Recaudo y Facturación

diffi cult to sell them. Such a situation

could give rise to signifi cant losses

In certain of Natixis’ businesses, a prolonged fall in asset prices could threaten the level of activity or reduce liquidity in the market concerned. This situation would expose Natixis to signifi cant losses if it was unable to rapidly close out its potentially loss-making positions. This is particularly true in relation to assets that are intrinsically illiquid. Certain assets that are not traded on a stock exchange or on a regulated market, such as derivatives traded between banks, are generally valued using models rather than market prices. Given the diffi culty in monitoring changes in prices of these assets, Natixis could suffer unforeseen losses.

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3.2

Pillar III

3.2.1

BASEL 2 REGULATORY

FRAMEWORK

Regulatory monitoring of bank capital was introduced by the Basel Committee on Banking Supervision (Basel 2) in 1988 and is based on three pillars that form an indivisible whole:

3.2.1.1

Pillar I

Pillar  I sets minimum capital requirements. It aims to ensure that banking institutions hold suffi cient capital to provide a minimum level of coverage for their credit risk, market risk, and operational risk. To calculate its capital requirement, the fi nancial institution may use standardized methods or with the prior approval of the French Prudential Supervisory Authority, using its own internal models.

3.2.1.2

Pillar II

Pillar II establishes a process of prudential supervision that complements and strengthens Pillar I.

It consists of:

● analysis by the bank of all of its risks, including those already covered by Pillar I;

● calculation by the bank of the amount of economic capital it needs to cover those risks;

● comparison by the banking supervisor of its own analysis of the bank’s risk profile with the analysis conducted by the bank. This is done in order to adapt its own prudential measures accordingly, by setting capital requirements above minimum requirements or by applying any other appropriate technique.

3.2.1.3

Pillar III

Pillar  III is concerned with establishing market discipline through a series of reporting requirements. These requirements –  both qualitative and quantitative – are intended to improve

3.2.2

SCOPE OF APPLICATION

Natixis has an obligation for consolidated regulatory reporting to France’s Prudential Control Authority (Autorité de Contrôle Prudentiel) and it therefore establishes Pillar III on a consolidated basis.

The scope of prudential consolidation is established on the basis of the scope of statutory consolidation. The main difference between these two scopes lies in the consolidation method for insurance companies, which are accounted for by the equity method under the prudential scope, regardless of the statutory consolidation method.

The following insurance companies are accounted for by the equity method under the prudential consolidation scope:

●Coface (insurance);

●Natixis Assurances;

●Compagnie Européenne de Garanties et de Cautions. EDF Investment Group is proportionally consolidated in accordance with the level of economic interest, i.e. 7%.

3.2.3

CAPITAL ADEQUACY RATIO

The French decree dated February  20, 2007 (amended by the decrees dated October  19, 2007, September  11, 2008, October 29, 2009, August 25, 2010 and December 13, 2010), is France’s version of the European CRD (Capital Requirements Directive), which implements the Basel  2 reform. It set out the “regulatory capital requirements applicable to banks and investment companies”.

Natixis applies these directives to the management of its risks and capital.

In accordance with the decree of February 20, 2007, credit risk exposure can be measured using two approaches:

●the “standardized” approach, based on external credit ratings and specific risk weightings according to Basel categories of

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−

the Advanced IRB approach, under which banks use all of their internal estimates of the components of risk, i.e. probability of default, loss-given default, exposure at default, maturity.

3.2.4

COMPOSITION OF CAPITAL

Regulatory capital is determined in accordance with CRBF Regulation No. 90-02 of February 23, 1990 relating to capital, meaning it is divided into three categories: Tier 1 capital, Tier 2 capital and Tier  3 capital. Deductions are made from these categories with regard for statutory audit data.

These categories are broken down according to decreasing degrees of solidity and stability, duration and degree of subordination.

3.2.4.1

Tier 1 capital

CORE CAPITAL AND DEDUCTIONS

●Share capital.

●Reserves, including revaluation reserves, and unrealized or deferred gains or losses.

Unrealized capital gains or losses on available-for-sale fi nancial assets are recorded in equity and restated as follows:

−

for capital instruments, net unrealized capital gains are deducted from Tier 1 capital net of the amount of tax already deducted. 45% of these pre-tax gains are included in Tier 2 capital. Net unrealized capital losses are not restated;

−

unrealized capital gains or losses recorded directly in equity due to a cash fl ow hedge are eliminated;

−

for other fi nancial instruments, including debt instruments or loans and receivables, unrealized capital gains or losses are also eliminated;

−

impairment losses on any available-for-sale assets recognized in the income statement are not restated.

●Issue or merger premiums.

●Retained earnings.

●Net income (group share), after deducting an estimated portion of this income for cash-settled dividends.

The following deductions are made:

●treasury shares held and stated at their carrying value;

●intangible assets, including set-up costs and goodwill;

●capital gains and losses for own credit risk.

OTHER TIER 1 CAPITAL

● Minority interests include shares of minority interests in stakes held by Natixis.

HYBRID SECURITIES

These comprise innovative or non-innovative equity instruments, with progressive remuneration for innovative equity instruments. They are subject to limits as to the total of Tier 1 capital.

3.2.4.2

Tier 2 capital

● Capital resulting from the issue of subordinated securities or loans (perpetual subordinated securities).

● Capital subject to the conditions of Article  4d of CRBF Regulation No.  90-02 of February  23, 1990 pertaining to capital (redeemable subordinated securities).

● Equity instruments: 45% of pre-tax net unrealized capital gains recognized as Tier 2 capital.

● Positive difference between expected losses calculated using internal ratings-based approaches and the sum of value adjustments and portfolio-assessed impairment relating to the exposures concerned.

3.2.4.3

Tier 3 capital

Tier  3 capital comprises subordinated debt with a maturity of over 5 years used only to hedge market risk. Natixis is not concerned by these instruments.

3.2.4.4

Deductions

They include:

● equity investments representing more than 10% of the share capital of a credit institution or investment firm, as well as subordinated loans and any other element constituting capital;

● securitization positions with a rating of less than BB-;

● total expected losses for equity exposure.

50% are deducted from Tier  1 capital and 50% from Tier  2 capital.

As of December 31, 2010 and in accordance with the French Prudential Supervisory Authority, Natixis’ investments in Caisse d’Epargne and Banque Populaire, in the form of Cooperative Investment Certifi cates (CCIs), are no longer deducted from capital but are included in risk-weighted assets. For further details on CCIs, see section [1.4.5] “Major contracts”.

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3.2.4.5

Regulatory capital and ratios

SHARE CAPITAL

Registered share capital amounted to €4,653,020,308.80, divided into 2,908,137,693  shares with a par value of €1.60 and was unchanged between December  31, 2009 and December 31, 2010.

REGULATORY CAPITAL AND CAPITAL ADEQUACY RATIO

The primary shareholding resulting in a capital deduction was the €0.3 billion stake in CACEIS.

As of December 31, 2010 and in accordance with the French Prudential Supervisory Authority, Natixis’ investments in the Caisse d’Epargne and Banque Populaire banks, in the form of corporate investment certifi cates (CCIs), are no longer deducted from capital but are included in risk-weighted assets.

CFDI (Caisse Française de Développement Industriel) is the only Natixis subsidiary subject to this individually. The parent company and other French subsidiaries are credit institutions that are exempt from compliance with these requirements on an individual basis, by authorization of the French Prudential Supervisory Authority,.

Regulatory capital is structured as follows with respect to the various rules (all data after impact of the guarantee):

(in billions of euros) 12.31.2010 12.31.2009 Change

Equity 20.9 20.9 0.0

Restatements, o/w

●Dividend forecast (0.2) (0.2)

●Reclassifi cation of hybrids and fair value fi ltering (5.1) (6.7) 1.5

●Hybrids 5.1 6.3 (1.2)

●Goodwill and intangible assets (3.6) (3.5) 0.0

●Other prudential restatements 0.5 0.9 (0.4)

Tier 1 capital 17.6 17.9 (0.3)

Deductions from Tier 1 capital (0.8) (5.3) 4.5

Basel 2 Tier 1 capital 16.8 12.7 4.1

Tier 2 capital 7.3 7.8 (0.5)

Deductions from Tier 2 capital (0.8) (5.3) 4.5

TOTAL CAPITAL 23.3 15.2 8.2

Tier 1 capital totalled €16.8 billion at December 31, 2010, up by €4.1 billion for the year.

Equity remained stable at €20.9  billion. The effects of the repayment of the €0.5  billion shareholder advance and €1.35  billion in hybrid securities and a €0.4  billion payout on these securities were offset by €1.7 billion in income for the year, a €0.3 billion reduction in the negative translation difference due to the dollar’s rise and a €0.3 billion decrease in net unrealized or deferred losses.

Tier  1 and total capital are impacted from changes in the prudential treatment of CCI. Whereas half (€4.7  billion) were

deducted from Tier  1 capital and half from Tier  2 capital at December 31, 2009, they are now booked under risk-weighted assets (see below). Tier  1 capital includes a €0.2  billion provision for distribution of cash dividends (50% of net income at December  31,  2010, minus post-tax remuneration payable on hybrid shares and an estimate of the percentage of this divided to be subscribed as shares). The drop in other prudential restatements was primarily due to the reduction in unrealized or deferred losses posted and fi ltered prudentially.

Tier 2 capital fell by €0.5 billion due to the effects of regulatory depreciation and amortization.

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Basel  2 risk-weighted assets amounted to €147.9  billion after the fi nancial guarantee granted by BPCE (€9.3  billion, down by €1.4 billion compared with December 31, 2009), and rose by €17.0 billion. Three risk categories contributed to this change:

(in billions of euros) 12.31.2010 12.31.2009 Change

Credit risks 132.3 106.9 25.4

Market risks 9.8 18.8 (9.0)

Operational risks 5.8 5.2 0.6

TOTAL RISK-WEIGHTED ASSETS 147.9 130.9 17.0

The €25.4  billion increase in credit risks was primarily due to the inclusion of CCIs (+€38.3 billion) and a currency effect (7% increase in the US  dollar, +€2.6  billion). These factors were partly offset by the approval granted for the advanced internal ratings-based approach (IRBA, -€15.9  billion at that date) on September 30, 2010.

Market risks fell by €9.0 billion, primarily due to the divestment of the portfolio of complex credit derivatives (-€6.3 billion) and reduced VaR (-€1.4 billion).

Operational risks increased by €0.6  billion due to the replacement of 2007 net revenues with 2010 net revenues (standard practice is to calculate operational risk using average net revenues for the previous three years).

All in all, the resulting Tier  1 capital  ratio was 11.4% at December  December  31, 2010 compared with 9.7% at December  31, 2009. The Core Tier  1 ratio, excluding hybrid securities, was 7.9% at December 31, 2010.

(in millions of euros) 12.31.2010 12.31.2009

Regulatory capital requirements 11,832 10,478

Regulatory capital requirements for credit risk, dilution risk

and settlement risk 10,583 8,552

Credit risk – standard approach 1,218 1,219

Governments and central banks -

Banks 38 50

Corporate entities 697 574

Retail customers 169 201

Shares 115 136

Assets other than credit obligations 15 29

Of which present value of residual exposure at default on fi nancial leases 15 -

Securitization positions 184 228

Credit risk – Internal ratings-based approach 9,365 7,333

Governments and central banks 14 9

Banks 587 817

Corporate entities 4,542 5,216

Retail customers 33 0

Shares 3,645 644

Securitization positions 100 163

Assets other than credit obligations 444 486

Regulatory capital requirements for market risks 784 1,508

Regulatory capital requirements for operational risk 465 417

ECONOMIC CAPITAL

A calculation of economic capital requirements is conducted on

Economic capital requirements are compared with regulatory capital requirements and equity that would be available to Natixis in the event of a crisis.

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OTHER REGULATORY RATIOS

New regulations relating to liquidity risk took effect on June 30, 2010 (French decree dated May 5, 2009 concerning identifi cation, measurement, management and control of liquidity risk). The liquidity ratio is designed to ensure that liquid assets with maturities of less than one month are greater than or equal to liabilities falling due within the same period. It is defi ned as the ratio between cash/cash-equivalents and liabilities falling due in less than one month.

This ratio is calculated on a parent company (non-consolidated) basis and according to regulations must be above 100%. Natixis and its subsidiaries respected this standard in 2010, and Natixis’ ratio was 107% at December 31, 2010.

The regulations on controlling large exposures were revised on December 31, 2010 (CRBF Regulation No. 93-05 amended by the decree of August  25, 2010). It aims to prevent excessive concentrations of risks for sets of counterparties that are related in a way that it makes it probable that if one encountered fi nancial problems, the others would also have diffi culties with fi nancing or reimbursement. The regulation is underpinned by an obligation to be respected at all times: all risks associated with a single counterparty cannot exceed 25% of the bank’s capital. Natixis complied with this requirement during 2010.

3.2.5

RISK MANAGEMENT

3.2.5.1

Natixis’ general risk management

system

(Data certifi ed by the Statutory Auditors in accordance with IFRS 7).

Natixis’ general risk management system is managed in accordance with banking regulations and governance guidelines laid down by its central shareholder, BPCE.

It uses three levels of coordinated controls:

● internal controls are carried out by operational or functional departments under the supervision of their management: business lines are responsible for the risks they incur in their transactions, until their extinction. Depending on the precise situation and transactions, first-level controls are conducted either by personnel themselves or by an ad hoc body, such as a middle office or an accounting control department, or,

The control system is structured into global functions integrated into those defi ned by BPCE.

The Risk and Compliance Departments carry out permanent controls. The control system comes under the overall supervision of the Chief Executive Offi cer and Board of Directors of Natixis. The Board is assisted in its duties by the Audit Committee.

3.2.5.2

Natixis’ Risk Department

(Data certifi ed by the Statutory Auditors in accordance with IFRS 7).

As part of the New Deal and guidance projects undertaken by the support functions, Natixis has launched an in-depth analysys of its governance and risk organization.

The Risk function was set up on July  1, 2010. It features heightened integration, shorter decision-making channels, closer cross-functional ties via the use of dedicated teams and more clearly established duties compared with those exercised by the business line and subsidiary teams. The latter two objectives led to the creation of a Consolidated Risk Department charged with taking a cross-functional, exhaustive approach to risks and a Service and Investment Solutions Risk Department in charge of the heads of Risk in the two divisions. The Risk function’s operating methods and procedures are described in the Risk function charter.

The Risk Department recommends a risk policy to executive management that is consistent with that of Groupe BPCE. Similarly, it makes proposals to the executive body concerning principles and rules in the following areas:

●risk acceptance procedures;

●limit authorizations;

●risk assessment;

●risk supervision.

It plays an essential role in the structure of Committees, the highest-level Committee being Natixis’ global Risk Committee. It participates in the ALM Committee, which is steered and organized by the Finance and Risk Department.

Lastly, it reports regularly on its work, submitting its analyses and fi ndings to Natixis’ executive and decision-making bodies, and to Groupe BPCE. A risk consolidation team risks generates an overview through the use of scorecards that report on risks

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3.2.5.3

Credit risks

GENERAL PRINCIPLES GOVERNING ACCEPTANCE AND MANAGEMENT OF CREDIT RISK

(Data certifi ed by the Statutory Auditors in accordance with IFRS 7).

Natixis’ credit risk measurement and management procedures are based on:

●a standardized risk-taking process, structured via a system of limit authorizations and decision-making Committees;

●independent analysis carried out by the Risk Department as part of the process of reviewing loan applications;

●rating tools and methodologies providing standardized and tailored assessments of counterparty risk, thereby making it possible to evaluate the probability of default within one year and loss-given default;

●information systems that give an overview of outstanding loans and credit limits.

RISK MEASUREMENT AND INTERNAL RATINGS

(Data certifi ed by the Statutory Auditors in accordance with IFRS 7).

The internal rating system is an integral part of Natixis’ credit risk monitoring and control mechanism. It covers all the methods, processes, tools and controls used to evaluate credit risk. It takes into account fundamental parameters, including one-year counterparty default probability, which is expressed as a rating, and loss-given default (LGD), which is expressed as a percentage.

Pursuant to regulatory requirements, all counterparties in the banking portfolio and the related exposures must have an internal rating when they:

●carry a loan or are assigned a credit limit;

●guarantee a loan;

●issue securities used as collateral for a loan. The mechanism is based on:

●internal rating methodologies specific to the various Basel asset classes and consistent with Natixis’ risk profile;

●an IT system used for managing the successive stages of the rating process, from initiation of the process to validation of the final rating;

●processes, procedures and controls that place internal ratings at the heart of the risk-management system, from transaction

origination to ex-post analysis of defaulting counterparties and the losses incurred on the relevant loans;

● periodic reviews of rating methodologies, the method of

calculating LGD and underlying risk parameters.

With respect to country risk, the system is based on sovereign ratings and country ratings that cap ratings that can be given to non-sovereign counterparties. These ratings are reviewed annually, or more often if necessary. The limits governing country exposure (country caps) are examined and approved by the Natixis Global Risk Committee in light of the countries’ ratings and situations. Moreover, the Credit Committee’s decisions regarding transactions deemed to entail signifi cant exposure in terms of the total amount, country situation or type of transaction are underpinned by an analysis of country risk.

Since September  30, 2010, Natixis has used internal rating methods specifi c to the different Basel asset classes that use the advanced internal ratings-based method (IRBA) to rate corporate, sovereign, banking, specialized lending and some categories of consumer fi nance exposures.

Ratings are established on the basis of two approaches, namely statistical approaches and expert appraisals.

Backtesting and performance-monitoring programs are also used to ensure the quality and reliability of LGD estimates and rating models and LGD grids or default probability scales. They include a detailed analysis based on a range of indicators, e.g.  differences in terms of severity and migration compared with agency ratings, observed defaults and losses and changes in ratings prior to default and LGD measurements, and the predictive power of indicators used in statistical models.

Natixis checks whether default probability scales are consistent with actual default rates in its portfolio. Statistics and the results of these checks are reviewed by oversight Committees in charge of monitoring as well as imposing corrective measures or adjustments wherever necessary, such as the enrichment or redefi nition of models, or the modifi cation of reference samples.

In addition to quantitative work on models, Natixis has introduced standards and procedures and periodic controls undertaken at different levels within the Bank so as to ensure the quality of ratings and LGDs. As part of its oversight function, the Risk Department makes sure the rules and commitments underpinning the Bank’s IRBA approval are respected, and also ensures the proper operation of the tools and processes used and the quality and consistency of data. It also coordinates training and provides support to Bank employees.

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CREDIT RISK REDUCTION TECHNIQUES

(Data certifi ed by the Statutory Auditors in accordance with IFRS 7).

Natixis uses credit risk reduction techniques including netting agreements, personal guarantees, asset guarantees or the use

In document REPUBLICA DE HONDURAS SECRETARIA DE FINANZAS (página 45-116)