
technical reserves
25,725
Deferred income, accrued
charges and other liabilities
16,861
Negative goodwill
(2,153)
(737)
Customer
Debt
deposits securities
Interest
rate
hedging
reserve
Deferred
income
tax
liabilities
Current
tax
liabilities
1,939
Long-term subordinated debt
4,675
Fund for General Banking
Risks
2,192
Minority interests
2,068
Shareholders’ equity
(excluding FGBR)
- Common stock
- Additional paid-in capital
- Retained earnings
- Net income for the period
9,576
3,033
741
4,743
1,059
250,404
Other
liabilities
Liabilities
associated
with noncurrent assets
held for sale
(44,908)
(97,874)
(41,717)
(221)
(183)
(14,665)
142
Provisions for contingencies
and losses
Total liabilities
(29)
Deposits
from
banks
(142)
0
(130)
(183)
(130)
0
(29)
(3,222)
(221)
(44,908)
(97,874)
(41,717)
(14,807)
29
3,222
221
44,908
97,874
41,717
183
130
14,807
2005 ANNUAL REPORT
IFRS
Insurance Provisions
companies’
technical
reserve
Subordinated
debt
Minority
Equity
interests attributable
to equity
holders of
the parent
Share
capital
and
reserves
Retained Unrealized
earnings
or
deferred
gains or
losses
Net
income
for the
period
05
Other
reclassifications
(assets/
liabilities)
119
(313)
(18)
(25,725)
(1,055)
(1,846)
(37)
(4,675)
(2,192)
(2,068)
(9,576)
(3,033)
(741)
(3,932)
(953)
143
(1,059)
(25,725)
(4,037)
(4,675)
(2,068)
(9,576)
(7,706)
(953)
(143)
(1,059)
0
(1,230) IFRS
29
Financial liabilities at fair value
3,222
Hedging instruments
221
Deposits from banks
44,908
Customer deposits
97,874
Debt securities
41,717
0
183
130
14,807
Other liabilities
Liabilities associated with non-current
assets held for sale
25,725
0
25,725
4,037
4,675
2,068
9,576
7,706
953
Provisions
4,037
Subordinated debt
4,675
Minority interest
2,068
9,576
- Share capital and reserves
7,706
- Retained earnings
(143)
- Unrealized or deferred gains or losses
1,059
- Net income for the period
Total liabilities
953
(143)
1,059
249,174
121
Comments on reclassifications
(see board I.2.1)
The balance sheet reclassifications relate to the adoption of the
new presentation format set out in CNC recommendation
2004-R-03 of October 27, 2004, and the main reclassifications
made at December 31, 2004 (under 2004 IFRS) and at January 1,
2005 (under EU IFRS), including the following:
(1) Breakdown of securities portfolio
Under 2004 IFRS, financial instruments at fair value through
profit or loss comprise only financial instruments held for
trading, while available-for-sale financial assets comprise securities
held for sale, investments in affiliates and non-consolidated
companies and other long-term investments.
The adoption of IAS 32 and IAS 39 as of January 1, 2005 led to
the reclassification of items making up the securities portfolio to
take account of the new classification rules based on the purpose of the financial instruments and their valuation method.
(2) Breakdown of insurance company investments
Under French GAAP, insurance company investments are broken down into four asset classes: marketable securities (mainly
bonds at fixed or revisable rates), equities, property investments,
and loans and deposits.
Under IFRS, insurance investments (B26 billion) are reclassified
by type:
n investments in marketable securities have been reclassified in
accordance with the categories set out in IAS 32 and IAS 39, as
follows:
- Assets at fair value through profit or loss (B3.7 billion),
- Available-for-sale financial assets (B15.9 billion),
- Held-to-maturity financial assets (B5.7 billion) *
property investments are classified as “Investment property”
(B0.6 billion);
n B0.2 billion has been reclassified as “Loans and advances to
customers.”
n
* The “held-to-maturity financial assets” category is only used by the Group for fixedincome securities representing insurance company investments.
(3) Hedging instruments
Under French GAAP, the fair value of financial instruments was
recognized in the balance sheet as “Accrued income, prepaid
expenses and other assets” or “Deferred income, accrued charges and other liabilities” and related solely to derivative financial
instruments held for trading purposes.
Under IFRS, all derivative financial instruments are recognized on
the balance sheet at their fair value on inception, whether they
are for trading or hedging purposes:
trading derivatives are recognized as financial assets or liabilities at fair value through profit or loss;
n hedging derivatives are identified in the balance sheet under a
separate line item.
n
2005 ANNUAL REPORT
I.2.2 - Main restatements made at December 31, 2004 (2004 IFRS)
05
Assets
Changes in scope and methods
of consolidation
Employee
benefits
Deferral of Elimination Restatement Goodwill
fees and
of FGBR
of lease
and
commissions
financing value of
Coface
network
(1)
(2)
(3)
(4)
(5)
Noncurrent
assets
(6)
Equali- Deferred
zation
tax
reserve
on
capitalization
reserve
(7)
Increase
in
percentage
holding
in NBP
(8)
Firsttime
consolidation
Other
(9)
Cash and balances with central banks
and post offices
Financial assets at fair value through
profit or loss
(137)
Hedging instruments
0
0
1
(136)
0
0
(683)
5
(849)
0
0
510
(1)
149
0
4
(3)
141
(4)
(337)
(3)
(409)
8
(6)
2
394
(4)
739
40
16
50
(2)
(342)
0
366
(64)
1
(289)
0
0
(1)
(2)
(8)
0
(8)
(186)
0
(186)
5
0
116
19
(2)
(72)
(170)
Total
2004
IFRS
impacts
(360)
112
23
5
Other assets
(66)
Investment property
349
(2)
Intangible assets
(4)
(341)
Goodwill
2
366
Total assets
112
(43)
(8)
25
(6)
(307)
Liabilities
Hedging derivatives
0
Deposits from banks
(1)
Customer deposits
Debt securities
0
10
68
33
Other liabilities
5
(103)
10
Liabilities associated with non-current
assets held for sale
Provisions
(190)
320
(2,186)
91
(3)
Subordinated debt
Minority interests
Equity attributable to equity
holders of the parent
Retained earnings
Unrealized or deferred capital
gains or losses
Total liabilities
3
(96)
(7)
(1,876)
0
0
(366)
2
76
(288)
(67)
(2)
(113)
2,122
(4)
1,924
66
136
(8)
129
(12)
121
(33)
51
12
(46)
2,186
(2)
2,074
(7)
140
(15)
88
(30)
40
13
8
3
115
(2)
(11)
2
33
(3)
11
(1)
66
(19)
112
(43)
(8)
25
(6)
(305)
(66)
1
(213)
(43)
(221)
(10)
(289)
Comments :
(1 - 9) See comment on each restatement in note I.1.1 - Impact on equity and Tier 1 capital at December 31, 2004 (2004 IFRS).
(10) In application of IAS 21, the translation reserve arising on the conversion of foreign entities’ financial statements existing at January 1, 2004 has been transferred to retained earnings. As this is a
reclassification between items of equity, it had no impact on opening equity.
123
I.2.3 - Main restatements at January 1, 2005 (EU IFRS)
Assets
Impact of fair value
Amortized FV through
AFS
CF
cost
P&L
assets
hedges
exc.
exc.
exc.
Insurance Insurance
Insurance
investments investments investments
(1)
Impact of provisions
FV Insurance
hedges
company
exc. investments
Insurance
investments
(2)
Hedging instruments
331
0
(44)
4
Other impacts
Preferred
shares
Treasury
shares
Other
(2)
1,168
179
577
(3)
(260)
1
191
0
451
(398)
Total
EU IFRS
impacts
(4)
5
7
Collec- Home
tive
loan
provi- saving
sions scheme
provisions
(3)
and post offices
Discounting
5
0
(19)
(2)
112
18
1,505
15
341
0
742
(120)
(1)
(60)
0
(184)
34
(110)
(741)
(44)
(1,119)
38
79
0
84
82
0
0
84
(10)
291
21
(90)
1
1
2
16
103
Other assets
(42)
(192)
123
0
Investment property
24
40
0
0
Intangible assets
2
2
0
0
27
1,619
0
84
399
24
546
80
0
78
12
0
12
51
(12)
Goodwill
0
Total assets
(211)
94
577
179
555
999
(75)
(722)
103
112
(19)
Liabilities
79
Hedging derivatives
5
(29)
Deposits from banks
152
(3)
Customer deposits
Debt securities
(25)
(9)
6
17
145
6
6
52
3
29
(125)
(133)
97
2
249
2
(34)
5
(285)
599
(3)
710
(595)
63
(531)
(58)
7
(31)
(14)
7
(543)
(35)
1
522
1
28
1,619
(2)
Other liabilities
9
117
Liabilities associated with
non-current assets held for sale
793
Provisions
(7)
Subordinated debt
(20)
793
0
(583)
299
132
2
Minority interests
0
Equity attributable to equity
holders of the parent
Retained earnings
Unrealized or deferred
capital gains or losses
(161)
32
432
100
5
74
(75)
(139)
(196)
(9)
(161)
14
89
(15)
5
(6)
(75)
(139)
(196)
(9)
18
343
114
Total liabilities
(211)
94
577
179
81
0
555
999
Comments: (1 - 4) See comment on each restatement in note I.1.2 - “Impacts on equity and Tier 1 capital at January 1, 2005 (EU IFRS).
2005 ANNUAL REPORT
(19)
0
(19)
(75)
(721)
103
112
(19)
05
I.3 - Transition of income statement at December 31, 2004
(2004 IFRS)
Income statement
2004 IFRS
12/31/2004
French GAAP
Reclassifications
Restatements
Preferred
shares
12/31/2004
2004 IFRS
Note I.3.1
Note I.3.2
(1)
(1)
11
Interest income
9,620
809
Interest expense
(6,100)
(37)
8
(48)
(6,176)
65
(65)
////////
////////
////////
Income from variable income securities
Net fee and commission income
Net gains/(losses) on trading
account securities
Gains or losses on financial instruments
at fair value through profit or loss
Net gains on securities held for sale
Gains or losses on available
for-sale financial assets
2,321
414
10,440
2
2,323
(414)
////////
////////
////////
////////
430
(21)
409
240
(240)
199
(13)
187
////////
////////
Other banking revenue and expenses
74
(74)
Gross margin on insurance operations
810
(810)
196
220
46
Net banking income
7,641
18
34
(4,789)
(30)
14
(4,805)
7
(300)
Depreciation, amortization
and impairment of property, plant &
equipment and intangible assets
(307)
////////
////////
463
(48)
2,545
(12)
56
(480)
3
0
2,065
7
(9)
56
0
26
(21)
0
5
(33)
(10)
(43)
Provisions for loans losses
Operating income
Exceptional items
Income tax
Charge to fund for general banking risks
Net income
Attributable to minority interests
Attributable to equity holders
of the parent
(48)
7,646
2,541
(477)
(48)
2,064
7
2,066
(30)
46
(48)
2,034
(30)
30
////////
////////
////////
(700)
(35)
(736)
(115)
////////
115
////////
////////
1,221
0
125
(48)
1,298
11
48
(103)
(162)
1,059
0
136
1,195
Comments: (1) For comparability, minority interests in preferred shares were reclassified in net banking income as of December 31, 2004.
125
I.3.1 - Breakdown of reclassifications at December 31, 2004 (2004 IFRS)
Income statement
Reclassifications
Total
Exceptional
items
Gains or losses
on other assets
Other
(1)
(2)
(3)
Interest income
809
809
Interest expense
(37)
(37)
(65)
(65)
////////
////////
account securities
0
////////
////////
(414)
(414)
430
430
////////
(240)
(240)
18
181
199
Gains or losses on financial instruments
////////
Gains or losses on available-for-sale financial assets
Other banking revenue and expenses
////////
////////
(74)
(74)
////////
////////
(810)
(810)
220
220
0
18
Net banking income
0
18
(30)
(30)
Depreciation, amortization and impairment
of property, plant & equipment and intangible assets
0
(30)
18
0
3
Operating income
(30)
21
3
0
(9)
0
(21)
(21)
0
(30)
0
0
(30)
30
////////
////////
30
////////
////////
////////
0
0
0
0
0
Exceptional items
Income tax
Charge to fund for general banking risks
(12)
0
Net income
of the parent
0
0
0
0
0
Comments:
(1) Reclassification of exceptional items
Exceptional items have been reclassified as general operating expenses. They mainly comprise expenses relating to mergers between Banque Populaire regional banks (B17m), expenses
relating to the Coface Group’s stock option plan (B8m) and other expenses corresponding to prior year results of subsidiaries that were consolidated for the first time in 2004 (B2m).
(2) Reclassification of gains or losses on other assets
Gain or losses on disposal of financial assets and net provision charges against securities held for investment classified under French GAAP as “gains or losses on other assets” are
reclassified respectively under IFRS in “net banking income” and “Impairment charges and other credit provisions”. Net gains or losses on disposal of property, plant & equipment and
intangible assets used in the business, and on disposal of investments in companies that were still consolidated at the time of disposal, are still classified in “gains or losses on other
assets”
.
(3) Other reclassifications
Other reclassifications comprise reclassifications within “net banking income”, principally:
- allocation of gross margin on insurance operations;
- reclassification of interest on fixed-income trading securities in “interest income”
.
2005 ANNUAL REPORT
05
I.3.2 - Income statement at December 31, 2004 - Breakdown of restatements for 2004 IFRS
Income statement
Restatements*
Total
Changes in scope and methods
of consolidation
Employee
benefits
(1)
Deferral Elimination Restatement Goodwill
of fees and
of FGBR
of lease
and
commissions
financing value of
Coface
network
(2)
(3)
Interest income
(4)
(5)
(7)
Increase
in
percentage
holding
in
NBP
(8)
///////
///////
///////
///////
///////
///////
///////
///////
///////
4
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
///////
Gross margin on insurance
operations
///////
///////
///////
///////
///////
Net banking income
4
12
///////
///////
///////
(2)
(3)
52
0
(3)
(6)
52
0
Depreciation, amortization and
impairment of property, plant &
equipment and intangible assets
///////
(15)
Other banking revenue
and expenses
12
4
12
(3)
4
Charge to fund for general
banking risks
Net income
/////// ///////
///////
0
2
/////// ///////
///////
0
0
(21)
/////// ///////
///////
2
(13)
///////
/////// ///////
///////
///////
/////// ///////
///////
0
46
2
0
34
(1)
(1)
14
8
(1)
(1)
1
7
0
1
56
0
0
0
0
1
56
0
0
0
1
(10)
52
(15)
0
1
5
(3)
5
(15)
52
(15)
0
0
0
(11)
Income tax
8
0
Exceptional items
11
1
4
(1)
0
Impairment charges and other
credit provisions
Operating income
13
(21)
Gains or losses on available
for-sale financial assets
Other
11
(2)
Gains or losses on financial
instruments at fair value
Net gains on securities
held for sale
Firsttime
consolidation
(9)
(3)
account securities
(6)
Equali- Deferred
zation tax on
reserve capitalization
reserve
0
Interest expense
Income from variable income
securities
Noncurrent
assets
12
4
0
(3)
(11)
5
52
2
46
///////
///////
///////
///////
///////
///////
///////
///////
///////
/////// ///////
///////
(4)
(1)
(3)
(19)
(3)
(4)
(1)
(35)
///////
///////
115
///////
///////
///////
///////
///////
///////
/////// ///////
115
8
3
115
(2)
(11)
2
33
(3)
(19)
1
3
115
(2)
(11)
0
0
30
0
of the parent
8
(15)
2
33
(3)
11
0
1
126
(19)
11
(19)
136
Comments:
* See comment on each restatement (1 to 9) in note I.1.1 - “ Impact on equity and Tier 1 capital at December 31, 2004 (2004 IFRS)”.
127
Note II - Basis of presentation
As an unlisted company, the Banque Populaire Group is not obliged to adopt international financial reporting standards (IFRS).
However, with a view to transparency and comparability with
other major banking groups in the market, the Board of
Directors of Banque Fédérale des Banques Populaires has
decided to prepare its consolidated financial statements in accordance with IFRS as of January 1, 2005.The consolidated financial
statements include a balance sheet, income statement, statements of changes in equity, cash flow statement and notes to the
financial statements.
The consolidated financial statements for the year ended
December 31, 2005 are the first to be prepared using the international financial repor ting standards as endorsed by the
European Union and applicable as of that date.These standards
include IAS 1 to 41, IFRS 1 to 6 and their interpretations endorsed by the European Union as at December 31, 2005.
The Group has elected to adopt the June 2005 fair value amendment to IAS 39 “Financial Instruments: Recognition and
Measurement” prospectively.This amendment permits the recognition of financial assets and liabilities at fair value through
profit or loss provided that they meet one of the following three
criteria:
hybrid instruments containing one or more embedded derivatives;
n
instruments that belong to a group of assets or liabilities that is
managed and its performance evaluated on a fair value basis;
n
instruments that eliminate or significantly reduce an accounting
mismatch.
n
As permitted by IFRS 1, the Group elected not to adopt IAS 32,
IAS 39 and IFRS 4 for its opening balance sheet at January 1,
2004.These standards have been adopted for the first time as of
January 1, 2005. The 2004 comparative data affected by these
standards are therefore based on the French GAAP previously
used by the Group in accordance with standards CRC 99-07 and
2000-04 of the “Comité de la Réglementation Comptable”.The
principles of first-time adoption of IAS 32-39 and IFRS 4 are
described in note I of this report.
The consolidated financial statements provide comparative data as
of December 31, 2004 for the income statement, based on IFRS
excluding IAS 32-39 and IFRS 4, and comparative data as of
January 1, 2005 for the balance sheet and cash flow statement.
Meanwhile, the Group has elected not to adopt the following
amendments prospectively, which were endorsed by the
European Union as of December 31, 2005:
n the amendment to IAS 39 “Financial Instruments: Recognition
and Measurement” concerning cash flow hedges of future intragroup transactions in foreign currencies;
The Group has elected not to adopt the following standards
prospectively, which were published by the IASB and endorsed
by the European Union on January 11, 2006:
n
the amendment to IAS 1 concerning equity disclosures;
n
IFRS 7 “Financial Instruments: disclosures”.
These two standards only concern information to be provided
in the notes and therefore have no impact on the Group’s financial statements.They will be adopted as of January 1, 2007.
Consolidation methods and principles are set out in note III.
For greater clarity, the significant accounting policies used to
prepare the consolidated financial statements at December 31,
2005 are presented in the notes to the financial statements, and
principally the notes to the balance sheet (note V), income
statement (note VI) and the note on payroll costs, employees,
employee compensation and benefits (note VIII).
Note III - Consolidation
methods and principles
III.1 - Structure of the Banque
Populaire Group
The Banque Populaire Group is a group of cooperative banks
with an ownership structure in the form of an inverted pyramid.
The capital of the Group’s central body, Banque Fédérale des
Banques Populaires, is owned by the Banque Populaire regional
banks, which are wholly-owned by their member-stakeholders.
Banque Fédérale des Banques Populaires is also the holding
company for Natexis Banques Populaires, which is the Group’s
listed entity.
Due to its unusual ownership structure, the consolidated financial statements of the Banque Populaire Group are based on the
definition of a reporting entity made up of a group of members
bound by a single mechanism for financial relations and corporate governance.
The reporting entity has been determined in accordance with
IAS 27, which allows the Group to prepare its consolidated financial statements using IFRS.
III.1.1 - The role of Banque Fédérale
Since its reincorporation as a société anonyme pursuant to
ar ticle 27 of law no. 2001-4200 of May 16, 2001, Banque
Fédérale des Banques Populaires has fully and actively exercised
the two key roles assigned to it:
n
n Role of central body of the Banque Populaire Group
The application of these two amendments is not expected to
have a material impact.
In accordance with the 1947 Act on cooperative groups, set out
in article 8 of the May 16, 2001 law, the role of central body
forms the core of the Banque Populaire group’s organization.
the amendment to IAS 19 “Employee Benefits” concerning
actuarial gains and losses, group plans and disclosures.
2005 ANNUAL REPORT
Banque Fédérale des Banques Populaires is responsible for:
organizing the liquidity and capital adequacy of the network as
a whole;
n
defining the policy and future strategy of the Banque Populaire
Group;
n
n negotiating national and international agreements on behalf of
the network;
n more generally, exercising administrative, technical and financial
control over the organization and management of the Banque
Populaire banks and their direct or indirect subsidiaries in order
to maintain a cohesive network and ensure its proper functioning and development.
In 2003, the role of central body was extended to Crédit
Maritime Mutuel, pursuant to article 93 of the Financial Security
Act (law no. 2003-706) of August 1, 2003.
n The role of banking holding company and bank
Banque Fédérale des Banques Populaires is the holding company of the Natexis Banques Populaires Group and other
directly-owned subsidiaries. As a fully-fledged bank, Banque
Fédérale des Banques Populaires centralizes the Banque
Populaire banks’ cash surpluses and ensures their refinancing.
This function is substantially delegated to Natexis Banques
Populaires under a cash pooling agreement.
III.1.2 - Liquidity and capital adequacy –
internal guarantee mechanisms
The system to guarantee the liquidity and capital adequacy of the
Banque Populaire network has been organized by Banque
Fédérale des Banques Populaires in its capacity as central body,
in accordance with articles L. 511-30, L. 511-31, L. 511-32 and
L. 512-12 of the French Monetary and Financial Code.
The system functions by pooling the capital of all the banks in the
network.
If any one bank is faced with a lack of liquidity or is undercapitalized, all the other banks will be called on to contribute capital,
within the limit of their own resources. As a last resort, the
Banque Fédérale des Banques Populaires will also provide capital from its own resources.
05
Populaire banks respectively as a specific component of the Fund
for General Banking Risks. Under IAS 30 and IAS 37, these funds
do not meet the criteria for recognition as a liability and accordingly they have been reclassified as equity in the consolidated
financial statements as of January 1, 2004. Similarly, transfers in
and out of the funds in 2004 and 2005 have been eliminated in
the income statement.
A collective agreement has also been signed, whereby each
Banque Populaire bank guarantees the liquidity and capital
adequacy of the mutual guarantee companies whose corporate
purpose is limited to guaranteeing the activities of the Banque
Populaire banks.
The guarantee system of the Banque Populaire network also
guarantees the liquidity and capital adequacy of Crédit Maritime
Mutuel, for which the Banque Fédérale des Banques Populaires
is the central body, in accordance with Article L. 512-69 of the
French Monetary and Financial Code. This guarantee system
kicks in after Crédit Maritime Mutuel’s own system.
Lastly, the members of the network contribute, along with all
French credit institutions, to the Fonds de Garantie des Dépôts
(deposit guarantee fund) set up in application of the Depositors’
Protection Act.
III.1.3 - Definition of the reporting entity
Due to the Group’s unusual ownership structure, the reporting
entity is made up of all the institutions directly or indirectly
affiliated with the central body, as follows:
n the Banque Populaire banks, i.e. the 19 Banque Populaire
regional banks, Casden Banque Populaire and Crédit Coopératif;
n the Crédit Maritime Mutuel banks that are affiliated to
Banque Fédérale des Banques Populaires pursuant to the
Financial Security Act (law no. 2003-706 of August 1, 2003 and
consolidated as of the second half of 2005;
the mutual guarantee companies (SCM) which are licensed
jointly with the Banque Populaire banks;
n
n the Group’s central body – within the meaning of the law –
The capital pool is organized in two tiers.The first tier consists of
the “Federal Solidarity Fund” set aside by Banque Fédérale des
Banques Populaires and the second tier is the “Regional
Solidarity Fund” set aside by each Banque Populaire bank. Each
year, the Banque Populaire banks transfer an amount to this fund
equal to 10% of their net income before transfers to the fund for
general banking risks and tax, after deduction of tax on the
amount of the transfer. Withdrawals from these funds by the
Banque Populaire banks must be authorized by Banque Fédérale
In the separate financial statements of each entity, the Federal
Solidarity Fund and Regional Solidarity Funds are recognized by
Banque Fédérale des Banques Populaires and the Banque
129
Memberstakeholders
Memberstakeholders
Memberstakeholders
Mutual guarantee
Companies
Crédit
Maritime Mutuel
Banque Populaire banks
Local subsidiaries
99%
Banque Fédérale des
Banques Populaires
Reporting entity
Associated
institutions *
81% **
Natexis
Banques Populaires
(*) Credit institutions “associated” with Crédit Coopératif via an association agreement.
(**) Percentages include the holdings of Banque Fédérale’s subsidiaries in Natexis Banques Populaires and exclude treasury shares.
Since the first half of 2004, the Banque Populaire Group includes
the credit institutions that have signed an association agreement
with Crédit Coopératif.Their Group’s share in their net income
and equity is recorded under minority interests.
The other Group companies, including Natexis Banques
Populaires, are treated as subsidiaries of the reporting entity.
III.2 - Scope of consolidation and
consolidation methods
The scope of consolidation includes all significant entities over
which the reporting entity exercises control or influences its
management. Three types of control are identified under IFRS:
companies that are exclusively controlled, companies that are
jointly controlled and companies over which the entity exercises
significant influence.The type of control exercised by the reporting entity is not based solely on the percentage of voting rights
it holds, but includes an economic and legal analysis of relations
between the reporting entity and its subsidiaries.
Under IAS 27, exclusive control is presumed to exist when the
parent has:
n ownership, directly or indirectly through subsidiaries, of more
than half of the voting power of an entity;
power to govern the financial and operating policies of the
entity under a statute or an agreement;
n
n power to appoint or remove the majority of the members of
the Board of Directors or equivalent governing body and control
of the entity is by that board or body;
For entities that are 40-50% owned, IAS 27 requires control to
be demonstrated for the entity to be fully consolidated.
Joint control is the contractually agreed sharing of control over
an economic activity between a limited number of shareholders
or investors, and exists only when the strategic financial and
operating decisions relating to the activity require the unanimous
consent of the parties sharing control. Jointly controlled companies are proportionately consolidated.
2005 ANNUAL REPORT
Significant influence is the power to participate in the financial
and operating policy decisions of an economic activity but is not
control or joint control over those policies. Significant influence
is presumed to exist when the repor ting entity directly or
indirectly owns at least 20% of the voting rights.
In order to present a true and fair picture of the group’s consolidated operations, only those subsidiaries providing a material contribution are consolidated. Materiality is not determined with respect
to numerical thresholds, but based on the principle of ascending
materiality. In other words, any entity included at a sub-consolidation level is included at all higher consolidation levels, even if it is not
material at those levels. Conversely, any entity considered to be
material within a given scope of consolidation is also considered to
be material at all lower consolidation levels and must therefore be
consolidated by them where exclusive control is exercised.
Consolidation methods
The Group’s consolidated financial statements include the financial statements of the parent company, controlled entities and
entities over which the Group has significant influence. Entities
over which the Group has exclusive control are fully consolidated, those over which it has joint control are proportionately
consolidated and those over which it has significant influence are
accounted for by the equity method.
Potential voting rights
IAS 27 requires the reporting entity to consider the existence
and effect of instruments such as call options and potential voting
rights when assessing whether it exercises control or significant
influence. However, potential voting rights are not taken into
account for the purpose of calculating the percentage holding.
A review of potential voting rights held by Natexis Banques
Populaires did not lead to any changes in the scope of consolidation in 2004 and 2005.
Private equity
IAS 27 requires the consolidation of all subsidiaries regardless of
the activity of the parent company. It therefore applies to private
equity companies in the same way as other companies.
Accordingly, a private equity company is required to consolidate
all investments in which it holds more than 50%, provided they
are material.
and charged first against the goodwill allocated to the CGU or group
of CGUs and then against other identifiable assets belonging to the
CGU or group of CGUs.
However, IAS 28 and 31 recognize the specific nature of the private equity business. Private equity investments between 20%
and 50% do not have to be accounted for using the equity
method if they are designated at inception as at fair value
through profit or loss in accordance with IAS 39.These standards
accept that for this type of investment:
Negative goodwill is recognized immediately in the income statement under “Changes in value of goodwill”.
n fair value provides a better level of information than full
consolidation or equity accounting;
n measurement at fair value is a well-established practice among
private equity companies;
n percentage holdings may vary and the application of IAS 28
would therefore lead to frequent deconsolidations and reconsolidations which would affect the quality of the information provided.
Private equity subsidiaries in which the Group holds between
20% and 50% or, in line with the fair value option amendment, in
which its holding is less than 20%, are designated as financial
assets at fair value through profit or loss. Fair value, which includes an illiquidity discount where appropriate, is reviewed on
each reporting date and changes are recognized through profit
or loss.
A review of investments held by the Group’s private equity
companies did not lead to the consolidation of any majority
investments, as none is material.
Business combinations
As required by IFRS 3, all business combinations are accounted
for using the purchase method.The cost of a business combination is the aggregate of the fair values, on the acquisition date, of
assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, plus any costs directly attributable
to the business combination.
Business combinations that took place after January 1, 2004, have
been restated in accordance with IFRS 3.Those prior to January 1,
2004, have not been restated retrospectively, as permitted by IFRS 1.
On the acquisition date, the Group measures the fair value of all
identifiable assets and liabilities (including any contingent liabilities), regardless of their purpose. The excess of the cost of the
business combination over the acquirer’s interest in the acquiree’s identifiable assets, liabilities and contingent liabilities is recognized as goodwill (see note V.10), which is allocated on the
acquisition date to one or more cash-generating units (CGUs)
expected to benefit from the acquisition.
Goodwill is not amortized but tested for impairment at least
once a year and whenever there is objective evidence that the
goodwill might be impaired. Impairment testing consists of comparing the carrying amount of the CGU or group of CGUs
(including goodwill) with its recoverable amount.
05
Exclusion from the scope of consolidation
The only exclusion from the scope of consolidation are those
entities acquired with the intention of reselling them within
twelve months of their acquisition, where an active plan to seek
a purchaser has been established. None of the Group’s entities
meet this condition.
III.3 - Securitization and special
purpose entities
These transactions are governed by SIC 12, an interpretation
that has been endorsed by the European Union. Under SIC 12,
the reporting entity may be presumed to have control over a
special purpose entity even where there is no equity relationship.The main criteria for appreciating the existence of control as
defined by SIC 12 are as follows:
Activities: in substance, the activities of the SPE are being
conducted on behalf of the Group, which directly or indirectly
created the SPE according to its specific business needs.
n
Decision-making: in substance, the Group has the decisionmaking powers to obtain the majority of the benefits of the activities of the SPE or, by setting up an “autopilot” mechanism, the
Group has delegated these decision making powers.
n
Benefits: in substance, the Group has rights to obtain a majority of the benefits of the SPE’s activities distributed in the form
of future net cash flows, earnings, net assets or other economic
benefits, or rights to majority residual interests.
n
n Risks: in substance, the Group retains the majority of the residual or ownership risks related to the SPE or its assets in order
to obtain benefits from its activities.
The Group has reviewed all its special purposes entities in light
of these four criteria.
III.3.1 - Securitization transactions
Own-account transactions
Natexis Banques Populaires carries out synthetic securitization transactions on its own account in order to transfer a significant portion of the counterparty risk relating to certain loan
portfolios (collateralized loan obligations) or bonds (collateralized bond obligations), using credit derivatives (credit default
swaps) or market derivatives (credit linked notes).
n
When the recoverable amount is lower than the carrying amount,an
irreversible impairment loss is recognized in the income statement
131
Natexis Banques Populaires has carried out five synthetic asset securitizations for its own account since 2000 (PARIS 1, PARIS 2, NATIX,
IGLOO 1, IGLOO 2), two of which still existed at December 31, 2005. As part of the Group’s active portfolio management policy and
in agreement with the supervisory authorities, PARIS I AND II were wound up prematurely in 2004 and IGLOO 1 in the first half of 2005.
NATIX is not consolidated principally because the Group does not retain the majority of the ownership risks. However, IGLOO 2 has
been consolidated as of 2003 as the Banque Populaire banks are exposed to the majority of the ownership risks, having subscribed to
units in the SPE.
As of December 31, 2005, the attributes of NATIX were as follows:
December 31, 2005 – in millions of euros
SPE
NATIX
Currency
Inception
Maturity
Gross amount
securitized
Weighted risks
securitized
Weighted risks
retained
First loss
USD (first loss
in euros)
2000
2008
145
145
29
3
As of December 31, 2004, the attributes of IGLOO 1 and NATIX were as follows:
December 31, 2004 – in millions of euros
SPE
Currency
Inception
Maturity
Gross amount
securitized
Weighted risks
securitized
Weighted risks
retained
First loss
EUR
2000
2005
997
778
368
33
USD (first loss
in euros)
2000
2008
190
190
34
3
1,187
968
402
36
IGLOO 1
NATIX
In March 2001, BRED Banque Populaire securitized a portfolio
of home loans through the CRYSTALYS special purpose entity,
partly guaranteed by CASDEN Banque Populaire. In line with SIC
12, CRYSTALYS is fully consolidated in the IFRS financial statements as of January 1, 2004, as CASDEN Banque Populaire and
BRED Banque Populaire retain the majority of the risks and
rewards of ownership of both compartments. Its consolidation
had no impact on equity or Tier 1 capital as the Banque Populaire
Group has retained all the units issued by the SPE.
n
In December 2004, CASDEN Banque Populaire and BRED
Banque Populaire carried out a securitization through the Amaren
2 special purpose entity. At inception, the SPE’s assets comprised
B1,026 million of real estate loans granted by CASDEN Banque
Populaire and B769 million of real estate loans granted by Bred
which were partly guaranteed by CASDEN Banque Populaire and
BRED Banque Populaire’s mutual guarantee companies. CASDEN
Banque Populaire and BRED Banque Populaire have retained the
majority of the notes issued by the SPE and Amaren 2 is therefore
consolidated by the Banque Populaire Group.
n
Transactions on behalf of clients
In 2002, Natexis Banques Populaires created a multiseller
conduit called ELIXIR FUNDING to refinance its client securitization transactions on the commercial paper market.
Natexis Banques Populaires acts as arranger, depository, underwriter, cash provider, letter of credit guarantor and paying agent
for ELIXIR FUNDING.
2005 ANNUAL REPORT
ELIXIR FUNDING is not consolidated as it does not meet the
control conditions required by SIC 12.
At December 31, 2005 and December 31, 2004, the attributes
of ELIXIR FUNDING were:
12/31/2005
12/31/2004
1,070.7
614.6
Amount drawn
918.0
538.2
Natexis Banques Populaires liquidity line
530.0
248.4
10.0
5.0
Amount authorized
Natexis Banques Populaires letter of credit
III.3.2 - Tax structures
The Group provides asset financing (aircraft, ships, hotels, technocenters, etc.) to certain clients via look-through entities (GIEs,
SCIs, SAs organized as a tax group), either alone or in partnership with other banks.
In these structures, the Group acts both as lender and seller of
tax positions. It has the power to make decisions concerning the
activities of these look-through entities, in substance in a fiduciary
capacity on behalf of its clients. However, it does not exercise
control within the meaning of SIC 12 and the look-through
entities are therefore not consolidated.
III.3.3 - Real estate structures
SCI non-trading real estate companies are set up to hold finance
leases granted by the Group’s leasing subsidiaries to finance real
estate acquisitions (car parks, offices, headquarters buildings,
etc.).
Natexis Banques Populaires acts in a fiduciary capacity at the
request of its clients and does not exercise control over the real
estate structures within the meaning of SIC 12.
III.4 - Presentation of the financial
statements and year end
III.4.1 - Consolidated financial statements
The consolidated financial statements are presented in the format
set out in CNC recommendation no. 2004-R03 of October 27,
2004.
All figures are expressed in millions of euros unless other stated.
III.3.4 - Financial structures
III.4.2 - Year end
The purpose of these structures is to transfer ownership of participations in syndicated loans to a group of investors with different seniority rankings. In 2004, Natexis Banques Populaires
carried out a transaction of this type called VALLAURIS CLO
PLC. Its assets comprise a portfolio of bank loans managed by
Natexis Banques Populaires and refinanced through senior, mezzanine and subordinated notes issued by the entity and purchased by external investors.
The consolidated financial statements are based on the separate
financial statements of Group companies as of December 31, 2005.
As none of the four control conditions set out in SIC 12 is fulfilled, the SPE is not consolidated.
Total notes issued
Notes retained by NBP
Total invested in the portfolio
Fees paid to the portfolio manager
12/31/2005
12/31/2004
308.0
308.0
12.5
19.5
284.7
230.0
0.5% / year
0.5% / year
III.3.5 - “Alizé” employee stock
ownership plan
On May 31, 2001, Natexis Banques Populaires made an
employee share offering open to employees of the Banque
Populaire Group. The offering was carried out through the
Group’s employee stock ownership plan governed by the Act of
February 19, 2001. A corporate mutual fund – FCPE Alizé Levier
– was set up to hold the shares acquired by the employees
participating in the offering.
Banque Fédérale des Banques Populaires entered into an agreement with the fund’s custodian, guaranteeing the net asset value
of any units in the fund surrendered by employees.
Based on the characteristics of the operation, the Group has
consolidated the FCPE Alizé Levier mutual fund. It was also
consolidated under French GAAP.
III.3.6 - Other structures
None of the guaranteed funds or regional investment funds
managed by the Banque Populaire Group are consolidated as
the Group does not exercise control and does not have the
majority of the risks and benefits inherent in ownership.
Dedicated funds controlled by the Group are fully consolidated.
They mostly concern the Group’s insurance companies.
05
III.5 - Institutional activities
conducted by Natexis Banques
Populaires
Under article 84 of the 2001 amended Finance Act (law no. 20011276 of December 28, 2001), the mandate entrusted to Natexis
Banques Populaires and companies under its control to manage
certain public procedures on behalf of the State has been extended until December 31, 2005. This mandate was extended
beyond December 31, 2005, by the 2005 amended Finance Act
(law no. 2005-1720 of December 30, 2005).These transactions
are recognized separately in the financial statements and some
of them may be guaranteed by the State. The State and other
related creditors have a specific right over the assets and liabilities
allocated to these institutional activities.
Insurance transactions managed by Coface on behalf of the State
are not recognized in the financial statements. However, management fees received are recognized in the income statement
under the heading “Net fee and commission income”.
The amount of fees received and financing outstanding in
connection with institutional activities is not material.
Accordingly, the financing outstanding has not been restated at
amortized cost. Activities other than financing, where Natexis
Banques Populaires acts as intermediary on behalf of the State,
have been accounted for in the IFRS financial statements in the
same way as before.
III.6 - Foreign currency translation
The consolidated financial statements are expressed in euros.
The balance sheets of foreign subsidiaries and branches whose
functional currency is not the euro are translated into euros at yearend exchange rates. Revenue and expense items in the income statements are translated at the average rate for the period.
Exchange differences arise from:
the impact on net income for the year of any difference between the current year’s average rate and closing rate;
n
n the impact on equity (excluding net income for the year) of
any difference between the historic rate and the year-end rate.
133
They are recognized in equity under the line item “unrealized or
deferred gains or losses – exchange differences” and in minority
interests for the non-Group share.
In line with IFRS 1, the translation reserve existing at December 31,
2003 has been transferred to retained earnings. Exchange differences arising on the translation of foreign entities’ financial statements have been calculated prospectively as of January 1,
2004. As this is simply a reclassification in equity between translation reserves and retained earnings, it had no effect on equity
or regulatory capital. If a foreign entity is subsequently sold, the
gain or loss on sale will only include those exchange gains or losses arising after January 1, 2004.
III.7 - Non-current assets held
for sale
The assets and liabilities of subsidiaries which the Group intends
to sell within a period of twelve months and for which it has
initiated an active plan to locate a buyer are identified separately
in the balance sheets as non-current assets held for sale and liabilities associated with non-current assets held for sale.
III.8 - Elimination of intragroup
transactions
Assets, liabilities, commitments, and expense and revenue items
between fully consolidated companies are eliminated where
they are material. For proportionately consolidated companies,
these items are eliminated to the extent of the Group’s percentage holding.
Intragroup dividends, impairment provisions for consolidated
investments and capital gains on intragroup disposal are eliminated in full.
III.9 - Insurance business
n General principles
The following rules apply to fully consolidated insurance companies:
n items of income and expense are classified by nature in accordance with banking accounting policy and not by destination;
n balance sheet items are included under the corresponding
line items of the financial statements presented in the banking
format.
Insurance company investments are classified in the balance
sheet under the various categories of financial asset defined in
IAS 39. Accordingly, they are measured at fair value through profit or loss except for those classified as held-to-maturity financial
assets or as loans and receivables.
Contracts managed by the Group’s insurance subsidiaries meet
the definition of insurance contracts or investment contracts
with a discretionary participation feature provided in IFRS 4.
Accordingly, they give rise to the recognition of technical reserves, which are measured in accordance with French GAAP
2005 ANNUAL REPORT
pending publication of an IFRS on technical liabilities of insurance companies.
n Discretionary participation features
Investment contracts with a discretionary participation feature
(life insurance) give rise to the recognition of a deferred participation liability to offset the difference in value between assets
and liabilities, in accordance with IFRS 4 (shadow accounting).
The deferred participation liability is equal to the share of gains
or losses on investments due to policyholders in respect of
their insurance contracts.The amount is calculated on the basis
of the average rate of distribution to policyholders (average
contractual distribution rate for each product weighted by the
value of investments on the calculation date).The change in the
deferred participation liability is recognized directly in equity
for changes in value of available-for-sale assets and in profit or
loss for changes in assets at fair value through profit or loss.
n Equalization reserve
Insurance subsidiaries regularly take equalization reserves in their
separate financial statements to protect against the risk of catastrophe. IAS 30 and 32 do not permit the recognition of reserves
covering risk of a general nature. Accordingly, the equalization
reserve has been reclassified in equity as of January 1, 2004.
Charges to the equalization reserve made under French GAAP
have therefore been eliminated in the IFRS financial statements.
n Life and non-life insurance contracts
Products sold by the Group’s insurance subsidiaries are principally life insurance contracts, and more particularly investment
contracts, and life and non-life personal risk contracts.
Under IFRS, over 99% of investment products have been classified as insurance contracts and investment contracts with a
discretionary participation feature (governed by IFRS 4) and the
remainder as investment contracts with no discretionary participation feature (governed by IAS 39).
Personal risk products are entirely classified as insurance
contracts (governed by IFRS 4).
In accordance with this classification and with IFRS 4, assets, liabilities, income and expenses connected with insurance contracts
are recognized and measured using French GAAP (insurance
code regulations).
Note IV - Scope of
consolidation
IV.1 - Impact of first-time
adoption of IFRS
An analysis of the control criteria defined by IFRS did not have
any material impact on the scope of consolidation.
n Adoption of 2004 IFRS
The consolidation of securities in Natexis Banques Populaires
held by the Banque Populaire banks and their subsidiaries, and
the deduction of treasury shares from Natexis Banques
Populaires’ share capital, had the effect of increasing the Banque
Populaire Group’s percentage holding in Natexis Banques
Populaires from 75.59% to 82.76%.
Other changes in the scope of consolidation included:
Consolidation of the Crystalys securitization fund, which is
wholly-owned by BRED Banque Populaire, which was not
consolidated under French GAAP (see note III.3)
n
n Consolidation of five non-trading real estate companies (Sociétés
Civiles Immobilières) that hold the property investments of
Natexis Assurances, the first four through its subsidiary Assurance
Banque Populaire Vie and the fifth through the Coface sub-group:
-
SCI Fructifoncier
SCI ABP Iéna
SCI ABP Pompe
SCI Neuilly Château (sold in second half of 2005)
SCI Cofimmo.
However, investments between 20% and 50% held by private equity
subsidiaries have not been accounted for under the equity method
as they have been designated as financial assets at fair value through
profit or loss. IAS 28 and 31 on investments in associates recognize
that for such investments, fair value represents a better level of information than proportionate consolidation or equity accounting.The
adoption of IAS 27 for the private equity business has not led to the
consolidation of any majority investments, as none is material.
n Adoption of EU IFRS
The only change is the consolidation of dedicated funds representing insurance company investments, as required by IAS 39:
n
n
-
Coface:
AKCO Fund,
Coface Europe,
Cofaction 2,
Cofobligations,
MSL 1 Fund.
Natexis Assurances:
ABP Actions,
ABP Croissance Rendement,
ABP Taux,
ABP Monétaire Plus,
ABP Midcap,
ASM Alternatif Garanti 1.
05
Populaire du Sud, as approved by their member-stakeholders on
October 28 and 29, 2005 respectively.
As the merged banks were already part of the reporting entity
and the mergers were accounted for at net book values, they
had no impact on the consolidated financial statements.
IV.2.2 - Tie-up between Crédit Maritime Mutuel
regional banks and Banque Populaire banks
At its meeting of October 19, 2004, the Board of Directors of
Société Centrale du Crédit Maritime agreed to create closer ties
between the Crédit Maritime regional banks and the Banque
Populaire regional banks on an individual basis:
Caisse Régionale du Nord is tied to Banque Populaire du Nord;
Caisse Régionale du littoral de la Manche and Caisse
Régionale du Finistère are tied to Banque Populaire de l’Ouest;
n Caisse Régionale du Morbihan et de Loire Atlantique and
Caisse Régionale de Vendée are tied to Banque Populaire
Atlantique;
n Caisse Régionale du Sud-Ouest is tied to Banque Populaire
du Sud-Ouest;
n Caisse Régionale de Méditerranée is tied to Banque
Populaire du Sud;
n Caisse Régionale de la Guadeloupe, Caisse Régionale de la
Martinique and Caisse Régionale de la Réunion are tied to
BRED Banque Populaire. In the first half of 2005, these overseas
banks merged to create Crédit Maritime Outre Mer.
n
n
As part of the restructuring, the Banque Populaire banks took up
new shares issued by the Crédit Maritime Mutuel banks, which
are affiliated to Banque Fédérale des Banques Populaires
pursuant to the Financial Security Act (law no. 2003-706) of
August 1, 2003. Accordingly, they have been consolidated by the
reporting entity as of the second half of 2005.
IV.2.3 - Partnership between Banque
Populaire Group, MAAF and MMA
In line with the agreements entered into by the three groups,
MAAF and MMA acquired a 34% stake in SBE (Société de
Banque et d’Expansion) on December 26, 2005.
On September 20, 2005, by extraordinary resolution of the shareholders, SBE approved the following transactions:
SBE transferred its industrial premises branch business and
remote banking business to Sogefip, a joint subsidiary of BRED
Banque Populaire and Banque Populaire Val de France;
n
On December 26, 2005, SBE made a new share issue restricted to COVEA MAB (MAAF, Mutuelle du Mans, etc.);
n
IV.2 - Changes in scope of
consolidation in 2005
The main changes in scope of consolidation in 2005 were:
SBE was then renamed MA Banque (Multi Accès Banque) and
Sogefip was renamed SBE.
n
IV.2.1 - Mergers of Banque Populaire banks
All these transactions took place in the final quarter of 2005.The
merger bonus was eliminated in the consolidated financial statements.
Banque Populaire du Midi and Banque Populaire des Pyrénées
Orientales, de l’Aude et de l’Ariège merged to form Banque
MA Banque and SBE are 66% and 100% owned respectively by
the Group and are fully consolidated.
135
IV.2.4 - Capital transactions concerning
The Group’s percentage holding in Natexis Banques Populaires
fell from 82.76% at December 31, 2004 to 80.87% at December
31, 2005.The main changes during the year that contributed to
this decrease were:
Divestment by SGTI, a subsidiary of Casden Banque Populaire,
of 620,701 Natexis Banques Populaires shares in the first quarter of 2005, reducing the Group’s percentage holding in Natexis
Banques Populaires by 1.3%;
- Natexis Services Ltd, a resource sharing company for the Group’s
operations in London, subsidiary of Natexis Banques Populaires;
- Segimlor, a company which carries the owner-occupied buildings of Banque Populaire Lorraine Champagne;
- Volksbank International AG (VBI), an Austrian credit institution, 25%-owned by Banque Fédérale des Banques Populaires
and accounted for using the equity method;
n
n Exercise of stock options covering 480,436 Natexis Banques
Populaires shares during the year, reducing the Group’s percentage holding in Natexis Banques Populaires by 0.8%;
n New share issue for cash restricted to Banque Fédérale des
Banques Populaires made by Natexis Banques Populaires on
December 27, 2005, leading to the issuance of 256,039 shares
and increasing the Group’s percentage holding in Natexis
Banques Populaires by 0.1%.
IV.2.5 - Other companies consolidated for the
first time in 2005
- Three non-trading real estate companies (sociétés civiles
immobilières):
- Société Civile Immobilière de la Banque Populaire du SudOuest, subsidiary of Banque Populaire du Sud-Ouest;
- Créponord and SCI Faidherbe, subsidiaries of Banque
Populaire du Nord.
The impact of these companies on 2005 consolidated net banking income and net income was as follows (in millions of euros):
Company
Banque Calédonnienne d’investissement
0
3
Coface Sub-group
6
1
Creponord
0
0
42
29
Investima 12
0
0
Natexis LLD
3
1
Natexis Services Ltd
1
0
Natexis Private Equity
International Management
1
0
SCI BPSO
0
3
SCI Faidherbe
0
1
Segmilor
2
2
Volksbank International AG
0
3
Banque Calédonienne d’Investissement, 35%-owned by
BRED and accounted for by the equity method;
FNS3
Coface sub-group:
- Coface Chili, 84%-owned by Coface SA;
n
n
- Coface Factoring Italia Spa, a subsidiary created to develop
the factoring business in Italy, 100%-owned by Coface Italia;
- Coface Service (France), created in 2005 to receive asset
transfers from Coface SCRL and Coface ORT, 100%-owned by
Coface SA;
- Coface South African Insurance Company, a South African
subsidiary created in October 2005, 100%-owned by Coface SA;
- Credit Underwriting Agency Limited (CUAL), in which
Coface already owned 22% of the capital and acquired the
remaining 78% in February 2005;
- Coface Leid, a Lithuanian credit insurance company acquired in
March 2005 by Coface, and then merged with OKV Coface, itself
79.2%-owned by AK Coface Holding and 14.8% by Coface SA;
IV.2.6 - Companies deconsolidated in 2005
n
- FNS 3, a private equity subsidiary of Natexis Private Equity
International Singapore (NPEIS) operating in Asia;
- Investima 12 which carries Banque Fédérale des Banques
Populaires’ third owner-occupied building;
- Natexis Private Equity International Management (NPEIM), a
private equity management company, subsidiary of Natexis
Banques Populaires;
- Natexis LLD, a vehicle leasing company, subsidiary of Natexis
Lease;
2005 ANNUAL REPORT
Bancassurance Popolari, sold on September 26, 2005;
Cofacerating.fr and Cofacerating.it., two Coface subsidiaries
wound up during the year;
n
n
- Cofacerating.ch, a Swiss business information and receivables
management company created by Coface in Switzerland, 100%owned by Coface SA.
December 31, 2005
Net banking
Net
income
income
OFIVM, sold during the second half;
n SAMIC, subsidiary of Natexis Banques Populaires, in which
Natexis Banques Populaires acquired 24% from the minority
shareholders and then sold 75% during the second half;
n SCI Cofimmo which carries Coface SCRL’s head office, sold on
September 30, 2005;
n
SCI Neuilly Château sold on September 9, 2005;
n Two subsidiaries were deconsolidated as their contribution no
longer met the materiality threshold:
- Vecteur Gestion, subsidiary of Banque Populaire Val de France,
- Union des Caisses Régionales, subsidiary of Crédit Maritime
Mutuel.
05
At December 31, 2004, the respective contribution of these
companies to consolidated net banking income and consolidated net income was as follows (in millions of euros):
Company
December 31, 2004
Net banking
Net
income
income
Coface Sub-group
0
0
Bancassurance Popolari
1
0
OFIVM
0
0
Samic
6
0
SCI Neuilly Château
2
3
Union des Caisses Régionales
1
0
Vecteur Gestion
0
0
IV.2.7 - Other internal restructurings
Coface sub-group:
- Creation of Coface Service by merging Coface SCRL and
Coface ORT, to become the leader in business information and
trade receivables management;
- Absorption of Cofacerating.com and Unistrat Assurance by
Coface SA through a transfer of all their assets and liabilities;
n
Absorption of Cristal Négociations by Spafica, a subsidiary of
Natexis Banques Populaires;
n
Absorption of SAS SBE by Banque Fédérale des Banques
Populaires;
n
Absorption of SOCIEP by its parent company Banque
Populaire Val de France;
n
n Absorption of Natexis Investissement Asia by FNS, a private
equity subsidiary based in Singapore;
n Transfers of business within the Natexis Banques Populaires:
- Creation of Natexis Investor Servicing by transferring the
fund administration business of Natexis Banques Populaires,
Natexis Epargne Entreprise and Natexis Asset Management;
- Transfer of businesses by Natexis Banques Populaires to two
of its subsidiaries:
- Domestic and international payments business to Natexis
Paiements;
- Aircraft financing business to Natexis Transport Finance.
These transactions involved businesses or subsidiaries that were
already consolidated by the Group and therefore had no impact
on the consolidated financial statements.
137
IV.3 - Companies included in the scope of consolidation
December 31, 2005
Companies
Company/Business line
%
interest
%
voting
rights
Consolidation
method
(b)
December 31, 2003
%
interest
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
-
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Merged
100.00% 100.00%
100.00% 100.00%
Merged
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
Full
Full
N
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Merged
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
Full
Full
Full
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
-
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
Merged
100.00% 100.00%
100.00% 100.00%
Merged
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
N
Full
Full
N
Full
Full
Full
Full
Full
Full
Full
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Merged
100.00% 100.00%
///
///
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Full
Full
Full
N
Full
N
Full
Full
Full
Full
Full
100.00%
100.00%
///
100.00%
100.00%
///
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
///
100.00%
100.00%
///
100.00%
100.00%
100.00%
100.00%
100.00%
Full
Full
N
Full
Full
N
Full
Full
Full
Full
Full
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Liquidated
Liquidated
100.00% 100.00%
100.00% 100.00%
Merged
100.00% 100.00%
100.00% 100.00%
Merged
100.00% 100.00%
///
///
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Merged
Full
Full
Full
Full
Full
Full
N
N
Full
Full
N
Full
Full
N
Full
N
Full
Full
Full
N
100.00% 100.00%
///
///
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Merged
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Full
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
Full
Full
Full
Full
100.00%
///
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
///
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Full
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
(a)
%
Consolidation
voting
method
rights
(b)
December 31, 2004
Country
%
interest
%
Consolidation
voting
method
rights
(b)
I - Consolidating entity
I-1 Banque Populaire banks
Banque Populaire Occitane
Banque Populaire Bourgogne
Franche-Comté
Banque Populaire du Massif Central
Banque Populaire des Alpes
Banque Populaire du Nord
Banque Populaire Centre Atlantique
Banque Populaire de Loire et Lyonnais
Banque Populaire Provençale et Corse
BICS - Banque Populaire
Banque Populaire Atlantique
Banque Populaire de la Côte d’azur
Banque Populaire du Midi
Banque Populaire des Pyrénées
Orientales, de l’Aude et de l’Ariège
Banque Populaire de l’Ouest
Banque Populaire Nord de Paris
Banque Populaire Alsace
Banque Populaire Toulouse-Pyrénées
BRED - Banque Populaire
CASDEN - Banque Populaire
Crédit Coopératif
I-2 Mutual guarantee companies
ACEF QUERCY AGENAIS
ACEF DU TARN ET DE L’AVEYRON
BICS HABITAT
BRED HABITAT
FOREST. LORRAINE
FOREST. MASSIF CENTRAL
FOREST. PYRENEES-ORIENTALES
FOREST. SEINE-ET-MARNE
PROCOMI COTE-D’AZUR
SOCACEF BAS-RHIN
SOCACEF CENTRE-ATLANTIQUE
SOCACEF MASSIF CENTRAL
SOCACEF NORD
SOCACEF TARN ET AVEYRON
SOCAMA ALPES-MARITIMES
SOCAMA ANJOU-VENDEE
SOCAMA ARIEGE
SOCAMA ATLANTIQUE
SOCAMA AUDE
SOCAMA AVEYRON
2005 ANNUAL REPORT
-
Companies
December 31, 2005
Country
%
interest
(a)
%
Consolidation
voting
method
rights
(b)
December 31, 2004
%
interest
%
voting
rights
December 31, 2003
Consolidation
method
(b)
%
interest
%
Consolidation
voting
method
rights
(b)
SOCAMA BAS-RHIN
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA BICS
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA BOUCHES-DU-RHONE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA BOURGOGNE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA BRED-IDF
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA CHAMPAGNE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA CHARENTE-MARITIME
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA CORSE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA DAUPHINE-ALPES DU SUD
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA DEUX-SEVRES
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA DOUBS-HTE-SAONE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA HAUTE-GARONNE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA HAUTE-SAVOIE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA HAUT-RHIN
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA JURA-AIN
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA LOIRE-Ht-VIVARAIS
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA LORRAINE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA LOT
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA LOT-ET-GARONNE
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA LYON-ET-REGION
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA MASSIF CENTRAL
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA MIDI
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA MIDI-PYRENEES OUEST
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA NORD
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA Nord de Paris
-
FR
Merged
N
SOCAMA NORMANDIE
-
FR
100.00% 100.00%
Full
///
///
N
///
///
N
SOCAMA Occitane
-
FR
100.00% 100.00%
Full
///
///
N
///
///
N
SOCAMA OUEST
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA REGIONALE L-C-D
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA ROUSSILLON
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA SAVOIE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA SUD-OUEST
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA TARN
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA VAL-DE-FRANCE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA VAR
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMA VAUCLUSE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI TARN et AVEYRON
-
FR
N
Merged
N
100.00% 100.00%
Full
SOCAMI ATLANTIQUE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI AUDE-ARIEGE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI BAS-RHIN
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI BOURGOGNE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI CENTRE ATLANTIQUE
(ancienne Socami Limousin)
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI CENTRE-OUEST
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI CHAMPAGNE
-
FR
N
Merged
N
100.00% 100.00%
Full
SOCAMI COTE D’AZUR
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI DAUPHINE-ALPES DU SUD
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI FRANCHE-COMTE-M-A
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
///
///
///
///
///
///
N
SOCAMI HAUTE-SAVOIE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI HAUT-RHIN
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI HTE-GARONNE-HABITAT
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI LIMOUSIN
-
FR
N
Change of name
.N
100.00% 100.00%
Full
SOCAMI LOIRE ET LYONNAIS
-
FR
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
///
///
100.00% 100.00%
05
139
Companies
December 31, 2005
Country
%
interest
(a)
%
Consolidation
voting
method
rights
(b)
///
///
December 31, 2004
%
interest
N
%
voting
rights
Merged
Consolidation
method
(b)
%
Consolidation
voting
method
rights
(b)
SOCAMI LORRAINE
-
FR
SOCAMI LORRAINE CHAMPAGNE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI MASSIF CENTRAL
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI MIDI
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI NORD
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI Nord de Paris
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI Occitane
-
FR
100.00% 100.00%
Full
SOCAMI OUEST
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI PROVENCE ET CORSE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI PYRENEES-ORIENTALES
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI SAVOIE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI SUD OUEST
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMI TARN ET AVEYRON
-
FR
Merged
N
100.00% 100.00%
Full
100.00% 100.00%
Full
///
///
N
December 31, 2003
%
interest
N
100.00% 100.00%
///
///
///
///
Full
N
N
SOCAMI VAL-DE-FRANCE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMMES
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAMUPROLOR
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOCAUPROMI
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOFRONTA
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOPROLIB COTE D’AZUR
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOPROLIB FRANCHE-COMTE-M-A
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOPROLIB LORRAINE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOPROLIB NORD
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOPROLIB SAVOIE-HTE-SAVOIE
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
SOPROLIB SUD-OUEST
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
-
FR
100.00% 100.00%
Full
100.00% 100.00%
Full
100.00% 100.00%
Full
I-3 Central bodies
BANQUE FEDERALE
DES BANQUES POPULAIRES
I-4 Affiliates (c)
SOCIETE CENTRALE DU CMM
-
FR
100.00% 100.00%
Full
7.64%
100.00%
Full
7.68%
100.00%
Full
(13)
FR
100.00% 100.00%
Full
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE DE MEDITERRANEE (17)
FR
100.00% 100.00%
Full
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE DE VENDEE
(6)
FR
100.00% 100.00%
Full
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE DU FINISTERE
(16)
FR
100.00% 100.00%
Full
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE LITTORAL MANCHE (16)
FR
100.00% 100.00%
Full
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE SUD OUEST
(14)
FR
100.00% 100.00%
Full
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE MORBIHAN / L.A
(6
FR
100.00% 100.00%
Full
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE DE GUADELOUPE (9)
FR
Merged
N
0.00%
100.00%
Full
1.95%
100.00%
Full
CAISSE REGIONALE DE MARTINIQUE (9)
FR
Merged
N
0.00%
100.00%
Full
0.00%
100.00%
Full
CAISSE REGIONALE DE REUNION
(9)
FR
Merged
N
0.00%
100.00%
Full
0.00%
100.00%
Full
CREDIT MARITIME OUTRE MER
(9)
FR
100.00% 100.00%
Full
CAISSE REGIONALE REGION NORD
Consolidated from 2005
N
N
II – ASSOCIATES (d)
CMGM
(10)
FR
5.37%
100.00%
Full
6.03%
100.00%
Full
EDEL
(10)
FR
33.94%
100.00%
Full
33.94%
33.94%
Full
Gedex Distribution
(10)
FR
0.00%
100.00%
Full
0.00%
100.00%
Full
N
MONINFO
(10)
FR
33.91%
100.00%
Full
33.91%
100.00%
Full
N
Nord Financement
(10)
FR
0.97%
100.00%
Full
0.96%
100.00%
Full
N
Société financière de la NEF
(10)
FR
5.76%
100.00%
Full
6.95%
100.00%
Full
N
SOCOREC
(10)
FR
0.00%
100.00%
Full
0.00%
100.00%
Full
N
33.94%
33.94%
N
Equity
SOFIGARD
(10)
FR
0.29%
100.00%
Full
0.29%
100.00%
Full
N
SOFINDI
(10)
FR
4.76%
100.00%
Full
5.06%
100.00%
Full
N
SOFIRIF
(10)
FR
4.21%
100.00%
Full
4.29%
100.00%
Full
N
2005 ANNUAL REPORT
Companies
December 31, 2005
Country
%
interest
(a)
SOFISCOP
SOFISCOP SUD EST
SOMUDIMEC
SOMUPACA
(10)
(10)
(10)
(10)
FR
FR
FR
FR
ACHATPRO
(9)
AGRO AUDACES
(4)
AMEDIS
(9)
ATLANTIQUE PLUS
(6)
BANKEO
(2)
BANQUE CALEDONIENNE
D’INVESTISSEMENT
(9)
BANQUE MONETAIRE ET FINANCIERE (3)
BATINOREST
(10)
BDG SCI
(5)
BERCY GESTION FINANCE
(9)
BGF+
(9)
BIC BRED
(9)
BICEC
(2)
BISE
(10)
B-PROCESS
(9)
BRED COFILEASE
(9)
BRED GESTION
(9)
BTP Banque
(10)
BTP CAPITAL INVESTISSEMENT
(10)
C.2.C
(3)
Caisse centrale
(10)
Caisse de Garantie Immob. du Bâtiment(10)
Caisse solidaire
(10)
CAPI COURT TERME N°1
(3)
CERIUS INVESTISSEMENTS
(2)
CLICK AND TRUST
(9)
CLIVEO SNC
(2)
COFEG
(9)
COFIBRED
(9)
(13)
CREPONORD
COOPAMAT
(10)
(10)
Crédit Coopératif Trésorerie plus
CREDIT MARITIME INVESTISSEMENT (12)
CYBERPLUS MARKET
(4)
DE PORTZAMPARC
(6)
ECOFI INVESTISSEMENT
(10)
EFITEL
(10)
ESFIN
(10)
(4)
FCC AMAREN II
(9)
FCC CRISTALYS (f)
(8)
FINANCIERE VECTEUR
FONCIERE VICTOR HUGO
(7)
(4)
GC2I INVESTISSEMENT
GIE CARSO MATERIEL
(4)
GIE LIVE ACHATS
(4)
1.71%
4.18%
0.33%
1.67%
%
Consolidation
voting
method
rights
(b)
December 31, 2004
05
December 31, 2003
%
interest
%
voting
rights
Consolidation
method
(b)
%
interest
%
Consolidation
voting
method
rights
(b))
1.68%
3.92%
0.35%
1.74%
100.00%
100.00%
100.00%
100.00%
Full
Full
Full
Full
N
N
N
N
100.00%
100.00%
100.00%
100.00%
Full
Full
Full
Full
FR
FR
GB
FR
FR
92.80% 92.80%
89.13% 91.82%
Deconsolidated
100.00% 100.00%
60.00% 60.00%
Full
Full
N
Full
Full
91.37% 91.37%
89.40% 91.82%
Deconsolidated
100.00% 100.00%
60.00% 60.00%
Equity
Full
N
Full
Full
39.58% 39.58%
80.85% 82.94%
0.00% 96.00%
100.00% 100.00%
60.00% 60.00%
Equity
Full
Full
Full
Full
FR
FR
FR
FR
FR
FR
FR
CM
PL
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
35.00% 35.00%
100.00% 100.00%
94.88% 94.88%
100.00% 100.00%
99.96% 99.96%
100.00% 100.00%
99.95% 99.95%
52.48% 52.48%
46.67% 46.67%
42.20% 42.20%
100.00% 100.00%
100.00% 100.00%
99.95% 99.95%
79.42% 79.42%
Deconsolidated
100.00% 100.00%
33.40% 33.40%
11.33% 100.00%
100.00% 100.00%
99.85% 99.85%
100.00% 100.00%
100.00% 100.00%
99.67% 99.67%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Deconsolidated
Deconsolidated
Deconsolidated
72.67% 74.53%
99.99% 99.99%
99.99% 100.00%
37.58% 37.58%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Deconsolidated
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Equity
Full
Full
Full
Full
Full
Full
Full
Equity
Equity
Full
Full
Full
Full
N
Full
Equity
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
N
N
Full
Full
Full
Equity
Full
Full
Full
N
Full
Full
Full
100.00% 100.00%
85.13% 80.00%
100.00% 100.00%
99.96% 99.96%
100.00% 100.00%
99.95% 99.95%
52.08% 52.48%
37.92% 37.91%
34.89% 34.89%
100.00% 100.00%
100.00% 100.00%
99.95% 99.95%
79.42% 79.42%
Deconsolidated
100.00% 100.00%
33.40% 33.40%
11.40% 100.00%
100.00% 100.00%
99.85% 99.85%
100.00% 100.00%
100.00% 100.00%
99.67% 99.67%
100.00% 100.00%
100.00% 100.00%
Deconsolidated
Deconsolidated
Deconsolidated
72.86% 74.53%
99.98% 99.99%
99.99% 100.00%
37.58% 37.58%
100.00% 100.00%
100.00% 100.00%
Deconsolidated
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
N
Full
Full
Full
Full
Full
Full
Full
Equity
Equity
Full
Full
Full
Full
N
Full
Equity
Full
Full
Full
Full
Full
Full
Full
N
Full
N
N
N
Full
Full
Full
Equity
Full
N
Full
N
Full
Full
Full
100.00% 100.00%
100.00% 100.00%
99.96% 99.96%
100.00% 100.00%
99.94% 99.94%
52.08% 52.49%
28.55% 26.80%
26.56% 26.56%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
79.41% 79.41%
48.99% 48.99%
100.00% 100.00%
33.40% 33.40%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
99.67% 99.67%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
2.61% 100.00%
100.00% 100.00%
67.02% 67.02%
99.98% 99.98%
100.00% 100.00%
37.58% 37.58%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
N
Full
N
Full
Full
Full
Full
Full
Equity
Equity
Full
Full
Full
Full
Full
Full
Equity
N
Full
Full
Full
Full
Full
Full
N
Full
Full
Full
Full
Full
Full
Full
Equity
N
N
Full
Full
Full
Full
Full
III – SUBSIDIARIES
III.1 – Retail banking
141
Companies
December 31, 2005
Country
%
interest
FR
FR
FR
FR
FR
FR
FR
FR
FR
LU
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
99.79% 100.00%
100.00% 100.00%
Deconsolidated
99.76% 99.76%
100.00% 100.00%
80.87% 100.00%
100.00% 100.00%
Deconsolidated
100.00% 100.00%
90.00% 90.00%
100.00% 100.00%
66.00% 66.00%
98.07% 99.43%
100.00% 100.00%
92.06% 92.44%
99.20% 99.20%
99.99% 99.99%
99.78% 99.78%
99.96% 99.97%
65.81% 65.81%
99.76% 100.00%
99.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
28.92% 28.92%
100.00% 100.00%
100.00% 100.00%
51.70% 51.70%
Deconsolidated
Deconsolidated
99.67% 100.00%
absorption
Merged
Merged
100.00% 100.00%
Merged
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Deconsolidated
100.00% 100.00%
62.57% 44.00%
Deconsolidated
Deconsolidated
100.00% 100.00%
24.50% 24.50%
(a)
GIE USC
(10)
GROUPEMENT DE FAIT
(10)
GUIDEO
(2)
INFORMATIQUE BANQUES POPULAIRES(4)
INTERCOOP
(10)
INVESTIMA 12
(2)
LFI
(9)
LFI2
(4)
LFI4
(9)
LUX EQUIP BAIL
(15)
Mone+CC2
(10)
NOVACREDIT
(4)
OUEST CROISSANCE SCR
(4)
PARNASSE FINANCES
(3)
(3)
PARNASSIENNE DE CREDIT
PREPAR COURTAGE (ex BERPA)
(9)
PREPAR-IARD
(9)
PREPAR-VIE
(9)
PROMEPAR
(9)
MA BANQUE (ex SBE)
(2)
SAS PERSPECTIVES ET PARTICIPATIONS (9)
SCI BPSO
(14)
SCI du CREDIT COOPERATIF
(10)
SCI FAIDHERBE
(13)
SCI L’ARENAS
(7)
SCI SAINT-DENIS
(10)
SDR Nord Pas de Calais
(10)
SEGIMLOR
(15)
SGTI
(3)
SICOMI COOP
(10)
SMI
(7)
SNC AZUR IMMO
(7)
SNC M+X
(4)
SOCIEP
(8)
SODEGA
(9)
SODEMA
(9)
SOFIAG
(9)
SOFIDEG
(9)
SOFIDER
(9)
(3)
SOFINCIL
SBE (ex SOGEFIP)
(8) & (9)
(9)
SPIG
TRANSIMAT
(10)
(10)
TRANSIMMO
TRUST AND PAY
(9)
UNION DES CAISSES REGIONALES (12)
VECTEUR Gestion
(8)
VIALINK
(9)
(2)
Volksbank International AG (VBI)
%
Consolidation
voting
method
rights
(b)
Full
Full
N
Full
Full
Full
Full
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Equity
Full
Full
Full
N
N
Full
N
N
N
Full
N
Full
Full
Full
Full
N
Full
I.P.
N
N
Full
Equity
December 31, 2004
%
interest
%
voting
rights
100.00% 100.00%
100.00% 100.00%
Deconsolidated
99.76% 99.76%
100.00% 100.00%
100.00% 100.00%
Deconsolidated
98.04% 98.04%
90.00% 90.00%
100.00% 100.00%
65.77% 65.77%
98.26% 99.22%
100.00% 100.00%
92.09% 92.44%
99.20% 99.20%
99.99% 99.99%
99.78% 99.78%
99.96% 99.97%
99.78% 99.78%
99.76% 99.76%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
28.92% 28.92%
100.00% 100.00%
50.26% 50.26%
Deconsolidated
Deconsolidated
99.67% 100.00%
99.99% 99.99%
Merged
Merged
100.00% 100.00%
Merged
100.00% 99.49%
100.00% 100.00%
100.00% 100.00%
Deconsolidated
100.00% 100.00%
59.35% 44.00%
0.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Consolidation
method
(b)
Full
Full
N
Full
Full
N
Full
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
Full
N
Full
Full
Equity
N
Full
Full
N
N
Full
Full
N
N
Full
N
Full
Full
N
Full
N
Full
I.P.
Full
Full
Full
N
December 31, 2003
%
interest
%
Consolidation
voting
method
rights
(b)
100.00% 92.00%
100.00% 100.00%
100.00% 100.00%
99.75% 99.75%
100.00% 100.00%
100.00% 100.00%
99.01% 99.01%
98.04% 98.04%
90.00% 90.00%
100.00% 100.00%
66.00% 66.00%
97.32% 99.24%
100.00% 100.00%
92.08% 92.44%
99.30% 99.30%
99.98% 99.98%
99.77% 99.77%
99.96% 99.97%
99.77% 99.77%
99.76% 99.76%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
28.92% 28.92%
100.00% 100.00%
49.96% 49.96%
100.00% 100.00%
100.00% 100.00%
99.75% 100.00%
99.99% 99.99%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 99.49%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
55.69% 44.00%
0.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Full
Full
Full
Full
Full
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
Full
N
Full
Full
Equity
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
Full
Full
Full
I.P.
Full
Full
Full
N
III.2 – Natexis Banques Populaires and its subsidiaries (e)
FR
BAIL EXPANSION
(1)
FR
2005 ANNUAL REPORT
80.87%
80.87%
Full
82.76%
82.76%
Full
82.33%
82.33%
Full
80.77%
99.88%
Full
82.66%
99.88%
Full
82.23%
99.88%
Full
Companies
December 31, 2005
December 31, 2004
December 31, 2003
Country
%
interest
%
Consolidation
voting
method
rights
(b)
%
interest
%
voting
rights
Consolidation
method
(b)
%
interest
%
Consolidation
voting
method
rights
(b)
(a)
DOMIMUR
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
DUPONT DENANT CONTREPARTIE
(1)
FR
40.43%
100.00%
Full
41.38%
50.00%
Full
41.16%
50.00%
Full
ECRINVEST 6
(1)
FR
80.83%
99.95%
Full
82.71%
99.94%
Full
82.27%
99.94%
Full
ENERGECO
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
FINANCIERE CLADEL
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.32%
100.00%
Full
FRUCTIBAIL
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
FRUCTICOMI
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
INVESTIMA 6
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
NATEXIS ALGERIE
(1)
DZ
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS ABM CORP.
(1)
US
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
Full
N
NATEXIS ARBITRAGE
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS BAIL
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS BLEICHROEDER Inc
(1)
US
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NAT. BLEICHROEDER SA
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS BLEICHROEDER UK
(1)
GB
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS COFICINE
(1)
FR
74.80%
92.50%
Full
76.55%
92.50%
Full
76.15%
92.50%
Full
NATEXIS FINANCE
(1)
FR
80.86%
100.00%
Full
82.76%
100.00%
Full
82.32%
100.00%
Full
NATEXIS FUNDING
(1)
FR
80.86%
99.99%
Full
82.75%
99.99%
Full
82.32%
99.99%
Full
NATEXIS LLD
(1)
FR
80.87%
100.00%
Full
NATEXIS IMMO DEVELOPPEMENT
(1)
FR
80.86%
99.99%
Full
NATEXIS INVESTMENT CORP.
(1)
US
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS LEASE
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
82.75%
99.99%
N
Full
82.32%
99.99%
N
Full
NATEXIS LEASE MADRID
(1)
SP
80.87%
100.00%
Full
N
N
NATEXIS LEASE MILAN
(1)
IT
80.87%
100.00%
Full
N
N
NATEXIS LUXEMBOURG
(1)
LU
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS COMMODITY
MARKETS LTD (ex Metals)
(1)
GB
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS MOSCOW
(1)
RU
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
82.00%
99.08%
Full
81.57%
99.08%
Full
NATEXIS PRAMEX INTERNATIONAL
(1)
FR
80.13%
99.08%
Full
NATEXIS SERVICES LTD
(1)
GB
80.87%
100.00%
Full
NATEXIS TRANSPORT FINANCE
(ex SBFI)
N
82.32%
99.99%
N
(1)
FR
80.87%
100.00%
Full
82.75%
99.99%
Full
NATEXIS US FINANCE CORPORATION (1)
US
80.87%
100.00%
Full
82.76%
100.00%
Full
VAL A (SAS)
FR
80.87%
100.00%
Full
81.18%
98.09%
Full
80.75%
98.09%
Full
Full
(1)
05
Full
N
BANQUE PRIVÉE ST DOMINIQUE
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
BP DEVELOPPEMENT Globale
(4)
FR
89.09%
97.05%
Full
87.94%
93.91%
Full
92.79%
97.73%
Full
BPSD GESTION
(1)
FR
80.86%
99.99%
Full
82.75%
99.99%
Full
82.32%
99.99%
Full
FCPR NATEXIS INDUSTRIE Globale
(1)
FR
72.56%
89.73%
Full
74.32%
89.80%
Full
82.33%
100.00%
Full
FIN. NATEXIS SINGAPOUR
(1)
SG
80.87%
100.00%
Full
82.76%
82.76%
Full
82.33%
100.00%
Full
FINATEM
(1)
DE
72.78%
100.00%
Full
74.48%
100.00%
Full
74.09%
90.00%
Full
FNS2
(1)
SG
80.87%
100.00%
Full
82.76%
100.00%
Full
N
FNS3
(1)
SG
80.87%
100.00%
Full
N
N
INITIATIVE ET FINANCE
INVESTISSEMENT
(1)
FR
74.65%
91.81%
Full
76.40%
91.81%
Full
76.00%
92.37%
Full
MERCOSUL
(1)
GB
80.87%
100.00%
Full
82.76%
82.76%
Full
82.33%
100.00%
Full
NATEXIS INVESTMENT GLOBAL.
(1)
FR
80.62%
99.69%
Full
82.30%
99.45%
Full
81.70%
99.26%
Full
NAT. INVEST ASIA
(1)
HK
N
82.76%
82.76%
Full
82.33%
100.00%
Full
NATEXIS CAPE
(1)
LU
Full
82.76%
82.76%
Full
82.33%
98.71%
Full
NATEXIS ACTIONS AVENIR
(1)
FR
N
67.64%
81.25%
Full
NATEXIS ACTIONS CAPITAL
STRUCTURANT
(1)
FR
52.29%
100.00%
Full
54.93%
57.84%
Full
66.79%
73.71%
Full
NATEXIS INDUSTRIE
(1)
FR
80.73%
99.83%
Full
82.62%
99.83%
Full
82.20%
99.85%
Full
Absorption
80.87%
100.00%
Liquidated
N
Liquidated
143
Companies
December 31, 2005
December 31, 2004
Country
%
interest
%
Consolidation
voting
method
rights
(b)
%
interest
%
voting
rights
Consolidation
method
(b)
80.87%
100.00%
82.76%
82.76%
(a)
%
Consolidation
voting
method
rights
(b)
Full
82.33%
100.00%
Full
N
75.29%
91.53%
Full
NATEXIS INVERSIONES
(1)
SP
NATEXIS NOUVEAUX MARCHES
(1)
FR
NATEXIS PRIVATE
BANKING LUXBG
(1)
LU
77.47%
95.80%
Full
72.66%
87.80%
Full
72.28%
87.80%
Full
NATEXIS PRIVATE EQUITY
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
INTERNATIONAL
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
INTERNATIONAL MANAGEMENT
(1)
FR
80.87%
100.00%
Full
INTERNATIONAL SINGAPOUR
(1)
SG
80.87%
100.00%
Full
82.76%
NATEXIS PRIVATE
EQUITY OPPORTUNITIES
(1)
FR
80.64%
99.71%
Full
NATEXIS VENTURE SELECTION
(1)
FR
80.87%
100.00%
Full
NEM2
(1)
FR
80.73%
99.82%
PARIS OFFICE FUND
(1)
FR
40.43%
50.00%
SOFINNOVA
(1)
FR
Deconsolidated
Liquidated
Full
December 31, 2003
%
interest
N
Liquidated
N
N
100.00%
Full
N
82.76%
100.00%
Full
82.76%
100.00%
Full
Full
82.61%
99.82%
Full
I.P.
41.38%
50.00%
I.P.
N
Deconsolidated
N
N
82.13%
99.76%
Full
72.50%
88.07%
Full
20.07%
23.38%
N
Full
SOPRANE SERVICES
(1)
FR
80.67%
99.76%
Full
82.56%
99.76%
Full
82.13%
99.76%
Full
SOPROMEC
(1)
FR
89.09%
100.00%
Full
87.94%
100.00%
Full
84.37%
98.07%
Full
NAXICAP PARTNERS
(1)
FR
80.86%
99.99%
Full
82.75%
99.99%
Full
82.32%
99.99%
Full
SPEF LBO
(1)
FR
80.86%
99.99%
Full
82.75%
99.99%
Full
82.32%
99.99%
Full
SPEF VENTURE
(1)
FR
80.85%
100.00%
Full
82.74%
99.98%
Full
82.31%
99.97%
Full
ABP ACTIONS (f)
(1)
FR
80.02%
98.95%
Full
N
N
N
Services
ABP CROISSANCE RENDEMENT (f)
(1)
FR
79.16%
97.88%
Full
N
ABP MIDCAP (f)
(1)
FR
80.87%
100.00%
Full
N
N
ABP MONETAIRE PLUS (f)
(1)
FR
80.87%
100.00%
Full
N
N
ABP PREVOYANCE
(1)
FR
80.87%
100.00%
Full
ABP TAUX (f)
(1)
FR
80.07%
99.01%
Full
ABP VIE
(1)
FR
80.87%
100.00%
Full
ADIR
(1)
LB
27.49%
33.99%
Equity
ASM ALTERNATIF GARANTI 1 (f)
(1)
FR
80.07%
99.01%
Full
ASSURANCES BP IARD
(1)
FR
40.45%
49.99%
Equity
AXELTIS Ltd
(1)
GB
80.87%
100.00%
BANCASSURANCE POPOLARI
(1)
IT
Sold
82.76%
100.00%
Full
N
82.76%
100.00%
Full
28.13%
33.99%
Equity
N
41.38%
49.99%
Equity
Full
82.76%
100.00%
N
42.21%
51.00%
82.32%
100.00%
Full
N
82.33%
100.00%
Full
27.99%
33.99%
Equity
N
41.17%
49.99%
Equity
Full
82.33%
100.00%
Full
I.P.
41.99%
51.00%
Full
CREDIT MARITIME VIE
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
3.07%
100.00%
Full
INVEST KAPPA
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
87.99%
96.94%
Full
NATEXIS ASSET MANAGEMENT
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS ASSET SQUARE
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS ASSURANCES
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
NATEXIS EPARGNE ENTREPRISE
(1)
FR
N
82.75%
100.00%
Full
82.32%
100.00%
Full
NATEXIS INTEREPARGNE
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.32%
100.00%
Full
NATEXIS INTERTITRES
(1)
FR
80.81%
99.93%
Full
82.70%
99.93%
Full
82.26%
99.92%
Full
NATEXIS INVESTOR SERVICING
(1)
FR
80.87%
100.00%
Full
NATEXIS LIFE
(1)
LU
79.71%
100.00%
Full
79.33%
100.00%
Full
78.91%
100.00%
Full
NATEXIS PAIEMENTS
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
Full
Absorption
N
N
NX ASSET MANAGEMENT
IMMOBILIER
(1)
FR
80.61%
99.67%
Full
82.49%
99.67%
Full
82.06%
99.67%
NXBP1
(1)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
OFIVM
(1)
FR
N
28.14%
34.00%
Equity
27.99%
34.00%
Equity
N
82.33%
100.00%
Full
Full
62.24%
75.60%
Full
PROXIGMA
(1)
FR
SAMIC
(1)
MC
SCI ABP IENA (f)
(1)
FR
2005 ANNUAL REPORT
Sold
Deconsolidated
Sold
80.87%
100.00%
N
N
Full
Deconsolidated
62.57%
75.60%
N
N
Companies
December 31, 2005
December 31, 2004
%
interest
(1)
(1)
(1)
(1)
(1)
(1)
FR
FR
FR
FR
FR
FR
80.87% 100.00%
80.87% 100.00%
Sold
80.87% 100.00%
20.19% 24.97%
80.87% 100.00%
COFACE
(1)
ADG COFACE ALLGEMEINE
DEBITOREN GESELLSCHAFT
(11)
ALLGEMEINE KREDIT COFACE
FINANZ
(11)
(11)
AKCO FUND (f)
(11)
INFORMATIONS
(11)
AXA ASSURCREDIT (ex ASSURCREDIT) (11)
CENTRE D’ETUDES FINANCIERES (CEF) (11)
CIA DE SEGUROS DE CREDITOS
COFACE CHILE SA
(11)
CIMCO SYSTEMS LIMITED
(11)
CODINF Services
(11)
COFACE AK HOLDING
(11)
COFACE COLLECTION NORTH AMERICA (11)
COFACE CREDIT MANAGEMENT
NORTH AMERICA
(11)
COFACE DEBT PURCHASE
(11)
(11)
COFACE EUROPE (f)
COFACE EXPERT
(11)
COFACE FACTORING ITALIA SpA
(11)
COFACE HOLDING AMERICA LATINA (11)
COFACE NORTH AMERICA
HOLDING COMPANY
(11)
COFACE INTERCREDIT BULGARIA
(11)
COFACE INTERCREDIT
CZECH REPUBLIC
(11)
COFACE INTERCREDIT
HRATSKA (CROATIA)
(11)
COFACE INTERCREDIT HUNGARY
(11)
(11)
COFACE INTERCREDIT POLAND
COFACE INTERCREDIT ROMANIA
(11)
COFACE INTERCREDIT SLOVAKIA
(11)
COFACE INTERCREDIT SLOVENIA
(11)
(11)
COFACE ITALIA
COFACE MOPE
(11)
(11)
INSURANCE
(11)
(11)
COFACE ORT
(11)
COFACE SCRL
COFACE SERVICE (France)
(11)
(11)
COFACE SERVICE (Italie)
COFACE SERVICE ECUADOR
(11)
(ex VERITAS ANDINA)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
DE
80.87%
100.00%
Full
62.07%
75.00%
Full
61.75%
75.00%
Full
DE
DE
DE
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
Full
Full
Full
DE
FR
FR
80.87% 100.00%
32.35% 40.00%
80.87% 100.00%
Full
I.P.
Full
CL
GB
FR
DE
US
68.22% 84.36%
80.87% 100.00%
Sold
80.87% 100.00%
80.87% 100.00%
Full
Full
N
Full
Full
US
GB
FR
FR
IT
MX
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
Full
Full
Full
Full
Full
Full
US
BU
80.87%
60.64%
100.00%
100.00%
Full
Full
33.10%
62.06%
40.00%
100.00%
Full
Full
82.33%
61.74%
100.00%
100.00%
Full
Full
CZ
60.64%
100.00%
Full
62.06%
100.00%
Full
61.74%
100.00%
Full
HR
HU
PL
RO
SK
SI
IT
PT
US
60.64%
60.64%
58.82%
60.64%
60.64%
60.64%
80.87%
80.87%
80.87%
100.00%
100.00%
97.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Full
Full
Full
Full
Full
Full
Full
Full
Full
62.06%
62.06%
60.20%
62.06%
62.06%
62.06%
82.76%
82.76%
82.76%
100.00%
100.00%
97.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Full
Full
Full
Full
Full
Full
Full
Full
Full
61.74%
61.74%
59.88%
37.04%
61.74%
37.04%
82.33%
82.33%
82.33%
100.00%
100.00%
97.00%
60.00%
100.00%
60.00%
100.00%
100.00%
100.00%
Full
Full
Full
Full
Full
Full
Full
Full
Full
US
FR
FR
FR
IT
80.87% 100.00%
Merged
Merged
80.87% 100.00%
80.87% 100.00%
Full
N
N
Full
Full
EC
80.87%
100.00%
Full
SCI ABP POMPE (f)
SCI FRUCTI FONCIER (f)
SCI NEUILLY CHATEAU (f) (g)
SLIB
SOCECA
VITALIA VIE
Full
Full
N
Full
Equity
Full
%
interest
%
voting
rights
December 31, 2003
Country
(a)
%
Consolidation
voting
method
rights
(b)
82.76% 100.00%
20.66% 24.97%
82.76% 100.00%
Consolidation
method
(b)
N
N
N
Full
Equity
Full
05
%
interest
%
Consolidation
voting
method
rights
(b)
82.33% 100.00%
20.55% 24.97%
82.33% 100.00%
N
N
N
Full
Equity
Full
82.76% 100.00%
82.76% 100.00%
Full
N
Full
82.33% 100.00%
82.33% 100.00%
Full
N
Full
Full
I.P.
Full
82.33% 100.00%
32.93% 40.00%
Full
I.P.
N
82.76% 100.00%
Sold
82.76% 100.00%
82.76% 100.00%
N
Full
N
Full
Full
82.33% 100.00%
24.70% 30.00%
82.33% 100.00%
N
Full
Equity
Full
N
33.10% 40.00%
82.76% 100.00%
82.76% 100.00%
82.76% 100.00%
Full
Full
N
Full
N
Full
82.33% 100.00%
82.33% 100.00%
82.33% 100.00%
Full
Full
N
Full
N
N
82.76%
33.10%
82.76%
100.00%
40.00%
100.00%
82.76% 100.00%
82.76% 100.00%
82.76% 100.00%
82.76% 100.00%
82.76%
100.00%
Full
Full
Full
N
Full
Full
82.33% 100.00%
82.33% 100.00%
82.33% 100.00%
82.33%
100.00%
Full
N
Full
N
Full
Full
145
Companies
December 31, 2005
December 31, 2004
Country
%
interest
%
Consolidation
voting
method
rights
(b)
%
interest
%
voting
rights
Consolidation
method
(b)
(a)
December 31, 2003
%
interest
%
Consolidation
voting
method
rights
(b)
82.33%
100.00%
COFACE SERVICES COLOMBIA
(ex VERITAS COLOMBIA)
(11)
CO
80.87%
100.00%
Full
82.76%
100.00%
Full
COFACE SERVICES NETHERLAND
(11)
NL
80.87%
100.00%
Full
82.76%
100.00%
Full
COFACE SERVICES NORTH
AMERICA GROUP
(11)
US
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACE SERVICES PERU
(11)
PE
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACE SERVICES VENEZUELA
(11)
VE
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACE SERVICIOS CHILE
(11)
CL
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACE SERVICIOS ARGENTINA
80.87%
100.00%
Full
82.76%
100.00%
Full
N
(11)
AR
COFACE SERVICIOS COSTA RICA, S.A
(11)
(ex VER. DE CENTRO AMERICA)
AR
80.87%
100.00%
Full
82.76%
100.00%
Full
COFACE SERVICIOS DO BRAZIL
(11)
BR
80.87%
100.00%
Full
82.76%
100.00%
Full
COFACE SERVICIOS ESPAÑA, SL
(11)
ES
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACE SERVICIOS MEXICO SA DE CV (11)
MX
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACE SERVICIOS PANAMA
(11)
PA
80.87%
100.00%
Full
82.76%
100.00%
Full
COFACE SOUTH AFRICAN
INSURANCE COMPANY
(11)
ZA
80.87%
100.00%
Full
COFACE UK
(11)
GB
80.87%
100.00%
Full
COFACE UK SERVICES LIMITED
(11)
GB
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACERATING HOLDING
(11)
DE
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACERATING.CH
(11)
CH
80.87%
100.00%
Full
COFACERATING.COM
(11)
FR
COFACERATING.DE
(11)
DE
COFACERATING.FR
(11)
FR
Absorption
80.87%
100.00%
Liquidated
Liquidated
N
82.76%
100.00%
82.76%
100.00%
N
Full
N
Full
Full
82.33%
100.00%
82.33%
100.00%
82.33%
100.00%
N
Full
N
N
N
Full
N
Full
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
N
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACERATING.IT
(11)
IT
N
82.76%
100.00%
Full
82.33%
100.00%
Full
COFACREDIT
(11)
FR
29.11%
36.00%
Equity
29.79%
36.00%
Equity
29.64%
36.00%
Equity
COFACTION2 (f)
(11)
FR
80.87%
100.00%
Full
COFINPAR
(11)
FR
80.87%
100.00%
Full
COFOBLIGATIONS (f)
(11)
FR
80.87%
100.00%
Full
COGERI
(11)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
CREDICO LIMITED
(11)
GB
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
CREDITORS GROUP HOLDINGS LTD
(11)
GB
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
CREDIT UNDERWRITING
AGENCY LIMITED (CUAL)
(11)
ZA
80.87%
100.00%
Full
EIOS
(11)
FR
24.07%
29.76%
Equity
24.63%
29.76%
FIMIPAR
(11)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
GRAYDON HOLDING
(11)
NL
22.24%
27.50%
Equity
22.76%
27.50%
Equity
22.64%
27.50%
Equity
Full
82.76%
100.00%
N
Full
N
82.33%
100.00%
N
Full
N
N
N
Equity
N
GROUPE COFACE INTERCREDIT
HOLDING AG
(11)
AT
60.64%
74.99%
Full
62.06%
74.99%
Full
61.74%
74.99%
KOMPASS BILGI
(11)
TK
56.54%
69.91%
Full
57.86%
69.91%
Full
57.56%
69.91%
Full
KOMPASS CZECH REPUBLIC
(11)
CZ
75.21%
93.00%
Full
76.97%
93.00%
Full
76.56%
93.00%
Full
KOMPASS INTERN. NEUENSCHWANDER (11)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
KOMPASS JAPAN
(11)
JP
80.83%
99.95%
Full
82.72%
99.95%
Full
82.29%
99.95%
Full
KOMPASS POLAND
(11)
PL
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
KOMPASS SOUTH EAST ASIA
(11)
SG
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
KOMPASS UNITED STATES
(11)
US
80.87%
100.00%
Full
82.76%
100.00%
Full
82.33%
100.00%
Full
LIBRAIRIE ELECTRONIQUE
(11)
FR
80.87%
100.00%
Full
82.76%
100.00%
Full
N
LONDON BRIDGE FINANCE LIMITED (11)
GB
80.87%
100.00%
Full
82.76%
100.00%
Full
N
MSL 1 FUND (f)
(11)
DE
80.87%
100.00%
Full
N.V. COFACE EURO DB
(11)
FR
80.87%
100.00%
Full
82.76%
ÕESTERREICHISCHE
KREDITVERSICHERUNGS COFACE
(11)
AT
76.02%
94.00%
Full
ÖKV KREDITINFORMATIONS
(11)
AT
76.02%
100.00%
Full
OR INFORMATIQUE
(11)
FR
80.87%
100.00%
Full
2005 ANNUAL REPORT
N
N
100.00%
Full
N
77.79%
94.00%
Full
77.39%
94.00%
Full
77.79%
100.00%
Full
77.39%
100.00%
Full
82.76%
100.00%
Full
N
Companies
December 31, 2005
Country
%
interest
(11)
(11)
(11)
(11)
(11)
(11)
(11)
(11)
(1)
(1)
FR
GB
IT
FR
FR
US
IT
IT
FR
DE
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
Absorption
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
80.87% 100.00%
80.59% 99.66%
41.10% 51.00%
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(2)
(1)
(1)
(1)
(1)
(1)
(2)
(1)
(1)
(1)
(2)
(1)
(1)
FR
FR
FR
FR
GB
FR
FR
FR
NL
FR
US
FR
FR
US
US
US
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
FR
IE
FR
GB
(2)
(4)
(2)
(2)
(2)
(2)
FR
FR
FR
FR
FR
FR
(a)
ORCHID TELEMATICS LIMITED
THE CREDITORS GROUP LIMITED
THE CREDITORS INFORMATION CO LTD
UNISTRAT ASSURANCES
UNISTRAT COFACE
VERITAS PUERTO RICO CORP.
VISCONTEA COFACE
VISCONTEA IMMOBILIARE
NATEXIS FACTOREM
VR FACTOREM
%
Consolidation
voting
method
rights
(b)
December 31, 2004
05
December 31, 2003
%
interest
%
voting
rights
Consolidation
method
(b)
%
interest
%
Consolidation
voting
method
rights
(b)
Full
Full
Full
N
Full
Full
Full
Full
Full
I.P.
82.76%
82.76%
82.76%
82.76%
82.76%
82.76%
82.76%
82.76%
82.48%
42.06%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.66%
51.00%
Full
Full
Full
Full
Full
Full
Full
Full
Full
I.P.
82.33% 100.00%
41.16% 50.00%
82.33% 100.00%
82.33% 100.00%
82.33% 100.00%
82.05% 99.66%
N
Full
N
Full
N
Full
Full
Full
Full
I.P.
80.87% 100.00%
80.86% 100.00%
80.71% 99.80%
Absorption
80.87% 100.00%
80.85% 100.00%
16.51% 20.42%
80.86% 100.00%
80.86% 99.99%
80.87% 100.00%
0.00% 100.00%
80.87% 100.00%
80.87% 100.00%
0.00% 100.00%
100.00% 100.00%
0.00% 100.00%
80.87% 100.00%
Absorption
80.87% 100.00%
80.87% 100.00%
80.73% 100.00%
80.87% 100.00%
80.85% 99.99%
100.00% 100.00%
80.86% 99.99%
80.86% 99.99%
80.86% 99.99%
100.00% 100.00%
80.87% 100.00%
80.87% 100.00%
Full
Full
Full
N
Full
Full
Equity
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
82.76%
82.75%
82.59%
82.72%
82.76%
82.75%
16.90%
82.76%
82.75%
82.76%
0.00%
82.76%
82.76%
0.00%
100.00%
0.00%
82.76%
100.00%
82.76%
82.76%
82.62%
82.76%
82.75%
99.23%
82.75%
82.75%
82.75%
100.00%
82.76%
82.76%
100.00%
100.00%
99.80%
99.96%
100.00%
100.00%
20.42%
100.00%
99.99%
100.00%
100.00%
100.00%
82.76%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.99%
100.00%
99.99%
99.99%
99.99%
100.00%
100.00%
100.00%
Full
Full
Full
Full
Full
Full
Equity
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
82.33% 100.00%
82.32% 100.00%
82.16% 99.80%
82.29% 99.96%
82.33% 100.00%
82.31% 100.00%
16.81% 20.42%
82.32% 99.99%
82.33% 100.00%
41.62% 100.00%
82.33% 100.00%
82.33% 100.00%
0.00% 100.00%
100.00% 100.00%
0.00% 100.00%
82.33% 100.00%
100.00% 100.00%
82.33% 100.00%
82.33% 100.00%
82.19% 100.00%
82.32% 100.00%
82.31% 99.99%
99.22% 100.00%
82.32% 99.99%
82.32% 99.99%
82.32% 99.99%
100.00% 100.00%
82.33% 100.00%
82.33% 100.00%
Full
Full
Full
Full
Full
Full
Equity
N
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Merged
Merged
100.00% 100.00%
Full
Full
Full
N
N
Full
Other activities
AUXILIAIRE ANTIN
CIE FONCIERE NATEXIS
CO ASSUR
CRISTAL NÉGOCIATIONS
EDVAL C INVESTMENTS Ltd
FONCIERE KUPKA
IFCIC
IMMOBILIERE NATEXIS
INTERFINANCE NATEXIS NV
NATEXIS ALTAIR
NATEXIS AMBS
NATEXIS IMMO EXPLOITATION
NBP INVEST
NBP PREFERRED CAPITAL 1, LLC
NBP PREFERRED CAPITAL II, LLC
NBP PREFERRED CAPITAL III, LLC
SAGP
SAS SBE
SCI ALTAIR 1
SCI ALTAIR 2
SCI VALMY COUPOLE
SEGEX
SEPIA
SIBP
SODETO
SOGAFI
SPAFICA
SPV IGLOO2
STÉ FINANCIÈRE BFCE
WORLEDGE A INVESTMENTS Ltd EUR
III.3 – Other subsidiaries
BFBP ACTIONS EUROPE
FCP ALIZE
MAINE SERVICES
SCI BP
SCI JAVEL
SCI PONANT+
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
Merged
Merged
100.00% 100.00%
Full
Full
Full
N
N
Full
100.00%
100.00%
100.00%
99.00%
99.00%
99.90%
100.00%
100.00%
100.00%
99.00%
99.00%
100.00%
Full
Full
Full
Full
Full
Full
147
COMMENTS
(a) Subsidiaries of:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Joint subsidiaries of Banque Populaire banks
Banque Populaire Atlantique
Banque Populaire Côte d’Azur
Crédit Coopératif
Coface
Crédit Maritime Mutuel
Banque Populaire du Nord
Banque Populaire de l’Ouest
(b) Consolidation method
Full
Full consolidation
Equity Accounted by the equity method
Prop. Accounted by the proportionate consolidation
N
Not consolidated
(c) By decision of the Board of Directors of Société Centrale du Crédit Maritime on October 19, 2004, the Crédit Maritime regional banks will be
supported by the appropriate Banque Populaire regional bank. As a result, the Banque Populaire banks have acquired a holding in the share capital
of the Crédit Maritime Mutuel banks affiliated to the Banque Fédérale des Banques Populaires pursuant to the Financial Security Act of August 1,
2003 (law no. 2003-706), which have been consolidated by the consolidating entity as of the second half of 2005.
(d) Crédit Coopératif joined the Banque Populaire Group in 2003 and merged with Caisse Centrale du Crédit Coopératif (C.C.C.C.) on October 17,
2003, at which point C.C.C.C. ceased to be Crédit Coopératif ’s central body within the meaning of the French Banking Act of January 24, 1984. By
decision of the Comité des Etablissements de Crédits et des Entreprises d’Investissement (CECEI) on July 25, 2003, and following the October 17,
2003 merger, Crédit Coopératif continues to exercise first-line responsibility over its former “affiliates”, the terms of which are set out in association
agreements between each of the credit institutions previously affiliated to the C.C.C.C and Crédit Coopératif, which now guarantees their liquidity
and solvency.These credit institutions are now known as “associates” (rather than “affiliates”) of Crédit Coopératif.
(e) Subsidiaries are broken down by business activity (see note IX).
(f) Consolidated for the first time upon adoption of IFRS.
(g) Sold in second half of 2005.
2005 ANNUAL REPORT
Note V - Notes to the balance
sheet
V.1 - Assets and liabilities
These are securities held for trading purposes or designated as
at fair value through profit or loss on initial recognition in accordance with IAS 39.
Securities held for trading purposes are those acquired principally for the purpose of selling them in the near term and those
forming part of a portfolio of identified financial instruments that
are managed together and for which there is evidence of a
recent actual pattern of short-term profit-taking.
The June 2005 fair value option amendment to IAS 39 “Financial Instruments: Recognition and Measurement”, endorsed by the European Union on November 15, 2005, sets out the
conditions for designating assets and liabilities at fair value.They
must fall into one of the following three categories:
Hybrid instruments containing one or more embedded derivatives;
n
n Instruments that belong to a group of assets or liabilities that is
managed and its performance evaluated on a fair value basis;
n Instruments that eliminate or significantly reduce an accounting
mismatch.
These assets and liabilities are measured at fair value on each
reporting date and any changes recognized through profit or loss
on a separate line item entitled “gains or losses on financial instruments at fair value through profit or loss”.The interest component is recognized as interest income or expense.
No impairment is recognized against financial assets at fair value
through profit or loss as the counterparty risk is incorporated in
their market value.
V 1.1 - General provisions relating to fair
value
The fair value of a financial asset or liability is the amount that can
be obtained in an arm’s length transaction between knowledgeable, willing parties.
At inception, fair value is the price paid or received. On subsequent
reporting dates, fair value is the quoted price if the instrument is
quoted on an active market. If there is no active market in the instrument, fair value is established using a valuation technique based
on observable data resulting from recent arm’s length market
transactions, discounted cash flow analysis or option pricing models.
Values may be adjusted to take account of liquidity or counterparty risk, and modeling risk in the case of hybrid instruments. In
the case of hybrid instruments sold, if fair value is based on a valuation technique using observable market data, any gain reflecting
the difference between the transaction price and fair value as
determined is recognized through profit or loss at inception.
05
If observable market data are not available, fair value is based on
the transaction price not the fair valuearising from the valuation
technique.The gain is then deferred and recognized through profit or loss over the life of the instrument.
n Instruments quoted on an active market:These are listed
securities and derivatives, such as futures and options, that are
traded on organized and identifiably liquid markets.
Over-the-counter instruments valued using recognized
models and observable data:
n
Standard instruments
The majority of over-the-counter derivatives, such as swaps,
forward rate agreements, caps, floors and plain vanilla options,
are traded in an active market, i.e. a liquid market with regular
trading.
Valuations are determined using widely accepted models (discounted future cash flows, Black and Scholes model, interpolation techniques) and directly observable market data,
documented as such.
Hybrid instruments
Certain hybrid and/or long-maturity financial instruments are
valued using a recognized internal model based on observable
data such as yield curves, implied volatility ranges for options and
information arising from market consensus or from active overthe-counter markets.
The observability of the market data used has been demonstrated. In terms of methodology, data must meet the following four
conditions to be considered as observable:
n they are derived from external sources (via a recognized
contributor if possible);
n
they are updated periodically;
n
they are based on recent transactions;
n their characteristics are identical to those of the transaction
concerned. If necessary, a proxy may be used, provided its appropriateness is demonstrated and documented.
The fair value of instruments obtained using valuation models is
adjusted to take account of counterparty risks, modeling risks
and data risks.
The trading profit generated by these instruments is recognized
immediately through profit or loss.
n Over-the-counter instruments valued using unrecognized models or non-observable data
Under IAS 39, a profit may only be recognized after initial recognition if it is generated by a change in a factor that market
participants would consider in setting a price, i.e. only if the
model and the data used to obtain the valuation are observable.
If the valuation model is not recognized or the data used not
observable, the trading profit generated at inception may not be
recognized immediately in profit or loss.
At December 31, 2005, only a limited number of hybrid optiontype derivatives were valued on the basis of non-observable
149
data. The gain generated on these instruments at inception is
deferred and released to profit or loss over the life of the instrument or until the data becomes observable.
either on the basis of the group’s share in the underlying net
Instruments traded on active markets are quoted securities,
trading or hedging derivatives (swaps, FRAs, collars, futures, etc.).
Net positions are measured on the basis of the bid price for
short positions and the asking price for long positions.
ments.
The fair value of investments in equity instruments that do not
have a quoted market price in an active market is estimated
instruments and variable income securities, and more particu-
assets using latest available data, or on the basis of price earnings
or discounted cash flow models for the most significant invest-
At December 31, 2005, assets at fair value principally comprised
fixed-income securities and, to a lesser extent, derivative financial
larly private equity investments.
V.1.2 - Financial assets at fair value through profit or loss
Notes
Securities held for trading
Securities
22,243
22,655
22,243
22,655
22,026
(1)
615
629
0
0
V.1.4
4,815
3,685
4,815
3,685
Pledged assets
Derivative financial instruments held for trading
01/01/2005
EU IFRS
21,628
Fixed income
Variable income
12/31/2005
EU IFRS
Trading transactions
Other
0
0
Securities designated as at fair value
5,986
4,794
Securities
5,891
3,991
3,976
2,679
1,915
1,312
95
803
281
741
33,325
31,874
Fixed income
Variable income
(1)
Pledged assets
Loans and receivables at fair value through profit or loss
Total
(1) Variable income securities valued on the basis of their quoted market price (listed securities) or using another valuation method
(unlisted securities valued on the basis of price-earnings ratio or discounted cash flows) break down as follows:
Variable income securities at fair value through profit or loss
12/31/2005 EU IFRS
Quoted market
price
Other valuation
methods
Total
Trading securities
574
41
615
932
983
1,915
99
969
1,068
1,506
1,023
2,530
o/w private equity investments
Total
2005 ANNUAL REPORT
At December 31, 2005, financial liabilities at fair value through
profit or loss comprised primarily derivative financial instruments
not designated as hedges and liabilities arising from short-selling
of financial assets (securities).
European Commission on November 15, 2005, permits the
designation of financial liabilities as at fair value through profit or
loss.The Group has elected to use this option retrospectively as
of January 1, 2005 and has re-designated certain interest-rate
instruments index-linked to different types of component (equities for personal savings plans and structured medium-term
notes) as at fair value through profit or loss.
The June 2005 fair value option amendment to IAS 39 - Financial
Instruments: Recognition and Measurement, endorsed by the
Changes in credit risk are not included in the fair value of financial liabilities measured at fair value.
V.1.3 - Financial liabilities at fair value
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Trading securities
2,107
3,210
Securities
2,011
995
1,915
766
Notes
Fixed income
Variable income
96
229
Pledged securities
96
2,215
324
0
Securities
Fixed income
Variable income
Derivative financial instruments held for trading
Other liabilities (1)
Total
V.1.4
324
0
324
0
0
0
4,155
4,023
173
4
6,758
7,237
05
(1) Principally equity-based personal savings plans and structured medium-term notes.
151
V.1.4 - Derivative financial instruments held for trading
Derivative financial instruments not designated as hedges are automatically deemed to be held for trading, regardless of the period for
which they are held.They are measured at fair value through profit or loss.
If a hybrid instrument (host contract and derivative) is not measured at fair value through profit or loss, the embedded derivative is
separated from the host contract and recognized as an asset or liability at fair value through profit or loss if it meets the definition of a
derivative and its financial characteristics and associated risks are not closely related to those of the host contract.
Futures and forwards
12/31/2005 EU IFRS
01/01/2005 EU IFRS
Notional amount
Asset
Liability
Asset
Liability
872,760
1,537
1,522
938
1,515
Organized markets
99,158
9
17
5
0
Interest rate
64,536
3
9
5
0
Currency
0
0
0
0
0
34,622
6
8
0
0
773,602
1,528
1,505
933
1,515
Interest rate swaps
591,669
1,010
1,231
882
1,322
Forward currency
Other
Over-the-counter
181,251
54
4
117
118
Currency swaps
341
396
249
45
56
Other
341
68
21
(111)
19
304,719
3,268
2,624
2,743
2,504
17,327
17
5
1
666
3,157
1
0
0
0
30
0
0
0
0
Options
Organized markets
Interest rate options
Currency options
Other
Over-the-counter
Interest rate options
Currency options
Other
Credit derivatives
Total
14,140
16
5
1
666
287,392
3,251
2,619
2,742
1,838
80,768
628
595
289
397
192,624
1,161
711
1,040
688
14,000
1,462
1,313
1,413
752
2,450
10
10
4
4
1,179,929
4,815
4,155
3,685
4,023
V.2 - Hedging instruments - assets
and liabilities
IAS 39 defines a derivative as a financial instrument that has all
three of the following characteristics:
its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign
exchange rate, index of prices or rates, credit rating or other
variable (the “underlying”);
n it requires no or little initial net investment;
n it is settled at a future date.
n
IAS 39 defines three types of hedging relationship:
n
cash flow hedge,
n
fair value hedge,
n
hedge of a net investment in a foreign operation.
2005 ANNUAL REPORT
The Group does not hold any hedges of net investments in
foreign operations.
In accordance with IFRS 1 (para 29), all hedging relationships
existing as of December 31, 2004 are recognized as hedges in
the opening balance sheet on January 1, 2005, excluding those
not allowed under IAS 39 such as written options or interest
rate hedges of held-to-maturity securities. In other words, a
transaction may not be designated as a hedge if it was not
already so designated in the consolidated financial statements at
December 31, 2004. If a transaction designated as a hedge
before the date of transition does not meet the criteria for
hedge accounting under IAS 39, changes in fair value are no
longer recognized in retained earnings but recognized in profit or
loss over the life of the hedged item. For cash flow hedges, changes in value of the hedging instrument are recognized through
equity. Hedging relationships are presumed to be effective when
the ratio of actual changes in the value of the hedging instrument
and the hedged item is between 80% and 125%.
V.2.1 - Cash flow hedges
Cash flow hedges are used to hedge exposure to changes in
interest rates on variable rate assets and liabilities and future
fixed-rate transactions.The Group principally uses cash flow hedges for macro-hedging purposes (hedging portfolios of loans or
borrowings). The hedging instruments are recognized in the
balance sheet at their fair value and any changes are recognized
directly in equity for the effective portion of the hedge under the
line item “unrealized or deferred gains or losses”. They are released to profit or loss under net banking income symmetrically
with gains or losses on the hedged items. The hedged item is
measured in line with the rules for measuring the asset class to
which it belongs.
Transactions classified as macro-hedges in the separate financial
statements have been treated under IFRS as cash flow hedges,
which corresponds exactly to the method of managing interest
rate risk used by the Banque Populaire banks. The Banque
Populaire Group is therefore not concerned by the “carve out”
version of IAS 39 on the treatment of macro-hedges as endorsed in European regulation no. 2086/2004 of November 19,
2004.
Portfolios of assets or liabilities that may be hedged are, for each
maturity band:
assets and liabilities exposed to variability in cash flows (variable-rate loans and borrowings) due to the fact that future interest rate levels are not known in advance;
n
n highly probable forecast transactions whose future cash flows
are not known today, i.e. exposure to variability in cash flows
on future fixed-rate loans as the interest rate at which the loan
will be granted is not yet known. Similarly, the Group may be
exposed to variability in cash flows on future refinancing in the
market.
Under IAS 39, hedges of an overall net position of fixed rate
assets and fixed rate liabilities with similar maturities do not qualify for hedge accounting. However, almost the same effect can
be achieved by designating a percentage of one or more portfolios of variable interest rate instruments as the hedged item.
The effectiveness of a hedge is assessed by creating a “hypothetical” derivative for each maturity band and comparing changes
in its fair value since inception with those of the derivatives to be
documented as hedges.
For a cash flow hedge, the hypothetical derivative is created so as to
achieve a hedge that qualifies as effective.Its characteristics are based
on those of the hedged item. Effectiveness is then assessed by comparing the changes in value of the hypothetical derivative with the
actual hedging instrument.This method requires the preparation of
a maturity schedule.
The prospective effectiveness test involves verifying whether
the portfolio of hedging instruments is acceptable in a macrohedging relationship.
The hedge is effective if, for each target maturity band, the nominal amount of items to be hedged is higher than the notional
amount of the hedging instruments.
The retrospective test is used to check whether the hedge
implemented remains effective on different reporting dates.
On each reporting date, changes in the fair value of hedging instruments, excluding accrued interest, are compared with those of
hypothetical derivative instruments (synthetic instruments representing assets and liabilities and the management intention). The
ratio of their respective changes should be between 80% and 125%.
If the hedged item is sold or the future transaction is no longer
highly probable, the cumulative gain or loss recognized in equity
is recognized immediately in profit or loss.
If the hedging relationship is discontinued but the hedged item is
still held, the fair value of the derivative, excluding accrued interest, on the date the relationship was discontinued is deferred
over the life of the hedged item.After discontinuation of the hedging relationship, changes in the fair value of the former hedging
instrument are recognized immediately in profit or loss.
01/01/2005 EU IFRS
12/31/2005 EU IFRS
Notional amount
Asset
Liability
Asset
Liability
74,186
158
113
268
263
0
0
0
0
0
74,186
158
113
268
263
74,185
158
113
267
263
1
0
0
0
0
Options
0
0
0
0
0
Organized markets
0
0
0
0
0
Over-the-counter
0
0
0
0
0
Credit derivatives
0
0
0
0
0
74,186
158
113
268
263
Organized markets
Over-the-counter
Interest rate swaps
Currency swaps
Total
05
153
V.2.2 - Fair value hedges
Fair value hedges are used by the Group principally for microhedging purposes to hedge fixed-rate assets and liabilities.
Changes in fair value of the hedging instrument are recognized
in profit or loss under the line item “gains or losses on financial
instruments at fair value through profit or loss”. Accrued interest
on the derivatives is recognized as interest income or expense.
The hedged item is accounted for symmetrically with the hedging instrument. Hedged items otherwise measured using the
effective interest rate method are still measured on an accruals
basis and the gain or loss excluding accrued interest is recognized in profit or loss under the line item “gains or losses on financial instruments at fair value through profit or loss”.
The prospective test is used to check that the financial characteristics of the hedged item and the hedging instrument are the same.
The retrospective test is used to check whether the hedge
implemented remains effective on different reporting dates.
On each reporting date, changes in the fair value of hedging
Organized markets
Other
Over-the-counter
Interest rate swaps
Currency swaps
instruments, excluding accrued interest, are compared with
those of hypothetical assets and liabilities (synthetic instruments representing assets and liabilities to be hedged at the
risk-free rate). The ratio of their respective changes should be
between 80% and 125%.
If the hedging relationship is discontinued (e.g. the hedging instrument is sold) or the hedge is no longer effective, hedge
accounting is discontinued prospectively.The hedging instrument
is reclassified as held for trading and adjustments to the value of
the hedged item are amortized to profit or loss on a straight-line
basis over the shorter of the term of the derivative and the residual term of the previously hedged item. In the case of early
repayment of the hedged item, the changes in value are recognized immediately.
Documentation of a hedging relationship includes the items
concerned (hedged item and hedging instrument), the hedging
strategy (risk hedged, type of hedge accounting used) and detail
of effectiveness tests (frequency, results, etc.).
12/31/2005 EU IFRS
01/01/2005 EU IFRS
Notional amount
Assets
Liabilities
Assets
Liabilities
14,917
117
359
294
501
0
(7)
0
0
0
0
(7)
0
0
0
14,917
125
359
294
501
10,600
99
346
248
444
4,316
25
14
46
57
Options
3
3
0
9
3
Organized markets
0
0
0
0
0
Over-the-counter
3
3
0
9
3
Swaptions
1
0
0
0
0
Other
2
3
0
9
3
0
0
0
0
0
14,920
121
359
303
504
Credit derivatives
Total
2005 ANNUAL REPORT
V.2.3 - Assessing hedge effectiveness
V.2.4 - Credit derivatives
The effectiveness of a hedge is assessed at inception of the hedging relationship and through its life both prospectively and
retrospectively at least half-yearly. The retrospective test is used
to check whether changes in the value of the hedging instrument
and the hedged item are within the accepted range of 80% 125%. The prospective test is not necessarily quantified and
covers the residual term of the hedging relationship.
Credit derivatives are not considered to be financial guarantees.
Accordingly, credit default swaps are classified as derivatives
governed by the provisions of IAS 39. Credit link notes are
hybrid instruments containing a host contract and embedded
derivative.
Assessing the effectiveness of a fair value hedge involves creating
a synthetic asset (or liability) to eliminate the effect of the unhedged components of market value (interest margin and liquidity).
The effectiveness test compares changes in fair value of the synthetic asset (or liability) with those of the hedging instrument.
As required by IFRS 1, hedging relationships existing at
December 31, 2004 have been recognized at the transition date
of January 1, 2005, save for those not permitted under IFRS such
as hedges of held-to-maturity securities.
05
The embedded derivative is measured in the same way as a simple derivative. If there is no active market, embedded derivatives
are measured using an internal model.
V.2.5 - Internal contracts
Given the structure of the Banque Populaire Group, many of the
hedging instruments used by the Banque Populaire banks are
contracted with Natexis Banques Populaires. To ensure that
these contracts qualify as hedges on a consolidated level, Natexis
Banques Populaires ensures that the transactions are turned
around correctly in the market in terms of notional amount and
sensitivity, on an index-by-index and currency-by-currency basis
and for each maturity band.
This rule only applies to futures and forward contracts.
Accordingly, all internal option-based contracts are recognized at
fair value through profit or loss, even if they qualify as hedges in
the separate financial statements.
The tables below show a breakdown of the excess of external
derivatives over internal derivatives, expressed in sensitivity and
notional amount.The notional amount of internal contracts turned
around in the market was B22,225 million at December 31, 2005.
Maturity
Sensitivity
Under
1 month
1-3
months
3-6
months
6 months
to 1 year
1-3
years
Over
3 years
Total
12
79
64
233
715
4,192
5,295
US dollar
1
8
10
18
118
448
603
Pound sterling
0
-
0
4
6
42
53
Swiss franc
-
0
-
0
0
20
20
13
87
73
255
839
4,703
5,971
Euro
Total
Maturity
Notional amount
Euro
US dollar
Pound sterling
Swiss franc
Total
Under
1 month
1-3
months
3-6
months
6 months
to 1 year
1-3
years
Over
3 years
Total
31,919
53,587
23,882
42,282
47,432
71,794
270,895
4,962
7,531
3,309
3,108
7,386
8,731
35,027
108
-
587
781
308
759
2,544
-
129
-
18
5
320
472
36,989
61,246
27,778
46,189
55,131
81,605
308,938
155
V.3 - Available-for-sale financial
assets
Available-for-sale financial assets are non-derivative financial
assets that are not classified as loans and receivables, held-tomaturity investments or financial assets at fair value through profit or loss. In the Group’s case, they mainly comprise fixed-income
securities or variable income securities (equities).
At initial recognition, available-for-sale financial assets are measured at fair value. Discounts are not recognized at inception as the
purchase price is presumed to be the market price. Fair value is
determined on the basis set out in note V.1.
Fair value at initial recognition is the purchase price plus directly
attributable transaction costs (brokerage, commissions paid to
stockbrokers, stock exchange tax) and accrued interest. As the
transaction costs on these securities are not material, they are
recognized immediately as an expense.
On subsequent reporting dates, available-for-sale financial assets are
remeasured at fair value and any changes recognized in equity,
other than interest and amortization of premiums/discounts on
fixed-income securities, which are recognized through profit or loss.
assets”. Once an impairment loss has been recognized in respect
of an equity instrument, all additional impairment losses are
recognized in profit or loss. Impairment losses are reversed in
equity.
Unrealized losses on fixed-income securities are recognized as
provisions (impairment charges and other credit provisions in
the income statement) as the provision can be reversed in
profit or loss if the value of the security increases in a subsequent
period.
Available-for-sale financial assets that are part of a interest rate
hedging relationship are measured at fair value and any changes
attributable to the hedged risk recognized in profit or loss.This
does not affect the actuarial deferral of the premium or
discount, nor the recognition of interest in the case of fixedincome securities.
12/31/2005
01/01/2005
EU IFRS
EU IFRS
Outstanding loans
0
0
Loans and receivables
0
0
Other
0
0
In the case of variable income securities, the entire change in fair
value is recognized in equity.
Accrued interest
0
0
29,920
28,837
Fair value for listed securities is their market price on the reporting date. Fair value for unlisted securities is determined using
price/earnings or discounted cash flow models.
Fixed income
24,690
24,056
5,020
4,541
Available-for-sale financial assets are assessed for objective
evidence of impairment on each reporting date. Impairment losses are incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after initial recognition of the asset. The definition of objective evidence of
impairment is the same as that used for loans. Two additional
indicators are used in the case of equity instruments: negative
effects due to the technological, legal or economic environment
and, more importantly, a significant and prolonged decline in the
fair value of an equity instrument below its cost.
Impairment tests are conducted when the following conditions
are met:
n fair value has fallen below cost for a period of six consecutive
months;
n the value loss is at least 25%.
Where there is objective evidence of impairment, including prolonged impairment for variable income securities, the cumulative
loss that had been recognized in “unrealized or deferred gains or
losses” is removed from equity and recognized in profit or loss.The
amount of the impairment loss is equal to the difference between
purchase cost (net of any principal repayment and amortization)
and the recoverable amount. Recoverable amount is the net present value of expected future future cash flows discounted at the
market interest rate in the case of fixed-income securities, and fair
value on the reporting date for variable income securities.
Impairment losses are recognized in net banking income under
the line item “net gains/(losses) on available-for-sale financial
2005 ANNUAL REPORT
Securities
Variable income
(1)
Accrued interest
Total
210
240
29,920
28,837
(1) Variable income securities traded on an active market amounted to €430 million at
December 31, 2005.
V.4 - Loans and advances to banks
and customers
V.4.1 - General rules
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market.
All the regional banks’ loans and advances to customers are classified as loans and receivables, including portfolios of loans
acquired. All loans and advances to banks are classified as loans
and receivables.
At initial recognition, loans are measured at their fair value,
which is the nominal amount of the loan less any discount and
transaction income plus transaction costs.
If a loan is granted at a below market interest rate, a discount
equal to the difference between the nominal value of the loan
and the sum of future cash flows discounted at the market rate
is deducted from the nominal value of the loan. Market rate is
the rate practised by the large majority of banks in the market
place at a given time for instruments and counterparties with
similar characteristics. Amounts recognized by the Group as
discounts were not material at January 1, 2005 and December
31, 2005.
After initial recognition, loans and receivables are measured at
amortized cost using the effective interest method.
effective interest rate. For short-term assets with a maturity
of less than one year, future cash flows are not discounted and
impairment losses are assessed on an overall basis with no
distinction between interest and principal.
Internal costs included in the effective interest rate comprise
variable costs directly incurred in granting the loans.The Banque
Populaire Group has adopted a restrictive position whereby only
the performance-related component of account managers’
salary directly contingent upon granting loans is included in the
effective interest rate. No other internal costs are included.
Movements in impairment losses are recognized in profit or loss
under the line item “impairment charges and other credit provisions”.
External costs principally comprise fees and commissions paid to
outside business introducers.
Specific impairment
Transaction income is income directly attributable to the origination of new loans and principally comprises set-up fees charged
to customers, rebilled costs and commitment fees (if it is more
probable than improbable that the loan will be drawn down).
Fees received in respect of financing commitments that will not
give rise to a drawdown are deferred on a straight-line basis over
the term of the commitment.
Expenses and income arising on loans with an initial term of less
than one year at inception are deferred on a pro rata basis with
no recalculation of the effective interest rate. For variable or
revisable rate loans, the effective interest rate is recalculated at
each repricing date. Changes in future cash inflows or outflows
are accounted for using the “catch-up” method, which involves
maintaining the original effective interest rate at inception of the
contract and recognizing immediately in profit or loss the difference between the carrying amount and the value obtained
using discounted cash flow.
The fair value of loans and advances to banks and customers is
determined on the basis of discounted future cash flows.The discount rate used is the market rate on the reporting date. If there
is a quoted price that meets the criteria of IAS 39, the quoted
price is used.
The fair value of loans with an initial term of less than one year
is deemed to be their carrying amount.
V.4.2 - Impairment of loans and receivables
IAS 39 defines the method of recognizing and measuring impairment losses.
A loan or receivable is deemed to be impaired if the following
two conditions are met:
n there is objective evidence of impairment on an individual or
collective basis as a result of one or more events that occurred
after the initial recognition of the asset (a “loss event”);
n the loss event (or events) has an impact on the estimated
future cash flows of the financial asset that can be reliably estimated.
The impairment loss is equal to the difference between amortized cost and the recoverable amount, which is the net present
value of future cash flows estimated to be recoverable taking
account of any available collateral, discounted at the original
05
IAS distinguishes between two types of impairment:
n
n
specific impairment;
collective impairment.
Specific impairment is calculated on a loan by loan basis according to a schedule of future cash flows, and determined according to historical loss experience for the category of loan
concerned. Guarantees reduce the amount of the impairment
and when a loan is fully guaranteed, no impairment charges are
recognized.
Collective impairment
If there is no objective evidence of impairment for an individually
assessed financial asset, the asset is included in a group of financial assets with similar credit risk characteristics and collectively
assessed for impairment in accordance with IAS 39.
The method used by the Group is largely based on the internal
ratings system implemented as part of the Basel II reform, crossapplied to three portfolios (personal/small business/corporate)
and three risk types (pre-default/performing in default/industry).
The breakdown by portfolio is based on the segmentation
recommended under Basel II and performing loans are grouped
into portfolios with similar risk characteristics.
For collective assessment purposes, assets have been divided
into three risk groups:
n Loans classified in the two lowest risk rating categories with a high
probability of default: these loans, which are identified in the
management systems by a special rating, present objective evidence of deterioration, mostly in the form of payment arrears.
Most of these loans are for small amounts and the impairment
charge is based on future expected loss rates calculated using
the future Mac Donough ratio models.
n Loans in default according to Basel II but deemed performing
under accounting standards: some loans do not fulfil the criteria
for individual impairment assessment, but they are nonetheless
considered to be “in default” from a prudential standpoint. In this
case, a collective impairment provision is determined by applying
the expected loss rate used for the purpose of calculating the
future McDonough ratio, to the principal outstanding for all loans
in the Group.
Industry and country exposure determined according to a combination of quantitative and qualitative criteria: objective evidence of
impairment is based on in-depth analysis and monitoring of business sectors and countries. It typically arises from a combination
of micro or macroeconomic factors specific to the industry or
country.
n
157
When a group of financial assets is found to be impaired, the
impairment charge is calculated on the basis of expected losses,
as required by the Basel II accord.
However, under Basel II, the expected losses are based on the
probability of default over a one-year horizon. The Group has
adapted the calculation method to take account of the probability of default over the maturity of the loans concerned.
The Group uses its experienced judgement to adapt the results
of this model to its real perceived risk.
V.4.3 - Loans and advances to banks
Notes
12/31/2005
EU IFRS
01/01/2005
EU IFRS
V.4.3.1
55,745
39,552
Performing loans
Performing loans
(47)
(58)
55,697
39,494
108
109
Specific impairment
(61)
(60)
46
49
55,744
39,543
Net
Net (1)
Total
(2)
(1) Impairment losses accounted for 56% of total non-performing loans at December 31, 2005 against 55% at January 1, 2005.
(2) At December 31, 2005, the fair value of loans and advances to banks, determined in accordance with note V.4, was €55,730 million.
V.4.3.1 - Performing loans and advances to banks
Performing loans and advances to banks mostly comprise repurchase agreements.
Under IFRS, repurchase agreements are treated in the same way as in the separate financial statements, except that securities sold must
be identified by the vendor as the counterparty has the option to sell them on again or keep them as collateral.
The purchaser recognizes the nominal value of the receivable under loans and receivables.The amount disbursed in respect of the asset
is recognized under “securities bought under repurchase agreements”.
12/31/2005
EU IFRS
01/01/2005
EU IFRS
12,182
8,769
3,456
2,054
14
0
39,341
28,365
Other
301
115
Accrued interest
450
249
55,745
39,552
Loans and advances
Current accounts in debit
Reverse repos
Total
2005 ANNUAL REPORT
05
V.4.4 - Loans and advances to customers
Notes
12/31/2005
IFRS-EU
01/01/2005
IFRS-EU
V.4.4.1
145,547
128,521
(749)
(691)
(57)
(54)
144,740
127,776
5,782
5,626
(3,919)
(3,930)
Performing loans
Performing loans
Impairment of securities
Net
Specific impairment
Net
1,863
1,696
146,603
129,472
Notes
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Lease financing
V.4.4.2
8,681
8,195
Other loans and receivables
V.4.4.3
115,283
99,588
Current accounts in debit
8,454
7,527
2,931
2,958
Reverse repos
5,469
6,569
Factoring
3,469
2,683
Other
599
456
Accrued interest
661
545
145,547
128,521
(1)
Total (2)
(1) Impairment losses accounted for 68% of total non-performing loans at December 31, 2005 against 70% at January 1, 2005.
(2) At December 31, 2005, the fair value of loans and advances to customers, determined in accordance with note V.4, was €148,327 million.
V.4.4.1 - Performing loans and advances to customers
Total (1)
(1) At December 31, 2005, the fair value of performing loans and advances to customers, determined in accordance with note V.4, was €147,214 million.
V.4.4.2 - Lease financing
Leases are classified as finance leases when substantially all the
risks and rewards incidental to legal ownership are transferred
by the lessor, otherwise they are classified as operating leases.
the leased assets are of such a specialized nature that only the
lessee can use them without major modifications.
n
IAS 17 also describes three indicators that could also lead to a
lease being classified as a finance lease:
if the lessee can cancel the lease, the lessor’s losses associated
with the cancellation are borne by the lessee;
IAS 17 gives five examples of situations that lead to a lease being
classified as a finance lease:
n
n the lease transfers ownership of the asset to the lessee by the
end of the lease term;
n gains or losses from the fluctuation in the fair value of the residual
accrue to the lessee;
the lessee has the option to purchase the asset at a price that
is expected to be sufficiently lower than the fair value at the date
the option becomes exercisable for it to be reasonably certain,
at the inception of the lease, that the option will be exercised;
the lessee has the ability to continue the lease for a secondary
period at a rent that is substantially lower than the market rent.
n
n the lease term is for the major part of the economic life of the
asset;
at the inception of the lease, the present value of the minimum
lease payments amounts to at least substantially all of the fair
value of the leased asset;
n
n
Finance leases are recognized in the balance sheet in an amount
equal to the payments due under the contract discounted at the
interest rate implicit in the lease plus any unguaranteed residual
value accruing to the lessor.As required by IAS 17, unguaranteed
residual values are reviewed on a regular basis.At December 31,
2005, the unguaranteed residual value accruing to the lessor
amounted to B206 million.
159
reflecting a constant period rate of return on the net investment
in the finance lease, using the interest rate implicit in the lease.
If there is a reduction in the estimated unguaranteed residual
value, the income allocation over the lease term is revised. Any
reduction in respect of amounts accrued is recognized immediately in profit or loss and any reduction in respect of future amounts
is recognized by revising the interest rate implicit in the lease.
The interest rate implicit in the lease is the discount rate that:
at the inception of the lease, causes the aggregate present
value of the minimum lease payments;
n
Impairment charges for finance leases are determined using the
same method as that described for loans and receivables.
the unguaranteed residual value to be equal to the sum of the
fair value of the leased asset and any initial direct costs of the
lessor.
n
Finance income corresponding to interest is recognized in the
income statement under “interest income” based on a pattern
V.4.4.2.1 - Finance leases
Finance lease outstandings
12/31/2005 EU IFRS
01/01/2005 EU IFRS
Real estate
Equipment
TOTAL
Real estate
Equipment
TOTAL
5,198
3,482
8,681
5,025
3,169
8,195
88
62
150
104
62
166
Net non-performing leases (1)
Non-performing leases
130
99
229
155
95
250
Impairment
(42)
(37)
(79)
(52)
(33)
(84)
5,286
3,544
8,830
5,129
3,231
8,360
Total (2)
(1) Impairment losses covered 35% of non-performing leases at December 31, 2005 against 34% at January 1, 2005.
(2) At December 31, 2005, the fair value of performing finance leases, determined in accordance with note V.4, was €8,782 million.
V.4.4.2.2 - Residual maturity of finance leases
Residual maturity
Under 1 year
1 to 5 years
Over 5 years
Not allocated
TOTAL
1,022
3,775
3,140
0
7,938
396
2,518
2,494
Finance leases
Gross investment
Net present value of minimum
lease payments
Unearned finance income
0
5,408
578
578
Contingent lease payments recognized
////////
////////
////////
0
0
Provisions for unrecoverable minimum
lease payments
////////
////////
////////
3
3
2005 ANNUAL REPORT
05
V.4.4.3 - Other loans and advances to customers
Other loans and advances to customers amounted to B115,283 million against B99,588 million at January 1, 2005:
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Commercial loans
3,624
3,513
Export credits
1,206
1,145
24,299
20,087
Cash loans and consumer credit
Equipment loans
33,827
30,119
Home purchase loans
44,081
38,764
Other
8,247
5,960
Total
115,283
99,588
V.5 - Held-to-maturity financial
assets
These are non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Banque Populaire
Group has the positive intention and ability to hold to maturity,
other than those that are designated at initial recognition as at
fair value through profit or loss, those designated as available for
sale and those that meet the definition of loans and receivables.
At initial recognition, they are measured at fair value including
transaction costs. After initial recognition, they are measured at
amortized cost using the effective interest method.They are tested for impairment on each reporting date and where necessary
an impairment loss recognized through profit or loss under the
line item “impairment charges and other credit provisions”.
In the Banque Populaire Group’s case, this category is only used
for fixed-income securities representing insurance company
investments.
12/31/2005
EU IFRS
01/01/2005
EU IFRS
6,898
5,748
0
0
6,898
5,748
Cost
1
0
Impairment
0
0
1
0
6,899
5,748
Bonds
Cost
Impairment
Net
Other
Net
Total (1)
(1) At December 31, 2005, the fair value of held-to-maturity securities, determined in accordance with note V.4, was €6,937 million.
161
V.6 - Deferred income tax assets and liabilities
Deferred taxes arise on temporary differences existing in the separate financial statements between the book value and the tax base
of assets and liabilities carried on the balance sheet or on specific consolidation adjustments. They are calculated using the liability
method based on future applicable tax rates.
The net deferred income tax balance recognized in the balance sheet as either deferred income tax assets or liabilities, arises principally from the following sources:
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Main sources of deferred income taxes (1)
Flow-through entities
(430)
(450)
Leasing reserve
(562)
(618)
Elimination of equalization reserve
(246)
(187)
Financial instruments at fair value through equity
(908)
(747)
Other financial instruments at fair value
(215)
(125)
Provisions for employee benefits
917
938
Provisions for regulated savings schemes
306
299
Other non-deductible provisions
1,199
1,151
Ordinary and evergreen tax loss carryforwards
232
310
Amortized cost of loans
275
243
Unrealized gains on mutual funds
115
70
(2)
Other temporary differences
9
6
Total sources of deferred income taxes, gross
692
890
Unrecognized sources of deferred tax assets
(374)
(422)
Total sources of deferred income taxes, net
318
468
136
215
4
10
Recognized deferred tax assets
Deferred taxes at standard rate
Deferred tax liabilities
Deferred taxes at reduced rate
Total recognized deferred taxes
Including
- deferred tax assets
- deferred tax liabilities
- deferred taxes of associates
(1) Positive amounts correspond to sources of deferred tax assets and negative amounts to sources of deferred tax liabilities.
(2) Including collective impairment and the impact of discounting specific impairment charges.
2005 ANNUAL REPORT
(2)
(10)
138
215
682
(536)
(8)
767
(548)
(4)
V.7 - Other assets and liabilities
Other assets and liabilities correspond to technical accounts,
details of which are given below.
The line item deferred income and accrued charges includes
“Day One Profit or Loss” (DOPL). Under IFRS, if a financial
instrument is not quoted in an active market, its fair value is
based either on data from recent similar transactions in the
market or on internal measurement models. The December
05
2004 amendment to IAS 39 “Financial Instruments: recognition and measurement” endorsed by the European Commission on October 25, stipulates that if an internal
measurement model is used, a gain or loss (DOPL) may only
be recognized at inception if the internal model is based on
observable market data. Otherwise the gain or loss is deferred
over the term of the transaction. At December 31, 2005, the
amount of deferred DOPL carried in the balance sheet
amounted to B1.2 million.
Assets
Notes
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Sundry assets
V.7.1.1
3,036
2,375
Accrued income and prepaid expenses
V.7.2.1
4,107
3,384
Accrued income and prepaid expenses - insurance companies
V.7.3.1
Total
1,010
861
8,152
6,621
Liabilities
Notes
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Sundry liabilities
V.7.1.2
6,446
5,907
Deferred income and accrued charges
V.7.2.2
5,064
4,666
Deferred income and accrued charges - insurance companies
V.7.3.2
1,008
196
12,517
10,769
12/31/2005
EU IFRS
01/01/2005
EU IFRS
0
4
32
74
Total
V.7.1 - Sundry assets and liabilities
V.7.1.1 - Sundry assets
Securities settlement accounts
Real estate development
Other assets
547
146
2,444
2,141
14
10
3,036
2,375
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Amounts due on securities
1,955
1,775
Sundry payables
4,025
3,728
Other receivables
Accrued interest
Total
V.7.1.2 - Sundry liabilities
Securities settlement accounts
Other
Accrued interest
Total
86
44
305
284
74
75
6,446
5,907
163
V.7.2 - Accruals and prepayments
V.7.2.1 - Accrued income and prepaid expenses
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Collection accounts
792
597
Adjustment accounts
41
2
Prepaid expenses
74
80
Accrued income
677
707
6
5
Other
2,517
1,994
Total
4,107
3,384
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Collection accounts
504
747
Adjustment accounts
12
453
Deferred charges
V.7.2.2 - Deferred income and accrued charges
Deferred income
988
866
1,056
1,052
1
0
Other
2,502
1,548
Total
5,064
4,666
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Accrued expenses
Day one profit and loss
V.7.3 - Accruals and prepayments - insurance companies
V.7.3.1 - Accrued income and prepaid expenses - insurance companies
Reinsurers’ share of technical reserves
272
263
Insurance receivables
459
393
Reinsurance receivables
49
49
Accrued premium income
134
129
Deferred acquisition costs
18
20
Other
79
6
Total
1,010
861
12/31/2005
EU IFRS
01/01/2005
EU IFRS
V.7.3.2 - Deferred income and accrued charges - insurance companies
Insurance liabilities
145
101
Reinsurance liabilities
75
76
Cash deposits received from reinsurers
29
14
Other
759
4
Total
1,008
196
2005 ANNUAL REPORT
V.8 - Investment property
IAS 40 defines investment property as property held to earn
rentals or for capital appreciation or both.
As is the case for property, plant & equipment (see note V.9),
investment property is recognized as an asset when it meets the
following conditions:
n it is probable that the future economic benefits associated with
the investment property will flow to the entity;
n
the cost of the investment property can be measured reliably.
05
Investment property is measured in the same way as property,
plant & equipment (cost less accumulated depreciation and impairment losses) by all Group entities except the Natexis Assurances
sub-group, which measures its investment properties at fair value
with changes in fair value recognized through profit or loss.
Investment property leased under an operating lease may have a
residual value that will reduce the depreciable amount of the asset.
Gains or losses on disposal of investment properties are recognized in profit or loss under the line item “net income or expenses on other activities”.
12/31/2005 EU IFRS
01/01/2005 EU IFRS
Cost
Depreciation &
impairment
Net
Cost
Depreciation &
impairment
Net
Fair value (1)
549
////////
549
470
////////
470
Cost
973
(368)
605
921
(335)
585
1,522
(368)
1,154
1,391
(335)
1,055
Investment property
Total (2)
(1) Insurance company investments. Changes in fair value give rise to the symmetrical recognition of a deferred participation reserve equal, on average, to 92% of the base concerned.
(2) The fair value of investment property is obtained by capitalizing the rental income at the market yield:
Fair value of investment property
Operating leases
Finance leases - TUP *
12/31/2005 EU IFRS
Cost
Fair value
478
642
24
24
Other
652
670
Total
1,154
1,336
* TUP: Temporarily unlet properties.
165
V.9 - Property, plant & equipment
This item includes owner-occupied property, equipment owned
and used in the business, equipment let under operating leases,
property acquired under finance leases and assets temporarily
unlet under finance leases, and interests in non-trading real estate
companies (SCIs).
In accordance with IAS 16 and IAS 38, property, plant & equipment and intangible assets are recognized as assets only if they
meet the following conditions:
it is probable that the future economic benefits associated with
the asset will flow to the entity;
n
n
the cost of the asset can be measured reliably.
In accordance with IFRS1, the Group has elected not to measure
these assets at fair value in the 2004 opening balance sheet.They
have been maintained at cost, which is defined as the purchase
price plus directly attributable transaction expenses (transfer
duties, fees, commissions and registration expenses). Borrowing
costs are not capitalized.
Internally-generated computer software is measured in accordance with IAS 38. Expenses incurred during the development
phase are only recognized as intangible assets if they meet the
six conditions set out by IAS 38. Expenses incurred during the
research phase are recognized as expenses when they are
incurred.
A specific deprecation schedule is drawn up for each significant
component of an item of property, plant and equipment which
has a different useful life or rate of consumption of future economic benefits than the item as a whole. Useful life is not necessarily the same as the depreciation period for tax purposes, nor
the asset’s economic life.
The following significant components and depreciation periods
have been identified:
Component
Depreciation period
Land
N/A
Indestructible elevations
N/A
Walls, roof, waterproofing
20 - 40 years
Foundations, framework
30 - 60 years
External rendering
10 - 20 years
Equipment and installations
10 - 20 years
Internal fixtures and fittings
8 - 15 years
Other items of property, plant and equipment are depreciated
over their estimated useful life, which ranges from 5 to 10 years.
The depreciable amount of each component is cost less residual
value. Residual value is the present value of the asset at the end
of its estimated useful life. The Group does not believe it can
reliably measure the residual value of items other than land
and indestructible elevations. They are therefore assigned a nil
residual value.
2005 ANNUAL REPORT
Intangible assets with a finite useful life are amortized on a
straight-line basis over their estimated useful life, which may not
exceed eight years in the case of software. Amortization begins
as soon as the asset is ready for use. No residual value is assigned.
Intangible assets with an indefinite useful life, including purchased
goodwill, are not amortized but tested for impairment at least
once a year. Leasehold rights are amortized on a straight-line
basis over the residual term of the lease (with no extension) and
tested for impairment compared by comparing the net present
value of market rents and actual rents.
The charge to depreciation or amortization is recognized in the
income statement under the heading “depreciation, amortization
and provisions for impairment of property, plant and equipment
and intangible assets”.
In accordance with IAS 36, assets are assessed for objective evidence of impairment based on external indicators (decline in
activity, sharp increase in rates) or internal indicators (obsolescence, wear & tear, restructuring, discontinuation of activity) at
the interim and year-end reporting dates. Impairment testing
consists of estimating the recoverable amount of an asset, which
is the higher of fair value less costs to sell and value in use.Value
in use is the present value of future cash flows expected to be
derived from continuing use of the asset.
The recoverable amount is estimated on an asset by asset basis,
but not allocated to components of an asset.
Impairment losses are recognized in the income statement
under the heading “depreciation, amortization and provisions for
impairment of property, plant and equipment and intangible
assets”.They may be reversed if conditions change (e.g. evidence
of impairment no longer exists). Impairment losses are deducted
from the depreciable or amortizable amount of the asset and
therefore have an impact on the future depreciation or amortization schedule.
Gains or losses on the sale of property, plant & equipment or
intangible assets are recognized in the income statement under
the heading “gains or losses on other assets”.
Assets held under finance leases (Group as lessee) are recognized in the consolidated balance sheet under property, plant &
equipment if their amount is material. At inception of the lease,
they are measured at the lower of fair value or the net present
value of minimum future lease payments.
These assets are depreciated over the same period as other
assets in the same category. Assets leased under operating leases
are recognized as assets on the balance sheet as property, plant
& equipment.
05
V.9.1 - Property, plant & equipment and intangible assets
12/31/2005 EU IFRS
Cost
Depreciation
amortization &
impairment
3,623
Assets held under finance
leases
Buildings
Other
Owned assets
Net
Cost
(1,921)
1,702
3,579
Depreciation
amortization &
impairment
Net
(1,807)
1,772
168
(99)
69
168
(89)
79
168
(99)
69
168
(89)
79
0
0
0
0
0
0
1,633
3,411
3,455
Shares in non-trading real estate
companies
01/01/2005 EU IFRS
(1,822)
(1,718)
1,693
59
0
59
91
0
91
206
(3)
203
233
(3)
230
Buildings
1,325
(626)
699
1,153
(557)
596
Other
1,865
(1,193)
672
1,934
(1,158)
777
788
(502)
286
727
(494)
234
Leasehold rights
186
(107)
79
167
(100)
67
Software
483
(363)
121
433
(342)
91
Other
119
(32)
87
127
(52)
76
4,411
(2,423)
1,989
4,306
(2,301)
2,005
Land
Intangible assets
Total
V.9.2 - Movements in property, plant & equipment and intangible assets during the year
Assets held under finance
leases
Buildings
Other
Owned assets
Shares in non-trading real estate
companies
Cost
01/01/2005
Increase
3,579
412
Decrease and Change in scope
other disposals of consolidation
(383)
(19)
Exchange
differences
Other
Cost
12/31/2005
2
32
3,623
168
0
0
0
0
0
168
168
0
0
0
0
0
168
0
0
0
0
0
0
0
3,411
412
(383)
(19)
2
32
3,455
91
2
(1)
(32)
0
0
59
233
7
(32)
1
0
(2)
206
Buildings
1,153
132
(115)
(12)
0
166
1,325
Other
1,934
272
(235)
24
2
(132)
1,865
727
113
(64)
6
2
4
788
167
2
(5)
21
0
0
186
Land
Intangible assets
Leasehold rights
Software
433
59
(24)
(16)
2
30
483
Other
127
52
(35)
1
0
(26)
119
4,306
525
(446)
(13)
4
36
4,411
Total
167
“Private Equity and Wealth Management”, “Receivables
Management”, “Services” and “Other Businesses”, which themselves form CGUs for the purpose of impairment testing.
V.10 - Goodwill
V.10.1 - Accounting treatment
Goodwill is maintained in the balance sheet at its historic value
in the currency of origin and translated into euros at the yearend rate. Adjustments to goodwill are made within twelve
months of the date of acquisition.
Negative goodwill is recognized immediately in the income statement under “Changes in value of goodwill”.
Goodwill is not amortized but tested for impairment whenever
there is objective evidence that its value may be impaired, using
the discounted cash flow method.
V.10.2 - Impairment testing
For the purpose of impairment testing, goodwill is allocated to
cash-generating units (CGUs).The Group’s CGUs correspond to
the segments defined for the purpose of segment reporting (see
note IX.):
n “Retail Banking”, which principally comprises the 21 Banque
Populaire banks and Crédit Maritime Mutuel,
“Federal Activities”, which principally comprises the activities of
Banque Fédérale (and international retail banking activities
conducted by the direct subsidiaries of Banque Fédérale des
Banques Populaires),
n
n “Financing, Investment Banking and Services” represented by
Natexis Banques Populaires and grouped into the following core
businesses: “Corporate and Institutional Banking and Markets”,
The impairment loss is equal to the difference between the carrying
amount of a CGU (which includes a portion of goodwill) and its recoverable amount, defined as the higher of fair value and value in use.
When the recoverable amount is lower than the carrying
amount, an irreversible impairment loss is recognized in profit or
loss and charged first against the goodwill allocated to the CGU
and then against other identifiable assets in proportion to their
carrying values.
At December 31, 2005, goodwill amounted to a total of B586
million, including B556 million (96% alllocated to three Natexis
Banques Populaires core businesses: Receivables Management
(B447 milion), Corporate and Institutional Banking and Markets
(B59 million) and Services (B50 million).
Save for exceptions, the value in use of the Natexis Banques
Populaires CGU has been determined on the basis of future
annual free cash flows discounted to perpetuity. Future cash
flows have been estimated on the basis of the medium-term
business plan (2006-2008) and after 2008, on a constant perpetual growth rate of 2%, which is equal to the average expected
inflation rate over an extremely long-term horizon.
The discount rate used is based on recent stock market data. It
represents the projected average rate of return on listed stocks
in the sector concerned, based on their current market value,
their expected results over the next few years and an extrapolation into perpetuity based on a constant growth rate of 2%.
01/01/2005 EU IFRS
12/31/2005 EU IFRS
Opening
value
Acquisitions
Exchange
differences
Closing
value
436
3
439
20
20
Net values per CGU
Coface Group
Volksbang International AG
Natexis Assurances
39
31
39
Natexis Bail
12
12
Coficiné
9
9
Natexis Factorem
6
6
Natexis Intertitres
6
6
5
Other
18
2
Total
556
25
2005 ANNUAL REPORT
36
20
5
586
V.11 - Deposits from banks and
customer deposits
Deposits from banks and customers deposits are presented by
nature and divided into demand or time deposits.They are measured in accordance with IAS 39 as other financial liabilities using
the amortized cost method.
At initial recognition, these liabilities are measured at fair value,
which corresponds to market rates for the Group.
Accordingly, no discount or premium is recognized at inception. For liabilities with an initial maturity of more than one
year, fair value includes transaction costs if they are material.
05
After initial recognition, deposits are measured at amortized
cost, which consists of reducing the liability by the amount of
repayments. Accrued interest is recognized in profit or loss
under the heading “interest expense” whether or not the liability is hedged.
The fair value of deposits from banks and customer deposits is
calculated by discounting future cash outflows at the market rate
on the reporting date. If a quoted price is available that meets
the criteria of IAS 39, the quoted price is used.
The fair value of liabilities with an initial maturity of less than one
year and variable-rate liabilities corresponds to the carrying
amount.
V.11.1 - Deposits from banks
Deposits from banks and customer deposits are deemed to be made at market rates. Accordingly, no discount is recognized.
Repurchase agreements and pledged securities are accounted for in the same way as in the separate financial statements. Securities
sold or pledged are not derecognized by the vendor or pledgor as the risks and rewards have not been transferred.
Current accounts in credit
Accounts and deposits
Demand
Time
Pledged securities
Demand
Time
Repurchase agreements
Demand
Time
Other liabilities
Accrued interest payable
Total (1)
12/31/2005
EU IFRS
01/01/2005
EU IFRS
4,200
2,759
15,505
11,936
2,352
2,372
13,153
9,565
999
1,576
25
17
974
1,559
39,064
27,690
0
0
39,064
27,690
997
749
512
273
61,277
44,984
(1) The fair value of deposits from banks at December 31, 2005 was €61,779 million.
169
V.11.2 - Customer deposits
Customer deposits amounted to B104,483 million at December 31, 2005 against B97,878 million at January 1, 2005.The increase was
principally due to growth in demand deposits and special savings accounts.
12/31/2005
EU IFRS
Current accounts in credit
Demand
Time
Accounts and deposits
01/01/2005
EU IFRS
47,333
41,641
38,141
33,745
9,193
7,896
681
630
Demand
218
116
Time
463
514
125
67
125
67
0
0
16,112
17,297
Pledged securities
Demand
Time
Demand
Time
Special savings accounts
Factoring liabilities
3,500
5,731
12,612
11,566
38,057
36,256
385
339
1,096
1,004
Other
693
645
Total
104,483
97,878
(1)
(1) The fair value of customer deposits (see note V.10) at December 31, 2005 was €105,197 million.
V.12 - Debt securities
Debt securities (interest-bearing notes, interbank market instruments etc.) are broken down by nature. They do not include
subordinated debt, which is identified separately.
Debt securities are measured at fair value on inception, i.e. at
their issue price less transaction costs, and subsequently measured at amortized cost using the effective interest rate method.
No internal income or expenses are included in the effective
interest rate.Transaction costs include external expenses where
they are material. Debt securities are issued at market rates and
no market discount is recognized.
Interbank market instruments
Money market instruments
Premiums and discounts representing the difference between the
issue price and the redemption price are included in the calculation of the effective interest rate.The discount is deferred on an
actuarial basis and released to income under net banking income.
Accrued interest on debt securities is recognized in profit or loss
and recorded in an accrued interest account in the balance sheet.
The fair value of variable-rate debt securities is equal to their carrying amount on the balance sheet.
Fixed-rate debt securities are discounted using the fixed-rate
available in the market on the reporting date (excluding spread)
for a liability with the same residual maturity.
12/31/2005
EU IFRS
01/01/2005
EU IFRS
52
0
42,199
35,188
MTNs
11,752
9,480
CDs
30,447
25,708
5,563
4,961
Other debt securities
931
1,098
345
291
49,090
41,538
Bonds
Total
(1)
(1) The fair value of debt securities in issue at December 31, 2005 was €49,246 million.
2005 ANNUAL REPORT
V.13 - Insurance company technical
reserves
correspond to the estimated cost of all reported claims not yet
settled on the reporting date, plus a provision for unreported
claims calculated on a statistical basis.
Insurance companies cover their liabilities towards policyholders
by building up technical reserves calculated on a statistical basis:
n
– Life insurance reserves which correspond to total premiums
received, plus investment income distributed to policyholders,
less benefits paid. They also include a reserve to cover future
administration costs.
Deferred participation reserves represent the share of
investment income due to policyholders that has not yet been
distributed. These reserves must be distributed within a period
of eight years. Unrealized gains and losses on investments representing contracts with a discretionary participation feature are
largely offset (about 92%) by the recognition of a deferred participation liability under the shadow accounting principle permitted by IFRS 4, as a proportion of these gains and losses will
accrue to the policyholders through the return on their contract.
Loss reserves for life insurance correspond to the compensation due following a claim. For credit insurance, they
Other technical reserves comprise reserves for financial
uncertainties and reserves for deferred acquisition costs.
n
Mathematical reserves principally comprise:
– Unearned premium reserves which correspond to the proportion of premiums written during the year which relates to
a subsequent financial period.
n
Mathematical reserves
Life insurance business
Property & casualty business
Unit-linked business
n
12/31/2005
EU IFRS
01/01/2005
EU IFRS
27,090
24,401
22,012
19,862
183
176
4,895
4,363
Loss reserves
1,014
934
Deferred participation reserve
1,555
1,056
17
31
29,677
26,422
Other technical reserves
Total
05
171
V.14 - Provisions and impairment charges
V.14.1 - Summary
Impairment charges deducted
from assets
Performing loans (1)
Other
Provisions recognized as liabilities
01/01/2005
EU IFRS
Increase
Utilization
4,905
1,449
(774)
748
103
0
(73)
3,990
1,208
(602)
(629)
(715)
Surplus
released
Exchange
differences
Change
in scope
Other
12/31/2005
EU IFRS
43
3
13
4,925
18
0
0
796
24
0
(12)
3,980
166
138
(113)
(71)
0
3
25
148
2,006
378
(292)
0
2
1
(18)
2,077
315
129
(117)
0
1
(1)
1
329
Provisions
Provisions for counterparty risk
Provisions for impairment risk
Provisions for employee benefits
Provisions for operating risks
Provisions for regulated
savings accounts
Provisions for current income tax
Total
31
50
(27)
0
0
0
(27)
26
1,142
78
(72)
0
0
0
(4)
1,144
89
50
(38)
0
0
2
14
117
299
19
(13)
0
0
0
0
306
130
52
(25)
0
1
0
(3)
156
6,911
1,827
(1,008)
(774)
45
4
(5)
7,002
Impact on net income (2)
(45)
(1) The information previously reported about collective impairment provisions has been amended following an adjustment to the method of measuring losses. The amount previously
reported (€703 million) was based on expected losses resulting from the application of Basel II, using the probability of default on a one-year horizon. Expected losses have been recalculated to factor in the probability of default based on the actual maturity of each exposure included in the groups of assets to be assessed for impairment (industries and countries). This led
to a €45 million increase in provisions recognized in the opening balance sheet and a €30 million deduction from equity net of deferred tax (i.e. €24 million attributable to the Group).
(2) Inpact on income statement
Given the presentation of the financial statements, charges to and reversals of provisions may impact on each line item of the income
statement.The table below shows the impact of movements in provisions on the main consolidated income statement items:
Charges
Reversals
Net impact
Net banking income
(247)
307
60
Operating expenses
(123)
132
9
(3)
3
0
(373)
442
69
(1,399)
1,315
(84)
(3)
0
(3)
(1,775)
1,757
(18)
Income tax
(52)
25
(27)
Net income
(1,827)
1,782
(45)
Amortization, depreciation and impairment of property,
plant and equipment and intangible assets
2005 ANNUAL REPORT
05
V.14.2 - Provisions
A provision is a liability of uncertain timing or amount. A liability is
a present obligation arising from past events, the settlement of
which is expected to result in an outflow of resources embodying
economic benefits that can be reliably measured.
Provisions are not recognized for future operating losses or major
repairs. No contingent liabilities or assets have been recognized.
The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation on the reporting date.
In accordance with IAS 37, a provision is taken against a financing
commitment if there is a risk that the counterparty might default
during the commitment period, as the financing commitment is
irrevocable.
This amount is discounted where the effect is material. Provisions are
reviewed on each reporting date and adjusted if necessary to reflect
the best estimate on that date.
Provision charges and reversals are recognized in the income
statement on the line items corresponding to the nature of the
future expenses.
01/01/2005
EU IFRS
Increase
Notes
Counterparty risk
315
129
Financing and guarantee commitments
138
51
(69)
0
0
(10)
110
Customer disputes
138
59
(28)
0
(1)
18
184
39
19
(20)
1
0
(6)
34
31
50
(27)
0
0
(27)
26
Non-current financial assets
9
2
(5)
0
0
(3)
3
Real estate development
1
0
0
0
0
0
1
21
47
(22)
0
0
(24)
22
(4)
1,144
Other provisions
Impairment risk
Other provisions
Employee benefits
VIII.3.3
Utilization
(117)
Exchange
differences
1
Change
in scope
(1)
Other
12/31/2005
EU IFRS
1
329
1,142
78
(72)
0
0
Active employees
437
53
(24)
0
10
25
501
Retired employees
705
25
(48)
0
(10)
(30)
643
89
50
(38)
0
2
14
117
Operating risk
Restructuring
10
1
0
0
0
(1)
10
Other provisions
79
50
(38)
0
2
15
107
299
19
(13)
0
0
0
306
1,876
326
(267)
1
1
(16)
1,922
Home loan savings schemes
Total
V.14.3
V.14.3 - Provisions for home loan savings
schemes
Risks relating to home loan savings accounts and plans have been
assessed and provided for in the IFRS consolidated financial statements as of January 1, 2005.
The purpose of the provisions is to cover the two risks inherent
in these schemes:
n the risk of having to grant future loans at a contractually agreed
rate which is lower than the market rate;
n the risk of paying future interest on the savings at an abovemarket rate.
Both risks have been measured prospectively until extinction of
the savings carried on the balance sheet. This required modeling current outstandings (savings and conversion into loans)
based on assumptions regarding future market rates and client
behaviour.
The model used by the Group comprises three stages:
Stage 1: Modeling a 30-year data law, based on observed data
for all generations of scheme in existence over the past five
years, including the sensitivity of client behaviour to the difference between the contractually agreed rates and market rates
both in terms of savings and conversion into loans.
n
173
granted) and the rate on home loans granted at market rates.
Provisions are taken for net capital losses per generation of interest rate. Capital gains are not recognized. Each of the 10,000
provisions is calculated after deducting flows relating to the
amount outstanding that are deemed not to be sensitive to
changes in rates. For reasons of prudence, this risk-free profile is
capped at the level observed in the tenth year of each generation, and then run off on a straight-line basis over the next
twenty years.
Stage 2: Generating 10,000 run-off scenarios based on a set
of 10,000 random interest rate trends using the Monte Carlo
method (Ornstein-Uhlenbeck process) and applying a meanreverting diffusion process.This method incorporates a correlation matrix between the various indices based on ten-year
rolling historic data.The mean reversion target for each index is
determined based on long-term forecasts made by the Group’s
economists, which are also used for asset and liability management purposes.
n
The risk on home loan savings accounts is calculated in a similar
way, using separate interest rate mismatch assumptions.
However, for these accounts, the mismatch risk is only relevant
in the event of conversion into a loan as the rate paid during the
savings phase is revisable and indexed to market rates.The future
level of lending rates is determined by the model based on the
regulatory formula.
Stage 3: Calculating the final provision based on the average
of the differences observed for each scenario between cash
flows based on the contractually agreed rates (savings with no
government premium or loan) and those determined by the
model using future market rates for equivalent products for each
year of the scheme. These differences are discounted using the
average of month-end swap yields over the past twelve months.
For the savings phase, the equivalent product used is the Fidélis
step-up interest rate account sold through the Banque Populaire
network. For the lending phase, rates are determined by reference to the average spread observed over the previous three
years between the 5-year risk-free rate (average term of loans
n
The total provision includes the difference between future cash
flows discounted at the market rate in the year in which the loan
is granted and future cash flows at the contractually agreed rate,
for all home loans granted under the schemes which are outstanding on the calculation date.The difference is reversed on an
actuarial basis over the term of the loans concerned.
12/31/2005 EU IFRS
01/01/2005 EU IFRS
Under
4 years
4 to
10 years
Over
10 years
Total
Under
4 years
4 to
10 years
Over
10 years
Total
6,645
2,774
4,669
14,088
5,978
5,634
2,215
13,827
0
130
159
289
0
162
244
406
Provision
44
7
159
210
37
58
113
208
Charge/reversal in the year
11
(49)
46
8
-
-
-
-
Savings
513
503
1,026
2,042
551
481
1,022
2,054
Loans
333
146
7
486
412
140
6
558
Provision
-
-
-
95
-
-
-
91
Charge/reversal in the year
-
-
-
2
-
-
-
-
Home loan savings plans
(by generation)
Savings
Loans
Home loan savings accounts
(by generation)
2005 ANNUAL REPORT
05
V.15 - Subordinated debt
Subordinated debt ranks after all other secured or unsecured liabilities but before participating loans and notes and deeply subordinated notes. It is measured at amortized cost.
Preferred shares may be classified as either debt or equity depending on their characteristics. All the preferred shares issued by the
Banque Populaire Group are recognized as subordinated debt whereas they were recognized in minority interests in the French GAAP
consolidated financial statements.
V.15.1 - Amounts outstanding
12/31/2005
EU IFRS
01/01/2005
EU IFRS
5,428
4,449
299
0
V.15.2
5,128
4,449
V.15.2
194
218
610
559
23
19
Notes
Subordinated debt with fixed maturities
Deeply subordinated
notes (1)
Other
Perpetual subordinated debt
Preferred shares (2)
Mutual guarantee deposits
Accrued interest
Total (3)
149
140
6,404
5,385
(1) On January 25, 2005, Natexis Banques Populaires issued €300 million of deeply subordinated notes, recognized as Tier 1 capital, repayable on January 25, 2010.
(2) Preferred shares issued by Natexis Banques Populaires Preferred Capital 1, LLC (€200 million), Natexis AMBS (€240 million), and Natexis Banques Populaires Preferred Capital 3, LLC
(€170 million), recognized as Tier 1 capital.
(3) The fair value of subordinated debt at December 31, 2005 was €6,479 million.
V.15.2 - Movements in other subordinated debt during the year
Other subordinated debt
with fixed maturities
Subordinated notes
Subordinated debt
Other perpetual
subordinated debt
01/01/2005
EU IFRS
Issues
(1)
4,449
875
4,444
5
Redemptions
(2)
Exchange
differences
Change
in scope
Other
(3)
12/31/2005
EU IFRS
(297)
77
0
23
5,128
875
(297)
77
(3)
23
5,119
0
0
0
3
0
9
218
0
(21)
7
0
(10)
194
Subordinated notes
188
0
(21)
7
0
15
190
Subordinated debt
30
0
0
0
0
(25)
5
4,667
875
(317)
84
0
14
5,322
Total
(1) Issues:
Issues of redeemable subordinated notes: €750 million by Natexis Banques Populaires in October 2005 maturing in 2016 and €125 million (net of intragroup) by Banque Fédérale des Banques
Populaires (€59 million in June 2005 maturing in 2015, €51 million in October maturing in 2015 and €42 million in December 2005 maturing in 2016).
(2) Redemptions:
- Redemption by Natexis Banques Populaires of the redeemable subordinated notes issued in October 1993, May 1996 and August 1996 by the former Crédit National in USD (€263 million)
and by Banque Fédérale des Banques Populaires for the October 1993 tranche of €34 million (net of intragroup).
- Early redemption by Natexis Banques Populaires of perpetual subordinated notes maturing in 2049.
(3) Other movements in other subordinated debt mainly comprise the change in elimination of intragroup transactions, where other consolidated entities have taken up the subordinated
debt issued by the Group.
175
V.16 - Derecognition of assets
and liabilities
V.16.1 - Non-current assets held for sale
Stock lending
A non-current asset is classified as held for sale if its carrying
amount will be recovered principally through a sale transaction
rather than through continuing use.The asset must be available
for immediate sale and its sale must be highly probable within a
period of one year, evidenced by an active plan to locate a buyer
and complete the sale.
Stock lending/borrowing transactions do not qualify as transfers
of financial assets within the meaning of IAS. Accordingly, the
securities loaned are not derecognized. Under IAS, loaned securities are not separately identified but recognized in their original
category and measured accordingly. Borrowed securities are not
recognized by the borrower.
Non-current assets or groups of assets held for sale are no
longer amortized. Impairment charges are taken corresponding
to the difference between the carrying amount and fair value less
costs to sell.
Net gains or losses generated by discontinued operations are
identified separately in the income statement under the line item
“discontinued operations and non-current assets held for sale”.
The net gain or loss includes net income generated by discontinued operations up to the date of discontinuation, plus gains or
losses on revaluing assets or groups of assets held for sale at their
fair value less costs to sell, or gains or losses on actual disposal,
and the corresponding tax charge.
As of December 31, 2005, the Group had no non-current assets
held for sale.
V.16.2 - Derecognition of financial assets
and liability
If substantially all the risks and rewards of ownership of a financial
asset are neither retained nor transferred, the Group then determines whether it has retained control of the financial asset. If control is
not retained, the financial asset is derecognized. If control is retained,
the financial asset continues to be recognized to the extent of the
Group’s continuing involvement. Continuing involvement is evidenced by the existence of contractual conditions such as an option or
obligation to repurchase the assets transferred or receipt of financial
compensation related to the performance of the asset transferred.
A financial liability is derecognized if it is extinguished, cancelled
or expires.
Vendor: The securities sold are not derecognized. The Group
recognizes a liability representing the commitment to return the
cash received (“securities sold under repurchase agreements”).
This financial liability is measured at amortized cost, not fair value.
Purchaser : Securities purchased are not recognized on the
balance sheet. The Group recognizes a receivable representing
the cash disbursed to the vendor (“securities bought under
repurchase agreements”). This financial asset is treated for
accounting purposes as loans and receivables.
On subsequent reporting dates, the vendor continues to measure the securities sold in accordance with the rules governing
their original category. The purchaser recognizes the receivable
at face value under loans and receivables.
2005 ANNUAL REPORT
05
V.17 - Assets and liabilities by residual maturity
IAS 32 requires the disclosure of information on exposure to interest rate risk.The table below shows the contractual maturity of all
the Group’s assets and liabilities.
Assets and liabilities with no specific maturity, such as accrued interest, current accounts or receivables due on demand, appear in the
“demand” column.
12/31/2005 EU IFRS
Demand
Under
3 months
3 months
to 1 year
1 to
5 years
Over
5 years
Perpetual
Total
and post offices
3,042
78
0
0
0
8
3,129
2,237
10,317
4,110
5,749
3,425
7,487
33,325
5
14
26
115
104
15
279
1,223
3,672
2,404
6,436
7,520
8,664
29,919
Assets
Hedging instruments
Available-for-sale
financial assets
26,156
4,997
9,403
14,636
493
59
55,744
27,770
20,929
15,424
38,112
42,473
1,895
146,603
14
51
26
2,500
4,308
0
6,899
60,446
40,058
31,394
67,550
58,323
18,128
275,899
8
378
30
0
0
0
416
188
921
1,084
3,403
1,071
91
6,758
Hedging instruments
3
4
22
167
278
0
474
Deposits from banks
26,520
5,744
24,694
2,472
1,836
11
61,277
Customer deposits
71,190
12,838
8,615
6,804
3,719
1,317
104,483
2,861
37,051
4,981
2,684
1,488
24
49,090
125
1,534
279
2,204
2,006
257
6,404
100,895
58,470
39,705
17,735
10,397
1,700
228,902
Total assets
Liabilities
Due to central banks
Debt securities
Subordinated debt
Total liabilities
V.18 - Breakdown of the balance sheet by currency
The following table shows a breakdown of total assets and liabilities by currency at December 31, 2005:
Total
EUR
USD
GBP
JPY
CHF
Other
Assets
288,711
234,364
45,376
3,566
2,048
819
2,538
Liabilities
288,711
236,340
44,715
3,576
401
751
2,928
177
Note VI - Notes to the income statement
VI.1 - Net interest income
The line items “interest and similar income” and “interest and similar expense” comprise interest receivable on fixed-income securities
classified as available-for-sale financial assets, interest receivable on loans and advances to banks and customers, and interest payable on
deposits from banks and customer deposits.
They also include interest receivable on held-to-maturity financial assets, although this is a minority category for the Group and only
concerns insurance subsidiaries.
12/31/2005 EU IFRS
Income
Central banks and post offices
Securities
Expense
12/31/2004 2004 IFRS
Net
Income
Expense
Net
36
(7)
28
33
0
33
2,555
(2,393)
162
2,458
(2,018)
440
8,031
(3,718)
4,313
7,072
(3,253)
3,818
Banks
1,486
(1,905)
(419)
1,231
(1,547)
(316)
Customers
6,068
(1,767)
4,301
5,347
(1,654)
3,693
494
Lease financing
477
(46)
431
(299)
(299)
15
0
15
850
(709)
141
Subordinated debt
Other
Hedging instruments
Discontinuation of hedging relationship
(CFH)
Accrued interest
Impaired loans, including
restructured loans
Total
2005 ANNUAL REPORT
(52)
442
(315)
(315)
15
0
15
688
(590)
99
25
0
25
0
0
0
824
(709)
116
688
(590)
99
52
174
4,413
10,440
52
11,539
(7,126)
174
(6,176)
4,264
05
VI.2 - Net fee and commission income
The method of accounting for fees and commissions received in respect of services or financial instruments depends on the ultimate
purpose of the services rendered and the method of accounting for the financial instruments to which the service relates. Fees and
commissions for one-off services are recognized in income immediately the service is provided. Fees and commissions for ongoing
services such as guarantee commissions or management fees are spread over the period during which the service is provided.
Fees and commissions that form an integral part of the effective yield of an instrument such as commitment fees or loan set-up fees
are recognized as an adjustment to the effective interest rate over the term of the loan.Accordingly, under EU IFRS, these fees are recognized as interest income rather than fee and commission income.
12/31/2005 EU IFRS
Income
Expense
12/31/2004 2004 IFRS
Net
Income
Interbank transactions
53
(21)
32
10
Expense
(28)
Net
(19)
Customer transactions
1,267
(169)
1,098
1,336
(141)
1,195
Securities transactions
364
(31)
332
280
(33)
246
Payment services
750
(343)
407
690
(329)
361
Financial services
558
(166)
392
524
(121)
403
Financing, guarantee, securities,
derivatives commitments
138
(51)
87
159
(48)
112
Other
28
(2)
26
26
(2)
24
Total
3,157
(784)
2,373
3,024
(701)
2,323
VI.3 - Gains or losses on financial assets and liabilities
This item includes gains and losses on financial assets and liabilities at fair value through profit or loss, whether held for trading or
designated as at fair value through profit or loss, including interest.
Hedging instruments include changes in value of Fair Value Hedges, including interest, plus the symmetrical changes in value of items
hedged. It also includes the ineffective portion of Cash Flow Hedges.
Net gains on financial assets and liabilities excluding hedging instruments
Net gains on financial assets and liabilities held for trading
12/31/2005
IFRS-EU
12/31/2004
IFRS 2004
863
409
145
343
(243)
(195)
Net gains on other financial assets and liabilities designated as at fair value
385
174
Other
333
(108)
Hedging instruments and changes in value of hedged items
o/w derivative financial instruments not designated as hedges
(23)
0
Ineffective portion of cash flow hedges
7
0
Ineffective portion of fair value hedges
(30)
0
Changes in value of fair value hedges
23
0
Changes in value of hedged items
(53)
0
841
409
Total
179
VI.4 - Gains or losses on available-for-sale financial assets
Net gains or losses on available-for-sale financial assets principally comprise gains or losses on sale and impairment losses on variable
income securities (prolonged impairment).
Variable income securities classified as available-for-sale are tested for impairment and an impairment charge recognized if their carrying
amount is lower than their recoverable amount.
Impairment losses on fixed income securities are recognized under impairment charges and other credit provisions.
This item also includes dividends on variable income securities, where the Group’s right is established.
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
96
76
Gains or losses on sale
386
44
Gains
442
163
Losses
(56)
(119)
Impairment losses on variable income securities
(21)
67
Total
461
187
Dividends
VI.5 - Income and expenses from other activities
Income and expenses from other activities comprises mainly incidental income and expenses relating to finance leases and income and
expenses relating to investment property.
This item also includes income and expenses relating to insurance activities, in particular life insurance premium income, paid benefits
and changes in insurance companies’ technical reserves.
Finance leases
12/31/2005 EU IFRS
Notes
Income
Expense
Net
Income
Expense
VI.5.1
352
(372)
(21)
327
(332)
(5)
45
(25)
20
31
(22)
9
167
0
167
193
0
193
6
(5)
1
0
(3)
(3)
569
(403)
166
552
(357)
194
0
(1,673)
(1,673)
0
(912)
(913)
Operating leases
Investment property
Other non-operating assets
Sub-total real estate activities
Change in insurance companies’
technical reserves
Other insurance income and expense
VI.5.2
Sub-total insurance
Other income and expense
12/31/2004 2004 IFRS
VI.5.3
Total
Net
4,765
(3,374)
1,391
3,887
(2,970)
918
4,764
(5,046)
(282)
3,887
(3,882)
5
461
(191)
270
433
(171)
263
5,794
(5,640)
154
4,872
(4,410)
463
VI.5.1 - Finance leases
12/31/2005 EU IFRS
12/31/2004 2004 IFRS
Income
Expense
Gains or losses on sale
14
(46)
(33)
4
(21)
(17)
Impairment
29
(7)
22
32
(9)
22
Other income and expenses
309
(319)
(10)
291
(302)
(11)
Total
352
(372)
(21)
327
(332)
(5)
2005 ANNUAL REPORT
Net
Income
Expense
Net
05
VI.5.2 - Other insurance income and expense
Life insurance premium income
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
3,641
2,844
Personal risk insurance premium income
119
106
Credit insurance premium income
751
700
(3,193)
(2,799)
Paid benefits and claims
Other net income
72
68
1,391
918
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
Real estate activities
20
15
IT development and other services
49
43
125
120
76
85
270
263
Total
VI.5.3 - Other income and expense
Credit management
services (1)
Other activities
Total
(1) Corresponding to sales of credit information services, marketing information services and receivables collection services provided by Coface subsidiaries.
VI.6 - Operating expenses
Operating expenses comprise mainly payroll costs, including wages and salaries net of rebilled expenses (see VIII.1), social security charges and employee benefits (see VIII.3) such as pensions (defined benefit plans) and share-based payments (see VIII.4), in accordance with
IFRS 2.
This item also includes all administrative expenses and external services.
In millions of euros
Notes
12/31/2005
EU IFRS
01/01/2005
EU IFRS
Payroll costs
(1,897)
Wages and salaries
of which share-based payments
(1,780)
(5)
(4)
Post-retirement and other benefits
(277)
(265)
Social security charges
(605)
(566)
Incentive and profit-sharing plans
(252)
(216)
Payroll-based taxes
(168)
(154)
2
(4)
(3,195)
(2,986)
(161)
(148)
(1,684)
(1,592)
Other
Total payroll costs
VIII . 1
Other operating expenses
Taxes other than on income
Other general operating expenses
(6)
(17)
(38)
(62)
Total other operating expenses
(1,888)
(1,820)
Total
(5,084)
(4,805)
Merger-related costs
Other
181
VI.7 - Impairment charges and other credit provisions
This item comprises mainly charges to and reversals of specific and collective impairment losses and provisions relating to loans and
receivables (note V.2), plus bad debts written off during the year and recoveries of bad debts previously written off.
At December 31, 2005, in accordance with IAS 32 and IAS 39, the line item “specific impairment” includes securities classified as loans
and receivables.
12/31/2005
Charge
Provisions
Financing commitments
Other
Net
reversals
EU IFRS
Write-offs not
covered
Recoveries of bad
debts written off
Net
(126)
93
(33)
(51)
48
(3)
(74)
45
Financial assets at amortized cost
(1,266)
848
(50)
53
(416)
(1,266)
848
(50)
53
(416)
Specific impairment
(1,164)
774
(50)
53
(387)
(103)
73
(29)
(4)
19
15
Collective impairment of performing loans
Available-for-sale assets
Other
(3)
0
Total
(1,399)
960
Released
960
Utilized
355
o/w
Reversals
1,315
Write-offs provided for
(355)
Net release:
960
(30)
(2)
(50)
12/31/2004
Charge
Provisions
(165)
Net
reversals
53
(436)
2004 IFRS
Write-offs not
covered
Recoveries of bad
debts written off
162
Net
(3)
Financing commitments
(66)
66
0
Other (1)
(99)
96
(3)
(1,134)
707
Financial assets at amortized cost
Loans and advances
Specific impairment
Available-for-sale assets
(53)
44
(437)
(1,134)
707
(53)
44
(437)
(1,134)
707
(53)
44
(437)
(3)
3
0
Other (2)
(47)
10
(37)
Non-performing securities
(45)
10
(35)
Other
(2)
0
(2)
Total
(1,349)
882
Released
882
Utilized
429
Reversals
1,311
Write-offs provided for
(429)
Net release:
882
o/w
At December 31, 2004, IAS 32 and IAS 39 were not applied. Accordingly:
(1) charges to and reversals of industry and sector provisions were recognized in provisions under “other”;
(2) charges to and reversals of impairment charges against non-performing securities were recognized in “other”.
2005 ANNUAL REPORT
(53)
44
(477)
05
VI.8 - Share of results of associates
12/31/2005 EU IFRS
12/31/2004 2004 IFRS
Share of net
assets
Share of net
income
Share of net
assets
187
5
43
(1)
61
10
50
9
248
15
93
7
Financial institutions (1)
Other companies
Total
Share of net
income
(1) The increase in the share of net assets of financial institutions in 2005 was principally due to Volksbank International AG (acquired in 2005 - see note 1.2.2), partially offset by the change
of consolidation method for AchatPro, a subsidiary of BRED (fully consolidated in 2005).
VI.9 - Gains or losses on other assets
This item comprises capital gains and losses on the disposal of property, plant and equipment and intangible assets, as well as capital
gains and losses on the disposal of investments in consolidated companies.
12/31/2005 EU IFRS
Investments in
consolidated
companies
Property, plant
& equipment
and intangible
assets
(1)
12/31/2004 2004 IFRS
TOTAL
Investments in
consolidated
companies
Property, plant
& equipment
and intangible
assets
TOTAL
123
162
5
15
20
Net capital gains on disposals
38
Net capital losses on disposals
(24)
(21)
(45)
0
(14)
(14)
14
102
116
4
2
6
Total
(1) As part of its active property management policy, the Banque Populaire Group, through one of its subsidiaries, sold the Liberté 2 building in Charenton in September 2005, generating a
pre-tax capital gain of €95 million.
VI.10 - Changes in value of goodwill
This item includes goodwill impairment losses. An impairment loss is recognized whenever there is objective evidence of impairment.
No impairment losses were recognized in 2005.
Goodwill
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
0
(44)
Samic
-
(5)
-
(39)
3
1
(net impairment loss)
Negative goodwill
Unistrat
1
VAL A
1
-
BP Développement
2
-
3
(43)
Total
183
VI.11 - Income tax
VI.11.1 - Income tax charge
The tax charge for the period comprises:
- tax payable by French companies at the standard rate of
34.93% and by foreign companies and branches at the local rate;
- deferred taxes arising on temporary differences existing in the
separate financial statements between the book value and the tax
value of assets and liabilities on the balance sheet or on specific
consolidation adjustments, calculated using the liability method.
Deferred income tax assets and liabilities are set off at the level
of each tax entity.The tax entity may either be a single entity or
a group of entities that have elected for group tax relief. The
Group does not recognize net deferred tax assets unless it is
reasonably certain that they will be used to offset a future tax
charge. Accordingly, the effect of tax losses is not recognized if
the tax entity has incurred losses in the previous two years, as it
is presumed that the future tax benefit will not be recovered.
The capitalization reserve recognized in the separate financial
statements of insurance companies is intended to defer capital
gains arising on the sale of certain bonds to offset subsequent
capital losses.The portion presumed unlikely ever to be used is
reclassified in equity.
Under IAS 12, it is treated as a temporary difference that gives
rise to a deferred tax liability.
All temporary differences have been recognized regardless of
the recovery or payment date. The net deferred income tax
balance is recognized in the balance sheet as deferred income
tax liabilities or assets.
VI.11.2 - Reconciliation of the tax charge in the financial statements and the theoretical tax charge
+ Net income attributable to equity holders of the parent
12/31/2005
EU IFRS
12/31/2004
2004 IFRS
1,522
1,195
+ Net income attributable to minority interests
174
103
+ Income tax charge
855
736
(129)
(178)
+/- Other permanent
differences (1)
- Share of results of associates
(15)
(7)
= Consolidated taxable income
2,407
1,849
33.33%
33.33%
* Standard tax rate
= Theoretical tax charge
(802)
(616)
+ Tax assets
11
8
+ Impact of group tax relief
12
13
+ Contribution and contribution on earnings (CSB)
(33)
(32)
+ Income taxed at reduced rates
(23)
(15)
+ Tax reassessments
(41)
(44)
(9)
(9)
+ Differences in foreign tax rates
+ Changes in deferred tax assets, restricted for prudence
1
(12)
+ Exit tax on long-term capital gains reserves
0
(25)
29
(4)
= Tax charge for the year
(855)
(736)
o/w
(850)
(741)
(5)
5
+ Other items (2)
. Current
. Deferred
(1) Including income taxable at reduced rates.
For comparability, interest on preferred shares has been reclassified from minority interests to net banking income in 2004 as well as 2005. For the two years under review, therefore, interest on preferred shares is no longer a permanent difference as it was under French GAAP.
(2) The change in this item is mainly due to a decrease in tax on the private equity business (€17m) and prior year income arising on the taxation of finance leases (€7m).
2005 ANNUAL REPORT
05
Note VII - Risk management
VII.1 – Risk management
organization
The Group is exposed to four main categories of risk:
n
n
market risks arising from capital markets transactions;
interest rate, currency and liquidity risks, arising from retail banking transactions;
n
n
limits and decision-making procedures, complying with the rules
established at Group Banque Populaire level, as set out in the
credit risk manual updated in June 2004, the interest rate and
liquidity risk manual updated in April 2004 and the operational
risk manual updated in November 2005.
in accordance with the rules laid down by the Board of Directors
of Banque Fédérale des Banques Populaires – dealing in particular with the role of the Group Risk Management Committee –
and by the banking regulator.
At the end of 2003, the Banque Populaire Group established
comprehensive rating systems that comply with future prudential requirements.These systems are based on the use of homogeneous methods throughout the Group and centralized rating
applications dedicated to the principal client segments.
The Banque Populaire Group’s central body is responsible for
assessing risk policies and management procedures according to
standard principles and criteria. Risks are monitored at Group
level, as follows:
Banque Populaire banks, on a consolidated basis;
n Banque Fédérale des Banques Populaires subsidiaries on a
consolidated basis;
n
The organization of risk monitoring and control procedures is
described in the “Chairman’s Repor t on Internal Control
Procedures” included in this annual report.
operational risks, including compliance risk.
In accordance with standard CRBF 97-02, which was in force
during 2005, each bank has set up risk management and monitoring structures that are independent from operating units.
n
the Group’s risk management manuals, each bank sets internal risk
concentration limits based on its own specific characteristics,
which are usually lower than the limits authorized under banking
regulations. In 2005, a single limit lower than the regulatory limit
was introduced and will apply to all Banque Populaire Group entities on a consolidated basis as of June 30, 2006.
VII.2 – Analysis of the loan book
In 2005, world economic growth, led by the United States, showed considerable resilience to the sharp rise in oil prices, natural disasters and Chinese competition, most often at the expense
of large domestic deficits.
Thanks to a better second half, GDP growth in the euro zone
reached 2% against 1.4% the previous year, but unemployment is
still high.The new eastern European members are not yet strong
enough to drive European growth.
In France, after a sluggish first half, an improvement in the second
half led to growth of almost 1.6%, with weak household
consumption offset by 3.3% growth in corporate fixed investment.
Inflation remained under control at 1.8% despite the rise in oil
prices but the savings rate fell to 1.4% and household indebtedness has risen by 17.9% over two years.
A slight decline in the euro at the year end should boost exports
and the ECB’s decision to raise interest rates by one notch
should not put a brake on growth. However, public spending
accounts for 54.4% of GDP in France against an average of
48.6% for the euro zone, while public debt has reached 66% of
GDP.
The Banque Populaire Group is well-placed to avoid any serious
repercussions from these uncertainties, thanks to its strong risk
management culture and broad diversification in terms of both
country and industry exposure.
In addition to this consolidated risk monitoring system, the Group
Risk Management Committee performs monthly assessments of
material individual exposures at Group level or at the level of individual banks. Responsibility for performing credit reviews and the
credit rating process may be delegated to the Banque Fédérale
des Banques Populaires Risk Management department.
All Banque Populaire Group entities are informed of the decisions made by the Group Risk Management Committee.
Risk diversification represents a fundamental risk management rule
and is governed by external and internal guidelines.As required by
185
VII.2.1 - Total exposure
12/31/2005
EU IFRS
01/01/2005
EU IFRS
change
Customer loans
146,603
129,472
13.2%
Performing loans
144,740
127,776
13.3%
Lease financing
8,681
8,195
5.9%
Other loans and advances
115,283
99,588
15.8%
Commercial loans
3,624
3,513
3.2%
Export loans
1,206
1,145
5.3%
Short-term loans and consumer loans
24,299
20,087
21.0%
Equipment loans
33,827
30,119
12.3%
Home loans
44,081
38,764
13.7%
Other loans
8,247
5,960
38.4%
Overdrafts
8,454
7,527
12.3%
Factoring
3,469
2,683
29.3%
Unlisted fixed-income securities
2,931
2,958
-0.9%
Other
Interbank and money market assets
(749)
(691)
8.5%
6,672
7,515
-11.2%
1,863
1,696
9.9%
55,740
39,550
40.9%
Customer loans rose by about 13%, driven by the Group’s core strategic segments such as retail banking. Interbank loans grew faster
than customer loans.
VII.2.2 - Non-performing loans
Impairment charges and other credit provisions totaled B436 million, a decrease of 8%.The total breaks down into B355 million for
retail banking and B81 million for Natexis Banques Populaires.The decrease reflects an improvement in the economic climate coupled
with a continued highly conservative provisioning policy.
Coverage of non-performing loans (excluding collective impairment provisions) amounted to 68% at December 31, 2005, reflecting the
Group’s conservative policy.
12/31/2005 EU IFRS
Gross
Impairment
01/01/2005 EU IFRS
Net
Coverage
Gross
Impairment
Net
Coverage
Customer loans
Customer loans excluding
lease financing
Lease financing
108
5,782
(61)
(3,919)
46
1,863
57%
68%
109
5,626
(60)
(3,930)
49
1,696
55%
70%
5,552
229
(3,839)
(80)
1,713
150
69%
35%
5,376
250
(3,845)
(84)
1,530
166
72%
34%
Total
5,889
(3,980)
1,909
68%
5,735
(3,990)
1,745
70%
0
0
0
(796)
(47)
(749)
0
0
0
(748)
(58)
(691)
(748)
(58)
(691)
5,889
(4,776)
5,735
(4,739)
996
Collective impairment provisions
Interbank
Customers
Total (inc. collective impairment)
(796)
(47)
(749)
1,113
81%
83%
In the local retail banking business, 99% of defaults concerned clients in France.
For Natexis Banques Populaires, a breakdown of exposure and impairment charges by country shows a slight decline in both exposure
and impairment charges. However, within that total, there was a moderate increase in exposure to North America and in impairment
charges in Africa and the Middle-East.
2005 ANNUAL REPORT
05
Breakdown of Natexis Banques Populaires exposure and impairment charges
12/31/2005 EU IFRS
Specific
credit
risks
Country
risks
Industry
risks
Total
Specificimpairment
Country
provisions
Industry
provisions
Total
France
874
-
5,074
5,948
527
-
69
596
Rest of western Europe
176
-
3,578
3,754
135
-
91
226
Eastern Europe
25
44
1,081
1,150
17
1
5
23
North America
152
-
1,795
1,947
81
-
94
175
Central & Latin America
90
973
180
1,243
46
37
3
86
Africa and Middle-East
25
1,510
192
1,727
13
91
11
115
Countries
Asia-Pacific
Total exposure and impairment charges
54
653
518
1,225
18
12
5
35
1,396
3,180
12,417
16,993
837
140
278
1,256
VII.3 – Market risks
Market risks primarily concern Natexis Banques Populaires, a
subsidiary of Banque Fédérale des Banques Populaires.The market risk management system is described below.
VII.3.1 - Organization of market risk
management at Natexis Banques Populaires
The market risk system covers market activities conducted by
both Natexis Banques Populaires and its subsidiaries.The improvement program launched by Natexis Banques Populaires in
2002 continued during 2005. Improvements concerned organization, procedures and risk measurement.
Control over market risk management is mainly provided by the
Middle Office, the Risk Management Department and the Internal
Control Department. Internal Control and Risk Management
report to the General Secretariat, and the Middle Office reports
to Corporate and Institutional Banking and Markets.
The Executive Management of Natexis Banques Populaires has
distributed a directive formalizing the structure of the different
teams involved in managing market risks. This directive sets out
the work carried out in 2004 to determine each department’s
duties in terms of controlling market risks.
VII.3.1.1 - Role of the various departments involved
The major responsibilities of each control entity are as follows:
n First tier controls are carried out by the middle office, which
plays an operational role through the applications it manages and
uses daily. It key tasks are:
- producing and analyzing results and risks on a daily basis;
- producing and analyzing provisions on a monthly basis;
- developing the system of delegated limits and method of
calculating risk, in conjunction with Risk Management;
- monitoring and reporting any limit violations.
n Risk Management is responsible for the financial component of
second tier controls, in particular overseeing market risks and
models. Its key tasks are:
- validating the proposals made by the middle office, ensuring
their consistency throughout the Group and making recommendations where necessary;
- monitoring market risks at the various consolidation levels and
particularly at Group level;
- ensuring internal and external reporting on market risks;
- validating internally-developed models and software models
used to value products. In July 2005, the Risk Management
Department distributed the pricer and model validation chart,
which sets out the duties of the Risk Management Department
in validating models and pricers, as well as the documents that
must be provided by other divisions (Research and MO);
- validating the various authorizations and limits requested by
the Corporate and Institutional Banking and Markets department and proposed by the middle office;
- making recommendations on the risk management system;
- leading Market Risk activities at Natexis Banques Populaires
subsidiaries and branches.
n Internal Control is responsible for the operational component
of controls:
- ensuring that adequate procedures are in place and periodically assessing their appropriateness, particularly with regard to
business activities and regulations;
- ensuring that procedures are properly and correctly followed;
- ensuring the reliability of market parameters used to calculate
results and risks;
- making recommendations on the risk management system;
- proposing methods to calculate reserves while ensuring that
they are exhaustive and correspond to the nature of risks;
- more generally, ensuring that procedures governing the management and monitoring or market risks are respected.
187
This structure is completed by:
A New Products Committee, enabling capital markets activities to launch new products safely, after identifying and analyzing
the different risk factors that may impact the value of the product.The New Products Committee meets every six weeks and
is completed by working parties that meet every week.The committee examines the different risks inherent to a new product, in
particular market, counterparty, legal, accounting, tax and nonconformity risks.
n
n A Market Risks Committee, which meets monthly and comprises the heads of the various control levels together with front
office managers. It is chaired by the head of capital markets activities. The committee validates new limits, proposes changes to
limits and reviews any identified limit violations.
n A Risk Monitoring and Supervision Committee, which meets
quarterly, comprising front office and middle office managers, the
Risk Management department and the Internal Control department to present new methods for measuring risks and divide up
developments for their implementation.
The Board of Directors validates overall risk limits for all entities.
in addition, the Internal Control depar tments of Natexis
Banques Populaires and Banque Fédérale des Banques
Populaires periodically conduct specific audit assignments.
VII.3.1.2 - Market risk measurement
The market risk management system is based on a risk metrics
model that measures the risk run by each Natexis Banques
Populaires entity. The current model consists of a number of
standard metrics and VaR calculations.
n Standard metrics
The key standard metrics used are:
- sensitivity to a +/- 1% change in interest rates (overall and by
maturity);
- yield curve exposure expressed as the potential loss;
- currency exposure;
- equity exposure;
- sensitivity to a +/- 1% change in implied volatilities in the equity,
foreign exchange and fixed income markets (overall, by maturity
and by strike);
- specific indicators relating to product developments giving rise
to new types of risk (correlations).
All of these new products have been subject to the “New
Products” procedure and model validation;
- further improvements to limits for interest-rate products and
hybrid derivatives;
- significant increase in assets authorized for money market
securities, with deployment of the spread risk measurement
metric (Xsi - internal indicator) for this portfolio;
- launch of high-yield activities;
- increased sensitivity to yields on short-term treasury instruments;
- increase in limits for long/short equity, capital structure arbitrage and convertible bonds from Natexis Arbitrage;
- tightening of loss alert levels.
n Limits
Maximum sensitivity of interest rate maturity schedules to a
+/-1% shift in the yield curve is B100 million.
The currency risk limit is B3 million expressed in terms of a oneday potential loss with a 99% confidence level.
Maximum sensitivity to a change in issuer spreads in the secondary bond market trading book is B10 million, expressed in
terms of a one-day potential loss and a 99% confidence level.
Volatility limits for interest rate, currency and equity options are:
- B2.5 million for a 1% change in interest rate volatility;
- B1.35 million for a 1% change in equity volatility;
- B0.683 million to B0.975 million per currency for a 1% change
in foreign exchange volatility.
These overall metrics are supported by more precise measurements by underlying, maturity and strike price.
n VaR - Value at Risk
in addition to these standard metrics, Natexis Banques Populaires
also uses the Value at Risk (VaR) method. It uses Riskmanager software developed by Riskmetrics to perform historical VaR calculations designed to quantify the risk of losses from capital markets
activities, using conservative assumptions.The model is based on:
- one year’s historical data;
- sensitivity to a change in delta of an underlying (equities, fixed
income and currency);
- a one-day potential loss horizon;
- sensitivity to dividend levels;
The scope of VaR calculations is as follows:
- sensitivity to change in goverment security/swap spreads;
- sensitivity to change in correlations;
- trading and investment por tfolios of the Corporate and
Institutional Banking and Markets core business, excluding the
“structured equities” portfolio;
- monthly and annual loss alerts.
- trading portfolios of Natexis Bleichroeder S.A.;
New metrics and limits were introduced in 2005:
- trading portfolios of Natexis Arbitrage;
- deployment of the methodology for interest-rate risk measurement: curve risk indicator;
- trading portfolios of Natexis Commodity Markets;
- sensitivity to change in issuer spreads;
2005 ANNUAL REPORT
- a 99% confidence level.
- the investment portfolio of the Finance department.
For the Corporate and Institutional Banking and Markets core
business, VaR calculations are conducted daily by the Middle
Office and monthly by the Risk Management department of
Natexis Metals’ VaR calculations are conducted daily using local
Riskmanager software and monthly by the Risk Management
department.
Data is inputted into Riskmanager primarily using automatic
interfaces developed between the front office/middle office systems and the software. These interfaces supply the characteristics of an operation, enabling the software to understand the
various operations.
Market data are provided by Riskmetrics on the basis of information from Reuters and are subject to a data management
process by Riskmetrics.
- across-the-board shift in market rates: (+/- 200 bp);
- non-parallel shift in the yield curve: short rates +/-100 bp, long
rates -/+100 bp.
The sensitivity of earnings capacity must comply with a dual limit,
expressed as a percentage of earnings capacity and as an absolute value representing the “minimum required capacity”.
Sensitivity of net interest income on a dynamic basis:
The model uses projected (gradual) scenarios based on constant
rates, Natexis Banques Populaires economists’ forecasts, a yield
curve shift, a fall in rates, a rise in rates and a yield curve inversion.
For each of the four years concerned, net interest income must
be higher than the previous year after application of a multiplier.
n Hedging
n
VII.4 – Interest rate and liquidity risk
The Group’s financial risk management policy aims to:
- define the best strategy to develop net interest income while
controlling risk;
- ensure that business growth is consistent with the bank’s financial structure, in terms of both interest rate risk and liquidity risk;
- limit exposure to interest rate risk through an appropriate
hedging policy;
Cash flow hedges - CFH
Cash flow hedges are used by Group entities to fix the future
cash flows generated by variable rate borrowings (mostly interbank) and private or public issues, and variable rate loans (commercial or interbank).
They are based on maturity schedules for hedged variable rate
transactions, which may factor in assumptions about the renewal
of the assets or liabilities concerned.
n
Fair value hedges - FVH
- validate the organizational and control rules for the asset-liability management function;
Fair value hedges are used by Group entities to hedge fixed-rate
assets (securities and loans) or fixed-rate liabilities (deposits from
banks, long-term customer deposits, and private or public issues).
- define and periodically monitor internal risk limits.
n
The financial risk management policy of each Banque Populaire
bank must comply with the Group’s financial risk management
manual. The manual sets out the risk management and reporting
rules adopted at Group level for asset-liability management.
More specifically, it includes the system for setting interest rate
and liquidity risk limits.
VII.4.1 - Interest-rate risk
In the first three quarters of 2005, interest rates fell to record
lows in the Eurozone. At the year end, the yield curve began to
flatten, which could have a negative impact on the retail banking
business.The spread between 3-month Euribor and 10-year CMS
fell from an average of 208 bp in 2004 to an average of 129 bp
in 2005 and 91 bp in early 2006.
n Interest-rate risk limits
Limits are set as a percentage of projected net interest income on
a “dynamic” basis (incorporating business forecasts) and as a percentage of earnings capacity on a “static” basis (last balance sheet)
over a four-year horizon based on pre-defined scenarios.
Each Bank is free to set its own limits, provided they are expressed in
terms of the indicator set out in the Group risk management manual.
Sensitivity of earnings capacity on a static basis (“regulatory” view):
The model uses four matrix benchmark scenarios (instant shocks):
05
Effectiveness tests
Prospective testing:
For a hedge of a single asset or liability, prospective testing involves checking that the financial characteristics of the hedged item
and the hedging instrument are the same.
For a hedge of a group of assets or liabilities, prospective testing
involves drawing up:
n a schedule of cumulative variable-rate liabilities and fixed-rate
borrower swaps by maturity for cash flow hedges;
n a schedule of cumulative variable-rate assets and fixed-rate
lender swaps by maturity for cash flow hedges;
a schedule of cumulative fixed-rate liabilities and fixed-rate lender swaps by maturity for fair value hedges.
n
Hedging is demonstrated if the nominal amount of items to be
hedged is higher than the notional amount of hedging derivatives for each maturity band of the target repayment schedule.
Retrospective testing:
Retrospective testing involves conducting ex post checks on the
effectiveness of the hedge, at least on each reporting date.
On each reporting date, changes in the value of hedging instruments, excluding accrued interest, since the previous reporting
date or inception of the hedge are compared with those of the
hedged items over the same period.The ratio of their respective
189
changes should be between 80% and 125%. Outside these limits,
the hedging ratio would no longer be justified under IFRS.
For the purpose of retrospective testing, the hedged items are
represented by:
a hypothetical asset or liability to isolate the risk item hedged,
for fair value hedges;
n
n a hypothetical derivative representing a perfect hedge of the
items hedged for cash flow hedges.
n Results
n
Retail banks
charge of CDS trading. The idiosyncratic risk is measured using
the Xsi indicator (internal indicator), which is set monthly based
on the historic levels of JP Morgan bond indices. An Xsi base
measurement is also taken to limit the risk in the cash market.
The credit derivatives authorized are plain vanilla credit default swaps.
One restriction applies to trading positions: traders are not allowed to pile up positions and must either cancel or assign the
transaction to close out a position.
A CDS Management Committee met once a week from January
2004 to October 2004. A report was prepared after each working session of the committee.
Interest-rate risk:
VII.4.2 - Liquidity risk
An increase in sensitivity of net interest income to a fall in rates
and an inversion of the yield curve over the four-year horizon.
Liquidity gap limits are set on a dynamic basis, assuming both a
normal growth and a liquidity crisis scenario.
On a dynamic basis, sensitivity of net interest income to a sudden
200 bp fall in rates rose from -9% in 2004 to -24% in 2005, and sensitivity to a sudden flattening of the yield curve rose from -4% to
-7%. A more gradual fall in interest rates and yield curve flattening
would have less of an impact on net interest income in the first two
years (-5% in 2006 and -4% in 2007 compared with the 2005 level).
A second indicator used is the sensitivity of earnings capacity to a
50 bp increase in the spread over short rates measured over a
period of six months on a dynamic basis assuming a normal
growth scenario.
On a static basis,average sensitivity of earnings capacity over the four
years to a 200 bp fall in rates rose from -29% to -58%.Average sensitivity to an inversion of the yield curve rose from -15% to -19%.
n
Sensitivity:
Natexis Banques Populaires is chiefly exposed to a rise in shortterm interest rates.
n Credit derivatives
Apart from securitization transactions, credit derivatives held by
the Group at end December 2005 were not material. Their
nominal amount was B2.5 billion, principally in Credit Default
Swaps (CDS) held for trading purposes.
Most of these credit derivatives are carried by Natexis Banques
Populaires in line with its policy of developing a credit derivatives
business within its capital markets activities. As part of a cautious
approach, the Group implemented trading limits in several stages:
- January 2004: Creation of a credit derivatives trading book. In
January 2004, the risk committee delegated authorization to the
trader to trade CDSs in the cash market;
- April 2004: The authorization was extended to include directional positions, subject to a volume limit in order to keep tight
control over the operating process;
Liquidity risk has not increased as a result of the rise in the
customer asset-liability ratio.
The dynamic gap over six months for the Banque Populaire
banks as a whole, excluding NCDs, has even decreased substantially from B5 billion to B0.8 billion, due to the increased proportion of refinancing in total liabilities. Over four years, the
dynamic gap excluding NCDs has risen from B21 billion to B22
billion, which still represents 16% of residual assets.
Liquidity indicators show that business growth is controlled, even
more so than in the past.The slight increase in the asset-liability ratio
shows that growth has been managed more through borrowings
than customer liabilities. All banks comply with the regulatory ratios.
VII.5 – Operational risks
The Group’s system is based on a risk management manual
approved by the Board of Directors of Banque Fédérale des
Banques Populaires in 2005, which identifies and lists the activities covered and describes the reporting system.
Operational risk, as defined by the banking regulator, is the risk of
loss due to inadequacies or deficiencies in processes, people and
systems, or to external events. A risk mapping process based on
this definition led to the identification of four major types of operational risk: systems and processes, fraud and external risk, legal
and compliance risk, and strategic risk.
- October 2004: As the operating process was considered satisfactory, the volume restriction was lifted;
In 2004, the Group launched a project,overseen by Banque Fédérale
des Banques Populaires, to create a coherent operational risk management system by providing all Group entities with standardized
manuals for identifying key activities and information systems, as well
as guidelines for establishing business continuity plans.Work on the
project continued throughout 2005 and has resulted in the implementation of business recovery plans based on best practices.
- Since December 2004: The CDS trading positions have been
transferred to the non-government bonds desk, which is now in
In addition, an Operational Risk Charter was adopted in 2005 and
will govern relationships within the Group as of January 1, 2006.
- September 2004:The non-government bonds desk was authorized
to trade in CDSs.The limits delegated were fairly restrictive and the
volume restriction also applied to transactions initiated by this desk;
2005 ANNUAL REPORT
05
Note VIII - Payroll costs, number of employees, employee
compensation and benefits
VIII.1 - Payroll costs
Payroll costs amounted to B3,195 million at December 31, 2005
against B2,986 million at December 31, 2004.
Payroll costs include wages and salaries net of rebilled expenses,
social security charges, incentive and profit-sharing payments,
payroll-based taxes, share-based payments in accordance with
IFRS 2, and employee benefits such as expenses relating to defined
contribution pension plans and the annual charge for defined
benefit pension plans, including:
- incremental benefit entitlement for all employees;
- interest cost (impact of discounting);
- gross return on plan assets;
- amortization of actuarial gains or losses (corridor method)
and past service costs.
VIII.2 - Number of employees
The number of full-time equivalents at the year end was as follows:
Number
12/31/2005
12/31/2004
45,530
44,509
41,066
40,428
4,464
4,081
Employees
Domestic operations
International operations
VIII.3 - Employee benefits
n End-of-career allowances
In accordance with IAS 19, the Banque Populaire Group provides
for all its obligations with respect to employee benefits.
For end-of-career allowances, consolidated entities cover all or
par t of their commitments through insurance policies with
Assurance Banques Populaires Vie, a fully consolidated insurance
subsidiary of the Group.
VIII.3.1 - Obligations at end 2005
n Supplementary banking pension
Provisions are recognized in the consolidated financial statements for all obligations of Group entities not covered by insurance policies.
The Banque Populaire Group “Caisse Autonome de Retraite”(CAR)
pension scheme was closed to new entrants as of December 31,
1993, pursuant to the banking industry agreement of September 13,
1993, the terms of which were applied to the Banque Populaire
banks through an internal agreement dated January 7, 1994. This
scheme also covered Natexis Banques Populaires employees previously employed by the former Caisse Centrale des Banques
Populaires.
A ministerial decree of July 18, 2005 reformed the system of
end-of-career allowances. Departures on the initiative of the
employer before the age of 65 are no longer subject to social
security contributions. The impact of this decree amounted to
B44 million in 2005 and was treated as a past service cost deferred over the remaining vesting period on an entity-by-entity
basis.The charge for the year was B2 million, recognized under
payroll costs.
Obligations mainly comprise the following:
The Group’s obligations towards active and retired employees
concern supplementary pension benefits payable under the Banque
Populaire Group plan and the fraction of benefits due under the banking industry scheme closed to new entrants on December 31,1993
that is not covered by the Social Security system, as well as the
ARRCO and AGIRC obligatory supplemental pension plans.
Concerning the specific Natexis Banques Populaires pension plans,
the assets of the former BFCE pension fund are equal to the projected benefit obligation while those of the former Crédit National fund
are slightly lower than the projected benefit obligation.
n Long-service awards
Long-service awards are payable to all Group employees who
reach 20 years, 30 years, 35 years and 40 years service with the
Group.The amount payable is based on the number of years’ service.
The Group’s obligation is determined using the projected unit
credit method, similar to that used for end-of-career allowances.
191
n Other benefits
Other employee benefits principally comprise:
n
CATS early retirement agreement:
On February 18, 2002, the Banque Populaire Group signed an
agreement with employee representatives, providing for the
implementation of a “CATS” early retirement plan in application
of the A.F.B. industry-wide agreement dated January 15, 2001.
On August 30, 2002, the Banque Populaire Group signed
a “CATS” convention with the Ministry of Social Affairs,
Employment and Solidarity, exempting early retirement payments from social security taxes.
n
Mutual health plan for retirees and early retirees:
Under IAS 19, the employer’s contribution paid by some consolidated companies to mutual health funds on behalf of retirees
and early retirees is treated as a post-employment benefit. The
liability is therefore provided for in the consolidated financial
statements.
n
VIII.3.2 - Recognition and measurement
of the liability
The provision recognized in the balance sheet is equal to:
- the amount of the actuarial liability in respect of post-retirement and similar benefits for active and retired employees;
- less the market value of plan assets;
- plus or less any actuarial gains or losses arising from:
n
experience adjustments in respect of demographic variables;
changes in actuarial assumptions such as the discount rate,
employee turnover and future salary increases;
n
differences between the actual return and expected return on
plan assets.
n
The main actuarial assumptions made as at December 31, 2005,
are as follows:
Executive officers’ pensions
The executive officers belong to the supplementary group
pension scheme open to all executive officers of the Banque
Populaire Group, in accordance with the provisions of the status
accorded to this category.
Pensions
End-of-career
allowances
Long-service
awards
Discount rate
3.76%
3.60%
3.42%
Return on plan assets
6.00%
3.80%
///
The rate of increase in medical costs is 2% for inflation plus 2.5%
for the generation effect.
The change in liability recognized in profit or loss therefore corresponds to:
For end-of-career allowances and long service awards, employee
turnover is calculated by age bracket and grade based on a
three-year average.The rate is 0% for employees over 55. Future
salary increases are estimated by grade based on a constant
population and a three-year average
- incremental benefit entitlements (expenses);
Actuarial gains and losses are recognized in profit or loss using the
“corridor” method. Under this method, the portion that exceeds
10% of the greater of the group’s obligation or the fair value of
plan assets is deferred over the remaining working lives of the
employees participating in the plan. The “corridor” method is not
used for other long-term employee benefits such as long service
awards.
- amortization of actuarial gains and losses outside the “corridor”
for the plans concerned.
The Group has used the option available under IFRS 1 to recognize all as yet unrecognized actuarial gains or losses in equity in
the opening balance sheet at January 1, 2004.
2005 ANNUAL REPORT
- benefits paid during the period;
- interest cost on the opening liability (expenses);
- expected return on plan assets;
Banque Populaire Group uses independent actuaries to measure
its main liabilities.
05
VIII.3.3 - Summary of liabilities and provisions
Supplementary
pensions
End-of-career
allowances
Long-service
awards
Other
Total
536
333
103
170
1,142
Provisions recognized
Unrecognized actuarial gains and
losses (1)
38
15
3
56
Total liability at January 1, 2005
574
348
103
173
1,199
Benefits paid in the period
(21)
(4)
(7)
(36)
(68)
17
5
11
33
35
14
3
3
54
(12)
(5)
0
(17)
1
0
Incremental benefit entitlements
Interest cost
Expected gross return on plan assets
Change in management fees
1
Contribution to fund
(3)
Contribution-related expenses
0
Impact of change in plan recognized
during the period
(2)
Actuarial gains and losses
(3)
0
0
(2)
(1)
5
0
3
Other
(3)
3
3
(4)
(1)
Change recognized in payroll costs (2)
(1)
22
10
(29)
2
15
106
Actuarial gain or loss on liabilities
Actuarial gain or loss on return on plan assets
Other actuarial gains or losses
Change in unrecognized actuarial
gains or losses (1)
63
28
////////
(19)
(2)
////////
2
(1)
////////
46
25
(21)
1
2
16
87
Impact of change in plan during
the period
(44)
(44)
Cost not yet recognized (1)
(44)
(44)
Provisions recognized
Unrecognized actuarial gains or
535
losses (1)
84
Deferral of changes in plan
Total liability at December 31, 2005
355
113
141
1,144
40
////////
19
144
0
(41)
161
1,247
(42)
619
354
113
(1) Pursuant to IAS 19.
(2) As these provisions are recognized as liabilities in the balance sheet, Increases (expense) are shown as positive amounts and reversals (income) are shown as negative amounts in
brackets.
193
VIII.4 - Share-based payment plans
VIII.4.1 - Stock option plans
Banque Populaire Group grants stock options to certain of its
employees. As required by IFRS 2, stock options granted after
November 7, 2002, which have not vested on the reporting date,
are valued at their fair value on the grant date using the Black &
Scholes model. The fair value is expensed in payroll costs on a
straight-line basis over the vesting period with a corresponding
increase in equity. Fair value is reviewed on each reporting date
Year
and adjusted if subsequent information indicates a change to the
initial estimation of vested rights. The expense is then adjusted
for the current and future years.
The Group has four stock option plans covered by IFRS 2. The
options are over Natexis Banque Populaires shares and are exercisable over a period of three years after a lock-up period of four years.
Attributes of the plan
Number of options
Amount (euros)
Date of
grant
Initial
exercise
date
Expiry
date
Granted
Outstanding
at end 2005
Exercise
price
2002
11/20/2002
09/11/2006
09/09/2009
329,735
308,490
72.47
2003
11/19/2003
09/11/2007
09/09/2010
406,890
398,270
83.25
2004
11/17/2004
11/17/2008
11/16/2011
427,750
423,900
89.1
2005
11/15/2005
11/15/2009
11/14/2012
500,000
500,000
119.24
The charge for 2005 recognized in “payroll costs” amounted to B5 million versus B4 million in 2004.
VIII.4.2 - Stock options granted to the top 10 beneficiaries
The following table shows the number of stock options over Natexis Banques Populaires granted to (or exercised by) the 10 employees
(excluding executive officers) of Banque Fédérale des Banques that were granted (or exercised) the highest number of options in 2005.
Stock options over
Natexis Banques Populaires shares
Options granted in 2005
Options exercised in
2005 (1)
Number of
options
Plan
number
Initial
exercise
date
Expiry
date
Exercise
price
(in euros)
2005 Plan
11/15/2009
11/14/2012
119.24
85,000
2001 Plan
09/20/2005
09/19/2008
94.30
43,200
2000 Plan
09/20/2005
09/19/2007
83.14
49,500
1999 Plan
09/22/2004
09/21/2006
59.31
10,900
1998 Plan
07/07/2003
07/06/2005
57.65
1,500
105,100
(1) The average share price of Natexis Banques Populaires shares in 2005, the period in which the options were exercisable, was €118.60 (against €92.61in 2004).
2005 ANNUAL REPORT
05
Note IX - Segment reporting
IAS 14 requires the disclosure of information broken down by
business or geographical segments that are subject to different
risks and returns.
The Banque Populaire Group’s
primary format for reporting segment is business segment (see
note IX.1)
n
n
secondary format is geographical segment (see note IX.2).
Segment reporting is based on financial aggregates taken from
the balance sheet and income statement and reconciled with the
consolidated financial statements.
This information is completed by an analysis of the differences (note
IX.3) between insurance companies’ financial statements as presented in the insurance format and their presentation in banking format.
IX.1 - Segment reporting analysis
The Banque Populaire Group is structured into three sectors (or
levels):
Level 1: Retail banking
This level comprises the Banque Populaire Regional Banks, CASDEN
Banque Populaire, Crédit Coopératif, Crédit Maritime Mutuel, the
Mutual Guarantee Companies and the direct subsidiaries of these entities.Along with the direct subsidiaries of Banque Fédérale des Banques
Populaires (except for Natexis Banques Populaires), they account for
most of the Group’s retail banking business. For clarity, the capital markets business of the Banque Populaire banks, which is principally
conducted by BRED Banque Populaire, has not been reallocated.
Level 2: Financing, investment banking
and services
This level comprises Natexis Banques Populaires, the Banque
Populaire Group’s Financing, Investment banking and Services
bank, which is divided into the following four core businesses plus
an “other businesses” segment:
n
Corporate and Institutional Banking and Markets:
Corporate and Institutional Banking and Markets includes financing and capital markets activities for a clientele of large companies, banks and institutions. It has a highly integrated sales force
that is responsible for marketing Natexis Banques Populaires products and developing sales of all products to its clients, and particularly products provided by the core business, which include:
- Financing products: working capital finance (overdrafts, spot
credits, discounting, credit lines, guarantees and bonds, documentary credits), financing for equipment, assets, acquisitions, projects
and international trade;
- Capital market products: interest rate, equity, credit and currency derivatives, brokerage and arbitrage;
- Cash management and payment services: payment systems, EDI,
authorizations, checks, letters of credit, transfers, cash management.
n
Private equity and wealth management:
- The private equity business provides expansion capital, buy-ins
and buy-outs, venture capital (young companies) and international private equity for a clientele of small and medium-sized,
mostly unlisted companies;
- Wealth management provides advice, planning and asset management services for a clientele of high net worth individuals,
mostly clients of the Banque Populaire retail banking network
but also of Natexis Banques Populaires.
n
Services :
- Financial services provide securities back office services including custody (account holding, back office outsourcing, depository control), fund administration and accounting, issuer services,
order receipt and transmission, office service. Most of this business comes from Natexis Banques Populaires clients.
- Banking services provide payment systems services including
electronic payments, issuance and collection of low-volume electronic transfers, check processing.
- Asset management provides savings, investment and insurance products and services through three business lines: insurance (individual life, group life, P&C, personal risk), financial
management (mutual funds, multi-manager funds, multi-distribution), employee benefits planning (development and marketing of products, administration of employee share ownership
plans, employee account holding, fund administration and
accounting).
n
Receivables Management:
This business includes Coface and Factorem, which have a shared management structure. It includes trade receivables management and offers clients tailored products to manage, protect and
finance their receivables:
- Main activities: credit insurance, business information and credit
rating (solvency and marketing), trade receivables management
(from issuance to recovery), factoring (Factorem) and securitization.
- Other activities: bonds, management of public procedures on
behalf of the French State, trade receivables management training.
Receivables management has an extensive distribution network
comprising:
- the Coface network covering 58 countries, supported by the
CreditAlliance network (91 countries);
- the Banque Populaire retail banking network, which is a major
source of factoring business for Factorem and offers substantial
development potential for other activities.
n
Other businesses:
Other activities not covered by these four core businesses are
grouped under “Other businesses”, which primarily comprises
the functional departments (information systems, human resources, finance and internal audit).
195
Level 3 - Federal activity
This level is represented by Banque Fédérale des Banques Populaires, which guarantees the consistency and financial solidarity of the
Group through its function as central body and holding company of Natexis Banques Populaires.
IX.1.1 - Segmental analysis of the income statement
At December 31, 2005 (1)
Financing, investment banking and services bank
Retail
Banking
Corporate
Private
and
Equity &
Institutional
Wealth
Banking and
Management
Markets
Services
Receivables
Management
Federal
activity
Other
Total
Total
Net banking income
5,194
1,259
264
725
781
9
3,039
9
8,242
Year-on-year change (2)
4.5 %
8.7%
40.7%
18.7%
14.4%
ns
13.5%
ns
7.8%
Operating expenses
(3,385)
(191)
(1,994)
(11)
(5,390)
3.3%
ns
9.5%
ns
5.6%
(726)
10.9%
(90)
1.7%
(440)
7.2%
(547)
6.4%
1,810
533
173
285
234
(181)
1,044
6.6%
5.7%
75.1%
41.8%
38.6%
ns
21.8%
ns
12.3%
1,483
11.9%
472
16.8%
159
88.9%
282
50.7%
223
35.8%
(60)
ns
1,075
49.3%
(7)
ns
2,551
25.4%
(2)
2,852
(1) Results for each segment comprise directly attributable operating income and expenses, including transactions with other segments of the Group. The information is therefore perfectly
consistent with that published upon release of the financial statements on February 23, 2006 and published in the Group management report.
(2) The 2004 comparatives are based on IFRS excluding IAS 32, IAS 39 and IFRS 4.
2005 ANNUAL REPORT
05
IX.1.2 - Segmental analysis of the balance sheet
Assets (at December 31, 2005)
Corporate
and
Institutional
Banking and
Markets
Private
Equity &
Wealth
Management
8,406
16,813
1,185
7,915
Available-for-sale
financial assets
10,599
7,396
460
Loans and advances
to banks
14,321
53,421
Loans and advances
to customers
98,117
42,421
Retail
Banking
Receivables
ManagServices
ement
Federal
activity
Unallocated
Total
(1)
Other
Total
123
141
26,176
9
(1,267)
33,325
13,326
842
4,511
26,535
470
(7,684)
29,920
626
829
15
3,534
58,424
14,750
(31,752)
55,744
237
588
3,638
4,929
51,813
332
(3,658)
146,603
Held-to-maturity
financial assets
0
0
0
6,973
122
0
7,094
0
(195)
6,899
Goodwill
0
13
24
236
443
20
736
20
(170)
586
Other assets
7,612
3,005
117
1,820
1,126
1,092
7,160
1,565
(703)
15,634
Total assets
139,055
123,069
2,648
31,686
6,308
14,226
177,938
17,146
(45,428)
288,711
[1] This item includes intragroup balances and transactions between segments (see IAS 14 para. 24) and non-segment assets (certain consolidation adjustments that cannot be allocated
to the core businesses, mainly deferred tax assets).
Liabilities (at December 31, 2005)
Retail
Banking
Financial liabilities at fair
value through profit or loss
Corporate
and
Institutional
Banking and
Markets
Private
Equity &
Wealth
Management
Receivables
ManagServices
ement
Other
Total
Federal
activity
Unallocated
Total
(1)
1,922
5,285
5
6
0
50
5,346
2
(512)
6,758
Deposits
from banks
21,182
48,568
629
455
1,899
8,054
59,605
12,418
(31,928)
61,277
Customer deposits
81,143
18,369
543
46
786
5,415
25,158
0
(1,818)
104,483
Debt
securities
14,070
36,248
6
0
741
849
37,844
1,042
(3,866)
49,090
Insurance companies’
technical reserves
3,547
0
0
25,334
903
0
26,237
0
(107)
29,677
Subordinated debt
2,265
3,813
10
388
25
881
5,117
3,233
(4,211)
6,404
Other liabilities
5,993
3,925
146
4,343
702
998
10,114
205
14,709
31,022
130,122
116,208
1,339
30,572
5,055
16,247
169,421
16,901
(27,734)
288,711
Total liabilities
[1] This item includes intragroup balances and transactions between segments (see IAS 14 para. 24) and non-segment liabilities and equity (total equity and certain consolidation adjustments that cannot be allocated to the core businesses, mainly deferred tax liabilities).
197
IX.2 - Analysis by geographical segment
The Banque Populaire Group has a large domestic banking network through the Banque Populaire banks, but also a significant international business through Natexis Banques Populaires’ 116 offices abroad (including Coface).
The Group has identified four main geographical segments :
- France;
- Other EU countries;
- North America (Canada, USA);
- Other OECD countries.
Each legal entity has been allocated to a geographical segment based on its country of location.
IX.2.1 - Analysis of the income statement by geographical segment
Income Statement (at December 31, 2005)
France
Other EU
countries
North
America
Other OECD
countries
Unallocated
(1)
Total
Net banking income
7,392
469
233
14
134
8,242
Operating expenses
(4,959)
(279)
(109)
(14)
(29)
(5,390)
2,433
190
124
0
105
2,852
(406)
(10)
(16)
0
(2)
(436)
2,026
180
107
0
103
2,416
14
1
0
0
0
15
117
0
0
0
0
117
3
0
0
0
0
3
2,159
181
107
0
104
2,551
Impairment charges and
other credit provisions
Operating income
Income taxes
Net income
Attributable to equity holders of the parent
(740)
(62)
(36)
(1)
(16)
(855)
1,419
119
71
(1)
88
1,696
(120)
(13)
(13)
0
(28)
(174)
1,299
106
58
(1)
60
1,522
[1] Intragroup balances and transactions between geographical segments (IAS 14 para. 24) and countries outside the four identified geographical segments.
2005 ANNUAL REPORT
05
IX.2.2 - Analysis of the balance sheet by geographical segment
Assets (at December 31, 2005)
France
Other EU
countries
North
America
Other OECD
countries
Unallocated
(1)
Total
28,961
712
3,285
0
366
33,325
28,742
792
358
9
18
29,919
59,558
1,431
13,547
0
(18,792)
55,744
129,605
6,850
9,710
0
439
146,603
6,797
103
0
0
0
6,899
452
87
46
0
1
586
Other assets
14,080
1,047
271
14
223
15,635
Total assets
268,195
11,021
27,218
23
(17,745)
288,711
Goodwill
Liabilities (at December 31, 2005)
France
Other EU
countries
North
America
Other OECD
countries
Unallocated
(1)
Total
6,777
23
32
0
(74)
6,758
67,492
7,997
4,385
0
(18,598)
61,277
Customer deposits
94,170
854
9,053
0
406
104,483
Debt securities
36,822
6
12,191
0
71
49,090
28,455
1,134
28
19
42
29,677
6,009
10
831
0
(446)
6,404
Deposits from banks
Subordinated debt
Other liabilities
28,469
997
698
4
854
31,022
Total liabilities
268,195
11,021
27,218
23
(17,745)
288,711
[1] Intragroup balances and transactions between geographical segments (IAS 14 para. 24) and countries outside the four identified geographical segments.
IX.3 - Analysis of insurance company business
This table reconciles the amounts recognized in the separate
accounts of insurance companies (consolidated accounts of subgroups in the case of the Coface Group) and the amounts recognized in the consolidated financial statements presented in the
banking format.
The main reclassifications concern general operating expenses
which are analyzed by destination in the insurance format financial
statements and by nature in the banking format.
At the level of net banking income, insurance income and expenses that are similar to banking income and expenses (mainly interest, fees and commissions) are reclassified under the related line
items in the banking format, in the interests of consistency.
Movements in technical reserves and loss expenses are deducted from net banking income and not recognized as impairment
charges.
Reclassifications made in the balance sheet are not material. The
main insurance-specific balance sheet items are presented under
“Insurance company investments” on the assets side and “Insurance
companies’ technical reserves” on the liabilities side. Accrued interest, which is reported on a separate line in the insurance format,
is included on the same line as the item to which it relates in the
banking format.
199
December 31, 2005
Banking format
Insurance
format
Net
banking
income
Operating
Gross
expenses operating
income
Other
items
Minority
Net
interests income
Separate or sub-consolidated financial statements (*)
Premium income
4,439
4,439
0
4,439
4,439
Investment income
1,698
1,700
(2)
1,698
1,698
510
510
0
510
510
7
7
0
7
7
Loss expenses
(2,185)
(2,179)
(6)
(2,185)
(2,185)
Transfers to technical reserves
Mark-to-market gains on assets held
to cover linked liabilities
Other underwriting income
(2,224)
(2,224)
0
(2,224)
(2,224)
Policyholder dividends
(884)
(884)
0
(884)
(884)
Acquisition and administration costs
(706)
(323)
(383)
(706)
(706)
Investment expenses
(417)
(409)
(8)
(417)
(417)
Mark-to-market losses on assets held
to cover linked liabilities
(8)
(8)
0
(8)
(8)
Other underwriting expenses
64
78
(14)
64
64
Investment income transferred out of
the technical account
(2)
(2)
0
(2)
(2)
Underwriting result
291
705
(413)
291
Investment income transferred from
the technical account
(29)
(29)
0
(29)
(29)
Other non-underwriting income
343
342
1
343
343
Other non-underwriting expenses
(213)
(64)
(148)
(213)
0
0
291
(213)
(7)
0
(7)
(7)
4
0
4
4
Exceptional items
Employee profit-sharing
Income taxes
Goodwill amortization
37
0
(1)
37
37
(1)
(1)
37
(1)
(87)
0
(87)
(87)
(8)
0
(8)
(8)
(1)
(1)
Net income
331
953
(525)
429
(97)
(1)
331
Consolidation adjustments
(149)
(42)
(43)
(85)
(23)
(41)
(149)
Contribution of insurance companies
to the Group
182
911
(567)
344
(120)
(41)
182
Minority interests
0
(1)
* Coface sub-group
In accordance with IFRS, net banking income generated by the insurance business is broken down as follows in the banking format:
Interest income and expense
Fee and commission income and expense
Gains or losses on financial instruments at fair value through profit or loss
Gains or losses on available-for-sale financial assets
Income and expenses from other activities
Net banking income
2005 ANNUAL REPORT
801
(235)
83
249
13
911
05
Note X - Commitments
X.1 - Guarantee commitments
A non-financial guarantee commitment given (or received) is a
contract entailing an obligation (or right) to give (or receive)
non-financial assets in the event of default by the debtor.
A financial guarantee commitment is a contract that requires the
issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payment
when due. The exercise of these rights is subject to the occurrence of an uncertain future event.
IAS recognizes three types of financial guarantee:
- guarantees granted (received) upon the transfer of financial
assets/liabilities;
- financial guarantees treated as derivative financial instruments:
these include credit derivatives (see table on derivative financial
instruments for details);
- financial guarantees that meet the definition of an insurance
contract and are accounted for as insurance contracts.
The new standards do not apply until 2006. Amounts shown
represent the nominal value of the commitment:
12/31/2005
EU IFRS
01/01/2005
EU IFRS
To banks:
2,755
2,043
- Confirmed documentary credits
1,401
981
Guarantee commitments given
- Other guarantees
1,354
1,062
24,179
20,891
- Real estate guarantees
1,289
1,127
- Tax and other bonds
1,770
1,831
- Other bonds and endorsements
8,077
6,929
13,043
11,004
26,934
22,933
6,440
7,630
To customers:
- Other guarantees
Total guarantees given
Guarantees received from banks
X.2 - Financing commitments
In accordance with IAS 39 (para. 2), financing commitments
outside the scope of IAS 39 are recognized in accordance with
IAS 37 “Provisions, contingent liabilities and contingent assets”.
n The following financing commitments fall within the scope of
IAS 39:
- commitments classified as financial liabilities at fair value through
profit or loss. If an entity has a past practice of reselling or securitizing loans shortly after origination, these loans are subject to
IAS 39 from the commitment phase;
- commitments that can be settled net (i.e. sale);
- commitments to provide a loan at a below-market interest
rate.
n
Other financing commitments covered by IAS 37.
A financing commitment given is a contingent liability, defined by
IAS 37 as a possible obligation arising from past events whose
existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly
within the control of the enterprise or a present obligation arising from past events but which is not recognized because:
- it is not probable that an outflow of economic benefits will be
required to settle the obligation, or
- a reliable estimate of the amount of the obligation cannot be
made.
In the case of commitments to provide a loan at a belowmarket interest rate, a discount is recognized in expenses and a
corresponding amount in accrued income and deferred expenses.The discount is subsequently incorporated into the loan and
the calculation of the effective interest rate.
201
The nominal value of commitments governed by IAS 37 is as follows:
12/31/2005
EU IFRS
01/01/2005
EU IFRS
3,335
2,681
41,173
32,078
2,225
1,156
37,468
28,581
Financing commitments given
To banks
To customers:
Documentary credits
Other confirmed lines of credit
Other commitments
Total financing commitments given
1,480
2,341
44,507
34,760
6,998
5,514
0
0
6,998
5,514
Financing commitments received
- from banks
- from customers
Total financing commitments received
X.3 - Other commitments
In 2002, Banque Fédérale des Banques Populaires issued a guarantee relating to the shares issued by Natexis Banques
Populaires on the acquisition of Natexis Bleichroeder Inc. in
December 2002.
The acquisition of Natexis Bleichroeder Inc. (formerly Arnhold &
Bleichroeder Inc) was paid for through the issuance of 1,401,082
new shares.The share issue, carried out on December 6, 2002,
represented a capital increase of 3%.
Arnhold & Bleichroeder Holdings, the former owner of Natexis
Bleichroeder Inc., is committed to retaining at least 45% of these
shares for a minimum of five years.The remaining 55% of the shares may be sold over a period of seven years, as follows: no more
than 10% between six months and one year after the transaction
date, a cumulative maximum of 35% in the period to the end of
the second year, a cumulative maximum of 45% in the period to
the end of the third year and a cumulative maximum of 55% in
the period to the end of the seventh year.
2005 ANNUAL REPORT
Arnhold & Bleichroeder Holdings and Banque Fédérale des
Banques Populaires have also signed a value protection agreement stating that if the 55% of the shares referred to above are
sold at a price below their value at the date of issue – i.e. B75.56
– Banque Fédérale des Banques Populaires will transfer additional Natexis Banques Populaires shares to Arnold & Bleichroeder
Holdings without consideration.
This value protection agreement will only apply if the shareholders of Arnold & Bleichroeder Holdings have refused an offer to
purchase the Natexis Banques Populaires shares at a price previously proposed by Banque Fédérale des Banques Populaires. In
that case the Natexis Banques Populaires shares may not be sold
to a third party at a price lower than that offered by Banque
05
Note XI - Related parties
Related parties are companies consolidated by the Banque Populaire Group (regardless of consolidation method) and the executive
officers of Banque Fédérale des Banques Populaires, the Banque Populaire Group’s central body.
XI.1 - Executive officers’ compensation
XI.1.1 - Compensation, benefits in kind, loans and guarantees
n Total gross compensation paid to executive officers of Banque Fédérale des Banques Populaires includes both a fixed and a variable
component.
The fixed and variable compensation paid to Philippe Dupont and Michel Goudard has been unchanged since 2003.The table below
shows the compensation paid to executive officers in 2005:
in euros
2005
B.F.B.P.
Companies controlled
by B.F.B.P.
Total
compensation
Fixed
Variable
Long-service
award
Fixed
Variable
Philippe DUPONT
224,427
75,000
-
263,000
75,000
637,427
Michel GOUDARD
290,000
90,000
22,308
-
-
402,308
n Philippe Dupont and Michel Goudard each have a car and an
apartment paid for by the bank. In addition, Philippe Dupont
receives a standard allowance in his capacity as Chairman and
Chief Executive Officer.
Neither Philippe Dupont or Michel Goudard receive any allowances or benefits from companies controlled by Banque
Taxable allowances and benefits received from Banque Fédérale
des Banques Populaires in 2005 amounted to B63,868 for
Philippe Dupont and B11,437 for Michel Goudard.
No loans or guarantees have been granted to directors or
executive officers.
n
XI.1.2 - Directors’ fees
Directors’ fees paid to members of the Board of Directors of
Banque Fédérale des Banques Populaires are determined on the
basis of each member’s attendance rate at Board meetings and
Board Committee meetings, and are therefore entirely variable.
Total directors fees paid in 2005 in respect of 2004 amounted to
B209,504, including B10,945 paid to Philippe Dupont.
The directors of Banque Fédérale des Banques Populaires are
also paid fees in their capacity as directors of companies controlled by Banque Fédérale des Banques Populaires. Total fees paid
in respect of 2005 amounted to B180,740, including B10,065
paid to Philippe Dupont.
Michel Goudard also received fees of B10,065 in his capacity as
non-voting director of Natexis Banques Populaires.
XI.1.3 - Post-employment benefits
Philippe Dupont and Michel Goudard belong to the general
state pension scheme and the ARRCO and AGIRC obligatory
supplementary schemes. As executive officers, they also belong
to the two following Banque Populaire Group supplementary
plans:
n
Pension benefits
Philippe Dupont and Michel Goudard belong to the supplementary group pension scheme open to all executive officers of the
Banque Populaire Group, in accordance with the provisions of
the status accorded to this category.
The aggregate amount of pension benefits paid to each executive officer may not exceed 60% of their compensation during
the employment period, which amount is capped at B335,000.
For executive officers appointed after January 1, 2004, the maximum has been lowered to 50%.
This plan was established before May 1, 2005, i.e. before the
introduction of law no. 2005-842 of July 26, 2005.
It applies to Philippe Dupont in his capacity as executive officer
of Banque Fédérale des Banques Populaires and as executive
officer of Natexis Banques Populaires.
n
Loss of office compensation
Executive officers who are removed from office (except in the
case of gross misconduct) are entitled to an allowance equal to
one year’s compensation, plus one-twelfth of annual compensation per year of service with the Group, and in the case of the
chief executive officer one-twelfth of annual compensation per
203
year as chief executive officer. The maximum amount payable
may not exceed 42/12ths of annual compensation.
On retirement or early retirement, executive officers are entitled to an allowance equal to one-fortieth of annual compensation per year of service with the Group, up to a maximum of
40/40ths of annual compensation.
XI.1.4 - Stock options granted to and
exercised by executive officers
No options have been granted over Banque Fédérale des Banques
Populaires shares.
However, executive officers have been granted options over
Natexis Banques Populaires (see board) shares in their capacity
as executive officers of Banque Fédérale des Banques Populaires
and in their capacity as director of companies controlled by
Natexis Banques
Populaires stock
options granted
to executive
officers
of B.F.B.P.
Number of options granted
As director
As of companies
executive
controlled
officer
by B.F.B.P.
of B.F.B.P.
Initial
exercise
date
Expiry
date
Exercise
price
(in euros)
N°9–CA 09/19/01
N°10–CA 11/20/02
N°11–CA 09/10/03
N°12–CA 11/17/04
N°13–CA 11/15/05
09/19/2005
09/10/2006
09/10/2007
11/17/2008
11/15/2009
09/19/2008
09/09/2009
09/09/2010
11/16/2011
11/14/2012
94.30
72.47
83.25
89.10
119.24
10,000
5,500
6,000
6,000
7,000
N°9–CA 09/19/01
N°10–CA 11/20/02
N°11–CA 09/10/03
N°12–CA 11/17/04
N°13–CA 11/15/05
09/19/2005
09/11/2006
09/10/2007
11/17/2008
11/15/2009
09/19/2008
09/11/2009
09/10/2010
11/17/2011
11/14/2012
94.30
72.47
83.25
89.10
119.24
6,000
4,200
4,200
5,000
6,000
Plan number
Number
of options
exercised
(1)
Number
of options
outstanding
at end-2005
10,000
5,500
6,000
6,500
7,000
20,000
-
0
11,000
12,000
12,500
14,000
-
6,000
-
0
4,200
4,200
5,000
6,000
Philippe Dupont
Michel Goudard
(1) The average Natexis Banques Populaires share price in the final quarter of 2005, the period in which the options were exercisable, was €131.09.
XI.2 - Information about
consolidated companies
were proportionately consolidated in 2005. The uneliminated
portion of transactions with these companies was not material:
XI.2.1 - Transactions with consolidated
companies
- Deposits with joint venture companies: B10 million.
- Loans and advances to joint venture companies: B10 million,
A list of consolidated companies can be found in note IV.3.
Transactions with associated companies accounted for by the
equity method are not eliminated.The amounts involved are not
material (less than B1 million).
Transactions with fully-consolidated companies are eliminated in
consolidation. Transactions with non-consolidated related companies are not material.
XI.2.2 - Results of joint venture companies
and associates
Transactions with proportionately consolidated joint venture
companies are eliminated in proportion to the Group’s interest
in the assets and liabilities of the company. Only three companies
The following table shows the total net income of joint venture
companies and associates and the share attributable to the
Group at December 31, 2005:
Net income
2005 ANNUAL REPORT
Joint ventures
Associates
100%
Group
share
100%
Group
share
4
2
36
9
05
Note XII - Financial statements based on French GAAP
The consolidated financial statements for 2003 and 2004 and their notes were prepared using French generally accepted accounting
principles and were published in the annual report filed with the Autorité des Marchés Financiers on March 25, 2005 under number
D.05-0283.
Note XII-1 sets out the published financial statements for the year ended December 31, 2004 which served as the basis for the transition tables (see note I).
Note XII-2 sets out the main accounting policies used to prepare the financial statements at December 31, 2004 which served as a
basis for the transition tables.
XII.1 - Consolidated financial statements (French GAAP)
XII.1.1 - Consolidated balance sheet - Assets (French GAAP)
in million of euros
12/31/2004
12/31/2003
55,463
53,438
Customer loans
120,584
111,800
Lease financing
8,890
8,072
Bonds, equities and other fixed and variable income securities
26,256
22,397
Insurance company investment portofolios
26,044
23,451
989
2,096
2,389
2,237
Investments in affiliates and other securities held for investment
Property and equipment and intangible assets
Goodwill
Accrued income, prepaid expenses and other assets
Total assets
228
261
9,561
13,411
250,404
237,163
XII.1.2 - Consolidated balance sheet - Liabilities (French GAAP)
in million of euros
12/31/2004
12/31/2003
Interbank and money market liabilities
46,972
39,682
Customer deposits
98,253
98,945
Debt securities
42,001
37,527
Insurance company technical reserves
25,725
23,660
Deferred income, accrued charges and other liabilities
16,861
18,212
142
290
Provisions for contingencies and charges
1,939
1,873
Subordinated debt
4,675
4,431
Fund for general banking risks
2,192
2,077
Minority interests
2,068
1,962
Shareholders’ equity (excluding FGBR)
-Capital stock
-Additional paid-in capital
-Retained earnings
-Net income for the year
9,576
3,033
741
4,743
1,059
8,504
2,886
635
4,130
853
250,404
237,163
Negative goodwill
Total liabilities
205
XII.1.3 - Consolidated income statement (French GAAP)
in million of euros
12/31/2004
12/31/2003
Interest income
9,620
9,283
Interest expense
(6,100)
(5,933)
65
65
2,321
2,172
Net gains on trading account securities
414
361
240
183
Other banking revenues and expenses
74
32
810
722
Other net income
196
181
Net banking income
7,640
7,066
(4,788)
(4,491)
(307)
(305)
2,545
2,270
(480)
(565)
2,065
1,705
Depreciation, amortization and provisions for impairment of property and equipment and intangible assets
Provisions for loan losses
Operating income
Income from companies accounted for by the equity method
Net gains on disposals of fixed assets
Income before exceptional items and tax
Exceptional items
Corporate income tax
Goodwill amortization and negative goodwill written back to income
Net charge to fund for general banking risks
Minority interests
NET INCOME
7
11
26
19
2,098
1,735
(30)
(23)
(700)
(544)
(33)
(17)
(115)
(169)
(161)
(129)
1,059
853
12/31/2004
12/31/2003
58,012
50,144
34,760
22,933
319
31,673
17,955
516
0
0
13,713
10,199
5,514
7,900
299
3,955
5,378
866
85
36
XII.1.4 - Consolidated statement of off-balance sheet items (French GAAP)
in million of euros
Commitments given
Banking operations
- Financing commitments
- Guarantees
- Commitments on securities
Insurance operations
Commitments received
Banking operations
- Financing commitments
- Guarantees
- Commitments on securities
Insurance operations
2005 ANNUAL REPORT
XII.2- Summary of the main
accounting policies used
to prepare the 2003 and 2004
consolidated financial statements
under French GAAP
XII.2.1 - Consolidation methods
XII.2.1.1 - Accounting principles
The consolidated financial statements of the Banque Populaire
Group for the years ended December 31, 2003 and 2004 have
been prepared in accordance with French generally accepted
accounting principles and the standards formulated by the
Comité de la Réglementation Comptable, including standard
CRC 99-07 on consolidation methods and principles and standard CRC 2000-04 on the presentation of consolidated financial
statements.
There were no changes of accounting method during the period.
XII.2.1.2 - Consolidation methods
Companies controlled exclusively by the consolidating entity
whose business represents an extension of the consolidating
entity’s banking or financial services businesses are fully consolidated.This method is also applied to exclusively controlled companies engaged in related lines of business, such as insurance, as
well as to real estate investment and development companies
and IT services companies.
Exclusive control is deemed to be exercised when the consolidating entity is in a position to manage the financial and operating policies of the subsidiary in order to benefit from the
subsidiary’s business. This is the case where the consolidating
entity holds the majority of the voting rights (and not just the
majority of the shares) or exercises dominant influence by virtue
of contractual rights or due to the dilution of the subsidiary’s
capital, without holding the majority of voting rights.
Jointly controlled subsidiaries are consolidated by the proportional method. Joint control is deemed to be exercised when the
financial and operating policies of the subsidiary are decided
jointly by a limited number of shareholders.
Affiliates over which the consolidating entity exercises significant
influence are accounted for by the equity method. Significant
influence is deemed to be exercised when the consolidating
entity holds at least 20% of the voting rights.
XII.2.1.3 - Scope of consolidation
Subsidiaries that are not material in relation to the Group as a
whole are not consolidated. Materiality is determined on the
basis of the subsidiary’s qualitative contribution to the Group
accounts without applying any threshold in terms of net assets
or revenues.
To maintain consistency between the consolidated financial statements of sub-groups and those of the Banque Populaire
Group, all entities consolidated at the level of a sub-group are
05
also consolidated at the next level, even if they are not considered material at Group level.
XII.2.1.4 - Presentation of the consolidated
financial statements
The consolidated financial statements are presented in millions
of euros.
The consolidated financial statements have been prepared based
on the financial statements of Group companies at December 31.
Entities that do not have a December 31 year-end are consolidated based on audited interim financial statements prepared at
that date.
XII.2.1.5 - Business combinations
Business combinations are accounted for by the purchase
method, in accordance with standard CRC 99.07. Under this
method, the net assets of newly-acquired subsidiaries are taken
to the consolidated balance sheet at the date of acquisition after
fair value adjustments to identifiable assets, liabilities and offbalance sheet items. The difference between the cost of shares
in a newly-acquired subsidiary and the consolidating entity’s
equity in the underlying net assets after fair value adjustments is
recorded as goodwill.
Goodwill is amortized and negative goodwill written back to the
income statement by the straight-line method over a period
determined based on the objectives and nature of the acquisition, not to exceed 10 years. Goodwill representing less than B1
million is amortized over one year.
The Banque Populaire Group, assisted by a firm of independent
valuers, tests the value of any goodwill in excess of B4 million on
an annual basis, using the discounted cash flow method, to determine whether the amortization schedule should be revised.
In the case of sale of part of the consolidating entity’s interest in
the company concerned, a corresponding fraction of the unamortized goodwill or negative goodwill is written off or written
back to the income statement.
The Banque Populaire Group does not use the pooling of
interests method - provided for in paragraph 215 of standard
CRC 99-07 - to account for business combinations.
XII.2.1.6 - Foreign currency translation
The balance sheets and off-balance sheet items of foreign subsidiaries and branches are translated into euros at the year-end
exchange rate with the exception of their capital stock or capital allocation and reserves, which are translated at the historical
rate. Differences arising on translation are taken directly to
consolidated shareholders’ equity.
The income statements of foreign subsidiaries and branches are
translated at the average rate for the year. The difference between net income translated at the average rate and the year-end
rate is also taken to consolidated shareholders’ equity.
The exchange rates applied are the rates published by the
Banque de France.
207
XII.2.1.7 - Leasing transactions as lessor
Finance leases where the Group is lessor - i.e. lease financing granted by the Group’s specialist leasing companies - are recorded in
the consolidated balance sheet in an amount corresponding to
the net investment in the lease and not the net book value in the
individual company accounts. Lease payments are analyzed between amortization of the net investment and interest income.
Deferred taxes are recorded on the total difference between
accumulated book depreciation of the leased assets and the accumulated amortization of the net investment in the lease.
The difference is recorded under shareholders’ equity net of
deferred taxes. Lease financing on which any installments are
more than three months past due (equipment leases) or six
months past due (real estate leases) are classified as non-performing. Where a finance lease is classified as non-performing, all
other amounts receivable from the client concerned are also
classified as non-performing.
Gains and losses on disposal of leased assets and movements in
provisions for impairment in value of leased assets and temporarily unleased assets are included in net banking income. Lease
termination penalties are recorded under interest income.
Charges to provisions for losses on lease financing recorded
under “Provisions for loan losses” correspond solely to the fraction of the provision covering the past due principal.
In the case of finance leases concerning real estate, a provision
for impairment in value is recorded where the book value of the
property is higher than its estimated market value and there is a
probable or certain risk of it remaining the property of the lessor when the lease expires.
Real estate and equipment leased to clients under operating leases are included in “Property and equipment” and valued accordingly.
XII.2.1.8 - Leasing transactions as lessee
Operating assets leased under finance leases where the Group
is lessee are recorded in the consolidated balance sheet under
“Property, plant & equipment”, except for assets whose unit cost
is not material. Depreciation is calculated over the estimated
useful lives of the assets.
The annual depreciation charge is recorded in the consolidated
income statement under “Depreciation, amortization and provisions for impairment of property and equipment and intangible
assets”.
XII.2.1.9 - Regulated reserves and provisions
Regulated reserves and provisions recorded solely for tax purposes, including excess tax depreciation recorded in the
accounts of subsidiaries, are eliminated in consolidation.
XII.2.1.10 - Provisions for employee-related
benefits
For the purpose of comparability between 2004 and previous
years, the Group elected not to apply CNC recommendation
2003-R.01 of April 1, 2003 on accounting for employee benefits.
2005 ANNUAL REPORT
The employee-related liabilities of all Group entities are provided for in the consolidated balance sheet using consistent
methods throughout.
The main provisions for employee-related liabilities concern:
n pension benefits payable by the Caisse Autonome de Retraites
(CAR) pension scheme;
n pension benefits payable by the Caisses de Natexis Banques
Populaires pension plan;
n long-service awards payable to employees on retirement and
early-retirement benefits;
n
long-service awards payable to active employees;
n
early retirement agreement (CATS).
* The Banque Populaire Group “CAR” pension scheme was closed to new entrants as of December 31, 1993, pursuant to the
banking industry agreement of September 13, 1993, the terms of
which were applied to the Banque Populaire banks through an
internal agreement dated January 7, 1994.This scheme also covered Natexis Banques Populaires employees previously employed
by the former Caisse Centrale des Banques Populaires.
The Group’s obligations towards active and retired employees
concern supplementary pension benefits payable under the
Banque Populaire Group plan and the fraction of benefits due
under the banking industry scheme closed to new entrants on
December 31, 1993 that is not covered by the Social Security
system.
Commitments are calculated each year based on updated individual employee data. The projected obligation is determined
using appropriate mortality tables and a discount rate of 3.5%
net of inflation.
* Concerning the specific Natexis Banques Populaires pension
plans, the assets of the former BFCE pension fund exceed the
projected benefit obligation and those of the former Crédit
National fund are equal to the projected benefit obligation.
Consequently, no provision has been booked in the consolidated
financial statements for these plans.
* Long-service awards payable to employees on retirement are
funded in par t or in full under insured plans set up with
Prospérité, a fully consolidated insurance subsidiary of the
Group. In accordance with opinion no. 2001-G of the CNC
Urgent Issues Task Force, the related mathematical reserves carried in the accounts of Prospérité are eliminated from the consolidated balance sheet and a provision for charges is recorded in
the same amount.
Unfunded obligations are provided for in full in the consolidated
balance sheet by the projected unit credit method, based on
employees’ vested rights on the reporting date and projected endof-career salaries.The obligation is calculated by applying a discount
rate of 3.5% and a staff turnover rate ranging from 0% to 7.5%.
* Obligations for the payment of long-service awards to active
employees are also calculated by the projected unit credit
method, in the same way as for long-service awards payable to
employees on retirement.
* Early retirement plans:
On February 18, 2002, the Banque Populaire Group signed an
agreement with employee representatives, providing for the
implementation of a “CATS” early retirement plan in application
of the A.F.B. industry-wide agreement dated January 15, 2001.
On August 30, 2002, the Banque Populaire Group signed a
“CATS” convention with the Ministry of Social Affairs,
Employment and Solidarity, exempting early retirement payments from social security taxes.
A provision was recorded in the consolidated financial statements, covering the Group’s obligation towards employees eligible for early retirement under the plan.The estimated cost of the
plan, determined on an actuarial basis, is being recognized over
the remaining service lives of the employees concerned, up to
the expiry date of the agreement on March 31, 2006.
Obligations towards employees who have applied for early retirement are included in accrued expenses in an amount corresponding to the benefits payable to these employees in the
period until they reach the normal retirement age.
XII.2.1.11 - Fund for general banking risks
Funds for general banking risks are recorded by Group entities
to cover general risks. Charges to these funds are not tax deductible and do not give rise to any deferred tax asset.
Funds for general banking risks, which form an integral part of
consolidated shareholders’ equity, include the Banque Fédérale
des Banques Populaires guarantee fund, as well as the guarantee
funds set aside by the Banque Populaire banks that are available
to the Group under the internal guarantee mechanism, and the
funds for general banking risks recorded in the accounts of individual Group banks.
XII.2.1.12 - Intercompany transactions
Material intercompany receivables, payables and off-balance
sheet commitments and intercompany income and expenses
between fully consolidated companies are eliminated in full in
consolidation. In the case of intercompany transactions with proportionally consolidated companies, eliminations are prorated to
the Group’s interest in the company concerned.
Intercompany dividends, provisions for impairment in value of
investments in consolidated companies and gains on intercompany sales of assets are eliminated in full.
XII.2.1.13 - Corporate income tax
The corporate income tax charge recorded in the consolidated
statement of income includes:
- current taxes payable by the French entities, at the rate of
35.43%, and by foreign subsidiaries and branches at the local corporate tax rate.
05
at the level of the tax group. Net deferred tax assets are recognized only where their future recovery is deemed probable. In
accordance with this principle, net deferred tax assets are recognized at the level of each entity only when they do not correspond to tax loss carryforwards or when the taxable entity has
not reported a tax loss in either of the preceding two years.
Deferred taxes are determined by the liability method for all
temporary differences. They are not discounted, whatever the
year in which the temporary differences are expected to
reverse.
Pursuant to the 2005 Finance Act providing for the reduction
and then abolition of the 3% surtax, deferred taxes are calculated at the rate of 34.94% for temporary differences reversing in
2005 and 34.44% for those reversing in 2006 and subsequent
years.
Deferred taxes of foreign subsidiaries are calculated using local
tax rates.
XII.2.1.14 - Insurance companies
The accounts of Group insurance companies are not restated in
consolidation based on Group policies. However, income and
expenses are reclassified by nature, in accordance with bank
accounting standards, rather than by destination.
Balance sheet and off-balance sheet items are included in the
corresponding captions of the financial statements presented in
the banking format, with items that are specific to the insurance
business reported separately. These items are “Insurance company investment portfolios” and “Insurance company technical
reserves” in the balance sheet, and “Gross margin on insurance
operations” in the income statement.
Insurance company investments in securities issued by other
consolidated entities are qualified as intercompany receivables
and are therefore eliminated in consolidation. Consequently, in
the consolidated balance sheet, insurance company technical
reserves are represented by assets recorded under either “insurance company investment portfolios” or under banking assets.
In accordance with standard CRC no. 2000-05 on the consolidated financial statements of insurance companies, insurance company loss equalization reserves have been eliminated in
consolidation. In addition, a portion of the capitalization reserve,
net of deferred taxes, has been credited to policyholder surplus
reserves, corresponding to the amount that is expected to be
written back from the capitalization reserve in the case of a fall
in value of qualifying investments, to cover distributions to policyholders.
The loss equalization reserves recorded by the Coface group are
included in technical reserves because they cover a macro-economic risk of a change in claims experience over several years.
- deferred taxes arising from temporary differences between the
book value of assets and liabilities and their tax basis.
XII.2.2 - Accounting policies and
valuation methods
Deferred tax assets and liabilities are netted off at the level of
each taxable entity. In the case of companies that have elected
for group relief, deferred tax assets and liabilities are netted off
The consolidated financial statements have been prepared from
the financial statements of Group companies presented according to the following accounting policies and valuation methods.
209
XII.2.2.1 - Interbank and money market assets
and customer transactions
Interbank and money market assets include all receivables, including subordinated loans, due from credit institutions as part of
the Group’s interbank activity, save for those evidenced by a certificate. They also include assets purchased under resale agreements, regardless of the underlying, and receivables relating to
securities sold under repurchase agreements.
Provisions are determined on a case-by-case basis and adjusted
at quarterly intervals or more frequently where necessary, based
on an analysis of the related risk and available collateral.
Accrued interest on non-performing loans is recorded separately
in the balance sheet and credited to the income statement.A provision is booked for the total amount accrued, together with all
overdue interest. Charges to provisions for accrued interest are set
off against the related revenue in the income statement.
Customer loans are analyzed between commercial loans, customer overdrafts and other customer loans.
Accrued interest on irrecoverable loans is not booked to the income
statement unless it is actually received.
Loans are recorded in the balance sheet at face value, including
low interest loans and restructured loans but excluding purchased customer loan portfolios which are stated at acquisition cost.
Provision movements, loan write-offs, recoveries on loans written off
in prior years, and discounts calculated on restructured loans are
reported in the consolidated income statement under “Provisions for
loan losses”, except for movements in provisions relating to accrued
interest on non-performing loans,which are recorded under “net banking income”.Amortization of discounts on restructured loans calculated in accordance with the yield-to-maturity method as well as
interest thereon are also included in net banking income.
Non-performing loans are identified and accounted for using the
methods set out in standard CRC no. 2002-03 on credit risk,
applied for the first time on January 1, 2003.This standard includes rules regarding the method of classifying non-performing
loans, identifying irrecoverable loans and the accounting treatment of loans restructured at below market rates.
Loans are classified as non-performing when one installment is
more than three, six or nine months overdue, depending on the
type of loan.
All other loans to the same customer are also classified as nonperforming, even in cases where no provision is booked for the
outstanding principal based on an analysis of the recovery risk.
In the case of non-performing loans where the debtor has resumed making regular payments in accordance with the original
repayment schedule, the loan may be reclassified as sound. Nonperforming loans that have been restructured are also reclassified as sound provided the restructuring terms are met.
If a restructured loan reclassified as sound is at below market
rates, it is recorded in a separate account at nominal value less
a discount corresponding to the difference between the
expected future cash flows calculated at a) the new interest
rate and b) the lower of the original rate of interest and the
market rate prevailing at the time of the restructuring.
Discounts on restructured loans calculated as described above
are deducted from the carrying value of the loan and amortized over the remaining life of the loan by the yield-to-maturity
method.
If any installments on a restructured loan are not paid, whatever
the terms of the restructuring, the loan is permanently reclassified as irrecoverable.
Irrecoverable loans include loans where an event of default has
occurred, restructured loans where the borrower has once again
defaulted and loans classified as non-performing for more than
one year once a write-off has been envisaged, in accordance with
the opinion issued by the CNC Urgent Issues Task Force on
December 18, 2003.
Provisions for non-performing loans are deducted from the
value of the asset concerned to cover the estimated risk of nonrecovery, after taking account of any collateral or other guarantees.
2005 ANNUAL REPORT
Loans to real estate professionals are classified as non-performing
on a case-by-case basis taking account of the exit potential, the ability of the company’s shareholders to contribute fresh capital and
their credit rating. A provision is booked for the total amount of
accrued interest. A provision is booked for the outstanding principal based on guarantees received, future rental revenues, the projected exit price compared with market values and the credit rating
of the parties concerned.
XII.2.2.2 - Conversion of assets and liabilities
in foreign currencies
Assets, liabilities and off-balance sheet commitments denominated in foreign currencies are converted into euros at the yearend exchange rate. Revenues and expenses denominated in
foreign currencies are converted at the exchange rate ruling on
the transaction date.
Fixed assets and investments in affiliates denominated in foreign
currencies but financed in euros are converted at the historical
exchange rate.
Hedged and unhedged forward purchases and sales of foreign
currencies are converted at the exchange rate quoted for the
remaining term.
Exchange differences arising on conversion of borrowings for
which the currency risk is guaranteed by the State or which
relate to Natexis Banques Populaires’ institutional activities are
recorded in an accruals account.
XII.2.2.3 - Securities transactions
Trading account securities, securities held for sale, investment
securities and equity securities held for investment are valued in
accordance with Comité de la Réglementation Bancaire et
Financière standard CRBF 90-01 (revised).
They are carried in the consolidated balance sheet under
“government securities and equivalent” where the issuer is the
State, or under “bonds and other fixed income securities” or
“equities and other variable income securities” in other cases.
n
Trading account securities
Trading account securities are carried in the balance sheet at
cost, including transaction expenses and accrued interest at the
date of acquisition. At the period-end, they are marked to market and the resulting unrealized gain or loss is booked to the
income statement under “Net gains on trading account securities”, together with realized gains and losses on trading account
securities sold during the period.Trading account securities that
are still in the portfolio six months from the date of acquisition
are transferred to “Securities held for sale” at their market price
on the transfer date.
n
Securities held for sale
Securities held for sale are stated at the lower of cost and market, determined on a case-by-case basis.The market price of listed securities is the price quoted on the market at the year-end
and that of unlisted securities is their probable realizable value.
Premiums and discounts, corresponding to the difference between the cost of fixed-income securities and their redemption
price, are amortized to the income statement over the remaining life of the securities, by either the yield-to-maturity method
or the straight-line method depending on the type of securities
concerned.
Where securities are hedged, the hedging gain or loss is taken
into account to determine provisions for impairment in value.
Dividend income from equities carried in the “held for sale”
portfolio is recorded in the income statement under “Income
from variable income securities”.
Movements in provisions for impairment in value and disposal
gains and losses are recorded in the income statement under
“Net gains on securities held for sale”.
n
Investment securities
Investment securities are fixed-income securities acquired with
the intention of being held to maturity that are either matchfunded (generally via refinancing agreements, subordinated
debt and time deposits) or on which the interest rate risk has
been hedged (mainly by means of swaps in which there is a
liquid market). If the match-funding or hedging relationship is
broken, the securities are transferred to the “held for sale”
portfolio.
Premiums and discounts are amortized to the income statement
over the remaining life of the securities.
Interest income on bonds and other fixed-income securities is
recognized on an accruals basis.
In the case of sale of investment securities before maturity, the
resulting gain or loss is recorded in the income statement under
“Net gains on disposals of fixed assets”.
n
Equity securities held for investment
These securities are acquired with the intention of being held in
the medium to long-term in order to sell them at a profit.They
are stated at the lower of cost, excluding transaction expenses,
and fair value to the Group. Unrealized losses are not netted off
against unrealized gains on the same line of securities.
05
Movements in provisions for impairment in value and disposal
gains and losses are taken to the income statement under “Net
gains on securities held for sale”.
The bulk of the portfolio consists of investments made by the
private equity subsidiaries of Natexis Banques Populaires.
XII.2.2.4 - Investments in affiliates,
other investments in related companies
and other equity interests
Investments in affiliates, other investments in related companies
and other equity interests are stated at the lower of cost, excluding transaction expenses, and fair value to the Group.
The criteria used to determine fair value include the average
stock market price for listed companies, and adjusted net assets
for unlisted companies.
An impairment provision is taken for any unrealized losses.
Unrealized gains are not recognized.Transaction expenses incurred at the time of purchase or sale are included in operating
expense.
Disposal gains and losses and movements in provisions for
impairment in value are recorded in the income statement
under “Net gains on disposals of fixed assets”.
Dividends are recorded under “Income from variable income
securities” when their payment has been approved at a
Shareholders’ Meeting.
XII.2.2.5 - Property, plant & equipment
Standard CRC no. 2002-10 on asset depreciation, amortization
and impairment is applicable from January 1, 2005. The Banque
Populaire Group has not elected for early adoption of this standard. Article 15 of the standard contains transitional provisions
applicable from January 1, 2003, supplemented by the provisions
of opinion 2003-F issued by the CNC Urgent Issues Task Force,
relating to expenses incurred under multi-year programs for
major repairs or refits.
n
Assets used in the business
Fixed assets of the former Crédit National purchased prior to
December 31, 1976 are stated at fair value as determined at the
time of the 1976 legal revaluation. Assets purchased since 1976
are stated at cost.
Fixed assets of the former BFCE are carried in the Group’s
consolidated balance sheet at their fair value as determined at
the time of acquisition of BFCE by Crédit National.
For all other Group entities, land and buildings are stated at cost
or at fair value as determined at the time of legal revaluations.
Property and equipment are depreciated over their estimated
useful lives by the straight-line method or by the reducing
balance method where the related depreciation charge is tax
deductible.
n
Non-operating assets
Investment properties are stated at the lower of cost and estimated market value determined by capitalizing normalized rental
211
income. In accordance with the terms of the letter dated
October 21, 1997 from the Secretary General of the French
Banking Commission (Commission Bancaire Française), provisions for impairment in value have been recorded for individual
investment properties and other properties not used in the business, whose market value is less than their net book value.
n Provisions for industry and country risks: These provisions
cover certain businesses of Natexis Banques Populaires and
BRED Banque Populaire that carry potential future risks. These
businesses and the level of the related provisions are affected by
cyclical developments in each industry and country, and are
expected to change over time.
Unrealized losses are not netted off against unrealized gains on
other properties for the purpose of determining the amount of
the provisions. The cost of large-scale multi-year maintenance
programs, which are intended solely to keep the assets concerned in good working order without extending their initial estimated useful life, is accrued on a straight-line basis over the period
between each successive maintenance operation and booked
under provisions for contingencies and charges.
n Provisions for country risks: Group loans exposed to country
risks other than the sovereign risks referred to above are analyzed and provided for according to the method recommended by
the regulatory authorities, based on the estimated value of the
loans on the secondary country risk market. Country risks
mainly concern loans granted by Natexis Banques Populaires.
n
Intangible assets
Leasehold rights and purchased goodwill are stated at cost. A
provision is recorded in the consolidated financial statements if
their fair value to the Group is lower than their net book value,
after taking account of the amortization or provisions recorded
in the individual accounts of the entity that owns the asset.
Purchased software is amortized over a maximum of five years.
XII.2.2.8 - Financial futures and options
The Group’s exposure to risks on financial futures and options is
constantly monitored by closely tracking results and positions
and performing regular controls to check compliance with the
exposure limits set by management.
n
Interest rate instruments
These instruments are recorded off-balance sheet at their nominal value.
Intangible assets include the value attributed to the networks of
Coface.The Coface insurance network has been valued on the
basis of 40% of premium income.The credit information and credit management network has been valued using a range of criteria, including discounted cash flows, P/E multiples and revenue
multiples. The networks are not amortized but are tested for
impairment at each year end.
In accordance with standards CRBF 90-15 and 92-04, interest
rate swaps, FRAs, caps and floors are classified based on the purpose for which they are acquired, as follows:
In 2004 the Banque Populaire Group, assisted by a firm of independent valuers, measured the residual value of these networks
using the discounted cash flow method.
- specialized management of a trading portfolio
XII.2.2.6 - Subordinated debt
The majority of the Group’s subordinated debt is raised by
Banque Fédérale des Banques Populaires and Natexis Banques
Populaires.
Should the issuer go into liquidation, fixed-term and perpetual
subordinated debt is repaid only once all other creditors have
been paid.
Where perpetual subordinated loan notes are treated as equivalent to debt repayable in installments, each periodic payment
is broken down between the repayment of principal, which is
deducted from the outstanding debt, and interest, which is recorded in the income statement under banking expenses.
In the consolidated financial statements, subordinated debt issuance
costs are expensed in the income statement in the year of issue.
XII.2.2.7 - Provisions for contingencies and charges
Provisions for contingencies and charges are intended to cover
several types of risk:
Provisions for domestic counterparty risks:These include general provisions for loan losses and losses on irrevocable offbalance sheet commitments, recorded as liabilities.
n
2005 ANNUAL REPORT
- micro-hedging (hedging of specific transactions or positions)
- macro-hedging (structural balance sheet management)
- speculative position-taking
The first two categories are treated for income statement purposes as equivalent to lending/borrowing transactions and the
amounts received or paid are taken to the income statement on
an accruals basis.
Income and expenses on instruments acquired as hedges of specific items or groups of items with similar characteristics are
recorded on a symmetrical basis with the income and expenses
arising on the hedged items. The income or expense arising on
the hedging instrument is recorded under the same caption as
the income or expense on the hedged item, under “Interest
income” or “Interest expense”, except for income and expenses
on hedges of trading securities which are included in “Net gains
on trading account securities”.
Income and expenses on financial futures acquired to hedge
structural interest rate exposure are recorded in the income statement under “Interest income” or “Interest expense” on an
accruals basis.
Financial futures acquired for speculative position-taking purposes are stated at the lower of cost and market. Unrealized
gains are not recognized.
Instruments held in connection with the specialized management of trading portfolios are valued at replacement cost or
by the yield-to-maturity method, net of a discount for counterpar ty risks and the discounted present value of future
management costs. Changes in value during the period are
taken to the income statement under “Net gains on trading
account securities”.
- fees for ongoing services and services performed in several
successive stages are recognized by the percentage of completion method.
Equalization payments made when interest rate swaps are terminated or assigned are recognized immediately in the income
statement. Where the amounts involved are material they are
recognized on an accruals basis over the residual term of the
new contract where the swap is replaced or over the residual
term of the old contract where the swap is not replaced.
XII.2.2.10 - Exceptional items
Internal contracts are accounted for in compliance with formal
regulatory guarantees, without recognizing any material intercompany profits.
Positive or negative margin changes on exchange-traded futures
are recorded in the income statement.
Provision is made for unrealized losses on over-the-counter
contracts, by way of a charge to the income statement, but
unrealized gains are not recognized.
n
Options
Options or forward contracts acquired as hedges are accounted
for separately from contracts acquired in connection with trading activities, based on the notional amount of the underlying
instrument.
Premiums paid and received on interest rate, currency and
equity options are recorded in a suspense account. At the yearend, exchange-traded options are marked to market and the
unrealized gain or loss recorded in the income statement. In the
case of over-the-counter options, a provision is booked for any
unrealized losses but unrealized gains are not recognized.When
the option is resold, repurchased, exercised or allowed to lapse,
the premium is taken to the income statement immediately.
Income and expenses on options acquired for hedging purposes
are recognized on a symmetrical basis with the income and
expenses on the hedged items.
n
Currency instruments
Spot currency transactions outstanding at the year end are
valued at the year-end rate.
Contangos and backwardations on currency futures acquired as
hedges are recognized in the income statement on an accruals
basis. Other forward foreign exchange contracts and currency
futures are marked to market.
Exceptional income and expenses are items of income and
expense that are unusual in terms of their amount and frequency.
XII.2.2.11 - Summary of accounting principles
applied by insurance companies
n
Insurance company investment portfolios
Premiums collected by insurance companies are invested
in three categories of assets - marketable securities, including
fixed and floating rate bonds, equities, real estate, loans and
deposits.
Bonds and other fixed-income securities are stated at cost.
Premiums and discounts, corresponding to the difference between cost and redemption price, are amortized over the remaining life of the securities. A liquidity risk reserve is booked for
other securities whose aggregate cost is greater than their aggregate realizable value at the year-end.
Unlisted real estate investments are stated at cost, net of transaction expenses.The realizable value shown in the statement of
investments is determined on the basis of five-yearly independent valuations which are updated annually.
Investments in related companies are stated at cost.
Assets held to cover linked liabilities are marked to market.
n
Technical reserves
Insurance companies are required to hold investments with a
value at least equal to their commitments to policyholders.These
commitments are evidenced by technical reserves, recorded as
liabilities.
The amount of technical reserves required is determined by statistical calculations of commitments towards policyholders.
Unearned premium reserves correspond to the portion of premiums written during the year that corresponds to insurance
cover to be provided the following year.
Forward currency swaps are treated as a forward purchase of foreign
currency combined with a forward sale of the same currency.
Life reserves correspond to total premium income plus investment income attributable to policyholders less paid losses and
benefits.A separate reserve is recorded to cover future management costs of life insurance policies.
Currency swaps are accounted for in accordance with standard
CRBF 90-15 (revised).
Loss reserves correspond to the capital sum payable following a
claim.
XII.2.2.9 -Interest income and expense,
fees and commissions
For credit insurance, loss reserves also include an amount to
cover the estimated total cost of reported claims not settled at
the period end. A reserve is also recorded for claims incurred
but not reported, determined by reference to claims experience
in prior underwriting years. In 2003, Coface harmonized the
methods used by certain of its subsidiaries to calculate their loss
reserves.This had no impact on net income after taking account
of loss equalization reserves.
Interest and fees treated as interest are recorded in the income
statement on an accruals basis. Fees and commissions not treated as interest are accounted for as follows.
- fees for non-recurring services are recorded in the income statement when the service is performed.
05
213
Policyholder surplus reserves represent the portion of investment income attributable to policyholders but not yet distributed. The policyholders’ surplus must be paid out in dividends
within eight years.
Liquidity risk reserves are recorded where the total realizable
value of non-amortizable securities held for sale is less than their
carrying value.The amount charged to the reserve is the lower
of a) one-third of the total unrealized loss at the year-end and b)
the difference between the opening provision and the total
unrealized loss at the year-end. Standard CRC no. 2004-10,
which has amended the provisions of standard 2000-05 on the
treatment of liquidity risk reserves, no longer allows such reserves to be carried in the consolidated balance sheet.
This change of accounting treatment had no impact on the 2004
consolidated financial statements as the risk of depreciation in
insurance company investments is covered by the long-term
impairment provision and no charge was made to liquidity risk
reserves carried in the insurance companies’ individual accounts
at the year end.
Other technical reserves include loss equalization reserves, financial contingency reserves and reserves for deferred acquisition
costs.
2005 ANNUAL REPORT
05
STATUTORY AUDITORS’ REPORT
ON THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 2005
This is a free translation into English of Statutory Auditor’s report issued in the French language and is provided solely for the convenience
of English speaking readers.This report should be read in conjonction with, and construed in accordance with, French law and professional
auditing standards applicable in France, international accounting standards (IAS) and international financial reporting standards (IFRS)
endorsed by the European Union.
In compliance with the assignment entrusted to us by the Conseil Syndical de la Chambre Syndicale des Banques Populaires on
September 20, 2000 and by the Board of Directors of Banque Fédérale des Banques Populaires on June 23, 2004, we have audited the
accompanying consolidated financial statements of the Banque Populaire Group for the year ended December 31, 2005.
The consolidated financial statements have been approved by the Board of Directors of Banque Fédérale des Banques Populaires. Our
role is to express an opinion on these financial statements based on our audit.The consolidated financial statements have been prepared for the first time in accordance with the international accounting standards (IAS) and international financial reporting standards
(IFRS) endorsed by the European Union.They include comparative data for 2004 prepared on the same basis, with the exception of
IAS 32, IAS 39 and IFRS 4, which have been applied as of January 1, 2005 as permitted by IFRS 1.
I. Opinion on the consolidated financial statements
We conducted our audit in accordance with the professional standards applicable in France.These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall consolidated financial statement presentation.We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position, assets and liabilities of
the Banque Populaire Group at December 31, 2004 as of December 31, 2005, and the results of the operations of the entities and
bodies included in the consolidation for the year then ended, in accordance with international financial reporting standards.
II. Justification of our assessments
In accordance with the requirements of Art. L. 823-9 of the French Commercial Code (Code de commerce) on the justification of our
assessments, we draw your attention to the following matters:
Estimates made in the course of the banking business
The Banque Populaire Group uses significant estimates in the course of its banking business:
- As described in notes II,V and V.14 to the consolidated financial statements, the Banque Populaire Group records provisions to cover
the credit risks inherent in its business.We examined the control procedures implemented by management for monitoring credit risks,
modeling provisions, assessing the risks of non-recovery and determining the specific and collective provisions required.
- The Banque Populaire Group uses internal models and techniques to value financial instruments that are not traded in an active market, as well to record certain provisions and assess eligibility for hedge accounting (particularly financial assets and liabilities at fair value
through profit or loss, available-for-sale financial assets and financial instruments measured at amortized cost, the fair value of which is
disclosed in notes II and V to the consolidated financial statements).We examined the control procedure for verifying the models and
determining the underlying data used.
- As described in notes II and V to the consolidated financial statements, the Banque Populaire Group records a provision to cover the
risk inherent in home loan savings schemes.The method of calculating this provision complies with the provisions published by the CNC
in its release of December 12, 2005.We examined the application of these provisions on a test basis.
Other estimates
- The Banque Populaire Group makes significant accounting estimates to assess the amounts of goodwill and employee benefit obligations carried on the balance sheet.We examined the underlying assumptions and data used and verified that the accounting estimates
215
were based on documented methods in accordance with the principles described in notes II,V and VIII.3 to the consolidated financial
statements.
On this basis, we assessed the reasonableness of these estimates.
Our assessment of these matters formed an integral part of our overall audit of the consolidated financial statements, and therefore
contributed to our opinion as expressed in the first part of this report.
III. Specific verification
We have also reviewed, in accordance with the professional standards applicable in France, the information relating to the Group contained in the management report.We have no matters to report with respect to its fairness or its consistency with the consolidated financial statements.
Paris and Neuilly-sur-Seine, March 22, 2006
The Statutory Auditors
SALUSTRO REYDEL
Michel Savioz
2005 ANNUAL REPORT
ERNST & YOUNG
Richard Olivier Olivier Durand
CHAIRMAN’S REPORT ON INTERNAL CONTROL PROCEDURES
06
Chairman’s report
on internal control procedures
This report forms an integral part of the full Chairman’s report on the conditions in
which the work of the Board of Directors is prepared and organized and the internal
control procedures within the Company.
GENERAL ORGANIZATION
The Banque Populaire Group’s internal control system complies
with French banking and financial services regulations. These
require, in addition to general organizational systems, a system of
external monitoring by the Banking Commission and the
Financial Markets Authority (Commission Bancaire and Autorité
des Marchés Financiers). It also complies with the corporate
governance principles of the Banque Populaire Group.
These principles were defined by the Board of Directors of
Banque Fédérale des Banques Populaires, the Group’s central
body, and are set out in a corporate governance charter and an
internal control char ter for the Banque Populaire Group.
Changes in internal control regulations announced on March 31,
2005, prompted an extensive review of the organization of the
system to be implemented within the Group’s entities. A total of
five charters have been drawn up covering all areas of risk, compliance and audit.
They are supplemented by procedures designed to ensure that
for each family of risk – financial and operational – the level of
control is appropriate and consistent across the entire Group.
In addition, the process of implementing new capital adequacy
standards under the Basel II framework, being coordinated at
Group level, presents an opportunity to update and enhance
existing procedures.
Risk monitoring and management systems within the Banque
Populaire Group and the organization of internal control information systems reflect the decentralized organization structure
and are organized on two levels: at the level of each bank, on a
consolidated basis where applicable, and at that of Banque
This charter establishes the rules of corporate governance and
codes of conduct to be followed by all the Banque Populaire
banks. It sets out the responsibilities of each bank’s Board of
Directors, Chairman, Chief Executive Officer and Consultative
Committees. All Group banks are required to have a Risk
Management Committee (with the option of also creating an
Audit Committee) and a Remuneration Committee. They may
also choose to set up other committees, such as a MemberStakeholder Committee.
Well before the May 15, 2001 Corporate Governance Act entered the statute books, the Banque Populaire banks had already
decided to optimize the effectiveness of their executive and
management structures by separating the roles of Chairman and
Chief Executive Officer, thus separating responsibility for strategic decisions and control from the implementation of these decisions and the management of the business.
In addition, on January 21, 2004, the Board of Directors of
Banque Fédérale des Banques Populaires approved the internal
control charter for the Banque Populaire Group.This establishes
the central principle that each and every member of an organization has responsibility for its internal control system.
In each material Group entity, internal controls are organized
from the lowest to the highest level.The organizational structure
is defined by the Chief Executive Officer with the approval of the
Chairman.
Responsibilities and resources are allocated as efficiently as possible,
in line with the guidance issued by the Board of Directors, to ensure
the coverage, exhaustive identification and management of risks.
Internal involvement in control
Three levels of control are used:
Organization of internal control at
the level of the consolidated entities
On November 20, 2002, the Board of Directors of Banque
Fédérale des Banques Populaires approved the corporate governance charter and internal rules framework applicable to the
Boards of Directors of the individual Banque Populaire banks.
n First tier: each member of staff is responsible for performing
preliminary or simultaneous checks of each operation that they
carry out in performing their professional duties and functions
and supervisors are responsible for checking the transactions performed by those reporting to them.These first-tier controls provide the foundations of the internal control system. They are
described in written procedures and must be formally evidenced.
217
n Second tier : continuous checks are undertaken to ensure
compliance with internal and external rules and regulations as
well as to verify the existence, implementation and effectiveness
of first-tier controls. Second-tier controls cover functional areas
such as accounting, commitments and risks. Regulatory controls
apply to this second tier. Control at this level is performed by the
Compliance Officer, the Investment Services Depar tment
Control Officer, the Information Systems Security Officer, the
TRACFIN correspondent and any other officers with responsibility for specific controls required by the applicable regulations.
Third tier: consisting of periodic audits and investigations carried out by the Internal Audit department.The internal auditors
have free access to all information they require to conduct their
audit, including confidential and privileged information. A manager oversees all such audit work.
n
The Internal Control Officer is responsible for ensuring the
consistency and effectiveness of this three-tier system, reporting
to senior management – who have ultimate responsibility for
internal control, the Risk Management Committee and the
Board of Directors.
The role of the Board of Directors
The Board of Directors oversees control of the main risks incurred by the bank, as well as the quality and reliability of the internal control system in accordance with banking regulations.
The Risk Management Committee – one of the Committees of
the Board – is responsible for organizing reporting systems covering company-level and consolidated risk data, the results of
internal control procedures and the main findings of internal
auditors, in accordance with banking regulations.The Committee
assesses the quality of internal control, including risk measurement, monitoring and management systems. It is also responsible
for recommending additional measures where appropriate.
Organization of internal control
at the level of Banque Fédérale
In its role as the Banque Populaire Group’s central body, as defined
in the Monetary and Financial Code, Banque Fédérale des Banques
Populaires oversees the cohesiveness of the Banque Populaire network and takes all necessary measures to guarantee the liquidity
and solvency of Banque Populaire banks as well as of the network
as a whole through the Group Risk Management Committee.
More generally it supervises and controls all establishments making
up the Banque Populaire Group, particularly its subsidiaries.
Internal control structures
The Group Risk Management Committee exercises its supervisory role by drawing on the resources of Banque Fédérale des
Banques Populaires Risk Control and Audit department.
In 2005, the work of the Internal Audit and Risk Management
Department was organized around three sub-departments:
2005 ANNUAL REPORT
n The Risk Management department, expanded in 2005 – which
has no involvement in commercial decisions – is responsible for
ensuring that the same rules are applied throughout the Group,
deploying appropriate risk control and continuously monitoring
the risks governed by standard CRBF 97-02 (credit/counterparty
risk, interest rate risk, liquidity risk and operational risk) across
the entire Group. The Risk Management depar tment, in its
various areas of competence, has therefore continued to
enhance the Group’s risk control system.
The Internal Control Procedures department is responsible
for providing methodological and technical suppor t to the
Group entities and promoting the adoption by all entities of best
practices identified within the Group. In 2005, the department’s
work concentrated mainly on the production of Group-wide
audit methodologies, the organization and management of a
Group audit concerning compliance with AMF regulations governing customer relations and the creation of guidelines for antimoney laundering procedures. Annual internal control
assessments are performed and the results presented to the
Group Risk Management Committee, for the purpose of preparing the Group’s CRBF 97-02 report.
n
n The Internal Audit department and its information systems
audit unit perform periodical audits of Banque Populaire Group
entities in accordance with the internal audit charter approved
by the Board of Directors of Banque Fédérale des Banques
Populaires. These tasks are carried out in accordance with an
annual plan based on priorities established by the Risk
Management and Internal Control departments, with recurring
audits of all Group departments and entities carried out on a rolling program spanning several years. Each audit includes quantitative and qualitative risk analysis and assessments of the quality
of information systems and internal control systems.The internal
auditors also assess the overall efficiency of the audited entities.
The head of Internal Audit reports to the Group Chairman and
Chief Executive Officer and these reports are submitted to the
Board of Directors. In addition, reports are submitted to the
Group Risk Management Committee describing the action taken
to implement the internal auditors’ recommendations. In 2005, a
sub-department was created to audit operational models.
Within the framework of the reform of standard CRBF 97-02,
periodic control functions (Internal Audit) and permanent
control functions (Risk Management department) will be separated as of January 1, 2006; a Group Compliance department
will be created specifically for this purpose.
Role of the Board of Directors of Banque
Fédérale des Banques Populaires
Populaires ensures that the Group’s main risk exposures are properly managed and monitors the quality and reliability of the system of internal control.
In 2005, the Board of Directors of Banque Fédérale des Banques
Populaires, assisted by the Group Risk Management Committee,
continued to keep a close watch over the system of internal control
employed within Banque Fédérale des Banques Populaires and the
Banque Populaire Group as a whole in order to manage all risks arising in the course of the Group’s business, whatever their origin.
Decisions of the Board concerning internal
control
During 2005, the Board of Directors of Banque Fédérale des
Banques Populaires made a number of decisions concerning
internal control in addition to those made by the Group Risk
Management Committee.The matters addressed were:
n
February:
- review of the Chairman’s draft report on internal control procedures in the Banque Populaire Group during 2004.
n
April:
- review of Group balance sheet risks and implementation of
a procedure designed to set maximum limits for banks and
the Group as a whole;
- approval of the principle for finding a new system for measuring balance sheet risks at Group level;
n
n
During 2005, there were six full meetings of the Group Risk
Management Committee:
n four to deal with matters concerning the Banque Populaire
Group:
- in March to approve the Chairman’s report on the Banque
Populaire Group’s internal control procedures during 2004,
review balance sheet risks and propose considerations on
the development of internal limits and systems to monitor
development, as well as the review of a report by the Banking
Commission;
- in June to analyze the annual internal control report, propose
a series of priority actions relating to the development of the
Group internal control system, in particular within the framework of the reform of standard CRBF 97-02, and review the
results of a Group audit report on compliance with AMF
regulations;
May:
- designation of members of Committees of the Board (Group
Risk Management Committee,Audit Committee, Remuneration
Committee).
- in December to approve planned Group audits in 2006,
updated counterparty risk guidelines and the composition of
new risk monitoring bodies.
June:
- consideration of annual internal control reports regarding
Banque Fédérale des Banques Populaires and the Banque
Populaire Group;
- analysis of the results of the Group audit concerning compliance with AMF regulations;
- definition of a series of priority actions relating to the development of the Group internal control system, in particular
within the framework of the reform of standard CRBF 97-02;
n
Issues dealt with in meetings of the Group Risk
Management Committee
- in October to review the Basel II project, the general inspection report concerning Basel II, guidelines for operational
risks, limits for major counterparty risks and the draft reply to
a follow-up letter from the Banking Commission;
- review of a report by the Banking Commission.
September:
06
n two meetings to deal with issues concerning Banque Fédérale
- in June to analyze the annual report on internal control,
balance sheet risks, the business continuity plan and responses to recommendations made by the Internal Audit
department concerning IT risks;
- in December to assess the overall evaluation of risks as at
June 30 at Banque Fédérale des Banques Populaires, review
balance sheet risks and proposed new limits, and analyze the
business continuity plan.
approval of Group charters organizing the various aspects of
permanent control of risks (credit risks, operational risks, financial
risks), compliance and periodic controls (audit) within the framework of the reform of standard CRBF 97-02;
n
November:
- review of the Basel II project and the general inspection
report concerning Basel II;
- consideration of the reply to a follow-up letter from the
Banking Commission;
- adoption of Group guidelines concerning operational risk
and analysis of business continuity plans for Group banks;
- setting new limits for the concentration of major counterparty risks;
- approval of the new organizational structure of Banque
Fédérale des Banques Populaires in accordance with regulations in force as of January 1, 2006.
219
RISK MONITORING AND CONTROL PROCEDURES
Risk management organization
In the course of its business, the Group is exposed to four main
categories of risks:
n
n
market risks arising from capital market transactions;
n interest rate, currency and liquidity risks arising from retail
banking transactions;
n
operational risks, including non-compliance risks.
In accordance with standard CRBF 97-02, each bank has set up
risk management and monitoring systems that are independent
from operating units.
limits and decision-making procedures,complying with the rules established at Group level, as set out in the credit risk manual updated in
June 2004, the interest rate and liquidity risk manual updated in April
2004 and the operational risk manual updated in November 2005.
n Credit risk measurement and monitoring –
commitments surveillance
All business portfolios are monitored according to risk criteria
and by client category.
A preventative risk detection system, tailored for the specific features
of each client category, allows clients to be contacted and problems
to be addressed before an incident occurs. In addition, several independent structures perform non-overlapping supervisory controls.
Risk monitoring systems are designed to provide each senior
management and the Board of Directors of each bank and of the
Banque Populaire Group with quantitative and qualitative risk
data, covering both outstanding commitments and transaction
flows. These systems include regular reviews of at-risk commitments covering both exposures and related commitments.
Information systems include applications to generate management information schedules analyzing the level of activity and
qualitative and quantitative changes in risk, for both individual and
aggregate exposures.
Credit risks
n Managing non-performing and irrecoverable loans
Credit risk management in the banks based
on Banque Populaire Group standards
in accordance with the rules laid down by the Board of Directors
of Banque Fédérale des Banques Populaires – dealing in particular with the role of the Group Risk Management Committee –
and by the banking regulator.
Non-performing and irrecoverable loans are monitored separately in the banks, notably to ensure that the Banque Populaire
Group’s conservative provisioning policy is followed in all cases.
Each bank has a committee which meets regularly in order to
review the most significant troubled loans and commitments and
determine appropriate levels of related provisions. In addition to
these provisions against specific loans, the banks may also record
general provisions or reserves to protect themselves against a
probable escalation of risks in a given industry or country.
The risk policy defines:
business development strategies and objectives, particularly
regarding the type, quality and monetary value of risk exposures;
n
n
the rules governing the organization and control of risk exposure;
n
internal exposure limits, which are lower than regulatory limits.
The review process to examine credit risk control in lending activities resulted in 2005 in the adoption of the risk control charter, which governs relationships within the Banque Populaire
Group as of January 1, 2006.
n Centralization of risks with a single counterparty
or group
Data on exposures with banking counterparties are automatically aggregated.The banks have access to the Banque Fédérale
des Banques Populaires risk database containing information
about the largest exposures, as well as to the analyses produced
by Natexis Banques Populaires and the Group Risk Management
Committee, which are regularly updated.
n Client credit ratings
n Decisions and delegations
Lending decisions are based on formal procedures and approval
circuits and are made by reference to an assessment of the related cost and the potential benefits for the bank. Clear limits are
set on discretionary lending authority at each level, based on credit ratings and monetary amounts. In accordance with CRBF
97-02 (Art. 21), lending decisions are either countersigned or made
in exercise of formal delegations of authority. Where appropriate,
decision-makers take advice from the Group’s specialized entities
or other experts on legal, financial, international or other matters.
2005 ANNUAL REPORT
At the end of 2003, the Banque Populaire Group introduced an
internal credit rating system to comply with future regulatory
requirements. This is based on uniform methodologies throughout the Banque Populaire Group and centralized credit rating
programs for the main client categories.
For loans to companies, the system is based on quantitative
and qualitative assessments of the counterparty’s solvency and
draws on the expertise of the commercial team and risk managers, with the latter having the last word.The counterparty rating
scale has sixteen levels, excluding default.
n
n For small businesses and personal customers, the systems use
statistical techniques and take account of two main parameters:
the rating of the counterparty and the loss rate on the transaction.The rating scale has ten levels, excluding default.
n Interbank transactions are conducted exclusively with counterparties on the Banque Fédérale des Banques Populaires “approved” list, which are selected based on the credit ratings awarded
by external credit agencies. A new rating system is in the process
of being rolled out within the framework of Basel II reforms.
n Risk diversification
Risk diversification presents a fundamental risk management rule
and is governed by external and internal guidelines. As required
by the Group’s risk management manuals, each bank sets internal risk concentration limits based on its own specific characteristics, which are lower than the limits authorized under banking
regulations. In 2005, a single maximum level below the regulatory
threshold was implemented, which will apply to all Group banks
on a consolidated basis as of June 30, 2006.
Credit risk reporting and control structures
at Banque Populaire Group
The Group’s central body is responsible for assessing risk policies
and management procedures according to standard principles
and criteria. Risks are monitored at Group level as follows:
n
Banque Populaire banks on a consolidated basis;
n subsidiaries of Banque Fédérale des Banques Populaires on a
consolidated basis;
n
In addition to this consolidated risk monitoring system, the
Group Risk Management Committee performs monthly assessments of material individual exposures at Group level or at the
level of individual banks. Responsibility for performing credit
reviews and the credit rating process may be delegated to the
Banque Fédérale des Banques Populaires Risk Management
department.
All Group entities are informed of the decisions made by the
Group Risk Management Committee.
For interbank risks, Banque Fédérale des Banques Populaires collates details of the limits set by each bank and outstanding commitments by counterparty. Its Risk Management department
monitors aggregate exposures by counterparty, based on limits
that take into account the counterparty’s financial characteristics
and the weighting of the Group’s commitments in relation to the
counterparty’s total financing facilities.
Any differences in assessment of the level of the Group’s
exposure or that of a Group bank are referred to the monthly
meeting of the Group Risk Management Committee for consideration.
As part of the Basel II project, the Risk Management department
of Banque Fédérale des Banques Populaires has developed an
information system covering the Group’s exposures in their entirety.
06
Market risks
The Group’s exposure to market risks primarily concerns
Natexis Banques Populaires, a subsidiary of Banque Fédérale des
Banques Populaires. Natexis Banques Populaires’ market risk
monitoring system is described below.
Counterparty risk
Exposure limits have been set for commitments to capital market counterparties, most of which are banking institutions.These
limits are set by an ad hoc committee and are monitored by the
bank’s risk monitoring system. Any limit overruns are reviewed
at special monthly committee meetings.
Market risk policy
Natexis Banques Populaires is active in capital markets through
the Global Debt & Derivatives Markets and Equity Group
departments. Activities include intermediation, brokerage and
asset management for clients and proprietary transactions.
Proprietary transactions fall into several categories:
n
transactions to facilitate client transactions;
n
trading transactions;
n
arbitrage transactions;
n treasury transactions to manage overall interest rate and mismatch risks.
The entities carrying proprietary risks are the Global Debt &
Derivatives Markets and Equity Group departments.
Market risk management system
The permanent system for control of market risk at Natexis
Banques Populaires comprises three pillars:
n a three-tier control architecture in the form of each entity’s
middle office or risk manager, the Internal Control Department
and the Risk Department, these last two providing independent
monitoring of risks;
n a market risk measurement methodology to quantify the
bank’s risk exposure;
n a system of exposure limits based on the risk indicators defined using the internal risk measurement methodology and
applied to both Natexis Banques Populaires and its subsidiaries.
Control over market risks is based on a risk measurement
methodology that assesses market risk faced by all entities of the
Banque Populaire Group. The current methodology uses standard indicators and VaR calculations. However, Natexis Banques
Populaires is developing a new internal VaR model, with a view
to obtaining approval from the Banking Commission.
The main standard indicators used include sensitivity to the
various market risks including interest rate, currency, equity, commodity, volatility, issuer and correlation risks.
Alongside these standard indicators, Natexis Banques Populaires
performs VaR calculations. The Natexis Banques Populaires
Group uses an historic VaR approach.This serves to quantify the
potential losses on capital market activities using capital adequacy assumptions.
221
The heads of all capital markets businesses are assigned exposure limits defined by reference to risk management indicators.
Delegations of authority are decided at monthly meetings of the
Market Risks Committee. Market risk exposures are measured
on a daily basis by middle offices using front office systems or
specially developed tools.
Compliance with exposure limits is also checked on a daily basis
by middle offices, which report any overrun to the relevant operational management team, the Internal Control department and
the Risks department. For each overrun, a decision on whether
to temporarily allow the overrun or to bring exposure back
within limits immediately is taken jointly by the business line, the
middle office and the Risks Department.
Aggregate interest rate and liquidity risks
Interest rate risk corresponds to the risk of losses or an erosion
of interest margins due to an unfavorable change in interest rates
and is analyzed as a margin risk.
Liquidity risk is the immediate risk of being unable to honor the
bank’s debts or to finance assets.
A specific policy for each bank in complying
with rules of the Banque Populaire Group
Each bank is responsible for managing its own interest rate and
liquidity risks in compliance with the methods and rules set out
in the Group procedure manual as updated in April 2004. The
executive management of each bank determines the bank’s
financial risk policy, subject to approval from the Board of
Directors, with the aim of defining the best strategy to increase
interest margins while also reducing the related risks: striking an
appropriate balance between business growth and interest rate
and liquidity risk, reducing exposure to interest rate risk through
appropriate hedging programs, validating the rules governing the
organization and control of balance sheet risk lines and periodically monitoring internal exposure limits.
Working with Banque Populaire Group finance executives,
Banque Fédérale des Banques Populaires has produced an interest rate and liquidity risk procedure manual comprising management rules, measurement standards (methodologies and
scenarios) and procedures dealing with exposure limits.
n Interest rate risks: exposure limits are expressed as a percentage of expected interest margin on a “rolling” basis that takes
account of predicted increases in commitments and of earnings
capacity on a “fixed” basis using the balance sheet at the previous
year-end, over a four-year time frame and according to predefined scenarios.
n Liquidity risks: mismatch limits are expressed as a percentage
of assets, taking account of forecast increases in commitments,
based on normal and crisis scenarios over time frames of up to
four years.
The review process to examine financial risk control resulted in
2005 in the adoption of the risk control charter, which governs
relationships within the Banque Populaire Group as of January 1,
2006.
2005 ANNUAL REPORT
Interest rate and liquidity risk reporting
structures for the Banque Populaire Group
Banque Fédérale des Banques Populaires sets the assumptions
to be used for the various scenarios and ensures that the sensitivity of profits at the Banque Populaire banks to changes in interest rates is compatible with the earnings capacity at each bank.
Banque Fédérale des Banques Populaires’ Risk Management
department has set up an information system to report details
of interest rate and liquidity risk exposures of all Banque
Populaire banks on a standard basis.This reporting data provides
the Group Risk Management Committee with a comprehensive
overview of risks on which to base recommendations to the
Board of Directors concerning capital adequacy decisions.
Operational risks
Managing operational risks
The management of operational risks is based primarily on internal control systems organized at the level of each individual bank
in accordance with the requirements of CRBF 97-02. The
Group’s approach is based on a risk management manual approved by the Board of Directors of Banque Fédérale de la Banque
Populaire in 2005, a detailed inventory of the activities covered
and a reporting system.
The definition of operational risk is that provided by the regulator: the risk of loss resulting from inadequate or failed internal
processes, people and systems, or from external events. A mapping of such risks, based on this definition, has been undertaken
by the Banque Populaire Group, classifying risks into four main
categories: systems and processes, fraud and external risks, legal
and compliance risks and strategic risks.
The work undertaken in the risk mapping exercise of the Basel
II project will ultimately provide the Group Audit and Risks
Committee with a centralized overview of the magnitude of
operational risks.
In addition, the work carried out in the third quarter of 2004,
under the supervision of Banque Fédérale des Banques
Populaires, with a view to establishing a common methodology
throughout all entities in the Banque Populaire Group, based on
harmonized manuals for the review of activities and information
systems and a guide for the creation of business continuity plans,
continued. Based on best practice within the group, this methodology allows for the implementation of business continuity
plans.
The review process to examine operational risk control resulted
in 2005 in the adoption of the risk control charter, which governs
relationships within the Banque Populaire Group as of January 1,
2006.
Insurance and risk coverage
In common with other banking groups, the Banque Populaire
Group insures its major risks through policies with insurance and
reinsurance companies.The policies taken out for 2006 complete
the creation of a structure covering substantial and significant risks
for the Banque Populaire Group. Policies cover corporate and
management liability, fraud and embezzlement risks, the bulk of
the Group’s IT infrastructure and buildings and significant sites
such as the central offices and data centers. The policies cover
business interruption and consequential loss at each entity.
As in 2005, the entire program has been renewed for 2006 on
generally better terms than previously available. All cover is provided by leading international insurers of recognized and unquestionable standing.
Future developments
Preparation for a new international banking solvency ratio, the
so-called Basel II ratio, is a major strategic project for the Banque
Populaire Group. Launched in 2000 and overseen by the Group’s
most senior management, this major project covers all business
lines, involves all banks and data centers and has mobilized teams
throughout the Group. In 2005, Banque Fédérale des Banques
Populaires’ Internal Audit department conducted an in-depth
audit of the system in place covering all of the Group’s entities,
with a view to approval by the banking regulator.
The project has been based on standardized methodologies and
systems selected by the Board of Directors of Banque Fédérale
des Banques Populaires. It had been widely and successfully
implemented for major asset classes by the end of 2003.This has
been followed by the introduction of standardized management
tools and, for operational risks, the updating and group-wide
introduction of risk mapping and measurement tools.
Group compliance
Combating money laundering
Programs to prevent the laundering of the proceeds of crime
have been in place since the beginning of the 1990s and, following the events of September 11, 2001, they were extended to
include measures to combat the financing of terrorism.
In these two complementary areas, Banque Fédérale des
Banques Populaires has been committed to defining preventative
procedures and providing training tools for employees of
Banque Populaire Group banks.
Increased detection resources
Banque Fédérale des Banques Populaires has issued a framework set of anti-money laundering guidelines.This system applies
to all financial establishments in the Banque Populaire Group.This
framework will be incorporated into the operating procedures
of each bank. It includes a catalogue of data query procedures
designed to comply with the legal and regulatory standards of
vigilance, developed within i-BP in 2005.
To increase the automation of the system, Banque Fédérale des
Banques Populaires has selected a software system for the management of lists of terrorists published by the authorities for all
Banque Populaire Group establishments (decision of the Board of
Directors on January 22, 2003). Linked with a system for updating
06
lists, the structure adopted is based on centralized monitoring of
transactions carried out by Natexis Banques Populaires and
decentralized supervision of local client accounts.
In September 2005, Natexis Banques Populaires purchased a
customer profiling tool in order to enhance its existing system
further. This tool is supported by measures taken to detect all
doubtful or unusual transactions. It will be rolled out gradually
within Natexis Banques Populaires in the course of 2006 and
then in its subsidiaries. Analysis has been carried out by i-BP, the
IT service provider for the majority of the Group’s establishments, to set up a similar or identical system.
A group-wide training program
Throughout 2005, considerable attention continued to be paid
to increasing staff awareness and training in anti-money laundering procedures.This process was supported by the use of a system developed by the Fédération des Banques Françaises.
Ethics and compliance
The Banque Populaire Group considers the application of the
highest ethical standards to be a critical factor in sustainable
development and to this end increased the resources devoted
to the ethics program in 2005.
A single regulatory framework
for the entire Banque Populaire Group
Within the Banque Populaire Group, the Code of Ethics produced by the Chambre Syndicale des Banques Populaires (now
Banque Fédérale des Banques Populaires) has served as the
blueprint for the internal ethical rules drawn up for each Group
entity.
The central purpose of these rules is to protect clients’ interests
at all times.Within the framework of applicable laws, regulations
and conventions, they require all employees to adhere to the
highest standards of diligence, loyalty, neutrality and discretion.
A Compliance Officer in each bank
A Compliance Officer has been appointed at each Banque
Populaire bank. At Natexis Banques Populaires, to comply with the
spirit of the guidelines issued by the French securities regulator
(Conseil des Marchés Financiers, now renamed the AMF), this
function, which was segregated from the internal audit and control
function in 2002, has benefited from a steady increase in resources and structures during 2005, with a significant increase in staff
numbers and a deployment of resources in all business lines.
The Central Compliance Team is responsible for coordinating
the ethical compliance structures at Natexis Banques Populaires
and its subsidiaries, for monitoring people in sensitive positions
at Natexis Banques Populaires, supervision lists, monitoring and
managing multi-department projects, supervising the compliance
officers dedicated to each business line and working with the
heads of these business lines.
Even though Banque Fédérale des Banques Populaires does not
provide investment services, it has appointed a compliance officer,
who plays a key role in guiding and promoting ethical practice
223
throughout the Banque Populaire Group. In particular, the
Compliance Officer is responsible for distributing and commenting on all documents published relating to the area of ethics.
Compliance function
The review process to examine compliance resulted in 2005 in
the adoption of the compliance charter, which governs relationships within the Banque Populaire Group as of January 1, 2006.
Adaptation to the new regulatory
environment
In the decree of March 31, 2005, the French government implemented fundamental reforms to CRBF regulation 97-02, in particular requiring the separation of periodic and permanent
controls in the organization of internal control procedures and
establishing a system to control risks of non-compliance.
Following a review conducted throughout the first half of 2005
involving all concerned parties within the Banque Populaire
Group, in September, the Board of Directors of Banque Fédérale
des Banques Populaires approved charters relating to the organization within the Banque Populaire Group’s establishments and
at the level of the Group as a whole of the various types of risk
control (credit risk, operational risk and financial risk), compliance
and audit. Each establishment has to implement these charters
and adapt its organization and resources accordingly.
At the end of 2005, Banque Fédérale des Banques Populaires
and nearly all structures of the Banque Populaire Group had
adapted their organization to comply with these charters. At
Banque Fédérale des Banques Populaires, new risk supervisory
bodies are due to become functional in 2006. In terms of compliance, a New Products Committee will give its verdict on all
products marketed by more than one establishment of the
Banque Populaire Group and its subsidiaries. Furthermore, the
Standards and Methods Committees will provide an opinion on
proposed standards and methods of a collective nature within
the Banque Populaire Group by different natures of risks. Finally,
the Group Credit Risks Committee will follow on from the
monthly meetings of the Group Risk Management Committee in
the supervision of the Banque Populaire Group’s counterparty
risks on a consolidated basis.
2005 ANNUAL REPORT
06
INTERNAL AND CONTROL PROCEDURES COVERING FINANCIAL
AND ACCOUNTING INFORMATION
Preparation of the consolidated
financial statements
Conversion of Group consolidated
financial statements to IFRS
The consolidated financial statements of Banque Fédérale des
Banques Populaires and the Banque Populaire Group are prepared by Banque Fédérale des Banques Populaires in its capacity as
central body of the Banque Populaire banks and holding company of the Natexis Banques Populaires sub-group.The Banque
Fédérale des Banques Populaires Finance Depar tment has
drawn up and deployed a consolidation manual designed to guarantee the reliability of the process. It is based on the following
core principles:
Although the Banque Populaire Group is under no obligation to
adopt IFRS as it is not listed, the Board of Directors of Banque
Fédérale des Banques Populaires decided that the consolidated
financial statements of the Banque Populaire Group should be
prepared in accordance with IFRS from January 1, 2005. This
decision was made to facilitate transparency and comparability
with other major banking institutions. It represents a major
milestone for the Group and for all direct users of its financial
reporting.
definition and communication of accounting principles for the
Banque Populaire Group including the analysis and interpretation
of new texts issued during the period, both for French and international (IFRS) accounting standards;
Mindful of the importance of this transition, the Group launched
a project to implement these new standards in September 2002,
which involved customizing and adjusting the parameters of its
information systems, drafting new procedures and training
everyone participating in the production of financial data.
n
use of the direct consolidation method to permit detailed examination of the consolidation packages of consolidated entities
according to a formal review process;
n
use of a single consolidation system for all consolidations and
sub-consolidations conducted within the Banque Populaire
Group in order to guarantee the internal consistency of the
scopes of consolidation, definitions, standards, charts of accounts
processing sequences and analyses;
n
n the production of quarterly consolidated accounts in order to
provide a better level of control of half-yearly and full-year
accounts, through anticipation of operations over the period, the
provision of reliable estimates on a consolidated basis and optimization of the reconciliation of intra-group transactions;
n checking of data reported by consolidated entities through the
distribution of application interfaces and the use of more than
8,900 accuracy and consistency tests which must be completed
for the data to be transmitted;
item-by-item analysis of all entries that impact on consolidated
shareholders’ equity and production of a tax proof for each
consolidated entity respectively, providing full evidence of consolidated shareholders’ equity and individual justification of deterred taxes;
n
an audit trail system to trace the accounting data published in
the financial statements and the notes back to the accounts of
each consolidated entity and the consolidation adjustments;
In terms of the consolidation system, the conversion of the
Group’s financial statements to IFRS resulted in the distribution
of a new consolidation package allowing the identification and
checking of all information additional to that required under
French accounting standards to enable a transition to IFRS.This
solution, with more than 4,500 tests, provides a full audit trail between consolidated financial statements prepared under French
standards and those prepared under IFRS.
Control process
Internal control processes at the level
of the consolidated entities
Reflecting the decentralized nature of the Banque Populaire
Group, internal control procedures are tailored to the organization of each of the consolidated entities. In all cases, the process
includes several layers of controls:
n basic permanent controls are included in processing programs
at the operational level;
n second-tier independent checks of processing operations by
Finance and Accounting Departments to ensure the accuracy
and completeness of accounting data;
n
archiving and security procedures including the twice-daily
back-up of the unified consolidation database and regular data
recovery testing;
n
regular training of accounting teams at the consolidated entities and action to promote the use of best practice throughout
the Banque Populaire Group.
n
n third-tier controls by internal auditors, corresponding to
controls of controls;
n four th-tier controls by the Audit or Risk Management
Committees set up by the main entities covered by the scope of
consolidation of the Banque Populaire Group.Their purpose is to
analyze individual and consolidated accounts of the entities
concerned and to ensure the appropriateness and consistent
application of accounting methods and review of the main
assumptions used to prepare the financial statements.
225
These continuous and periodic controls, performed in the different accounting system environments within the Banque
Populaire Group, include reviews of account analyses produced
by the various departments, checks to ensure that suspense
items are cleared and errors corrected on a timely basis and
monitoring of indicators for “sensitive” accounts.
Outlook
Top level controls
The efforts undertaken to rationalize the resources and working
methods of the teams responsible for producing, checking and
monitoring accounting and financial reporting schedules will also
be pursued. In relation to this, three major projects were launched in 2005:
In addition to the self-checking and external checking procedures performed at the level of the local entities responsible for
preparing individual or consolidated financial statements, the
quality of accounting controls is verified by:
Banque Fédérale des Banques Populaires, which reviews the
regulatory repor ting schedules prepared by the Banque
Populaire banks (BAFI 4000 schedules and supplementary schedules) in its capacity as the network’s central body. To enhance
the effectiveness of these controls, the Banque Fédérale des
Banques Populaires Finance Department has elected to review
these schedules on a monthly basis, thus going beyond the requirements of the French banking regulator (Commission Bancaire)
for quarterly reviews;
n
n the group’s external auditors, who work in collegiate fashion
and whose opinions are based in part on the conclusions of the
external auditors of each of the consolidated entities, particularly
as regards compliance with the standards of the Banque
Populaire Group, as laid down by Banque Fédérale des Banques
Populaires, and the effectiveness of local internal control procedures;
n periodic internal audits by the Banque Fédérale des Banques
Populaires Internal Audit Department at various entities within
the Banque Populaire Group and at Banque Fédérale des
Banques Populaires.
Role of the Audit Committee
The Audit Committee of Banque Fédérale des Banques
Populaires, whose role is described on page 13, met twice in the
presence of the external auditors, on September 2, 2005, and
February 20, 2006, to review the consolidated financial statements for Banque Fédérale des Banques Populaires and the
Banque Populaire Group to June 30 and December 31, 2005,
respectively, prior to their presentation to the full Board of
Directors.
n
n Under the framework established by the Commission Bancaire
(CRBF 97-02) for supervision of credit institutions, the Internal
Audit and Risk Management Department of Banque Fédérale
des Banques Populaires submits to the Group Risk Management
Committee and to the Board of Directors an annual report on
internal control in the Banque Populaire Group.
This report is based on a detailed questionnaire which allows the
assessment of internal control procedures, particularly as they
concern accounting and financial information from consolidated
entities, and includes consolidated information where appropriate.
2005 ANNUAL REPORT
In 2006, as in 2005, the Banque Populaire Group will pursue strategies to optimize its data processing and control systems and
adapt these systems to keep pace with business development
and with changes in the regulatory framework, such as Basel II,
COREP, IFRS, Finrep and banking regulations.
n at the level of the Banque Populaire Group, the change of
consolidation tool which, in accordance with existing principles,
will allow for the consolidation of Coface and its subsidiaries in
the direct decentralized consolidation system as of the third quarter of 2006, while also offering a greater volume of consolidated
information and broader analysis and control functionalities;
n at the level of the Banque Populaire banks, an extensive overhaul of the accounting architecture of the banks belonging to the
Banque Populaire IT community (16 out of 21 Banque Populaire
banks), aiming for the gradual roll-out of a single accounting
interpretation solution based on identical accounting schedules
validated by external experts, as well as the creation of a database of elementary transactions, offering a more efficient audit
trail and broader reproduction and analysis functions;
at the level of Natexis Banques Populaires, the projects launched in 2004 concerning the restructuring of the accounting
control system and the development of an enterprise systems
development plan continued in 2005:
n
- the reliability of the accounting control process through
monthly reporting was ensured by the implementation of an
adequate organization to support the role of employees responsible for first and second-tier checks, as well as redefining mapping of controls and adapting it to the needs of the business lines,
and finally the implementation of a centralized reporting system
offering an overall view of the results of controls. An IT solution
to meet the reproduction, synthesis and management requirements of accounting controls became operational with the
launch of accounting control reproduction system “Nordicc” for
the preparation of the 2005 financial statements, the functionalities of which will be extended in 2006;
- the enterprise systems plan became operational with the preparation of the restructuring of the IT systems of central functions (accounting, management control management of
counterparty risks etc.). The expression of the requirements of
the new accounting system was defined at the same time as the
target system structure. This architecture defines the target to
which business applications need to migrate in order to deliver
the data flows required by the enterprise systems, as well as the
databases (third-parties, structures, activities, products) that need
to be updated to manage data shared between management
applications and enterprise systems.The group plans to create an
inventory management warehouse to collect all of the data
required for the enterprise systems and regulatory declarations.
06
STATUTORY AUDITORS’ REPORT ON THE CHAIRMAN’S REPORT
ON INTERNAL CONTROL PROCEDURES
Statutory auditors’ report on the report of the Chairman of the Banque
Populaire Group on the internal control procedures relating to the
preparation and processing of accounting and financial information
Year ended December 31, 2005
This is a free translation into English of Statutory Auditor’s report issued in the French language and is provided solely for the convenience of
English speaking readers.
The Statutory Auditors’ report includes information specifically required by French law in all audit reports, whether qualified or not, and this is
presented below in the opinion on the consolidated financial statements. This information includes an explanatory paragraph discussing the
Auditor’s assessments of certain significant accounting and auditing matters.Theses assessments were considered for the purpose of issuing an
audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions
or on information taken outside of the consolidated financial statements.
This report, together with the Statutory Auditors’ report addressing financial and accounting information in the Chairman’s report on internal
control, should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in
France, international accounting standards (IAS) and international financial reporting standards (IFRS) endorsed by the European Union.
Dear Shareholders,
In accordance with our appointment as auditors of the Banque Populaire Group, we present our report on internal control procedures for the year ended December 31, 2005.
In his report, the Chairman comments in particular on the conditions for the preparation and organization of the work of the Board
of Directors of Banque Fédérale des Banques Populaires and the internal control procedures in place within the Group.
We present to you our observations on the information set out in the Chairman’s report on the internal control procedures relating
to the preparation and processing of accounting and financial information.
We performed our procedures in accordance with professional guidelines applicable in France.These require us to perform procedures to assess the fairness of the information set out in the Chairman’s report on the internal control procedures relating to the preparation and processing of accounting and financial information.These procedures notably consisted of:
- obtaining an understanding of the objectives and general organization of internal control, as well as the internal control procedures
relating to the preparation and processing of financial and accounting information, as set out in the Chairman’s report;
- obtaining an understanding of the work performed to support the information given in this report.
On the basis of these procedures, we have no matters to report in connection with the information given on the internal control procedures relating to the preparation and processing of financial and accounting information contained in the Chairman’s report.
Paris and Neuilly-sur-Seine, March 22, 2006
The Statutory Auditors
SALUSTRO REYDEL
Michel Savioz
ERNST & YOUNG
Richard Olivier - Olivier Durand
227
Additional information
Person responsible for the AMF
annual report
Philippe Dupont, Chairman of the Banque Populaire Group and
Chairman and Chief Executive of Banque Fédérale des Banques
Populaires.
Financial communications
Financial calendar
n
February 23, 2006
Publication of 2005 results of the Banque Populaire Group and
Statement by the person
responsible for the AMF annual
report
Annual shareholders’ meeting of Banque Fédérale des Banques
Populaires (morning) and Natexis Banques Populaires (afternoon).
“Having taken all reasonable care to ensure that such is the case,
to the best of my knowledge, all of the information contained in
the annual report is in accordance with the facts and contains no
omission likely to affect its import.
Publication of 2006 first-half results of the Banque Populaire
Group and Natexis Banques Populaires.
I have obtained a letter from the statutory auditors certifying
that they have verified the information concerning the Group’s
financial position and the consolidated accounts as set out in the
annual report and have read the full annual report.”
n
n
May 18, 2006
September 7, 2006
Information officer
Pierre Jacob
Head of Investor Relations of Group Financial Communications
Tel: +33 (0)1 40 39 68 79 / Fax : +33 (0)1 40 39 63 40
E-mail: relinvest@nxbp.fr
Documents on display
The Chairman
Philippe Dupont
Documents relating to the Banque Populaire Group and Banque
Fédérale des Banques Populaires (memorandum and articles of
association, reports, letters and other documents, historical individual and consolidated financial data for each of the two years
preceding the publication of this document) are partly included
in this document and may be viewed at the registered office of
Banque Fédérale des Banques Populaires, preferably by appointment.
This annual report is available on the website of the Autorité
des Marchés Financiers (www.amf-france.org) and in
the “Financial Communications” section of the Group website
Any person wanting further information about the Banque
Populaire Group or Banque Fédérale des Banques Populaires
may, with no commitment and free of charge, request documents:
- by post: Banque Fédérale des Banques Populaires
Group Financial Communications
Investor Relations Department
Le Ponant de paris – 5 rue Leblanc
75511 Paris Cedex 15
- by telephone: 01.40.39.68.79
2005 ANNUAL REPORT
ADDITIONAL INFORMATION
07
Cross-reference table
1. Persons responsible
2. Statutory Auditors
3. Selected financial information
3.1. Selected historical financial information regarding the issuer for each financial year
3.2. Selected historical financial information for interim periods
4. Risk factors
5. Information about the issuer
5.1 History and development of the issuer
5.2 Investments
228
23
7
NA
86
28
83
6. Business overview
6.1. Principal activities
6.2. Principal markets
6.3. Exceptional factors
6.4. Extent to which the issuer is dependent on patents or licenses, industrial,
commercial or financial contracts or new manufacturing processes
6.5.The basis for any statements made by the issuer regarding its competitive position
46 - 60
46 - 60
NA
98
46 - 60
7. Organizational structure
7.1. Brief description of the Group
7.2. List of significant subsidiaries
25
27
8. Property, plant & equipment
8.1. Existing or planned material tangible fixed assets
8.2. Environmental issues that may affect the issuer’s utilization of the tangible fixed assets
166 to 167
NA
9. Operating and financial review
9.1. Financial condition
9.2. Operating results
85
83
10. Capital resources
10.1. Information concerning the issuer’s capital resources
10.2. Sources and amounts of the issuer’s cash flows
10.3. Information on the issuer’s borrowing requirements and funding structure
10.4. Information regarding any restrictions on the use of capital resources that have materially
affected or could materially affect the issuer’s operations
10.5. Information regarding the anticipated sources of funds needed to fulfill commitments
referred to in items 5.2 and 8.1
11. Research and development, patents and licenses
12. Trend information
13. Profit forecasts or estimates
14. Administrative, management and supervisory bodies
and senior management
14.1. Administrative bodies
14.2. Administrative, management or supervisory bodies
and senior management conflicts of interest
108 to 109
111
149 to 177
NA
149 to 177
NA
102 to 103
NA
8
12
15. Remuneration and benefits
15.1. Amount of remuneration and benefits
15.2.Total amounts set aside or accrued by the issuer to provide pension,
retirement or similar benefits
98
203
229
16. Board practices
16.1. Date of expiration of current term of office
16.2. Service contracts with members of the administrative bodies
16.3. Information about the issuer’s audit committee and remuneration committee
16.4.Whether or not the issuer complies with the corporate governance regime in its country of incorporation
8
12
17 to 18
8
17. Employees
17.1. Number of employees
17.2. Directors’ shareholdings and stock options
17.3 Arrangements for involving employees in the issuer’s capital
65
100
NA
18. Major shareholders
18.1. Shareholders owning more than 5% of share capital or voting rights
18.2. Different voting rights
18.3. Control over the issuer
18.4. Arrangements known to the issuer, the operation of which may at a subsequent
date result in a change in control
19. Related party transactions
20. Financial information concerning the issuer’s assets and liabilities,
financial position and profits and losses
20.1. Historical financial information
20.2. Pro forma financial information
20.3. Financial statements
20.4. Auditing of historical financial information
20.5. Age of latest financial information
20.6. Interim financial information
20.7. Dividend policy
20.8. Legal and arbitration proceedings
20.9. Significant change in the issuer’s financial position
26
26
26
26
203 to 204
104 to 214 – 229
NA
104 to 214
215 to 216
104
NA
NA
98
101
21. Additional information
21.1. Share capital
21.2. Memorandum and articles of association
22. Material contracts
23. Third-party information and statements by experts and
declarations of any interest
24. Documents on display
25. Information on holdings
NA
13 to 17
12
NA
228
138 to 148
Pursuant to article 28 of Commission regulation no. (EC) 809/2004 of April 29, 2004, the following information is incorporated by reference in this registration document:
- the consolidated financial statements for the year ended December 31, 2004, the statutory auditors’ report thereon and the
Group management report, on pages 107 to 172, page 173 and pages 85 to 106 of the registration document filed with the AMF
on March 25, 2005, under number D.05-0283;
- the consolidated financial statements for the year ended December 31, 2003, the statutory auditors’ report thereon and the Group
management report, on pages 97 to 163, pages 164 to 165 and pages 79 to 96 of the registration document filed with the AMF on
May 4, 2004, under number R.04-074 filed with the AMF.
All other chapters of reference documents no. D.05-0283 and R.04-074 are either of no material interest to investors or covered elsewhere in this registration document.
2005 ANNUAL REPORT
CONTACTS
Le Ponant de Paris
5, rue Leblanc, 75511 Paris Cedex 15
Tel: +(33) 1 40 39 60 00 – Fax: +(33) 1 40 39 60 01
Group Financial Communications
Pierre Jacob
Investor Relations Department
Cécilia Matissart
Frédérique Duvignacq
Alain Hermann
Pierre Jouffrey
E-mail: relinvest@nxbp.fr
2005 annual reports for the Banque Populaire Group, Banque Fédérale des Banques Populaires and
Natexis Banques Populaires can be downloaded under the heading «FINANCIAL COMMUNICATIONS».
231
Published by Banque Fédérale des Banques Populaires / Département Communication fédérale - Direction Communication financière Groupe Design-production avant garde - Tel: +(33) 1 45 74 61 61 Printing IMP Graphic Photo credits avant•garde - Digitalvision
Printed using vegetable inks by IMP Graphic (Cosne-sur-Loire, France), an Imprim’vert printer. The Imprim’vert label is awarded to printers implementing industrial strategies on environmental protection (waste management, exclusion of toxic products, etc.). The paper selected for the cover of this work was made in
Iggesund Paperboards factory (Sweden), which is certified to ISO 14001 and EMAS environmental management standards. 100% of the raw material used for interior pages is composed of used paper. It was produced by the Dalum Papir A/S factory (Denmark), which is certified to ISO 14001 and EMAS environmental management standards.
2005 ANNUAL REPORT

Groupe Banque Populaire Annual Report

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